Lower home prices and record-low interest rates in the third quarter of 2011 contributed to an improvement in housing affordability for California home buyers, according to the California Association of REALTORS®.
C.A.R.'s Traditional Housing Affordability Index (HAI) reveals 52 percent of home buyers could afford to purchase a median-priced, existing single-family home in California in the third quarter of 2011, up from 51 percent in second-quarter and up from 46 percent in the third quarter of last year.
REALTOR® officials say buyers continue to be hesitant about the housing market because of uncertainty about the future of the economy and tighter lender requirements. "While housing affordability has improved in most areas of the state, would-be buyers, especially first-timers, are having difficulty getting loans," said C.A.R. president Beth L. Peerce. "When affordability is high, first-time buyers typically make up a large share of the market, such as in the mid-90s, when first-timers made up half of the market. First-timers have made up just a third of the market this year, illustrating the hurdles many home buyers are experiencing in qualifying for a home loan."
California home buyers needed to earn a minimum annual income of $61,530 to qualify for the purchase of a $292,120 statewide median-priced, existing single-family home in the third quarter of 2011. The monthly payment, including taxes and insurance, would be $1,540, assuming a 20 percent down payment and an effective composite interest rate of 4.63 percent. The effective composite interest rate in second-quarter 2011 was 4.85 percent and 4.78 percent in the third quarter of 2010.
In Santa Clara County, the percentage of home buyers who could afford to purchase a median-priced home in the third quarter of 2011 rose to 34 percent, up from 32 percent in the previous quarter and from 30 percent the same time last year. Home buyers needed to earn a minimum annual income of $123,740 to qualify for the purchase of a $587,500 median-priced single-family home in the third quarter of 2011. The monthly payment, including taxes and insurance, would be $3,090, assuming a 20 percent down payment and an interest rate of 4.63 percent.
Newly released figures from C.A.R. reveal California home sales posted a marginal increase in October and also were above year-ago levels. Closed escrow sales of existing, single-family detached homes edged up to 493,240 units in October, up 0.9 percent from a revised 488,700 in September.
October sales of existing, single-family detached homes in Santa Clara County were down 7.5 percent from the previous month and down 4.6 percent from the previous year. "Lower conforming loan limits have had a cooling effect on home sales in October, particularly in the higher cost markets across the state," said Gene Lentz, president of the Silicon Valley Association of REALTORS®. "We hope Congress will reinstate the higher loan limits soon because right now, it is hurting our market with buyers having to face higher down payments, higher mortgage rates, and stricter loan qualification requirements."
Regionally, housing affordability rose in most counties in the San Francisco Bay Area but was down in Los Angeles County and Fresno County. At 77 percent, San Bernardino County was the most affordable, while San Mateo County was the least affordable, with only 25 percent of households able to purchase the county's median-priced home.
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.