Housing more affordable? Sure, compared with the bubble years
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The percentage of California households that can afford to buy an entry-level home has more than doubled in the last year because of plummeting home values.
That’s according to the California Association of Realtors, which released third-quarter results for its First Time Buyer Housing Affordability Index. Assuming an adjustable interest rate of 5.91% and a 10% down payment, the association calculated it would require a household income of $56,100 to buy an entry-level home. What’s an entry-level home? The association says a typical first-time buyer purchases a home equal to 85% of the state’s median home value. In today’s case, that’s $287,760 — which wouldn’t have gotten you a fixer-upper under the freeway not long ago. Using this formula, 53% of California households can afford an entry-level house today, up from 24% a year ago.
The gains were slightly more modest in Los Angeles County, where the index jumped from 20% last year to 42% today. In Orange County, it went from 23% to 43%, and in Santa Barbara County, a startling 11% to 45%.
‘From a homeowner’s point of view, you look at the price decline and wince,’ said Robert Kleinhenz, deputy chief economist for the association. ‘But for first-time home buyers, this is the first time in a decade they’ll have such an opportunity to buy a home. We haven’t seen this kind of affordability since the mid-1990s.’
-- David Pierson
