LOS ANGELES -- The percentage of households that could afford to buy an entry-level home in California stood at 24 percent in the third quarter of 2007, unchanged from the same period a year ago, according to a report released by the California Association of Realtors (C.A.R.).
C.A.R.'s First-time Buyer Housing Affordability Index (FTB-HAI) measures the percentage of households that can afford to purchase an entry-level home in California. C.A.R. also reports first-time buyer indexes for regions and select counties within the state.
The minimum household income needed to purchase an entry-level home at $482,910 in California in the third quarter of 2007 was $99,590, based on an adjustable interest rate of 6.56 percent and assuming a 10 percent down payment.
First-time buyers typically purchase a home equal to 85 percent of the prevailing median price.
The monthly payment including taxes and insurance was $3,320 for the third quarter of 2007.
In San Diego County, the third quarter 2007 affordability index for first-time buyers was 24 percent, an improvement from the second period's 23 percent and much better than 21 percent in the third quarter of 2006.
In San Diego County, the third quarter 2007 median price of $500,910 meant the minimum qualifying income was $103,300 to make the necessary payment of mortgage/interest, taxes and insurance of $3,443.
At 48 percent, the High Desert region was the most affordable in the state, followed by the Sacramento region at 46 percent.
Santa Barbara was the least affordable region in the state at 11 percent, followed by the Monterey region at 16 percent.
In Orange County, the third quarter 2007 affordability index was 24 percent, an improvement from the second period's 23 percent and much better than 22 percent in the third quarter of 2006.
Orange County's third quarter 2007 median price of $595,550 meant the minimum qualifying income was $122,817 to make the necessary payment of mortgage/interest, taxes and insurance of $4,094.
In the Inland Empire counties of Riverside and San Bernardino, the third quarter 2007 affordability index was 39 percent, an improvement from the second period's 37 percent and much better than 32 percent in the third quarter of 2006.
The Inland Empire counties' median price of $320,370 meant the minimum qualifying income was $66,068 to make the necessary payment of mortgage/interest, taxes and insurance of $2,202.
The cost of financing a home remains out of reach for many households in California in the wake of the Office of Federal Housing Enterprise Oversight (OFHEO) conforming loan limits for 2008, according to the C.A.R.
OFHEO's maximum 2008 conforming loan limit for single-family mortgages will remain at $417,000, unchanged since 2006.
The conforming loan limit determines the maximum size of a mortgage that Fannie Mae (NYSE: FNM) and Freddie Mac (NYSE: FRE) can buy or guarantee.
Non-conforming or jumbo loans typically carry a higher mortgage interest rate than a conforming loan, increasing the monthly payment and negatively impacting affordability for households in California.
"At more than $568,000, the median price of a home in California is more than 2.5 times the U.S. median of $221,000, yet California is not recognized by OFHEO as a 'high-cost' state," said C.A.R. President William E. Brown. "California still has the third highest home price in the nation, compared with Hawaii at seventh, and Alaska, which ranks 39th in terms of median home price. Yet Alaska, Hawaii, Guam and the U.S. Virgin Islands are recognized by OFHEO as 'high-cost' areas."
"With a 20 percent down payment, the highest-priced home one can buy with a conforming loan in California is $521,250, $44,750 below the third quarter median price of $568,130," he said. "Fifty-five percent of all home sales in California exceeded the $521,250 threshold in the third quarter. With a 10 percent down payment, even fewer buyers can qualify for a conforming loan."
"Now is the time for the U.S. Senate to pass legislation allowing regional adjustments to Fannie Mae and Freddie Mac loan limits and to modernize FHA loan programs," Brown said. "This critical legislation is a key step to allowing families in California an opportunity to climb the first rung of the homeownership ladder."