Is LA Housing Unaffordable?

A recent LA Times Article mentioned that only 22% percent of households can afford the Median priced home in Los Angeles.  In a perfect world, the average household should be able to afford the average house.  What’s different about LA is that we will always have a large part of the population, and more specifically at the lower income levels that will simply be renters for life.  Still the 22% percent number is too low for a healthy real estate market.  Affordability is made up of various parts which include wages, home prices and interest rates.  If interest rates go higher, prices tend to not adjust (fall) as rapidly so a snapshot of the market will show that affordability is low. General market trends appear to show that buyers are resisting price increases.  I would look for this number to increase.  These days, what would help entry-level buyers is to come in with a larger down payment.  Too many buyers are relying on low-down payment programs which require MI and elevate the payment higher than  if they had 20% down.  Families who don’t know how to save should use extreme caution when buying with little down as they may have difficulty adjusting to a higher payment than renting, along with the unexpected expenses of homeownership.


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