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Housing Affordability Still Looking Good for First-time Home Buyers

Tuesday, May 18, 2010

Housing affordability in the state of California continues to look good for first-time home buyers, according to the California Association of Realtors. The percentage of households that could afford to buy an entry-level home in California stood at 66 percent in the first quarter of 2010, compared with 69 percent for the same period a year ago, according to a report released last week by the state Realtor association.

The California Association of Realtors First-time Buyer Housing Affordability Indexmeasures 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 $246,270 in California in the first quarter of 2010 was $41,540, based on an adjustable effective interest rate of 4.33 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 $1,380 for the first quarter of 2010.

Affordability remains at a record level, even in the high-cost Silicon Valley region. In the first quarter of this year, 55 percent of households could afford to buy an entry-level home in Santa Clara County, up from 52 percent in the previous quarter and a far cry from only 25 percent in 2007. The same period a year ago, 62 percent of households could afford to purchase an entry-level home in the county. The minimum household income needed to purchase an entry-level home at $476,000 in the county in the first quarter of 2010 was $80,280. The monthly payment, including taxes and insurance, was $2,680.

"Affordability is not going to get better than it is now," California Association of Realtors deputy economist Robert Kleinhenz told Realtor members gathered at a meeting in San Jose last week.

Kleinhenz said purchasing a home has become more affordable due to historically low mortgage interest rates, lower home prices and incentives like the state and federal first-time home buyer credits. First-time home buyers made up 47 percent of the national buyers market in 2009.

There's always the worry that things will slow down once the federal and state tax incentives end. "We are seeing more activity in the high-end market. There are still problems with tight financing, but there continues to be a huge demand for homes in the Silicon Valley, which has always been a prime location. We hope the market's recovery will be sustainable as we move forward," said Jeff Bell, president of the Silicon Valley Association of Realtors.

The state Realtor group's report indicates 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 52 percent, followed by the San Francisco Bay region at 53 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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