Help for the First-Time Buyer

To those who don’t live in California or are new to our state, figures are shocking.

Last year, only 19% of the state’s households earned enough to purchase the median-priced home, which costs nearly $200,000.

The situation was even worse in Los Angeles, where only 16% of families could qualify. In the San Francisco Bay Area, the average home is now out of reach for nine out of every 10 households. For first-time home buyers, the situation is even more desperate.

It doesn’t take a statistician to recognize that California faces a housing affordability crisis. The numbers spell it out loud and clear. Yet, they don’t begin to reveal the underlying social and economic costs of living in a state where even two-income families are finding it difficult to purchase a decent home located a reasonable distance from the workplace.

But don’t take my word for it. Consider instead some of the disturbing stories members of the California Assn. of Realtors recently shared with our legislators in Sacramento.

Realtors from around the state collected more than 11,000 letters from frustrated first-time home buyers and others concerned that continued low levels of housing affordability could spell disaster for the California economy and wreak havoc on the lives of our children and grandchildren.

Take, for instance, the letter from a recently married Orange County couple. Both spouses are professionals, yet no matter how hard they try, they haven’t been able to save enough for a down payment on a home.

In the wife’s words, “Paying $12,000 a year in rent for a two-bedroom apartment is frustrating. Are our only choices to achieve home ownership to move out of California or out of Orange County and commute three hours a day?”

Then there’s the Concord resident who has decided to move to Oregon because homes are more affordable there. And the statistics don’t explain the situation faced by a couple that recently moved from Atlanta to San Diego.

“We owned a home for six years in Atlanta, but the housing costs (in California) are far beyond our means,” they wrote. “It is very difficult to explain to our children that we must now live in an apartment, that they have no back yard to play in, and that they cannot go outside to play after school.”

As president of the California Assn. of Realtors, I spend much of my time traveling up and down the state talking with realtors and others about major housing issues.

Many of the brokers and sales agents I visit are working with frustrated first-time buyers who would like to get into the market, but find themselves blocked from achieving their dream.

I hear enough troubling stories every week to know that we must find solutions, or the declining rate of home ownership will damage California’s economy and society--both of which benefit from responsible residents who care a lot about neighborhoods where they have ownership stakes.

In those thousands of letters that were delivered in Sacramento, legislators were asked by their constituents to deal with a huge task--finding a solution to the affordability crisis.

Obviously, there is no easy solution or one quick fix that will wipe out California’s housing problem. I can mention several potential solutions, including the use of state-sponsored mortgage revenue bonds, more rational development plans throughout the state and allowing the use of retirement savings for down payments.

However, it won’t do any good to talk about those solutions until the public becomes angry enough about this problem to demand action. I’m afraid some Californians have grown numb to out-of-sight housing prices and are accepting affordability constraints as an unchangeable reality.

Realtors have been working for several years to find solutions, but we can’t do it alone.

The affordability problem has been growing, and consumers have not exactly been knocking down the doors of local and state elected officials demanding action. Perhaps the people most capable of making meaningful noise are the estimated 2 million California renters who would qualify to buy a home virtually anywhere else in the United States.

Gov. George Deukmejian recently proposed his Housing Opportunity Program that would aim $1 billion of help to first-time buyers in the state’s high-cost regions.

CAR strongly supports the governor’s program, which we believe is a good first step toward easing affordability constraints. While it will not solve all of our problems, it is a viable proposal and one that promises to do much more than some critics have predicted.

The program would allow first-time buyers who meet income and purchase price restrictions to buy homes with 5% down payments. Participants in the program would also benefit from interest rates that are one half to three quarters of a percentage point below conventional fixed mortgage-interest rates.

This down payment and interest-rate assistance will make it possible for thousands of Californians to buy their first homes.

I am especially excited about the program because it was designed to direct first-time buyer assistance where it is needed most--the state’s less affordable urban areas.

Take, for example, a rookie police officer and secretary in Los Angeles, who together could earn an annual income of about $58,000. The couple would qualify for help under the governor’s proposal, which contains a $59,700 income limit for Los Angeles County.

The governor’s program would allow the purchase of a Los Angeles County home that costs up to $188,100. (The median price in L.A. County is $215,500.)

Deukmejian’s proposal would help first-time buyer households earning as much as $81,000 (in Santa Clara County where the median home price is $273,104).

Some have argued that the program will merely help the wealthy who don’t need assistance buying homes. However, a close look at the situation reveals that this is not the case. Salaries of $59,700 and even $81,000 don’t go far in California’s urban areas, as many of you reading this article no doubt realize all too well.

In the Silicon Valley, where the $81,000 income limit applies, it’s not unusual for a two-income family to earn close to that amount of money. A typical computer programmer and assistant bank manager would have a combined income of about $75,000 to $78,000 in the San Jose area.

These aren’t investment bankers or Hollywood entertainment executives we’re talking about here. They’re average professionals who, despite their hard work and hopes for the future, are unable to make the American dream come true in California.

The $60,000 that a family must come up with for a 20% down payment on a typical Bay Area home would buy an entire house in many parts of the nation, like Salt Lake City or San Antonio.

Clearly, the governor’s program is a very welcome move in the right direction. But it also is only the beginning.

Each of you can help improve the affordability situation by writing to your legislators. Tell them that you support the governor’s program and that it is important for other new and innovative ideas to come out of Sacramento.

Don’t underestimate the impact of a handwritten letter to your legislator. More than 11,000 people have already spoken, and I hope that their voices have urged our elected officials to make housing affordability a top priority during the 1990s.

We can’t afford to drive our talented young people out of the state in search of opportunities to plant roots, buy homes and create quality environments for their families.

Legislators, it is time for action. The statistics illustrate the scope of the problem. The letters from thousands of your constituents illustrate that Californians believe the situation has got to change. It’s time to make the dream of home ownership possible again for millions of our residents.