Housing Affordability

by Christine Braun and Tori Tsolis | Nov 18, 2015

Santa Barbara home values continue their steady rise since early 2012, when the median home value hit a low of 55% of the pre-recession peak value. The newest release of Zillow’s data puts prices back to 79% of their pre-recession values with 0.7% growth since August. Although prices continue to rise, growth has dramatically slowed, increasing 5% since September 2014 compared to a year-over-year growth rate of 10% in September 2014 and 20% in September 2013. With prices beginning to steady, but mortgage rates rising as expectations grow over the Feds decision to raise rates, where does this leave Santa Barbara’s housing affordability?


The figure above shows Zillow’s measure of mortgage affordability since 1979. Through the housing bubble Santa Barbara’s affordability measure was above both Los Angeles and San Francisco. The measure peaked in 2005, reaching 0.76 and implying that 76% of the median monthly household income was required to pay the mortgage on the median home. Currently this index is at 37%, slightly below Los Angeles (40%), San Francisco (41%) and San Luis Obispo (38%), but still above 30% which is generally considered the maximum amount of monthly income that should be spent on a mortgage payment.


The California Association of Realtors provides an alternative measure of affordability for which they calculate the percent of people that would pay no more than 30% of their monthly income for a mortgage on the median home in an area. The figure above shows this statistic for the second quarter of 2007, when affordability was at its lowest throughout California and the second quarter of 2015. The measure shows that currently about 16% of people living in Santa Barbara can afford the mortgage of the median home. Although this value is low, San Francisco is currently the least affordable area in California where only 10% of people can afford the median mortgage.

Santa Barbara may no longer be the least affordable area in California, but forecasts from Zillow and increasing rates suggest we may see a decrease in affordability in the county. Zillow projects housing prices to increase by 4.3% through the county and by 5.6% in Santa Barbara City over the next year. With the projection for the city home values higher than projections for Los Angeles (2%), San Louis Obispo (3.9%) and San Francisco (4.8%), Santa Barbara may soon have the least affordable housing again.