Good Housing News: Median-Priced California Home now Affordable to 44% of Households

http://www.businesswire.com/portal/site/google/?ndmViewId=news_view&newsId=20080520006393&newsLang=en


C.A.R. Reports Entry-Level Housing Affordability Rises 18 Percentage Points in First Quarter

LOS ANGELES--(BUSINESS WIRE)--The percentage of households that could afford to buy an entry-level home in California stood at 44 percent in the first quarter of 2008, compared with 26 percent for the same period a year ago, according to a report released today by the CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.).

....

The minimum household income needed to purchase an entry-level home at $356,350 in California in the first quarter of 2008 was $67,830, based on an adjustable interest rate of 5.65 percent and assuming a 10 percent down payment. First-time buyers typically purchase a home equal to 85 percent of the prevailing median price. The monthly payment including taxes and insurance was $2,260 for the first quarter of 2008.

At $67,830, the minimum qualifying income was 30 percent lower than a year earlier when households needed $96,500 to qualify for a loan on an entry-level home. Recent decreases in home prices and mortgage rates have brought affordability into better alignment with income levels of the typical California household, where the median household income was $50,700.

The First-time Buyer Housing Affordability Index rose 11 percentage points in the first quarter of this year compared to the fourth quarter of 2007 due to a .56 point decrease in the mortgage rate and a 14.3 percent decrease in the entry-level median home price.




With condolences to people who bought at the peak of the bubble, this is a good thing. When prices finally bottom out at around 1999 levels, home ownership will be attainable to middle-class people again, and not those who were fortunate enough to have bought decades ago. Let's hope that sane lending standards will help keep prices sane as well in the future. If prop 13 is ever repealed, California house prices might actually allow working-class people to buy modest homes. It's about time.

but if it drops a tad more, like oh 100,000 more, it will be at the MEDIAN income for the US....

What is wrong with this damn picture

what, another $10,000 in closing? On a $67,000 income???

yeah okay, whatever.

That monthly mortgage payment equals 40% of the monthly income of the median household income. That ain't affordable which is defined as households should not pay more than 30% of their monthly income toward their housing cost. Realtors are a big part of the problem when they try to convince people that they can afford more house than they can in reality. Realtors have a conflict of interest in that they make more money in fees the higher the sales price!

...as they are referring to a state wide median. Utterly useless to anyone who has to live in (for example) the Bay Area, or San Diego, where the medians are much, much higher.

Basically, this says that half of ALL the homes in CA have a market value below $356,350. That particular half of California's housing stock is located in places like Fresno, Bakersfield, Redding, Modesto, Chico, Victorville, and in the barrios of LA and other SoCal cities.

This spin-doctoring is transparent wishful thinking on the part of the real estate association.

Housing prices in the most overpriced markets have, indeed, fallen sharply. But the difference between $650,000 and $580,000 is not that relevant to someone making $60,000 a year. Still far beyond affordability.

realistically,
Bright

to say things like this. However, the fact is that lenders are requiring 20% down to buy a house now, and not a lot of people are able to afford that, so prices are falling...and sales are also falling. If fewer people are buying because fewer people have the upfront money to purchase a home, what does it matter that this income-based (and not available assets + income) measure concludes that more people should be able to afford a home?

The California Realtors Association sent out this press release to keep people optimistic about the market, and a lot of media outlets are doing them a favor by printing this without any critical commentary about the logic...