President's Corner #12
C.A.R. reports entry-level housing affordability at 25 percent in California
As with so many headlines, this one is misleading. Have you heard the old adage, “If I have one foot in boiling water and another in freezing water, on an average I’m comfortable”? If you’ve read this space for long, you know I’m repeating myself. Statewide averages don’t accurately depict individual markets…and as you’ve read here before, “all real estate is local.”
Although it IS true that over the whole of California, only 25% of first-time homebuyers can afford to buy a home, this percentage varies widely depending on the area. Here’s the CAR report. I’ll end this column with a bit of commentary.
“LOS ANGELES (March 1) The percentage of households who could afford to buy an entry-level home in California stood at 25 percent in the fourth quarter of 2006, compared with 27 percent for the same period a year ago, according to a report released today by the CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.).
C.A.R.’s First-time Buyer Housing Affordability Index (FTB-HAI) measures the percentage of households that can afford to purchase an entry-level home in California. C.A.R. also reports first-time buyer indexes for regions and select counties within the state. 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 $477,400 in California in the fourth quarter of 2006 was $96,760, based on an adjustable interest rate of 6.36 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 $3,230 for the fourth quarter of 2006.At 41 percent, the High Desert and Sacramento regions were the most affordable C.A.R. regions in the state. Santa Barbara and Los Angeles were the least affordable regions in the state at 19 percent.”
So if I add 41 percent and 19 percent and divide by two, I get 30 percent as the “average” of the two. And that average alone tells me nothing about any specific area. (Since the state average is only 25 percent, we can deduce that there are more less-affordable areas than more-affordable areas).
THE GOOD NEWS in the above article is that the “Sacramento region” of which we are a part, is one of the two most-affordable areas in the state for first-time homebuyers (and other buyers, for that matter). That’s why our area continues to attract Buyers from other less-affordable areas of the state. In strong markets and soft markets, this is a good place to own real estate!
As with so many headlines, this one is misleading. Have you heard the old adage, “If I have one foot in boiling water and another in freezing water, on an average I’m comfortable”? If you’ve read this space for long, you know I’m repeating myself. Statewide averages don’t accurately depict individual markets…and as you’ve read here before, “all real estate is local.”
Although it IS true that over the whole of California, only 25% of first-time homebuyers can afford to buy a home, this percentage varies widely depending on the area. Here’s the CAR report. I’ll end this column with a bit of commentary.
“LOS ANGELES (March 1) The percentage of households who could afford to buy an entry-level home in California stood at 25 percent in the fourth quarter of 2006, compared with 27 percent for the same period a year ago, according to a report released today by the CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.).
C.A.R.’s First-time Buyer Housing Affordability Index (FTB-HAI) measures the percentage of households that can afford to purchase an entry-level home in California. C.A.R. also reports first-time buyer indexes for regions and select counties within the state. 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 $477,400 in California in the fourth quarter of 2006 was $96,760, based on an adjustable interest rate of 6.36 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 $3,230 for the fourth quarter of 2006.At 41 percent, the High Desert and Sacramento regions were the most affordable C.A.R. regions in the state. Santa Barbara and Los Angeles were the least affordable regions in the state at 19 percent.”
So if I add 41 percent and 19 percent and divide by two, I get 30 percent as the “average” of the two. And that average alone tells me nothing about any specific area. (Since the state average is only 25 percent, we can deduce that there are more less-affordable areas than more-affordable areas).
THE GOOD NEWS in the above article is that the “Sacramento region” of which we are a part, is one of the two most-affordable areas in the state for first-time homebuyers (and other buyers, for that matter). That’s why our area continues to attract Buyers from other less-affordable areas of the state. In strong markets and soft markets, this is a good place to own real estate!
posted by Larry Underhill at 09:27
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