California Is Proving Too Pricey for Many

Fewer consumers can afford to own a home in California’s major metropolitan areas than those in Denver, Seattle, Portland and other Western cities where real estate also is booming, the California Assn. of Realtors warned Wednesday.

The Realtors’ survey found that the number of Californians who can purchase a home slid three percentage points last year to 37%, compared to the national rate of 55%. The state rate had held steady at 40% for the previous three years.

In Orange County, only 34 out of 100 households could afford to pay the median price--its lowest rate since 1991. In Los Angeles County, only 39 of 100 households could afford to pay the median price, the point at which half the home prices are higher and half lower.

Such a gap gives other big Western cities a huge competitive advantage by making California seem less desirable to many families and threatening the state’s economic prosperity.

“After considerable progress made in affordability trends in the 1990s, it’s now beginning to erode again,” said G.U. Krueger, an economist at the Realtors group who compiled the report.

For every 1 percentage point drop in affordability rates, 115,000 California households are priced out of the market, including about 9,400 of them in Orange County, Krueger said.

In Southland counties, the survey’s results found either stagnant or worsening rates: Riverside-San Bernardino fell three points to 53%, and San Diego dropped five points to 33%. Los Angeles County remained even, while Orange County dropped two points.

Home prices have been rising as the state’s economy produces jobs faster than builders can put up new homes. During the early 1990s, when Southern California was mired in a long economic recession, the region registered seven of its 10 slowest home-building years since World War II.

“We’re not building anything like we did in the past,” said John Burns, an analyst at the Meyers Group, an Irvine real estate research firm. “There’s just no supply.”

Statewide, buyers outnumber new home approvals by 64%, Burns said. Moreover, he said, there were three buyers for every new home permit issued in L.A. County, and three buyers for every two permits issued in Orange County.

The Realtors’ findings coincide with a statewide study showing fewer people are moving to California’s highest-priced metropolitan areas. California has the second-lowest homeownership rate among states, second only to New York, according to the U.S. Census Bureau.

“I foresee further erosion in affordability if home prices continue to go up the way they have been over the past year and a half or so,” Krueger said. He added that interest rates will make matters worse at least until the middle of this year.

“We’re not yet at the dismal state we were in 1989,” Krueger said, “but that is a possible future.”