Housing affordability deteriorated in 2022 for all California ethnic home-buying groups, as home prices soared to record highs last year, and interest rates jumped to levels not seen in more than a decade, the California Association of Realtors (C.A.R.) said April 5.
Twenty-one percent of all Californians earned the minimum income needed to purchase a home in 2022, down from 27% in 2021. At the same time, housing affordability for white/non-Hispanic households fell from 32% in 2021 to 26% in 2022. Twelve percent of Black and Hispanic/Latino households could afford the same median-priced home in 2022, down from 16% and 17% in 2021, respectively.
The significant difference in housing affordability for Black and Hispanic/Latino households illustrates the homeownership gap and wealth disparity for communities of color, which could worsen as the economy slows and rates remain elevated in 2023.
Housing affordability was better for Asians but also declined from the prior year, with the index registering 31% of Asian homebuyers who could afford the median-priced home in 2022, down from 38% in 2021, according to C.A.R.’s Housing Affordability Index.
The housing affordability gap between Blacks and the overall population in California improved from 11.7 percentage points in 2021 to 9.8 percentage points in 2022, and the gap for Hispanics/Latinos improved from 10.5 percentage points in 2021 to 9.4 percentage points in 2022.
According to the Census Bureau’s American Community Survey, the 2021 homeownership rate for all Californians was 55%, 63% for whites, 60% for Asians, 44% for Hispanics/Latinos and 37% for Blacks.
With Black and Latino families having much less wealth than the national average, C.A.R. last year strongly advocated for funding the California Dream Ffr All Shared Appreciation Loan assistance program, which provides a loan for 20% of the home purchase price, in the California 2022-2023 state budget. This program will help bridge down payment and closing cost hurdles that people of color often experience more acutely and allow many working Californians to get on the housing ladder and gain the benefits of homeownership.
Additionally, in an effort to address California’s growing housing affordability crisis and racial homeownership divide, C.A.R. has partnered with nonprofit housing organizations to provide closing cost grants up to $10,000 for eligible first-time home buyers from an underserved community. In 2022, C.A.R. awarded $1 million in closing cost grants through its Housing Affordability Fund’s Closing Cost Assistance program.
C.A.R.’s Housing Affordability Index (HAI) measures the percentage of households that can afford to purchase a median-priced, single-family home in California. C.A.R. also reports affordability indices for regions and select counties within the state. The index is considered the most fundamental measure of housing well-being for home buyers in the state.
A minimum annual income of $186,800 was needed to qualify for the purchase of a $822,320 statewide median-priced, existing single-family home in 2022. The monthly payment, including taxes and insurance on a 30-year, fixed-rate loan, would be $4,670, assuming a 20% down payment and an effective composite interest rate of 5.47%. The 2022 California median income for hites was $105,640, $120,040 for Asians, $76,310 for Hispanics/Latinos and $64,190 for Blacks — an income gap of nearly one-third that of the overall population, which was $93,380.
Key points from C.A.R.’s 2022 Housing Affordability by Ethnicity report include:
• Of the major regions for which C.A.R. tracks affordability by ethnicity, the affordability gap between Black and the overall population in 2022 was the largest in Contra Costa, Kern and Santa Clara counties, with each registering a gap of -14%. Other counties that had a double-digit affordability gap for Black households include San Francisco (-12%), Alameda (-11%), San Diego (-11%) and Sacramento (-11%).
• For Hispanic/Latino households, the affordability gap was the biggest in Santa Clara (-12%), Contra Costa (-11%), Ventura (-9%) and San Diego (-9%).
• At an affordability index of 7%, Alameda, Santa Clara and San Diego were the least affordable counties for Black households, while Fresno and Riverside were the most affordable counties at 31% for the ethnic group.
• The least affordable county in 2022 for Hispanic/Latino homebuyers was Orange County at 8%, and the most affordable was Kern at 32%.
• For Asian households, Orange County was also the least affordable, with 15% earning the minimum income required to buy a median-price home. Kern was the most affordable county with 54% of Asian households having the minimum income required to buy a median-priced home.
• San Mateo was the least affordable county for white households, with 14% earning the minimum income required to buy a median-price home. Fresno was the most affordable at 48%.
Leading the way in California real estate for more than 110 years, the California Association of Realtors (www.car.org) is one of the largest state trade organizations in the U.S. with more than 200,000 members dedicated to the advancement of professionalism in real estate. C.A.R. is headquartered in Los Angeles.