Bay Area Home Affordability Improves in the Forth Quarter

Housing affordability improved in the Bay Area and across California in the fourth quarter of 2015 — welcome news for homebuyers.

The California Association of Realtors said its fourth-quarter Housing Affordability Index reached 24 percent in the nine-county Bay Area, up two percentage points from the previous quarter and up three points from a year earlier. Statewide,  housing affordability stood at 30 percent — a gain of one percentage point from the third quarter but down one point from the fourth quarter of 2014.

The Housing Affordability Index tracks the percentage of homebuyers who can afford to purchase a median-priced, single-family home, and CAR credits the improved affordability to lower interest rates and level home prices.

Even with the rising numbers, however, homeownership remains out of reach for many more Californians and Bay Area residents than elsewhere in the United States. Nationwide, 58 percent of homebuyers could afford a median-priced home in their community.

In the Bay Area, housing affordability rose from the third to the fourth quarter in seven of nine counties. It stayed the same in one (Napa) and fell two percentage points in another (Marin).

Solano was the Bay Area’s most affordable county in the fourth quarter, with 45 percent of buyers able to afford a home there. It was followed by Contra Costa (37 percent), Sonoma (26 percent), Alameda (22 percent), and Napa (21 percent). The least affordable counties in the state that CAR tracks were San Francisco (11 percent), San Mateo (14 percent), Marin (17 percent), and Santa Clara (20 percent).

Homebuyers in the Bay Area needed to earn a minimum annual income of $147,080 to qualify for the purchase of a $735,170 median-priced, single-family home in the fourth quarter. The monthly payment, including taxes and insurance on a 30-year, fixed-rate loan, would be $3,680, assuming a 20 percent down payment and an effective composite interest rate of 4.07 percent.

(Image: Flickr/Pictures of Money)

Source: Pacific Union

30-Year Mortgage Tops 4%

Here’s a look at recent news of interest to homebuyers, home sellers, and the home-curious.

Fixed-rate mortgages last week reached new highs for 2015, with the average 30-year mortgage rising above 4 percent average for the first time in nearly a year, Freddie Mac reported.

Image of arrows pointing upThirty-year fixed-rate mortgages averaged 4.04 percent, up from 3.87 percent last week, and 15-year fixed-rate mortgages averaged 3.25 percent, up from 3.08 percent. One-year adjustable-rate mortgages averaged 2.53 percent, dropping from last week’s 2.59 percent average.

Last year at this time, 30-year rates averaged 4.20 percent, 15-year rates were at 3.31 percent, and one-year ARMs averaged 2.40 percent.

“Markets are responding to strong employment data,” said Freddie Mac economist Len Kiefer, in a statement accompanying the weekly interest rate report. “In May, the U.S. economy added 280,000 jobs. Moreover, job openings surged to 5.4 million in April, up over 20 percent from a year ago.”

The U.S. real estate market continues to improve and is on track for its best year since the peak of the housing bubble in 2006, according to an analysis by

“This time, though, it’s no bubble,” said chief economist Jonathan Smoke. “Job growth is powering the surge in demand for homes. More than 3 million jobs have been created in the past 12 months. And more than 1 million jobs have been created for 25- to 34-year-olds, the age range in which most Americans buy their first home.”

Rising rental rates, meanwhile, are outpacing ring home prices. Record numbers of renting households have driven down apartment vacancies and sent rents soaring, Smoke said. It is now cheaper to buy rather than rent in 80 percent of U.S. counties.

The number of homeowners who owe more than their home is worth continues to fall, with the San Jose and San Francisco metro areas leading the way, according to a new report from Zillow. But there are still plenty of mortgage holders who face a steep climb before their homes are no longer underwater.

The U.S. rate of negative equity among mortgaged homeowners 15.4 percent in the first quarter of 2015, down from 16.9 percent in the fourth quarter on 2014. San Jose, however, reported to lowest negative equity rate, 3.8 percent, followed by San Francisco at 6.1 percent.

The rate of negative equity improved in all of the 35 largest housing markets in the first quarter. But of those homeowners who are still underwater, more than half still owe 20 percent more than the value of their home, making it difficult for them to get out from under their mortgage.

“The depth of negative equity remains incredibly worrisome,” Zillow concluded. “Millions of Americans are so far underwater, it’s likely they may not regain equity for up to a decade or more at this pace.”


Source: Pacific Union blog

(Illustration: Flickr/FutUndBeidl)

Buying a Home Can Be Stressful

It’s no secret that buying a home can be stressful. Just how stressful was made clear in a recent survey that found that people are more anxious about the homebuying process (70 percent) than they are about getting a root canal (64 percent)!

