Dig Deep If You Want To Own A Home

The US Census Bureau released 2008 data on Monday that shows that housing is getting less affordable even though the country and the Bay Area have seen home price drop over the last year few years and continued to decline.

The numbers are staggering, with more than 40 million homeowners spent 30% or more of their household income on housing costs, an increase of 600,000 more families from 2007. The survey includes homeowners and renters and it revealed that there was an increase in renters in 2008. That should not be surprising since thousands have lost their homes to foreclosures and they still need a place to live. Many former homeowners have returned to renting this is reflected in a 142,000 drop in home ownership.

In the Bay Area, nearly half the renters and 53 percent of the homeowners spend more than 30 percent of their income on housing. Even with the high cost of housing, the Bay Area income is also higher. Places like California's Central Valley have higher numbers of renters spending a large portion of their household income on rent with Fresno at 57.2% and Modesto at 58.1%. Miami led the country of homeowners that spend 57.2%. Los Angeles followed closely behind at 55%.

According to the book "Housing America in the 1980s" by John S. Adams rent in the West was 22% in 1970 and 28% in 1980 of household income. Homeowners with mortgages in 1980 spent 19-20% of gross monthly income and houses without mortgages 10-15%.

San Francisco-Oakland-Fremont, CA
Renters spending 30% or more -- 49.5%
Homeowners spending 30% or more -- 53.0%
Renters spending 50% or more -- 25.1%
Homeowners spending 50% or more -- 23.4%

According to the USA Today Story that ran this morning:

Nearly two in five homeowners with mortgages and half of renters paid 30% or more of their before-tax income on housing costs, which is the limit the government sets for determining that housing is unaffordable, according to an analysis of Census data done for USA TODAY by the Joint Center for Housing Studies at Harvard University.

The basis for housing costs for homeowners include mortgage payments, taxes, insurance and utilities. Renter costs include rent and utilities, if they are paid separately.

Here in Alameda the August 2009 median home price of $505,500 require the following for a homeowner. (All numbers are estimated)

Down Payment (10%) -- $50,500
Mortgage (30 year) -- $2,442 month; $29,304
Taxes -- (Annual) -- $6,318
Insurance (Annual) -- $1,200
Utilities (Annual) -- $1,800

Total Annual Cost -- $38,622

The net income a household would need to be right at 30 percent level is $128,740. When you account for Federal (33%) and State (9.3%) taxes the gross household income needs to be well over $220,000.

These numbers are nothing new for those that live in California and in Alameda. We all know that it is a struggle to pay for a place to live and if you want to own your little piece of the Island you will have to dig deep into those pockets.

California Weak and High

Two new reports on the California Real Estate market came out today that details that the market as still very tenuous. New home sales suffered a sharp decline from the prior year and foreclosure filings hit new highs

According to the California Building Industry Association, February sales of new homes in California were down 54 percent from a year ago. This is a modest improvement from the prior month but still a very weak. Sales of single-family homes and townhomes were both down 55 percent from a year ago, while sales of condominiums were off 51 percent.

Not only are sales down but the median base price was also down 15 percent from a year ago and 6 percent from January.

News regarding distressed properties was no better. According to RealtyTrac foreclosure-related filings on U.S. homes during the first three months of the year were up 9 percent from the previous quarter and 24 percent from a year ago, surpassing previous highs for the current downturn.

The 803,489 properties subject to some kind of foreclosure filing during the first quarter -- including default notices, auction sale notices and bank repossessions -- marked a record high since RealtyTrac began reporting in January 2005.

The increase in filings can be attributed to legislative action. Many Banks/Lenders have been holding off on foreclosures because of moratoria and legislative delays. With these programs coming to an end these initiate new foreclosure proceedings.

In Alameda, foreclosures that have reach the MLS have been relatively very few. In fact we peaked in November of last year and have reached a 21 week low for foreclosed homes for sale. That number appears to be understated, according to RealtyTrac Alameda has 92 properties in Pre-Foreclosure, 37 Trustee Sales and 73 Bank Owned.

The 73 Banked owned is troublesome, it means that they, the Banks, are sitting on inventory and the 92 properties that have now entered some face of the foreclosure process means that the Island could see it own wave of distressed properties hit the market in the near future.

Demand for distressed properties by first-time homebuyers and investors has picked up in some hard-hit markets, locally in East Contra Costa County, but given the new news there is a new swell of properties entering the pipeline.

California, Florida, Arizona, Nevada and Illinois accounted for nearly 60 percent of properties subject to foreclosure-related filings during the first quarter, RealtyTrac said. California alone accounted for 29 percent of the properties in some stage of foreclosure -- 230,915 -- a 35 percent increase from the previous quarter, and the highest total seen in the four years RealtyTrac has been issuing reports.

The California State tax credit for new homes purchases in demand with first time homebuyers flocking to the program. The California Franchise Tax Board said it had received more than 3,100 applications for the tax credit, which is available to qualified buyers making purchases during the year beginning March 1, 2009, or until the $100 million allocated for the program runs out. Applications for $30.6 million in tax credits, or nearly one-third of the program's capacity, have been received so far.