SACRAMENTO, CA – August 19, 2011 – (RealEstateRama) — Housing affordability in California decreased in the second quarter of 2011 as 16 of the state’s 28 metropolitan areas included in the report showed declines, the California Building Industry Association announced today.
On a statewide basis, the HOI found that a family earning the median income could have afforded 61.3 percent of the new and existing homes that were sold during the second quarter of 2011, down from 64.6 percent in the first quarter.
Mike Winn, CBIA’s President and CEO, noted that the median price cited in the report was $10,000 higher than the median price cited in the first quarter.
“Statewide, the median price was $240,000, up from $230,000 in the first quarter, which could explain the slight decrease in affordability as markets continue to stabilize and prices begin to rebound,” said Winn. “Still, we’d encourage those that qualify to take advantage of the low interest rates and historically high affordability levels before we see a cyclical increase in prices.”
San Francisco, San Mateo and Marin counties once again claimed the distinction of California’s least-affordable metro area for the eleventh consecutive quarter, and second in the nation, with just 27.5 percent of the homes sold being affordable to a family earning the median income, down from 33.2 percent in the first quarter. Orange County came in third (40.5 percent), followed by Ocean City, N.J., (40.9 percent) and Los Angeles County (41.6 percent). The New York City metro area continued to hold the title of the nation’s least-affordable market for the 13th consecutive quarter with 25.2 percent affordability.
Sutter and Yuba counties became California’s most-affordable metro area with 88 percent affordability, down from 86.9 percent in the first quarter. Madera County became the state’s second most-affordable market with 86.8 percent affordability, followed closely by Stanislaus County with 86.7 percent affordability.
Nationwide, 72.6 percent of new and existing homes sold in the second quarter were affordable to families earning the national median income, down from 74.6 percent in the first quarter. Kokomo, Ind., was the nation’s most-affordable housing market for the second consecutive quarter with an affordability ranking of 95.8 percent, followed by Wheeling, W.Va.-Ohio, with a ranking of 94.7 percent.
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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mcastillo (at) cbia (dot) org