Affordability Crisis Looming?

Nef Cortez

By Nef Cortez

As the real estate market continues to chug along with a strong price trend increase, the question of affordability is at the forefront of many discussions. The obvious center of discussion is the real estate industry itself, including real estate agents, mortgage originators or loan agents, escrow companies, title companies, and other affiliated service companies whose businesses are directly tied in to the real estate market.  It is a discussion that is central to the issues of housing the lower income households as well as the homeless throughout the state of California.

The California Association of Realtors (C.A.R.) reported out in May the Housing Affordability Index (HAI) for the first quarter of 2018.  It reported that there was a slight increase in affordability, with the Housing Affordability Index (HAI) rate statewide  increasing from 29% to 31%.  The HAI of 31% means that thirty-one percent of the California households could afford to purchase the $538,640 median-priced home (the median price being the price in which one-half of the homes sold for less and one-half of them sold for more).

The analysis assumes a down payment of 20%, which would be, for the median-priced home in California in the first quarter of 2018, approximately $108,000.00. The analysis also determined that the annual household income needed to be at least $111,500.00 in order to make the monthly payments of $2,790.00, which would include principal, interest, and taxes on a 30 year mortgage at approximately 4.45%.

Utilizing the same assumptions for the Diamond Bar real estate market, the numbers are striking in respect to the low affordability index of the median priced home in Diamond Bar.  The first quarter of 2018 saw the Median Sales Price (MSP) of the Single Family Detached Housing Residence (SFDHR or SFR) at $735,000.00.  The monthly payments of approximately $3,800.00 would require a monthly household income of $12,667.00, or $152,000.00 annual income.  Less than 16% of California households earn sufficient income to qualify for the Median Sales Price home in Diamond Bar.  According to Bruce Norris, an expert in the real estate investment world of Southern California, any time affordability falls below 20% for a housing market it can be one of the indicators of a housing market weakness. Is this an indication of a slowing of price appreciation in Diamond Bar? This is a developing story…stay tuned.

This article was written by Nef Cortez who is a licensed Real Estate Broker, Ca BRE # 00560181, licensed since 1976. He can be reached for more information via e-mail at, or website Please feel free to email any questions regarding real estate.