SACRAMENTO, CA – May 26, 2011 – (RealEstateRama) — Overall housing affordability in California continued to increase in the first quarter of 2011, but half of the state’s 28 metropolitan areas included in the report showed decreases, the California Building Industry Association announced today.
On a statewide basis, the HOI found that a family earning the median income could have afforded 64.6 percent of the new and existing homes that were sold during the first quarter of 2011, up slightly from 62.9 percent in the fourth quarter of 2010.
Mike Winn, CBIA’s President and CEO, said this was good news for consumers looking to take advantage of low prices and encouraged buyers to get into the market before prices begin to rise.
“Affordability levels continue to remain high by our state’s historical standards, so this is an opportune time for buyers to get into the marketplace,” said Winn. “We’ve already seen in recent reports that prices are beginning to firm up and have started to rise in some areas of the state, and if history is any indication, these affordability levels will not be sustained as this cyclical industry continues to recover.”
San Francisco, San Mateo and Marin counties once again claimed the distinction of California’s least-affordable metro area for the tenth consecutive quarter, and second in the nation, with just 33.2 percent of the homes sold being affordable to a family earning the median income, up from 31.5 percent in the fourth quarter of 2010. Los Angeles County and Honolulu, Hawaii, switched spots from the previous quarter to claim the third and fourth least affordable markets in the nation with 43.1 percent and 43.4 percent affordability, respectively. Orange County came in fifth with 44.8 percent affordability, while the New York City metro area continued to hold the title of the nation’s least-affordable market for the 12th consecutive quarter with 24.1 percent affordability.
While affordability in California as a whole increased, half of the state’s 28 metropolitan areas included in the report showed decreases. Imperial County showed the largest decrease (4.9 percentage points) followed by Sutter and Yuba counties (3.4 percentage points) and Kern County (3.1 percentage points).
Stanislaus County became California’s most-affordable market with 87.3 percent affordability, down from 88.3 percent in the fourth quarter. Yuba and Sutter counties tied with Merced County to become the state’s second most-affordable metro areas with both areas showing 86.9 percent affordability. Tulare and Kings counties tied with Solano County and ranked as the third most-affordable metro areas in the state with 84.5 percent affordability.
Nationwide, 74.6 percent of new and existing homes sold in the first quarter were affordable to families earning the national median income, up from 73.9 percent in the fourth quarter of 2010. This marks the highest national affordability rate since NAHB started tracking housing affordability in 1991. Kokomo, Ind., was the nation’s most-affordable housing market with an affordability ranking of 98.6 percent, followed by Monroe, Mich., with a ranking of 97.8 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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