There is good news amid what many see as a "downturn" in the real estate market. According to the California Association of REALTORS®, housing is becoming more affordable in California and many parts of the Bay Area. The percentage of households that could afford to buy an entry-level home in California stood at 48 percent in the second quarter of 2008, compared with 24 percent for the same period a year ago, according to a report released by C.A.R. this week.
The minimum housing income needed to purchase an entry-level home at $329,120 in California in the second quarter of 2008 was $62,870, based on an adjustable interest rate of 5.69 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 $2,100 for the second quarter of 2008.
At $62,870, the minimum qualifying income was 38 percent lower than a year earlier when households needed $101,440 to qualify for a loan on an entry-level home. Recent decreases in home prices and mortgage rates have brought affordability into better alignment with income levels of the typical California households, where the median household income is $59,160.
While pleased with the C.A.R. report, Mark Burns, past president of the Silicon Valley Association of REALTORS®, put things in perspective.
"Home affordability in Silicon Valley has always been a struggle for everyone. Despite median prices, statewide affordability indexes, and the like extolling how much better the climate is to purchase a home these days, it is the same as it always has been. Five years ago rates for fixed rate loans dipped into the low to mid-4 percent range," said Burns. "Home prices were rising rapidly and most people were paying over the top premiums in multiple offer battles. Today you may find it easier to negotiate a 'reasonable' price for a home where values have declined from their peaks, but fixed rates hover in the mid to high 6 percent range now. There is the tradeoff. Everything balances out."
At 68 percent, the High Desert region was the most affordable area in the state. The San Francisco Bay Area region was the least affordable in the state at 32 percent, followed by the Santa Clara region at 33 percent. The Monterey, Northern Wine Country, Palm Springs/Lower Desert, Santa Barbara County, Southern California, Merced, Riverside, and Sonoma regions all reached record-high affordability levels in the second quarter of 2008.
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.