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Erika Kauzlarich-Bird: Single-family home price hikes offset low interest rates

Posted: November 21, 2012 5:57 p.m.
Updated: November 21, 2012 5:57 p.m.

We have much to be thankful for here in the Santa Clarita Valley where, like elsewhere in California, rising resale prices benefit the one out of five homeowners statewide who owe more than the current resale value of their home.

Yet each tick up in prices makes it that much harder for buyers, offsetting the benefit of today’s low interest rates and reducing overall housing affordability.

The percentage of homebuyers who could afford to purchase a median-priced, existing single-family home in California fell to 49 percent in the third quarter of 2012, down from 51 percent in second quarter 2012 and from 51 percent in third quarter 2011.

That was the finding of the California Association of Realtors’ recent study called the Traditional Housing Affordability Index, which is considered a fundamental measure of housing well-being for homebuyers throughout the state. The index found that homebuyers needed to earn a minimum annual income of $65,810 to qualify for the purchase of a $339,860 statewide median-priced, existing single-family home in the third quarter of 2012.

The monthly payment, including taxes and insurance on a 30-year fixed-rate loan, would be $1,650, assuming a 20 percent down payment and an interest rate of 3.72 percent. The effective composite interest rate in second-quarter 2012 was 3.92 percent and 4.63 percent in the third quarter of 2011.

Every Southern California county experienced lower affordability than the previous quarter because of higher home prices, while affordability improved or was stable in most San Francisco Bay Area counties.

At an index of 77 percent, San Bernardino County and Solano counties were the most affordable counties of the state. Conversely, San Mateo County was the least affordable, with only 24 percent of households able to purchase the county’s median-priced home.

For comparison, the median price of homes sold during October in the Clarita Valley was $360,000, according to the Southland Regional Association of Realtors. That was down 1.1 percent from a year ago. The median, while up 5.9 percent from the record low for this cycle of $340,000 set in November 2011, has yet to top the $400,000 benchmark, which was last reported in September 2010.

The median price of condominiums sold during October in the Santa Clarita Valley was $200,000, up 7.0 percent from a year ago and 17.6 percent ahead of its record low for this cycle of $170,000, which was set this July.
Bottom line?

There are still bargains out there, the window of opportunity is closing fast, and, yes, we have much to be grateful for. Happy Thanksgiving!

Erika Kauzlarich-Bird is president of the Santa Clarita Valley Division of the Southland Regional Association of Realtors. David Walker, of Walker Associates, co-authors articles for SRAR. The column represents SRAR’s views and not necessarily those of The Signal. The column contains general information about the real estate market and is not intended to replace advice from your Realtor or other realty related professionals.


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