Further indicating California's real estate market could be in for a correction, Silicon Valley's affordability index slipped further to 16 percent in March, the third lowest on record.
The index of one of California's leading regional real estate markets was last at 16 percent in October, 1989, just as the market was slipping into a recession. The lowest recorded index ever for the area was 13 percent in June, 1989, according to the California Association of Realtors.
CAR's monthly housing affordability index measures the percentage of households that can afford a median-priced single-family home in California. The index is the most fundamental measure of housing well-being in the state, the association says.
In Silicon Valley, that means that fewer than two in 10 Silicon Valley households can afford the median priced home.
Housing affordability statewide fell too -- down 8 percentage points from March 1999 to 31 percent in March this year. Nationwide, affordability was much better, 53 percent in March, down from 56 percent a year ago.
"The last time housing affordability was this low (statewide) was in June 1992, when it was 30 percent," said CAR president Richard F. Gaylord.
The time difference in the low points in Silicon Valley and California are significant for the nation. Just as the state of California lags behind the ups and downs in Silicon Valley, the nation often lags behind California.
"The median price of a home, which rose to an all-time high of $238,870 in March, coupled with rising mortgage interest rates, is putting home ownership out of reach for many families in California."
In addition to mortgage rates now averaging above 8 percent and rising, what's particularly troublesome for California is a stock market that won't cooperate at a time when it's common to compensate employees with stock options and other Wall Street perks.
The region's housing is also among the most expensive in the nation.
In Silicon Valley, the median selling price of single family homes surpassed the half million dollar mark in February. The National Association of Home Builders recently reported the nation's five most expensive communities were in California.
Some say market prices have peaked in Silicon Valley and already have begun to slide, as inventory grows and stock-market weary consumers think twice about buying during what could be a transition.
Home buyers find it even more difficult to buy homes in other San Francisco Bay Area communities. The state's lowest March affordability rates were 12 percent in the City of San Francisco, followed by 13 percent for Contra Costa and San Mateo counties and 14 percent in Monterey, outside the Bay Area.
In Southern California, San Diego County was the least affordable, registering 25 percent, followed by Orange County at 28 percent.
In Los Angeles County, affordability was 37 percent and in Ventura County it was 32 percent.
Living in the desert mountains remains a bargain. The High Desert region was the state's most affordable area with a 72 percent affordability index.
With some regions nearing the point where only one-in-10 households can afford to buy the median priced home, experts are concerned about California's economic health.
"If this trend continues, it could have long-term consequences on the overall economic health of the California economy," said Leslie Appleton-Young, CAR's vice president and chief economist.