SILVAR  :  Newsroom  : Real Estate Articles

Real Estate Articles

REALTOR®: State REALTOR® group reports housing affordability stabilizes in fourth quarter

Wednesday, February 12, 2014

The California Association of REALTORS® (C.A.R.) reported this week that the state's housing affordability held steady in the fourth quarter of 2013, following six consecutive quarters of decline. California housing affordability hit a record high of 56 percent in the first quarter of 2012, but has steadily declined since then, with the sharp rise in home prices.

The percentage of home buyers who could afford to purchase a median-priced, existing single-family home in California was 32 percent, unchanged from the third quarter of 2013, but was down from 48 percent in fourth-quarter 2012, according to C.A.R.'s Traditional Housing Affordability Index (HAI). The index measures the percentage of all households that can afford to purchase a median-priced, single-family home in California.

Home buyers needed to earn a minimum annual income of $89,240 to qualify for the purchase of a $431,510 statewide median-priced, existing single-family home in the fourth quarter of 2013. The monthly payment, including taxes and insurance on a 30-year fixed-rate loan, would be $2,230, assuming a 20 percent down payment and an effective composite interest rate of 4.43 percent. The effective composite interest rate in third-quarter 2013 was 4.36 percent and 3.50 percent in the fourth quarter of 2012.

Housing affordability was mixed around the state, with affordability mostly improving or unchanged in most counties in the San Francisco Bay Area, except Sonoma County, where housing affordability declined. At an index of 67 percent, Madera County was the most affordable county in the state at 60 percent, while San Mateo County was the least affordable at 16 percent.

San Mateo County home buyers needed to earn a minimum annual income of $193,370 to qualify for the purchase of a $935,000 median-priced single-family home in the fourth quarter of 2013. The monthly payment, including taxes and insurance on a 30-year fixed-rate loan, would be $4,830 assuming a 20 percent down payment and an effective composite interest rate of 4.43 percent.

In Santa Clara County, the housing affordability index rose two points from 21 percent in third-quarter 2013 to 23 percent in the fourth quarter. Home buyers needed a minimum annual income of $160,280 to qualify for the purchase of a $775,000 median-priced single-family home in the fourth quarter of 2013. Their monthly payment, including taxes and insurance on a 30-year fixed-rate loan, would be $4,010, with a 20 percent down payment and interest rate of 4.43 percent.

"Homeowners are now starting to see gains in equity, and that's very good news for our area. However, the lack of housing supply and high demand for housing has increased home prices sharply and reduced affordability, especially for first-time home buyers. Home prices are rising faster than incomes and mortgage interest rates, while still considered low compared to a few years back, are above the record lows of a year ago," observed David Tonna, president of the Silicon Valley Association of REALTORS®.

Tonna said REALTORS® are seeking the preservation of federal loan limits, which would help buyers in high-cost areas like Silicon Valley. He explained the Department of Housing and Urban Development (HUD) allowed the temporary loan limits it established as part of the Housing and Economic Recovery Act of 2008 to expire on December 31, 2013. As a result, the loan limits for Federal Housing Administration (FHA)-insured loans for high-cost areas like San Mateo and Santa Clara counties, which were temporarily raised to $729,750, have been reduced to the FHA permanent limit of $625,500 beginning January 1, 2014.

"This change affects borrowers in high-cost housing markets like Silicon Valley, where home prices are well above the national average," said Tonna.

REALTORS® were successful in convincing legislators in 2008 to permanently raise the FHA loan limits from $362,790 to $625,500, but despite aggressive lobbying efforts could not convince Congress to extend the temporary loan limits and make them permanent.


The Silicon Valley Association of REALTORS® (SILVAR) is a professional trade organization representing over 4,000 REALTORS® and Affiliate members engaged in the real estate business on the Peninsula and in the South Bay. SILVAR promotes the highest ethical standards of real estate practice, serves as an advocate for homeownership and homeowners, and represents the interests of property owners in Silicon Valley.

The term "REALTOR®" is a registered collective membership mark which identifies a real estate professional who is a member of the National Association of REALTORS® and who subscribes to its strict Code of Ethics.

Variations of this article have appeared in local area newspapers.

For further information, please contact Rose Meily at SILVAR Public Affairs, email , or phone (408) 200-0109.

» Back to Real Estate Articles

Site Navigation