The California Association of REALTORS® reports housing affordability declined in most areas of the state in the second quarter of 2011. C.A.R. attributed this primarily to a seasonal increase in home prices, but if loan limits are reduced it may get even tougher for buyers to afford to purchase a home, especially in Silicon Valley.
According to C.A.R.'s Traditional Housing Affordability Index, the percentage of buyers who could afford to purchase a median-priced, single-family home in California fell to 51 percent in the second quarter of 2011, down from 53 percent in the first quarter. The index was 46 percent in the same period last year. The index measures the percentage of all households that can afford to purchase a median-priced, single-family home in California.
In the April through June period this year, buyers needed a minimum annual income of $63,080 to qualify for the purchase of a $293,580 statewide median-priced home. Their monthly payment, including taxes and insurance, was $1,580, assuming a 20 percent down payment and an effective composite interest rate of 4.85 percent.
Housing affordability in the higher-priced San Francisco Bay Area and in the Central Coast was similarly impacted, but in lower-priced areas like the Central Valley, affordability improved. At 77 percent, housing was the most affordable in San Bernardino County. It was least affordable in San Mateo County, with only 21 percent of households able to afford that county's median-priced home.
In Santa Clara County housing affordability was at 32 percent in the second quarter, down from 37 percent in the first quarter, but up from 28 percent last year. Buyers needed a minimum annual income of $131,070 to qualify for the purchase of a $610,000 median-priced home. Their monthly payment, including taxes and insurance, was pegged at $3,280.
"Our concern is with the expiration of current conforming loan limits on September 30, it will be more difficult and more expensive for those who live in our region to purchase a home," said Gene Lentz, president of the Silicon Valley Association of REALTORS®. "Mid- to high-end housing in Silicon Valley, which has been recovering nicely, will be negatively impacted."
Beginning Oct. 1, the maximum FHA, Fannie Mae, and Freddie Mac conforming loan limit is scheduled to decline to $625,500, from the current $729,750 limit. Early this month lawmakers introduced legislation entitled the "Homeownership Affordability Act of 2011'' (S. 1508), which would extend the current loan limits until December 31, 2013, but no action on the bill has been taken as of this week.
In anticipation of the expiration of current conforming loan limits next month, a number of lenders have already rejected applications at the higher limits ($625,501-$729,750). If unable to acquire a conforming loan, buyers will have to resort to non-conforming or jumbo loans, which carry a higher mortgage interest rate and require a higher down payment.
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.