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More people eligible to buy homes

First-time buying is lower than pre-recession days, but affordability is increasing statewide

Posted: November 15, 2011 1:30 a.m.
Updated: November 15, 2011 1:30 a.m.
Housing is becoming more affordable according to the California Association of Realtors. Above is a home for sale. Housing is becoming more affordable according to the California Association of Realtors. Above is a home for sale.
Housing is becoming more affordable according to the California Association of Realtors. Above is a home for sale.

California’s housing affordability index is rising, reported the California Association of Realtors, or C.A.R., on Friday.

The percentage of homebuyers who could afford to purchase a median-priced, existing single-family home in California rose to 52 percent in the third quarter of 2011.

In the Santa Clarita Valley, home to a more upscale community, median home prices exceed both the state and L.A. County median prices.

Affordability is up 1 percent from second-quarter 2011 in California, and is up from 46 percent in the third quarter of 2010, C.A.R. reported.

Statewide, the median price of a home was $292,120 in the third quarter of 2011. Fifty-two percent of the population was eligible to purchase a home at the median value.

Nationwide, the median price for a home in the United States was pegged at $169,500, and in L.A. County, known for being an expensive real-estate market, the median price of a home was $324,830.

The median is the point at which half of the homes sell for more half sell for less the median price.

First-time buyers

Locally, the median price of a home in the Santa Clarita Valley was $360,000 in September, reported the Southland Regional Association of Realtors.

“While housing affordability has improved in most areas of the state, would-be buyers, especially first-timers, are having difficulty getting loans,” said Beth L. Peerce, C.A.R. president.

Tightened lending requirements are blamed for the inability of many potential homebuyers to secure loans.

But loose lending practices were cited for causing the real estate bubble that led, at least in part, to the collapse in the real estate market.

The pendulum of bank lending practices has swung from one end to the other during the recession.

When affordability is high, however, first-time buyers typically make up a large share of the market, such as in the mid-’90s, when first-timers made up half of the market, Peerce said.

“First-timers have made up just a third of the market this year, illustrating the hurdles many homebuyers are experiencing in qualifying for a home loan,” she said.

Santa Clarita Valley

Locally, the number of first-time buyers varies by realty agency.

New buyers represent 40 percent of the buyers Silver Creek Realty works with, said Richard Szerman. Second-home buyers represent 10 percent, but investors are roughly 50 percent of the agency’s business.

“Sixty percent of our buyers are first-timers,” said Connor MacIvor with ReMax of Santa Clarita.

Twenty percent are step-up buyers who last bought a home prior to 2002, he said. Another 20 percent are sitting out a three-year waiting period since their short sale or foreclosure concluded so that they can buy again, MacIvor said.

Pulling local data on Nov. 14, MacIvor found nearly 1,600 active listings in the Valencia, Castaic, Saugus, Newhall and Canyon Country areas where the median-priced home was at or below the median price listed for the Santa Clarita Valley.

Only Stevenson Ranch, with 92 active listings, had median price homes exceeding the valley’s median price. Homes in Stevenson Ranch had a median price of $430,000.

But there is an issue larger than the affordability index, local Realtors said. Many buyers, because of the need for repairs, do not quality for Federal Housing Administration loans in which case buyers need a 20 percent down payment, which very few have.

“And the biggest problem with the housing market is the very poor behavior and lackluster performance from the banks selling and short-selling homes,” Szerman said.

“It takes an average of four months to get a short sale approved and an average of two months to get a foreclosure approved,” he said.

“Most buyers are not going to wait. Because of this, prices are forced down and the affordability index is artificially deflated.”

Affordability Indexes

Affordability indexes are considered to be the fundamental measure of housing well-being for homebuyer. C.A.R.’s

Traditional Housing Affordability Index measures the percentage of all households that can afford to purchase a median-priced, single-family home in the state.

California homebuyers needed to earn a minimum annual income of $61,530 to qualify for the purchase of a $292,120 statewide median-priced, existing single-family home in the third quarter of 2011.

C.A.R. considered the monthly mortgage payment, taxes and insurance when determining affordability. It also assumed a buyer would be making a 20 percent down payment and be eligible for a 4.63 percent interest rate.


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