http://www.businesswire.com/portal/site/google/?ndmViewId=news_view&newsId=20080520006393&newsLang=enC.A.R. Reports Entry-Level Housing Affordability Rises 18 Percentage Points in First Quarter
LOS ANGELES--(BUSINESS WIRE)--The percentage of households that could afford to buy an entry-level home in California stood at 44 percent in the first quarter of 2008, compared with 26 percent for the same period a year ago, according to a report released today by the CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.).
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The minimum household income needed to purchase an entry-level home at $356,350 in California in the first quarter of 2008 was $67,830, based on an adjustable interest rate of 5.65 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 $2,260 for the first quarter of 2008.
At $67,830, the minimum qualifying income was 30 percent lower than a year earlier when households needed $96,500 to qualify for a loan on an entry-level home. Recent decreases in home prices and mortgage rates have brought affordability into better alignment with income levels of the typical California household, where the median household income was $50,700.
The First-time Buyer Housing Affordability Index rose 11 percentage points in the first quarter of this year compared to the fourth quarter of 2007 due to a .56 point decrease in the mortgage rate and a 14.3 percent decrease in the entry-level median home price.
With condolences to people who bought at the peak of the bubble, this is a good thing. When prices finally bottom out at around 1999 levels, home ownership will be attainable to middle-class people again, and not those who were fortunate enough to have bought decades ago. Let's hope that sane lending standards will help keep prices sane as well in the future. If prop 13 is ever repealed, California house prices might actually allow working-class people to buy modest homes. It's about time.