California Housing Affordability Index Falls 5% From Same Time Last Year
Yesterday, the CAR released it's monthly housing affordability index. Last year in November 19% of Californians could afford to purchase the average price home, this year it's only 14%.
I have always had a problem with the figure because of the assumptions used to calculate it which are: "based on an average effective mortgage interest rate of 6.26 percent and assuming a 20 percent downpayment"
The kicker is how many of the people whom have the income of $133,390 to pay the average priced home of $548,000 actually have $109,600 for the down payment not including the closing costs. Think about your friends and family for a moment whom have purchased homes and how much they put down.... gotta love those interest only, stated income, piggy back loans!
So, fact leads to three observations.
A) Most people buying a home are those who already own a home. This is supported by NAR figures. So the argument used by many that immigration will cause a continued strength in the housing market seems a little weak.
B)The is significantly less than 14% of Californians whom can afford to actually purchase a home.
C) Due to the strength of the real estate market and sales volume over the last two years, you must believe that the relaxed underwriting standards of interest only loans has allowed many people who can't really afford a home to actually buy one. You be the judge of whether this is good or bad.
In looking at the chart there are some interesting figures that one may want to notice.
A) Almost across the entire state the affordability index has flat lined. In a few places it decreased 1-2% over October but generally it stated the same. This seems to support that prices have also remained stable maybe indicating that the peak has finally arrived.
B) The markets are slowing changing as the average prices in 19 regions reported 8 regions experienced small price declines.
I have always had a problem with the figure because of the assumptions used to calculate it which are: "based on an average effective mortgage interest rate of 6.26 percent and assuming a 20 percent downpayment"
The kicker is how many of the people whom have the income of $133,390 to pay the average priced home of $548,000 actually have $109,600 for the down payment not including the closing costs. Think about your friends and family for a moment whom have purchased homes and how much they put down.... gotta love those interest only, stated income, piggy back loans!
So, fact leads to three observations.
A) Most people buying a home are those who already own a home. This is supported by NAR figures. So the argument used by many that immigration will cause a continued strength in the housing market seems a little weak.
B)The is significantly less than 14% of Californians whom can afford to actually purchase a home.
C) Due to the strength of the real estate market and sales volume over the last two years, you must believe that the relaxed underwriting standards of interest only loans has allowed many people who can't really afford a home to actually buy one. You be the judge of whether this is good or bad.
In looking at the chart there are some interesting figures that one may want to notice.
A) Almost across the entire state the affordability index has flat lined. In a few places it decreased 1-2% over October but generally it stated the same. This seems to support that prices have also remained stable maybe indicating that the peak has finally arrived.
B) The markets are slowing changing as the average prices in 19 regions reported 8 regions experienced small price declines.
Links to this post:
Create a Link
<< Home