California still home to 6 of top 10 least-affordable markets
SACRAMENTO, CA – February 17, 2011 – (RealEstateRama) — California housing affordability increased slightly in the fourth quarter of 2010 with all but one of the state’s 28 metropolitan areas included in the report showing increases in affordability, the California Building Industry Association announced today.
On a statewide basis, the HOI found that a family earning the median income could have afforded 62.9 percent of the new and existing homes that were sold during the fourth quarter, up slightly from 61.1 percent in the third quarter.
Mike Winn, CBIA’s President and CEO, said this was good news for consumers and encouraged buyers to take advantage of these high affordability levels.
“Clearly, this is a great time to buy a home for those who qualify,” said Winn. “The winter selling season is typically a little slower, but as the spring selling season begins, we expect to see prices firming up a bit as they did in several California markets last year. This is an opportune time for consumers as these affordability levels aren’t expected to last as the market continues to stabilize.”
San Francisco, San Mateo and Marin counties once again claimed the distinction of California’s least-affordable metro area for the ninth consecutive quarter, and second in the nation, with just 31.5 percent of the homes sold being affordable to a family earning the median income, up from 28 percent in the third quarter. Honolulu, Hawaii, came in third (42.1 percent), followed by Los Angeles County (42.9 percent) and Santa Cruz County (45 percent). The New York City metro area continued to hold the title of the nation’s least-affordable market for the eleventh quarter in a row (25.5 percent).
Imperial County was the only metro area in California to show a decrease in affordability with a ranking of 78.9 percent, down slightly from 79.5 percent in the third quarter.
Yuba and Sutter counties became California’s most-affordable market with 90.3 percent affordability, up from 83.7 percent in the third quarter. Stanislaus County became the second most-affordable metro area in California with 88.3 percent affordability, while Merced County remained the state’s third most-affordable market with 87.8 percent affordability.
Nationwide, 73.9 percent of new and existing homes sold in the fourth quarter were affordable to families earning the national median income, up from 72.1 percent in the third quarter. This marks the highest national affordability rate since NAHB started tracking housing affordability in 1991. Elkhart-Goshen, Ind., was the nation’s most-affordable housing market with an affordability ranking of 97 percent, followed by Lansing-East Lansing, Mich., with a ranking of 96.7 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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(916) 443-7933 ext. 346
mcastillo (at) cbia (dot) org