California still nation’s least-affordable housing

SACRAMENTO – Fueled by sharp price reductions in many Central Valley communities, housing affordability soared in many parts of California during the first quarter of 2008, but the welcome news for prospective homebuyers doesn’t mean an end to the state’s chronic housing affordability crisis, the CEO of the California Building Industry Association said recently.

Robert Rivinius, the homebuilding association’s President and CEO, noted that while the results of the quarterly National Association of Home Builders/Wells Fargo Housing Opportunity Index are encouraging for homebuyers, the fact remains that affordability in the state’s major metro areas continues to be depressingly low. In addition, underlying demographic trends point to rising prices in the future once the large supply of foreclosed homes is sold.

“On a statewide basis, the HOI found that a median-income family could have afforded 31 percent of the new and existing homes that were sold during the first quarter, which is a significant increase over previous quarters,” Rivinius said.

“But the bulk of those affordability gains were in communities most affected by the subprime mortgage and foreclosure issues, especially communities in the Central Valley. Affordability in most major metro areas remains at or below 25 percent, and we need our state and federal lawmakers to look at ways to streamline the homebuilding process, restore credit to the market, and ease regulations to make housing more affordable when the market corrects itself.”

Many economists believe the current upswing in affordability will be short-lived. For example, Gopal Ahluwalia, Vice President of Research for NAHB, said he expects affordability to decrease in California when the market turns around.

“With declining home prices, lower mortgage interest rates and higher household income for 2008, affordability has improved,” Ahluwalia said. “We expect the market to stabilize in the third quarter of 2008 and start picking up in 2009. With a decline in housing inventory and rising demand, home prices are likely to start moving up in 2009, thereby impacting affordability.”

Rivinius said the most-crucial bills for restoring the homebuilding market are federal legislation to make permanent higher conforming loan limits and establish a $7,500 homebuyer tax credit, and state bills sponsored by CBIA to give builders more time to build approved projects and to allow many impact fees to be paid when a home is sold instead of when the building permit is obtained.

“All of these bills continue moving forward in Congress and here in Sacramento, and we urge lawmakers in both capitols to pass these measures quickly to help stabilize the market, improve the economy, and ensure that qualified buyers can obtain the credit they need,” he said.

During the first quarter of 2008, seven of the 10 least-affordable metro areas in the nation were located in California, as were 15 of the bottom 20. While showing a slight up-tick in affordability, Los Angeles County was the nation’s least-affordable market, with just 10.5 percent of the homes sold affordable to a median-income family, up from 6.2 percent in the fourth quarter of 2007.

Rounding out the bottom five metro areas in the nation were New York City (12.5 percent), San Francisco, San Mateo and Marin counties (12.7 percent), Monterey County (13.1 percent) and San Luis Obispo County (13.8 percent).

The Sacramento region became California’s most affordable market with 49.7 percent affordability, up from 27.2 percent in the fourth quarter of 2007. Butte and Shasta counties became the second and third most affordable markets in California, with 41.5 percent and 38.1 percent affordability, respectively.

Nationwide, 53.8 percent of new and existing homes sold in the first quarter were affordable to families earning the national median income. Kokomo, Ind., remained the nation’s most-affordable major housing market with an affordability ranking of 95.3 percent, followed closely by Lima, Ohio, with a ranking of 95 percent.