California's high home prices, paired with rising mortgage interest rates, shut out 85 percent of households in the state from the housing market, according to a report released Thursday.
Only 15 percent of California households could afford to buy a median-priced home there in October, the same level as in September and down from 19 percent a year earlier, according to the report from the California Association of Realtors.
The group's measure of home affordability is hovering above a record low 14 percent posted in August. Home prices in California have doubled over the last four years, with prices soaring in coastal urban areas, now among the priciest local home markets in the nation.
Association economist Robert Kleinhenz said the measure will stay at 15 percent or slip to 14 percent through February because home prices will hold steady while mortgage interest rates edge higher.
The median home price in California is off its peak of $568,700 in August, but home buyers now face higher monthly housing costs because mortgages have become expensive to finance, Kleinhenz said.
"We had low interest rates for quite some time and they really opened that floodgate for the pool of home buyers," Kleinhenz said. "Interest rates are generally expected to go up so that's going to pinch that pool."
The minimum household income needed to buy a median-priced home at $538,770 in California in October was $128,480, based on an average effective mortgage interest rate of 6.03 percent and assuming a 20 percent downpayment, according to the realtors' group.
A year earlier, the median price of a California home was $459,530 and the prevailing interest rate was 5.70 percent. The minimum household income needed to purchase a median-priced home then was $106,490.
The realtors association arrives at its affordability measure by assuming home buyers would pay a typical 20 percent downpayment, have an average effective interest rate of 6.03 percent and spend no more than 30 percent of income on monthly mortgage payments.