Higher home prices caused housing affordability to fall in the second quarter of 2012, the California Association of REALTORS® reported last week. The San Francisco Bay Area experienced the largest quarterly declines in housing affordability due to double-digit price increases.
According to C.A.R.'s Traditional Housing Affordability Index (HAI), 51 percent of California home buyers could afford to buy a median-priced, existing single-family home in the state in the second quarter of 2012. This is down from 56 percent in first-quarter 2012, and the same percentage recorded in the second quarter of 2011. Home buyers needed to earn a minimum annual income of $62,390 in order to purchase a $316,230 statewide median-priced, existing single-family home in the second quarter of 2012. The monthly payment, including taxes and insurance on a 30-year fixed-rate loan, would be $1,560, with a 20 percent down payment and an effective composite interest rate of 3.92 percent.
The Bay Area's housing affordability dropped from 45 percent in first-quarter 2012 to 35 percent in second-quarter 2012, the same percentage as second-quarter 2011. San Mateo County was the least affordable among the nine-counties in the Bay Area, with only 23 percent of households able to purchase the county's $790,000 median-priced home.
In Santa Clara County, 32 percent of home buyers could afford to purchase a median-priced, existing single-family home in second-quarter 2012, the same as in second-quarter 2011, but down from 42 percent in first-quarter 2012. In order to qualify for the purchase of a $660,000 median-priced single family-home, Santa Clara County home buyers needed a minimum annual income of $130,220. Their monthly payment, including taxes and insurance on a 30-year fixed-rate loan, would amount to $3,260.
Suzanne Yost, president of the Silicon Valley Association of REALTORS®, said affordability is still at "reasonable levels." She noted in second-quarter 2006, only 12 percent of California home buyers could afford to purchase a $566,800 median-priced home. At that time, the interest rate was at 6.39 percent.
"The strong demand for homes, coupled with the low inventory in the area, has contributed to the steady rise in home prices," explained Yost.
The C.A.R. report explains when compared with the previous year, changes to the affordability index were minimal due to a near-one percent drop in the effective composite interest rate. The effective composite interest rate in second-quarter 2012 was 3.92 percent. The effective composite interest rate in first-quarter 2012 was 4.16 percent and 4.85 percent in the second quarter of 2011.
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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