Q4 First-time Buyer Housing Affordability

LOS ANGELES First-time buyer housing affordability matched or set new record-high levels in all regions of the state during the fourth quarter of 2010, the CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.) reported today. Led by historic-low interest rates and a slight decline in home prices, housing affordability surpassed or maintained current levels in both quarter-over-quarter and year-over-year comparisons statewide.
The percentage of first-time buyers who could afford to purchase an entry-level home in California rose to 69 percent in the fourth quarter of 2010, matching the record-high set in the first quarter of 2009, according to C.A.R.’s First-time Buyer Housing Affordability Index (FTB-HAI). In the third quarter of 2010, the Index was 66 percent, and was 64 percent in the fourth quarter of 2009, C.A.R. reported.

C.A.R.’s 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 considered the most-fundamental measure of housing well-being for first-time buyers in the state.

“With incomes better aligned with home prices during the fourth quarter, affordability matched or exceeded record-high levels across the counties and regions of the state,” said C.A.R. President Beth L. Peerce. “While this is an encouraging development, prospective home buyers want to see a recovery in the economy and have more confidence in their own personal situation before they’re willing to take advantage of higher affordability.”

Mortgage rates in the fourth quarter were more than one percentage point lower than the year prior, enabling first-buyers with lower incomes to enter the homeownership arena. First-time buyers, who typically purchase homes equal to 85 percent of an area’s prevailing median price, needed to earn a minimum annual income of $39,600 to qualify for the purchase of an entry-level home of $256,220 during the fourth quarter. The monthly payment, including taxes and insurance, was $1,320, assuming a 10 percent down payment and an adjustable effective interest rate of 3.39 percent.

At 85 percent, the High Desert region was the most affordable area in the state. Although affordability for first-time buyers increased in the San Francisco Bay region, the region was the least affordable in the state at 55 percent, followed by the San Luis Obispo County and Santa Clara County regions, both at 57 percent.