As rent continues to hike and housing affordability remains low in California, capable tenants should consider purchasing a house sooner rather than later, based on the housing affordability index released last week by the California Association of Realtors (CAR).
The housing affordability index is the percentage of people who can afford to buy a median-priced, single-family home.
According to CAR, for 2021’s third quarter, 24 percent of Californian households can afford a median-priced home, about $815,000, which is a one percent increase from the second quarter.
However, compared to the 28 percent in the same period last year, the current affordability index is still low.
Economist: Better Buy Now Than Later
Oscar Wei, deputy chief economist at CAR, said the growth of housing affordability will not continue into 2022, as indicated by multiple factors: growing interest rates, cost of living, and housing prices.
Interest rates, which generally correspond to inflation in the cost of living, will logically increase at the beginning of 2022 and through 2023, Wei said.
Although housing affordability remains low, the housing demand, for both rental and purchasing, will remain high and surpass the supply in the foreseeable future, as more young adults form families and people return to work, according to Wei.
Therefore, homebuyers should act as soon as possible. “If you can find something you like and can launch at a low rate, [you] should do it right away,” Wei said.
USC Report: Rent Hike Will Continue Into 2023
Earlier this year, USC Casden Economics Forecast predicted that the rent hike in Southern California might continue in the next two years.
By the end of the third quarter in 2023, rents are expected to increase by $252 over the current level in Los Angeles County, $410 in Orange County, $348 in San Diego County, $310 in Ventura County, and $241 in the Inland Empire, including Riverside and San Bernardino.
The forecast also projected that in 2023, the vacancy rate will remain steady in Los Angeles County and Inland Empire but slightly increase for San Diego County and Orange County.
While the cost of renting and buying a home is expected to get more expensive in Southern California, residents are considering their options.
Ava Bombio, a Torrance tenant in her 20s, said the realtor who recently bought her apartment complex raised the rent. Her mother needs to work two jobs to pay for it, and her family now plans to move to Texas soon due to California’s high cost of rent.
“The cost of living in California is getting out of hand,” Bombio told The Epoch Times. “To afford an apartment, you have to be making probably at least $30 per hour, which is way too high considering a lot of places doing minimum wage.”
Luke Huang, a college senior sharing a single house with seven other tenants, said he has been working as an Uber driver to save up for the down payment on a single house because he’s paying too much rent.
Huang told The Epoch Times he and his girlfriend plan to get married and buy a home as soon as he finishes his graduate studies. “We plan to buy a house in two years and sublet one or two rooms to help pay for the mortgage,” he said.