The historic-low interest rates and decline in home prices have greatly improved first-time buyer housing affordability in California, and set new record-high levels in all regions of the state during the fourth quarter of 2010, the California Association of REALTORS® reports.
The percentage of first-time buyers who could afford to purchase an entry-level home in California was up 69 percent in the fourth quarter of 2010, matching the record-high set in the first quarter of 2009, according to C.A.R.'s First-time Buyer Housing Affordability Index. The index measures the percentage of households that can afford to purchase an entry-level home in the state. The index measured 66 percent in the third quarter of 2010 and 64 percent in the fourth quarter of 2009.
At 85 percent, the High Desert region was the most affordable area in the state. Affordability for first-time buyers also was up in the San Francisco Bay region, but the region was the least affordable in the state at 55 percent, followed by the San Luis Obispo County and Santa Clara County regions, both at 57 percent.
First-time buyers, who typically purchase homes equal to 85 percent of an area's median price, needed a minimum annual income of $39,600 to qualify for the purchase of an entry-level home of $256,220 during the fourth quarter. The monthly payment, including taxes and insurance, was $1,320, assuming a 10 percent down payment and an adjustable interest rate of 3.39 percent. In the Santa Clara County region, first-time home buyers needed a minimum annual income of $77,400 to qualify for the purchase of a median entry-level home of $502,350. Their monthly payment was $2,580.
Affordability for first-time buyers in the Santa Clara County region was at 53 percent in the third quarter of 2010 and at 52 percent in the fourth quarter of 2009. In the past 10 years, it was least affordable for first-time home buyers to purchase a home in the second and third quarter of 2007, when affordability was only at 25 percent.
With the economy slowly improving, mortgage interest rates have started rising, said Gene Lentz, president of the Silicon Valley Association of REALTORS®. "We could see more people finding affordability more attractive, though many have been afraid to make a move because of the employment situation," Lentz said. "Recent news that the private sector has stepped up hiring in this region will be good for the region's housing market and economy. The rising of mortgage rates may also prompt those who are sitting on the fence to buy now before rates rise even more."
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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