Monday, November 24, 2008

More Affordable, for Some

Last week, the California Association of Realtors released report on Thursday that stated housing affordability has more than doubled in California during the past year.

CAR said the percentage of households that could afford to buy an entry-level home in the state rose to 53 percent in the third quarter of 2008, compared with 24 percent for the same period a year ago. Those looking to buy in Alameda will find prices have declined by 19% from September of last year, so more buyers now qualify for home loans with lower prices, but it looks like that homes still remain out of reach for many.

CAR's First Time Buyer Housing Affordability Index measures the percentage of households that can afford to purchase an entry-level home. The lower the index number is, the fewer people who can afford to buy a home.

According to the report the statewide minimum household income needed to purchase an entry-level home priced at $287,760 in the third quarter of 2008 was $56,100. The minimum qualifying income was 44 percent lower than a year ago when households needed $100,500 to qualify for a loan on an entry-level home.

This Index is based on an adjustable interest rate of 5.91 percent and assuming a 10 percent down payment. First-time buyers typically purchase a home equal to 85 percent of the prevailing median price. That would peg the monthly payment including taxes and insurance at $1,870 for the third quarter of 2008.

The San Francisco Bay region was the least affordable in the state, but the index there also rose from 18 percent last year to 35 percent this year. In San Francisco County the index went from 15 percent last year to 26 percent. In Alameda County the index rose from 23 percent last year to 39 percent this year, and in Costa Costa County it rose from 16 percent to 30 percent.

So taking a looking at median home prices from DataQuick Information Systems, derived from all types of home sales -- new and existing, condos and single-family, Alameda has seen a 19% decline in prices so an increase.



Sept 2008

Sept 2007

Y-T-Y %

Alameda County









Based on CAR’s formula for the Index, Alameda comes in at about a 25 using their rating System. I used an online calculator to come up with an Alameda example: A person buying a home at the average $564,750, after a 10% down payment you would have a payment of $3,872.49 with taxes, Insurance and PMI. The annual income needed would be $154,896.

According to Census 2000, Alameda’s average household income is $68,376. Although the data is dated, it shows that most of Alameda would have a hard time meeting the requirements. I think that the index shows that Alameda continues to hold value, because affordability has a direct relationship to what consumers desire. Supply and demand in its basic form controls much of of the affordability for home buyers.

If look around the Island, there are several properties that are bargains based on Alameda’s historical value and pricing. Based on the run-up in home value from 2000-2008 many properties are closer to 2000 prices than 2006, so if you now fall into the those who they say can afford the market gets better for you everyday.

Another School House Rock Video "Dollars and Sense": I forgot how educational they were.

1 comment:

  1. Very interesting data presented here. I would not have guessed the affordability index had gone up like that. The flip side, of course, is that when you take into account that peoples down payments have evaporated in the stock market, their incomes have stagnated or worse they have lost their jobs then being "affordable" doesn't mean much.. Not to mention how difficult it is to even get a loan at all right now.