Retro image of new homeowners

JPMorgan Chase’s national survey of potential homebuyers also found that one-third of homebuying couples have bickered over the process (we were, frankly, expecting a higher percentage), with men more likely than women to go beyond their agreed-upon budget limit to get the home they want.

“It’s understandable why first-time homebuyers are anxious about the process, but preparation is the best defense,” Cecelia Barbieri, senior vice president of marketing for Chase Mortgage Banking, said in a statement accompanying the survey. That’s a sentiment shared by Pacific Union’s real estate professionals, who work to bring down stress levels by helping buyers become familiar with the homebuying process and planning ahead to get the home they want.

The Chase survey also found that a solid majority of potential buyers (62 percent) believe now is a better time to buy a home than it was last year, and 30 percent plan to purchase a property in the next 18 months.

Rising rental costs and historically low interest rates are among the top reasons buyers are eager to close a deal in the coming months. Interest rates on 30-year mortgages averaged 3.80 percent this past week, according to Freddie Mac, and are expected to rise appreciably by 2016.

While potential homebuyers are optimistic that now is a good time to buy, they expect challenges along the way. Buyers are concerned about finding a home that fits within their budget (56 percent) and is located in a good neighborhood (56 percent).

Seventy-five percent worry that their offer will be outbid by others, and 60 percent anticipate that they may need to compromise and buy a smaller home, or consider other neighborhoods outside their top choices, due to rising prices.

“Buyers are clearly concerned about housing inventory and rising prices, especially during the competitive spring buying season,” Barbieri said. “But the research shows that interested buyers are optimistic and ready to act on their goals. In fact, 73 percent said they’d give up things like eating out and taking vacations in order to buy their dream home.”


Source: Pacific Union blog, May 8, 2015

Illustration: Flickr/Blush Printables)

Home Sellers Are Ready to Buy Again in 2014

The year 2013 was the year of the homebuyer, marked by multiple offers for virtually every desirable property on the market in Northern California. Bidding wars frequently pushed sales prices 10 to 15 percent above list.

Illustration of a person in front of a for-sale sign

But 2014 is shaping up to be the year of the seller.

After regaining equity in their homes last year, sellers are eager to get back into the market again, according to a recent survey by the California Association of Realtors (CAR).

More than two-thirds (69 percent) of home sellers purchased another home rather than renting after selling their previous residence in 2013, up from 47 percent in 2012 and only 12 percent in 2011.

“Much-improved housing market conditions in the last year have given sellers more confidence to own a home rather than to rent one,” CAR President Kevin Brown said in a statement accompanying the survey results. “With sellers being more positive about the future of home prices, the vast majority of sellers who are currently renting plan to buy again in the future.

“In fact, 70 percent of sellers who are currently renting said they would purchase another home, up from 22 percent in 2012.”

Sellers are more optimistic about repurchasing a home thanks to strong growth in home prices, record-low interest rates, and better financial situations at home, according to the CAR survey.

The reasons for selling changed significantly in just one year. In 2012, the majority of sellers sold primarily because of financial difficulties, but as home prices surged, a desire to trade up became the top reason for selling in 2013.

Others wanted to take advantage of low interest rates to finance their next home, while some sellers believed the price of their home had peaked and wanted to cash out.

Those survey results bode well for 2014, as more homeowners put their properties on the market and help to meet the demand of homebuyers — both first-time and move-up buyers.


Source: Pacific Union blog

(Image: Flickr/Scott Maxwell)

San Francisco ranking as the Third least affordable City in the World

If you’re looking to stretch your housing dollar to the maximum, the City by the Bay might not be your best bet: One recent study ranks San Francisco as the least-affordable city in the country and the third least affordable in the world.planetearth

According to the 10th Annual Demographia International Housing Affordability Survey: 2014, San Francisco trails only Hong Kong and Vancouver, British Columbia as the least-affordable of 360 world cities included in the study. The survey ranks cities’ affordability (or lack thereof) based on the “median multiple”: the ratio of median home price to median household income.

Demographia’s survey rates any city with a median multiple greater than 5.1 as “severely unaffordable.” San Francisco drew a median multiple of 9.2, while San Jose – ranked as the fifth least-affordable city in the world – came in with an 8.7.

Four of the survey’s 10 priciest cities in the world are located in California, with Los Angeles and San Diego also making the list.


Source: Pacific Union blog