Homes are biggest bargain since 2004
(CNNMoney.com) -- With prices crashing around the nation, home price affordability has improved dramatically in many U.S. cities.
As a result, 53.8% of all new and existing homes sold nationwide during the first three months of 2008 were affordable to families earning the median household income of $61,500, according to the latest Housing Opportunity Index released Tuesday by Wells Fargo and the National Association of Home Builders (NAHB).
That's up from 44% during the first three months of 2007 with home prices the most affordable they've been since the three month period that ended June 30, 2004.
"Three factors combined to substantially increase housing affordability," said NAHB president, Sandy Dunn, in a press release accompanying the report. "Mortgage rates returning to near the record low levels of a few years ago, a $2,500 rise in family income nationwide (from 2007 to 2008) and lower house prices."
California has been particularly hard hit by a liquidity squeeze in jumbo loan markets. These mortgages of greater than the $417,000 cap limit that Freddie Mac and Fannie Mae imposed (now temporarily raised to $729,250) are especially important to high-priced markets.
"Jumbo markets had essentially shut down, " said Seiders, "and many California markets depend on jumbo loans." These are getting a little easier to find but they still cost a full 1 to 1.5 percentage points higher than other loans.
That has helped make Los Angeles, the least affordable metro area in the United States, more affordable than last year. But still, despite much lower home prices, to a median $412,000 from $525,000, only a little more than 10% of homes sold during the first quarter of 2008 were priced low enough so that households earning the median income of $59,800 in the area could buy.
That, however, is a change from a year ago when only 3% of Los Angeles area homes sold were affordable to the average Joe.
The affordability improvement was even greater for Santa Ana in Orange County, Calif. Helped by a median price drop to $470,000 from $610,000 a year ago there, 17.4% of homes sold were affordable, up from 4.4% during the first three months of 2007.
In San Diego, home affordability rose to 25.2% from 9.4% as prices dropped to $368,000 from $460,000; in Riverside Calif. affordability went to 26.9% from 9.7% as prices fell to $288,000 from $380,000; and in Stockton, Calif., it soared to 35.5% from 9.7% as prices cratered to $262,000 from 390,000.
The least affordable big city outside California was the New York metro area. There, nearly flat prices - $490,000 this year compared with $500,000 last, led to an increase in affordability to 12.5% this year. Still, that's better than a year ago, when only 6% of homes sold were affordable. New York is the second least affordable area according to this survey..
Recent Comments