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Fewer home shoppers able to buy with fast-rising prices, higher interest rates

Fewer home shoppers able to buy with fast-rising prices, higher interest rates

California homeowners are cheering double-digit price gains, but home-shoppers are jeering, as more are unable to purchase their piece of the American Dream.

Fast-rising home prices coupled with higher interest rates – 3.64% today vs. 2.82% a year ago — have greatly curbed the number of families able to buy homes in recent months.

Only 36% of homebuyers could afford the median-priced home during the second quarter, the first time affordability dropped below 40% since third-quarter 2008, according to the California Association of Realtors.

Affordability was at 44% in the first quarter, and 51% in second-quarter 2012, according to the industry association.

The Bay Area is the most expensive market in California.

The Bay Area is the most expensive market in California.

How much does fast-rising home prices affect affordability? The average homebuyer needed to earn at least $80,000 to qualify for the median-priced home of $415,770 during the just-completed quarter.

Homebuyers who earned $62,400 per year could afford the median-priced home — $316,490 – a year ago.

The Bay Area, as always, remains the most difficult market for homebuyers. Only 17% of homebuyers could afford homes during the second quarter in San Francisco and San Mateo. A year ago, about one of every four homeowners could afford a home in those counties.

Santa Barbara was the second-least affordable market at 18%.

Madera County – just north of Fresno – remains the most affordable market, at 71%. But even that county’s affordability has dropped from 77% a year ago.

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