California Housing Affordability Inches Downward, CBIA Announces


California still home to half of the top ten least affordable markets

SACRAMENTO, CA – August 19, 2009 – (RealEstateRama) — Housing affordability inched downward throughout the state during the second quarter of 2009 as a result of incremental price increases and increased demand sparked by the state new-homebuyer tax credit, the California Building Industry Association said today.

The quarterly National Association of Home Builders/Wells Fargo Housing Opportunity Index found that homes were less affordable in 16 of the state’s 28 metro areas included in the report.

On a statewide basis, the HOI found that a median-income family could have afforded 62.7 percent of the new and existing homes that were sold during the second quarter, down from 64.4 percent in the first quarter.

Robert Rivinius, CBIA’s President and CEO, said the decrease in affordability could signal the bottom of the market and that prices are likely to go up as existing home inventories drop and builders sell more homes, leaving fewer homes on the market and leading to increased competition among buyers.

“If you’re a buyer and you’re sitting on the fence, now is the time to buy,” Rivinius said. “While it’s not a huge decrease in affordability, it could signal that the bottom of the market is here and we could be facing an imbalance in supply and demand as housing production hasn’t kept up with population growth, and we’re already seeing news reports of increased competition among buyers.”

Rivinius added that more homes need to be produced to help keep housing more affordable in California.

“It’s estimated by the California Department of Housing and Community Development that California needs to be building around 230,000 units per year to keep up with population growth, but California homebuilders couldn’t even put up a third of that number in 2008, and we’re expecting even less production in 2009,” said Rivinius. “We need lawmakers to ease regulations and make building more feasible in order to keep up with population growth and meet the demand to help sustain these affordability levels.”

Rivinius said that policy makers must defer or lower development impact fees so that builders will be able to get projects off the ground more quickly and affordably in hopes of avoiding a housing shortage once the market corrects itself.

San Francisco, San Mateo and Marin counties once again took the lead as California’s least-affordable metro area, and second in the nation, with just 26.9 percent of the homes sold affordable to a median income family, down from 32.1 percent in the first quarter. San Luis Obispo County came in third (31.8 percent), followed by the Ocean City metro area in New Jersey (32.6 percent) and Honolulu, Hawaii (41.8 percent). The New York City metro area continued to hold the title of the nation’s least affordable market for the fifth quarter in a row (21.2 percent).

Madera County overtook Stanislaus County to become California’s most affordable market with 84.4 percent affordability, up from 80.4 percent in the first quarter. Merced County and Stanislaus County were the second and third most-affordable metro areas in California with 84.3 percent and 83.6 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, down slightly from 72.5 percent in the first quarter. Kokomo, Ind., became the nation’s most-affordable housing market with an affordability ranking of 97.5 percent, followed by Lansing, Mich., with a ranking of 96.2 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 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,

Michael Castillo
Communications Manager
(916) 443-7933 ext. 346
mcastillo (at) cbia (dot) org


The California Building Industry Association (CBIA) is a statewide trade association representing thousands of homebuilders, remodelers, subcontractors, architects, engineers, designers, and other industry professionals.


California Building Industry Association
1215 K Street, Suite 1200
Sacramento, CA 95814
Phone: (916) 443-7933
Fax: (916) 443-1960

Michael Castillo
Communications Specialist
(916) 443-7933 ext. 346

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