Housing became a little more affordable for first-time homebuyers in California in the first quarter of this year, according to a report released by the California Association of Realtors. The report said 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.
The association’s First-time Buyer Housing Affordability Index measures the percentage of households that can afford to purchase an entry-level home in California. The index is the most fundamental measure of housing well-being for first-time buyers in the state.
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 percentage of households that could afford to buy an entry-level home in Santa Clara County increased to 31 percent during the first quarter of this year, compared with 27 percent in the same period a year ago. The affordability index increased 7 percent from the fourth quarter of 2007.
The minimum household income needed to purchase an entry-level home at $663,000 in Santa Clara County in the first quarter of 2008 was $126,200, based on an adjustable interest rate of 5.65 percent and assuming a 10 percent down payment. The monthly payment, including taxes and insurance, was $4,210 for the first quarter of 2008.
Leannah Hunt, president of the Silicon Valley Association of Realtors, said in addition to the decrease in the mortgage rate and entry-level median home price, the increase in conforming loan limits and relaxation of FHA requirements will help first-time homebuyers. “Our association is pushing to make the temporary increases to the conforming loan limits permanent. If this happens and legislation to improve FHA programs and Fannie Mae and Freddie Mac regulation passes, this will strengthen the housing market and make housing more affordable, especially for families living in high-cost areas like California.”
At 64 percent, Sacramento County and the High Desert region were the most affordable areas in the state. Monterey was the least affordable area in the state at 29 percent, followed by the Bay Area at 30 percent.
Information provided in this column is presented by the members of the Silicon Valley Association of Realtors at www.silvar.org. Send questions on any topic to rmeily@silvar.org.