California Affordability: 24% – WOOT!
3Q 06 First-time Buyer HAI
Housing affordability at 24 percent for first-time buyers in CaliforniaLOS ANGELES (Nov. 27) – The percentage of first-time buyers in California able to afford a median-priced home stood at 24 percent in the third quarter of 2006, compared with 28 percent for the same period a year ago, according to a report released today 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 first-time buyer households that can afford to purchase a home in California. C.A.R. also reports first-time buyer indexes for regions and select counties within the state. The Index is the most fundamental measure of housing well-being for first-time buyers in the state.
Sweet! Only 24%! A drop of 28%. As we all know, the less affordable California gets, the more special it becomes.
I can’t wait until it becomes 10%! San Mateo is on its way already…
Santa Clara County
Q3 2006 27%
Q2 2006 26%
Q3 2005 33%San Mateo County
Q3 2006 20%
Q2 2006 19%
Q3 2005 24%
Update: Readers pointed out that the formula changed. It used to be calculated based on a 20% downpay and a 30 year fixed. Now it’s a 10% downpay and ARM. I wonder what the affordability rate would be if they used the old formula…
Update2: Another reader had this to say: There was another change -> the new way of calculating the “affordable” house price is pegging it at 85% of the median statewide price. The rational behind this move was that first-time buyers don’t buy a median price home.
Under the old standard—down here in the LA/OC area—the affordibility index was under 2%. So by jiving around with their index, CAR has magically made homes affordable to 12X as many (shee)people. We should all be grateful.
Sweet! Maybe the affordability for the Bay Area is actually just 1%. How awesome would that be? It’d mean that we’re very very very special!
December 6th, 2006 at 9:16 am
And let me tell you San Mateo is prime!
December 6th, 2006 at 2:50 pm
Also, you will want to note that they very subtly changed the methodology from just a year ago. Historically, housing affordability is calculated using a 20% down payment and a 30-year fixed rate loan. Since that calculation made houses seem too expensive, they decided to change the formula to a 10% down, floating rate calculation.
Why not zero down and a negative amortization loan? We might hit 50% next time around!
December 6th, 2006 at 3:55 pm
I wonder what the actual affordability would be if they continued to use the old formula.
December 7th, 2006 at 7:55 am
There was another change -> the new way of calculating the “affordable” house price is pegging it at 85% of the median statewide price. The rational behind this move was that first-time buyers don’t buy a median price home.
Under the old standard—down here in the LA/OC area—the affordibility index was under 2%. So by jiving around with their index, CAR has magically made homes affordable to 12X as many (shee)people. We should all be grateful.