Affordability concerns continued to impact the residential real estate market in California, with the share of first-time buyers declining to their second lowest level from 30.5 percent in 2005 to 27.1 percent in 2006, according to a report released today by the California Association of Realtors® (C.A.R.).
C.A.R. has pegged the state's first-time buyer housing affordability index for the third quarter of 2006 at 24 percent. In the Santa Clara region, C.A.R. disclosed the percentage of first-time buyers able to afford a median-priced home stood at 26 percent during 2006, compared with 33 percent in 2005.
Based largely on the association's 26th Annual Housing Market Survey, "The State of the California Housing Market" examined trends in buyer and seller behavior during 2006, a transition year in which statewide sales of existing single-family homes decreased 23 percent, while price appreciation slowed dramatically as the year progressed.
"Home buyers with zero-down payments increased significantly from 4.5 percent in 2000 to 21.1 percent in 2006," said California Association of Realtors Vice President and Chief Economist Leslie Appleton-Young. "Two out of five first-time buyers made a zero-down payment on their home purchase, while just one in 10 repeat buyers purchased their home with no down payment.
Twenty-nine percent of first-time buyers purchased a condo or a town home in 2006 compared with 33 percent in 2005. The proportion of first-time buyers who purchased a single-family home increased slightly from 61 percent in 2005 to 65 percent in 2006, but still remained significantly below the 72 percent recorded in 2004. The median first mortgage amount for first-time buyers increased 6.8 percent from $347,800 to $371,600.
Housing affordability continues to be a concern, especially in Silicon Valley, where demand for housing is high, but new housing developments, mostly condominiums, are still out of reach for many individuals and families, said Silicon Valley Association of Realtors® (SILVAR) President Mark Burns.
"As it becomes more expensive for essential services providers like police, firefighters, government employees, teachers, and others to live and work here, economic pressure will increase for communities to provide subsidies for housing costs for our essential labor force that cannot afford to live here otherwise," said Burns, who has been a Realtor for 21 years.
"First-time homebuyer's programs and other programs for qualified individuals sponsored by public and private entities throughout the Valley currently help bridge some of the gap in affordability and will continue to do so," he added.
Burns outlined the problem facing the county.
"It would be foolish to believe that we can suddenly cause home ownership to become affordable for everyone who wishes to live in Silicon Valley," Burns said. "If that were so, everyone else's home in the Valley would lose the vast majority of its value, causing a potential economic cataclysm for the region."
Burns said a "fine balance" needs to be found and maintained when it comes to helping provide affordable housing.
"We're getting better at it every year but it will always be a problem because of what Silicon Valley is about. It is one of the greatest places in the world to live in and work in. There is simply a price to pay for that luxury," he noted.
Mortgage rates impact home buying, and as interest rates climb, pressure on the housing sector will grow, demand will slow and higher mortgage rates make it more difficult to buy a house, said Judy Hamilton, Bankers Network mortgage planner.
But Hamilton remains optimistic.
"I think this will still be a good year with plenty of loan products that will help consumers buy and sell their properties. We'll continue to work hand in hand with the Realtors to do our job of helping our clients with the purchasing of homes," Hamilton said.
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.