C.A.R. Reports First-Time Buyer Housing Affordability Improves Slightly in Third Quarter

Housing affordability among first-time home buyers improved slightly in the third quarter of 2010, both on a quarter-to-quarter and year-to-year basis, the CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.) reported. The percentage of first-time buyers who could afford to purchase an entry-level home in California stood at 66 percent in the third quarter of 2010, according to C.A.R.’s First-time Buyer Housing Affordability Index (FTB-HAI). In the second quarter of 2010, the Index was a revised 65 percent and was 64 percent in the third quarter of 2009.

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 interest rates at historic lows, which have led to lower monthly mortgage payments, affordability continues to remain at near record-high levels in California,” said C.A.R. President Beth L. Peerce. “Another high point for first-time buyers is the current ratio between the California median price and the California median household income. During the third quarter, the ratio stood at 5 to 1 and was at a level we haven’t seen in the last 10 years. This is opening many doors for potential first-time buyers.”

First-time buyers, who tend to purchase homes equal to 85 percent of the prevailing median price, needed to earn a minimum annual income of $42,300 to qualify for an entry-level home of $266,620 during the third quarter of 2010. The monthly payment, including taxes and insurance, was $1,410, assuming a 10 percent down payment and an adjustable effective interest rate of 3.66.

“Nearly every region in the state experienced an increase in first-time buyer housing affordability,” added C.A.R. Vice President and Chief Economist Leslie Appleton-Young. “Much of the increase in affordability can be attributed to the slight decrease in the state’s median home price during the third quarter.”

At 85 percent, the High Desert region was the most affordable area in the state. The San Francisco Bay region was the least affordable in the state at 51 percent, followed by the Santa Barbara area and the Santa Clara County regions, both at 53 percent.

C.A.R. First-time Buyer Housing Affordability Index

C.A.R. Region	Housing Affordability Index	Entry-Level Price	Monthly Payment Including Taxes & Insurance	Minimum Qualifying Income
California	66	$266,620	$1,410	$42,300
California - Condos	73	$218,310	$1,150	$34,500
United States	79	$151,220	$800	$24,000
Santa Barbara Area	53	$373,060	$1,970	$59,100

Source: C.A.R.