Falling prices mean rising affordability, California Realtors say
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Call it the silver lining of falling home prices.
With low interest rates and cheaper housing throughout the Golden State, the percentage of homebuyers who could afford to purchase a home increased in the third quarter, a real estate group said Thursday.
The number of households who could afford a home priced at the statewide median of $292,120 rose in the third quarter, according to an index produced by the California Assn. of Realtors. Fifty-two percent of California households could afford that price, compared to 51% in the second quarter.
Now if these households would only buy.
Beth L. Peerce, president of the group, said in the news release that one problem potential homebuyers could face is tight credit. Many first-time buyers don’t qualify for a loan, she said. Indeed, some analysts have noted that banks have tightened their loan criteria since the housing crash. But it was those loose lending standards that caused the real estate bubble in the first place, so many other analysts also argue that more carefully scrutinizing borrowers is appropriate.
The federal government has been providing enormous support to the mortgage market through loans backed by the Federal Housing Administration, though it has recently taken steps to scale back that support.
In California, potential buyers needed to earn at least $61,530 a year per household to qualify for the median-priced home. The median is the point at which half the homes in the state sold for more and half for less.
The real estate group calculated the monthly payment for a mortgage on such a home to be $1,540, including taxes and insurance, and assuming a 20% down payment and a 4.63% effective composite interest rate.
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-- Alejandro Lazo