Higher Home Prices Reduce Housing Affordability

   LOS ANGELES - (BUSINESS WIRE) - 8/11/2011 - Housing affordability fell throughout most areas of the state in the second quarter of 2011, primarily due to a seasonal increase in home prices, the California Association of Realtors (C.A.R.) reported today.
   The percentage of buyers who could afford to purchase a median-priced, single-family home in California declined to 51 percent in the second quarter of 2011, down from 53 percent in first-quarter 2011 but was up from 46 percent in the second quarter of 2010, according to C.A.R.’s Traditional Housing Affordability Index (HAI).
    C.A.R.’s HAI measures the percentage of all households that can afford to purchase a median-priced, single-family home in California. C.A.R. also reports affordability indices for regions and select counties within the state. The Index is considered the most fundamental measure of housing well-being for home buyers in the state.
    “The pending cut in the Fannie Mae/Freddie Mac high cost loan limits will make it harder and more expensive for those who live in high cost areas to purchase a home,” said C.A.R. President Beth L. Peerce. “Buyers who plan to finance their home purchase with a mortgage of $625,500 or more will face higher interest rates, higher down payments, and tighter loan qualification requirements beginning Oct. 1. Those in a position to buy should act before the loan limits are reduced,” Peerce noted.
    Mortgage rates in the second quarter of 2011 were essentially unchanged from the first quarter of 2011, but were down from second-quarter 2010.
   Buyers needed to earn a minimum annual income of $63,080 to qualify for the purchase of a $293,580 statewide median-priced home in the second quarter of 2011. The monthly payment, including taxes and insurance, would be $1,580, assuming a 20 percent down payment and an effective composite interest rate of 4.85 percent.
    Regionally, housing affordability fell in the higher-priced areas of the state, such as the San Francisco Bay Area and Central Coast, but edged up in lower-priced areas, such as the Central Valley. At 77 percent, San Bernardino County was the most affordable, while San Mateo County was the least affordable, with only 21 percent of households able to afford the county’s median-priced home.
    Visit http://www.car.org/marketdata/data/haitraditional/ to see C.A.R.’s historical housing affordability data. For first-time buyer housing affordability data, visit http://www.car.org/marketdata/data/ftbhai/.