California Housing Affordability Declines in Second Quarter, CBIA Announces
California still home to 7 of top 10 least-affordable markets
SACRAMENTO, CA – August 19, 2010 – (RealEstateRama) — After posting a slight increase last quarter, housing affordability in California decreased in the second quarter of 2010 with 15 of the state’s 28 metropolitan areas included in the report showing affordability levels creeping downward, the California Building Industry Association said today.
On a statewide basis, the HOI found that a family earning the median income could have afforded 58.4 percent of the new and existing homes that were sold during the second quarter, down from 60.8 percent in the first quarter.
Despite the slight drop, Liz Snow, CBIA’s President and CEO, said that affordability levels continue to remain high by California standards, and encouraged buyers to take advantage.
“High affordability levels and record-low interest rates make this a great time to buy a home for those who can afford to enter the market,” said Snow. “These affordability levels are relative to the downturn in housing, and we expect to see increased prices as the market continues to stabilize. While recent reports show decreasing home sales following the expiration of the federal tax credit for homebuyers, prices have remained relatively stable and continue to increase in some areas of the state.”
Snow noted that although the state has been one of the hardest-hit from the housing downturn, California is still home to over half of the top 10 least-affordable markets in the nation.
“We must continue to work with lawmakers to secure a permanent source of funding for affordable housing, and to reduce barriers to providing housing in hopes of keeping the state’s homes more affordable for California families,” said Snow.
San Francisco, San Mateo and Marin counties once again claimed the distinction of California’s least-affordable metro area, and second in the nation, with just 21 percent of the homes sold being affordable to a family earning the median income, down from 23.4 percent in the first quarter. San Luis Obispo County came in third (31.6 percent), followed by Orange County (32.9 percent) and Los Angeles County (33.3 percent). The New York City metro area continued to hold the title of the nation’s least-affordable market for the ninth quarter in a row (19.9 percent).
Stanislaus County overtook Merced County as California’s most-affordable market with 83.7 percent affordability, up from 81.5 percent in the first quarter. Merced County and Madera County were the second and third most-affordable metro areas in California with 82.6 percent and 80.8 percent affordability, respectively.
Nationwide, 72.3 percent of new and existing homes sold in the second quarter were affordable to families earning the national median income, up slightly from 72.2 percent in the first quarter. Syracuse, N.Y., was the nation’s most-affordable housing market with an affordability ranking of 97.2 percent, followed by Springfield, Ohio, with a ranking of 96.6 percent.
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How the HOI is calculated
For income, NAHB uses the annual median family income estimates for metropolitan areas published by the Department of Housing and Urban Development. NAHB assumes that a family can afford to spend 28 percent of its gross income on housing; this is a conventional assumption in the lending industry. That share of median income is then divided by twelve to arrive at a monthly figure.
On the cost side, NAHB receives every month a CD of sales transaction records from First American Real Estate Solutions (formerly, TRW). The data include information on state, county, date of sale, and sales price of homes sold. The monthly principal and interest that an owner would pay is based on the assumption of a 30-year fixed-rate mortgage, with a loan for 90 percent of the sales price (i.e., 10 percent down-payment). The interest rate is a weighted average of fixed and adjustable rates during that quarter, as reported by the Federal Housing Finance Board. In addition to principal and interest, cost also includes estimated property taxes and property insurance for that home. This is based on metropolitan estimates of tax and insurance rates from the 2000 Decennial Census, as estimated by NAHB from the Census Bureau’s Public Use Microdata Sample (PUMS). Mortgage insurance is not currently a component of the HOI.
More information about the HOI, including historical tables for communities nationwide, can be obtained at http://www.nahb.org/page.aspx/category/sectionID=135. Questions about the methodology should be directed to Gopal Ahluwalia (202-266-8480) or Rose Quint (202-266-8527) in NAHB’s Research Department.
The California Building Industry Association is a statewide trade association representing thousands of homebuilders, remodelers, subcontractors, architects, engineers, designers, and other industry professionals. More information is available on the Association’s Web site, www.cbia.org.
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Media Contact:
Michael Castillo
Communications Manager
(916) 443-7933 ext. 346
mcastillo (at) cbia (dot) org
