A report just released by the California Association of Realtors reveals the percentage of households who could afford to buy an entry-level home in Santa Clara County dropped slightly during the first quarter of 2007, compared to last year. Entry-level housing affordability from January to March 2007 in the state of California also slipped compared with the same period last year.
The percentage of households who could afford to buy an entry-level home in Santa Clara County stood at 27 percent in the first quarter of 2007, compared with 29 percent for the same period last year. In the state of California, 25 percent of households could afford to buy an entry-level home in the first quarter of 2007, compared with 26 percent for the same period a year ago.
The First-time Buyer Housing Affordability Index measures the percentage of households that can afford to purchase an entry-level home in California. First-time buyers typically purchase a home equal to 85 percent of the prevailing median price.
According to the report, at a median price of $669,800, a first-time homebuyer in Santa Clara County would have to have a qualifying income of $135,050 and a monthly payment including taxes and insurance of $4,500.
Affordability has become a problem, especially in places like Silicon Valley, which offer good climate, good schools, a good economy, but not much space for residential development.
"Look around the Valley and you'll find we are 'built out,'" said Silicon Valley Association of Realtor president, Mark Burns. "You have to travel pretty far out to find large areas of land that could be developed that aren't already or protected from future development by zoning."
"It is simply a factor of economic viability. Newly built properties will sell for less (and become potentially unprofitable) when the commute and lack of necessary of services is beyond a tolerable level," explained Burns. "My clients' tolerance generally seems to be about an hour each way to work. This could be as little as 15-20 miles. With our population and job growth, this will expand by itself without development in the far corners of our region; thus the result that we are not going to have vast numbers of new houses coming anytime soon."
Home values in the region appear resistant to market changes. Burns noted, even as the housing market transitions to more normal conditions, homes in Silicon Valley continue to appreciate, and with interest rates still low, Burns believes it is a good time to buy a home in the area and an excellent long-term investment.
"I run into someone almost every day waiting for the market to drop 20 percent or 30 percent, or even more. Then they will move in to pick up some bargains. In my 22 years experience in Silicon Valley, these people are almost never rewarded," said Burns. "They wait, prices go up, and eventually they knuckle under and purchase something 5 percent to 10 percent higher than they could have when they first started looking."
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.
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