The window of opportunity for first-time home buyers is still open in the golden state of California. The percentage of households that could afford to buy an entry-level home in the state stood at 64 percent in the third quarter of 2009, compared with 55 percent in the same quarter a year ago, according to a report released by the California Association of REALTORS® (C.A.R.).
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 and is considered 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 $247,150 in California in the third quarter of 2009 was $43,500, based on an adjustable interest rate of 4.79 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 $1,450 for the third quarter of 2009.
At $43,500, the minimum qualifying income was 19 percent lower than a year earlier when households needed $53,700 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 $61,030.
The index declined 3 percent in the third quarter compared with the previous quarter, signs that the market continues to stabilize as the median price of an entry-level home increased 10.2 percent.
In Santa Clara County 53 percent of households were able to afford an entry-level home at a cost of $481,100 in the third quarter, up from 41 percent in the same period last year, but down from 58 percent in the pervious quarter, according to the C.A.R. report. A minimum annual income of $84,600 was needed to qualify in Santa Clara County, and monthly payments, including taxes and insurance, came to $2,820.
"These record high affordability conditions, along with the tax incentives, have prompted a record number of first-time home buyers into the market. They clearly see that this is a golden opportunity for them," said Julia Truesdale Keady, president of the Silicon Valley Association of REALTORS®.
The C.A.R. report also noted at 85 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 47 percent, followed by the San Francisco Bay region at 49 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.