SACRAMENTO, CA - The sharp fall in median home price in Greater Sacramento has helped drive up affordability, according to two reports issued Tuesday. By one measure, the capital is now the most affordable housing market in California. About 55.7 percent of all homes for sale in the four-county metro area were priced so that a family making the median income in the region could afford them, according to the National Association of Home Builders/Wells Fargo Housing Opportunity Index. That was the highest affordability rating among any California market in the study, and was even better than the U.S. figure of 55 percent for the second quarter of 2008.
The average for all of California was 36.8 percent in the quarter, according to study data released by the California Building Industry Association. The San Francisco area ranked worst in the state, with just 13.8 percent of homes affordable for those with the median income, and was second only to New York City in the nation.
Another study approached the affordability question with a different but related measure: What percentage of households can afford to purchase an entry-level home? Sacramento County was third in the state by that measure in the second quarter, according to the California Association of Realtors in its latest First Time Buyer Housing Affordability Index. Fifty-seven percent of Sacramento-area households could afford an entry-level home (valued at $254,550) in the second quarter, CAR reported, up from 44 percent a year earlier but down from 64 percent in the first quarter of 2008.
Only Riverside/San Bernardino, at 60 percent, and the High Desert region, at 68 percent, had higher scores than Sacramento County for the quarter. Across California, 48 percent of households could afford an entry-level home, double the 24 percent figure recorded in second-quarter 2007. Some regions saw even steeper shifts, such as the Santa Barbara area, which jumped from 11 percent affordability to 46 percent in a year.
The U.S. affordability figure was 67 percent. For CAR purpose, a California entry-level home cost $329,120, while the nationwide figure was $175,530. The minimum income to qualify for a loan on a typical California entry-level home fell by 38 percent in a year, from $101,440 to $62,870, CAR said. Rising affordability is welcome news, said building industry association president Robert Rivinius, but restrictions on building and high impact fees mean the improvement may be short-lived.
"This is a great time for first-time homebuyers to get out there and start shopping around because affordability at these levels will not last long," Rivinius said in a news release. "California is still a highly desirable place to live and once we achieve market equilibrium the state will be facing a new-home shortage as production has lagged far behind the estimated 230,000 units per year needed to keep up with our growing population. We will then see affordability levels drop."
The homebuilders association bases its calculations on federal family-income estimates and assumes 28 percent of gross income goes toward housing, then calculates prices and payments based on sales data and the average rates for a 30-year fixed-rate mortgage with a 10 percent down-payment.
Source: Sacramento Business Journal