Lower interest rates and stabilizing home prices combined to make it easier for more Californians to purchase a home in the first quarter of 2015, according to the California Association of REALTORS®. This is the second consecutive quarter of improvements for the state and the highest level since second-quarter 2013.
The percentage of home buyers who could afford to purchase a median-priced, existing single-family home in the state in first-quarter 2015 rose to 34 percent from the 31 percent in the fourth quarter of 2014 and up from 33 percent in the first quarter a year ago, based on the state Realtor group's Traditional Housing Affordability Index (HAI). California's housing affordability index hit a peak of 56 percent in the first quarter of 2012.
Home buyers needed to earn a minimum annual income of $87,700 to qualify for the purchase of a $442,430 statewide median-priced, existing single-family home in the first quarter of 2015. The monthly payment, including taxes and insurance on a 30-year, fixed-rate loan, would be $2,190, assuming a 20 percent down payment and an effective composite interest rate of 3.97 percent.
The median home price was $418,570 in first-quarter 2014, and an annual income of $86,800 was needed to purchase a home at that price. The effective composite interest rate in first-quarter 2014 was 4.46 percent.
Seventeen regions saw improvement from the previous quarter, while nine regions had declines, and two were unchanged. Marin, San Luis Obispo, and Monterey counties saw the largest year-to-year improvements in affordability, mainly due to increases in median annual household income and interest rate declines. Contra Costa, Solano, and San Joaquin counties experienced the largest year-to-year declines in affordability, resulting from double-digit home price growth.
The report found affordability in Santa Clara and Sacramento counties held steady from the previous quarter, primarily due to moderate home price growth, which was offset by interest rate declines. Contra Costa, Santa Barbara, and San Mateo counties posted the largest quarter-to-quarter declines in affordability as the result of strong home price gains.
In Santa Clara County, 22 percent of homebuyers could afford a median-priced existing single-family home in the first quarter of 2015, unchanged from Q4 2014 and Q1 2014. Home buyers needed to earn a minimum annual income of $178,400 to qualify for the purchase of a $900,000 countywide median-priced, existing single-family home in the first quarter of 2015. The monthly payment, including taxes and insurance on a 30-year, fixed-rate loan, would be $4,460.
"Housing affordability is still an issue of concern. The San Francisco Bay Area continues to be the least affordable region in the state, but home prices have remained steady in Santa Clara County and with lower interest rates. It's been good for buyers. Sales have certainly picked up in the last month," said Chris Isaacson, president of the Silicon Valley Association of REALTORS®.
According to C.A.R.'s April sales report, closed escrow sales of existing single-family detached homes in Santa Clara County rose 31 percent from March and were up 11 percent from April 2014.
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.
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For further information, please email or call the SILVAR office at (408) 200-0100.