Affordability More than Doubles

Affordability More than Doubles
Lower resale prices and recent declines in the mortgage interest rate are prompting more people to jump into a market that is dramatically more inviting for entry-level buyers.

A study conducted recently found that the percentage of households that could afford to buy an entry level home in California stood at 53 percent in the third quarter of 2008.

That's more than double for the same period from a year ago when only 24 percent of households could qualify.

The First-Time Buyer Housing Affordability Index study conducted by the California Association of Realtors found that the minimum household income needed to purchase an entry-level home at $287,760 in California in the third quarter of 2008 was $56,100, based on an adjustable interest rate of 5.91 percent and assuming a 10 percent down payment.

First-time buyers typically purchase a home equal to 85 percent of the prevailing median price. The monthly payment including taxes and insurance was $1,870 for the third quarter of 2008.

At $56,100, the minimum qualifying income was 44 percent lower than a year earlier when households needed $100,500 to qualify for a loan on an entry-level home.

Recent decreases in home prices and mortgage rates have brought affordability into better alignment with income levels of the typical California households, where the median household income is $59,160.

The Index also rose 5 percentage points in the third quarter of this year compared to the second quarter of 2008, due to an 11.9 percent decrease in the entry-level median home price.

At 73 percent, the High Desert region was the most affordable area in the state.

The San Francisco Bay Area region was the least affordable in the state at 35 percent, followed by the San Luis Obispo County region at 38 percent.

In Los Angeles County the index stood at 42 percent, up from 20 percent a year ago.

The L.A. entry-level price of $332,680 requires a minimum-qualifying income of $64,8000 and comes with a monthly loan payment of $2,160.