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REALTOR®: California Entry-level Housing Affordability Remained at 64 percent in the Fourth Quarter of 2009

Santa Clara County first-time home buyer affordability index drops slightly.

Wednesday, February 24, 2010

The California Association of REALTORS® reports the percentage of households that could afford to buy an entry-level home in the state remained at 64 percent in the fourth quarter of 2009, compared with a revised 61 percent for the same period a year ago. However, the first-time buyer affordability index dropped slightly in some regions, including Santa Clara County, indicating the pendulum has started to swing back in some of the higher-end markets in the state.

The state REALTOR® association's first-time buyer housing affordability index measures the percentage of households that can afford to purchase an entry-level home in California. The index is the most fundamental measure of housing well-being for first-time buyers in the state.

The minimum household income needed to purchase an entry-level home at $257,940 in California in the fourth quarter of 2009 was $44,100, based on an adjustable interest rate of 4.5 percent and assuming a 10 percent down payment. First-time buyers typically purchase a home equal to 85 percent of the prevailing median price. The monthly payment, including taxes and insurance, was $1,470 for the fourth quarter of 2009.

At $44,100, the minimum qualifying income was 4 percent lower than a year earlier when households needed $45,900 to qualify for a loan on an entry-level home. Overall, home prices remained below peak levels, resulting in an improvement in housing affordability compared with the previous year.

In Santa Clara County, the percentage of households that could afford to buy an entry-level home dropped slightly to 52 percent in the fourth quarter of 2009, compared with 53 percent the same period a year ago. The minimum household income needed to purchase an entry-level home at $497,250 was $85,200. The monthly payment, including taxes and insurance, was $2,840 for the fourth quarter of 2009.

Jeff Bell, president of the Silicon Valley Association of REALTORS®, said he expects the affordability level to drop even more as home prices in the region continue to rise. "We were happy to see that more individuals and families could afford to purchase a home in the county, which is considered one of the more expensive places to live in the state of California," Bell said. "Unfortunately, as the market improves and home prices adjust to their values, no doubt we will see the affordability index drop, particularly in the Silicon Valley region."

Bell said according to figures from the California Association of REALTORS®, affordability in Santa Clara County peaked at 62 percent in the first quarter of 2009, then steadily dropped to 58 percent in the second quarter and then to 53 percent in the third quarter. Accurately reflecting the state of the housing market at the time, it appeared least affordable for first-time home buyers to purchase a home in Santa Clara County in the third quarter of 2008. At that time, only 41 percent of households could afford to buy an entry-level home, according to the state trade association's data.

"The past few months have created a window of opportunity for first-time buyers, especially with the incentives offered by the federal government," Bell said. "We continue to remind buyers to take advantage of the opportunity, if they can."

The California Association of REALTORS® reports at 84 percent, the High Desert region was the most affordable area in the state. The San Luis Obispo County region was the least affordable in the state at 48 percent, followed by the San Francisco Bay region and Santa Barbara area both at 50 percent.


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.

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