Fri, Nov 18, 2022 10:00 AM
By Madison Hirneisen, The Center Square
Homebuyers in several California cities lost hundreds of thousands of dollars in purchasing power when comparing affordable home prices in 2021 to 2022, according to new data analysis of the nation’s largest 100 cities.
Potential buyers in the Bay Area city of Fremont topped the analysis as the city with biggest losses in purchasing power this year compared to 2021, according to new data from Point2, an international real estate search portal. The analysis estimates that buyers in Fremont lost over $243,000 in purchasing power.
Buyers in other California cities were also found to lose significant purchasing power – potential buyers in San Jose lost over $200,000 and buyers in San Francisco lost over $198,000, according to the report. San Jose and San Francisco ranked as the second and third among the top 10 cities with the biggest losses in purchasing power.
“Aggressive rate hikes (after the latest increase, the average mortgage rate hovers around 7%), coupled with sky-high home prices mean buyers are bleeding money,” the analysis states.
The report comes as state officials and lawmakers are seeking ways to address California’s housing crisis and growing affordability issues. This year’s budget includes $500 million to establish the California Dream For All program, a program to assist first-time California homebuyers with state funds toward the purchase price of their homes.
The analysis by Point2 found that Irvine, Anaheim and Los Angeles have zero homes priced within an average buyers budget.
The report also analyzed the amount of space the average homebuyer could afford in 2021 compared to what they can afford now. In the span of just a few months, the analysis estimates buyers in the 100 largest cities lost between 92 square feet and 1,140 feet of square space from the home that they could afford.
Within California, Bakersfield was one of the top cities that lost affordable square footage between 2021 and 2022, with an estimated 592 square feet lost. Fresno was estimated to lose 491 square feet, Chula Vista was estimated to lose 428 square feet and Riverside was estimated to lose 424 square feet.
While these losses were smaller than other cities across the nation, the report notes that the average size of a U.S. bedroom is 132 square feet.
“When the interest rate was hovering around 3%, the pain of soaring home prices was just a dull ache compared to the major burden it has become,” the analysis states. “Now, with rates crossing the psychological barrier of 7% (a level not seen in more than two decades) the consequences for homebuyers are crushing.”