With home prices declining across the country, housing became more affordable for individuals and families in the last quarter of 2007. Both the National Association of REALTORS® and the California Association of REALTORS® report the affordability index rising because of these conditions.
According to NAR Chief Economist Lawrence Yun, "Significant price declines in some local markets have sharply and quickly improved local affordability conditions, and are inducing buyers to return to the marketplace."
The NAR housing affordability index is forecast to rise 14 percentage points to 127 in 2008. In February, C.A.R. reported the percentage of households that could afford to buy an entry-level home in California stood at 33 percent in the fourth quarter of 2007, compared with 25 percent for the same period the prior year.
C.A.R.'s First-time Buyer Housing Affordability Index measures the percentage of households that can afford to purchase an entry-level home in California. The minimum household income needed to purchase an entry-level home at $411,170 in California in the fourth quarter of 2007 was $82,200, based on an adjustable interest rate of 6.21 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 $2,740 for the fourth quarter of 2007.
For Santa Clara County, housing affordability for first-time homebuyers edged up a bit from the third quarter figure, but was not in the level of the previous year. In the fourth quarter of 2007, affordability was at 24 percent, up from 21 percent in the third quarter, but still down from 29 percent in the fourth quarter of 2006.
The minimum household income needed to purchase an entry-level home at $718,530 in Santa Clara County in the fourth quarter of 2007 was $143,700. The monthly payment, including taxes and insurance was $4,790 for the fourth quarter of 2007.
Realtors continue to support local policies that seek to make housing more affordable for everyone, so individuals and families can attain the dream of homeownership, said Silicon Valley Association of REALTORS® President Leannah Hunt.
"We are continuing to interface with all municipalities to encourage them to help identify sites for more affordable housing," said Hunt, who is a Realtor with Coldwell Banker. "The problem is much of our value is in the land alone, but many communities have policies that set aside a portion of new housing developments for affordable housing."
"Homeownership is a great financial and personal investment," said John Tripp, who is with Foundation Trust in Campbell and is a past president of SILVAR. "Studies also show many social benefits are derived from homeownership. Homeownership strengthens educational achievement among children, increases volunteerism and political participation, and reduces crime levels in communities."
According to C.A.R.'s report, during the fourth quarter of 2007, the High Desert region was the most affordable in the state, with an index of 54 percent, followed by the Sacramento region at 53 percent. Monterey was the least affordable region in the state at 20 percent, followed by the Santa Barbara region at 21 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 email or call the SILVAR office at (408) 200-0100.