“Numerology” tries to find reality within various measurements of economic and real estate trends.
Buzz: A typical California homebuyer’s mortgage payment is up 127% – yes, more than double – since the pandemic transformed the housing market.
Source: My trusty spreadsheet looked at housing costs using Freddie Mac’s weekly tally of the average 30-year fixed loan combined with median selling prices for existing, single-family homes provided by the California Association of Realtors.
Fuzzy math: California home sales are running 41% below the average buying pace since 1990.
Topline
So, how have mortgage rates at 23-year highs hit California house hunters?
Well, the typical California buyer would get a $4,717 payment, assuming 20% down, on the median-priced $843,340 single-family home at this week’s 7.63% average rate for a 30-year loan.
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Back in February 2020, just before coronavirus struck, rates were 3.47%. So a house payment on that month’s $579,770 median price was $2,075.
Yes, that 45% price hike is a huge jump in less than four years, but it’s a modest slice of the 127% surge in this house-payment benchmark.
Details
In December 2000, when mortgage rates were last at current levels, California’s median sales price was $248,000 – then the fourth-highest on record.
That means prices have increased 240% (nearly triple) over 23 years. Incomes meanwhile are up only 96% in the same period – not even double.
That price-to-pay gap sums up California’s 2023 affordability crunch. That financial hurdle won’t be lowering anytime soon as the Federal Reserve continues to battle stubborn inflation with high rates.
Bottom line
Rates near quarter-century highs are quite a pandemic-era switch.
Initially, the Fed backstopped a coronavirus-chilled economy with cheap money. Mortgage rates hit a historic low of 2.65% in January 2021 and stayed below 4% until the spring of 2022.
House hunters took advantage of the discounted financing to meet pandemic urges to have larger living quarters. Prices rose.
Next, the Fed rate-hike campaign created a mix of pricier loans and, to date, obstinately expensive homes. And the central bank won’t rapidly pivot to rate cutter.
So who can afford to buy?
Well, look at it this way: California sales activity is so depressed it’s running near lows not seen since 2007, the bubble-busting days just before the Great Recession’s financial meltdown.
Geographically speaking
Let’s look at how rising rates and prices are playing out among the state’s 10 largest counties, ranked in order of payment shock …
Los Angeles County: 146% payment hike since February 2020 – $5,116 on the $914,640 September price vs. $2,078 on the pre-pandemic $580,690 median. So prices are up 58%, with rising rates creating the rest of the cost bump.
Orange County: 133% payment hike – $7,328 on $1.31 million September price vs. $3,149 on $880,000 in 2020 (49% price increase).
San Diego County: 127% payment hike – $5,443 on $973,100 September price vs. $2,398 on $670,000 in 2020 (45% price increase).
San Bernardino County: 126% payment hike – $2,657 on $475,000 September price vs. $1,177 on $329,000 in 2020 (44% price increase).
Fresno County: 121% payment hike – $2,293 on $410,000 September price vs. $1,038 on $289,950 in 2020 (41% price increase).
Riverside County: 119% payment hike – $3,356 on $600,000 September price vs. $1,532 on $428,000 in 2020 (40% price increase).
Alameda County: 115% payment hike – $7,272 on $1.3 million September price vs. $3,382 on $945,000 in 2020. (38% price increase).
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Santa Clara County: 115% payment hike – $10,365 on $1.85 million September price vs. $4,832 on $1.35 million in 2020 (37% price increase).
Contra Costa County: 114% payment hike – $4,874 on $871,250 September price vs. $2,274 on $635,250 in 2020 (37% price increase).
Sacramento County: 114% payment hike – $3,049 on $545,000 September price vs. $1,426 on $398,500 in 2020. (37% price increase).
Jonathan Lansner is the business columnist for the Southern California News Group. He can be reached at jlansner@scng.com