California’s 1st-Time Home Buyer Affordability Surges in QI

Housing Affordability Index

LOS ANGELES (May 14) — The percentage of households that could afford to buy an entry-level home in California stood at 69% in the first quarter of 2009, compared with 46% for the same period a year ago (see chart above), according to a report released today by the CALIFORNIA ASSOCIATION OF REALTORS (C.A.R.).

C.A.R.’s First Time Buyer Housing Affordability Index (FTB-HAI) measures the percentage of households that can afford to purchase an entry-level home in California. The Index is the most fundamental measure of housing well-being for first-time buyers in the state.

The minimum household income needed to purchase an entry-level home at $213,040 in California in the first quarter of 2009 was $38,090, based on an adjustable interest rate of 4.96% percent and assuming a 10% down payment. First-time buyers typically purchase a home equal to 85% of the prevailing median price. The monthly payment including taxes and insurance was $1,270 for the first quarter of 2009.

MP: From lows of 26% in both 2006:Q2 and 2007:Q2, the FTB-HAI has increased by 43 percent to 69% in the first quarter of 2009, the highest first-time buyer housing affordability in the history of the index. Stated differently, only about 1 in 4 California households could afford an entry-level home in 2007, and today almost 7 out of 10 households can afford an entry-level home.

About Mark J. Perry 262 Articles

Affiliation: University of Michigan

Dr. Mark J. Perry is a professor of economics and finance in the School of Management at the Flint campus of the University of Michigan.

He holds two graduate degrees in economics (M.A. and Ph.D.) from George Mason University in Washington, D.C. and an MBA degree in finance from the Curtis L. Carlson School of Management at the University of Minnesota.

Since 1997, Professor Perry has been a member of the Board of Scholars for the Mackinac Center for Public Policy, a nonpartisan research and public policy institute in Michigan.

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