First time home buyers throughout the California might be rejoicing with this positive real estate news just released by the California Association of Realtors:
The percentage of households who can afford to purchase entry-level housing has rocketed to 59 percent in the fourth quarter of 2008, compared to a more paltry 33 percent just a year earlier.
What does this mean? On a broad level, it means that the minimum household income needed to purchase a California entry-level home of $248,030 in the last quarter of 2008 was $48,900. Thanks to lower home prices and interest rates, first time home buyers are faring better than a year earlier, when minimum income requirement was $83,700.
How does this translate for first time home buyers in the San Diego area, where we once had some of the highest-priced housing in the state?
San Diego’s Housing Affordable Index stands at 56 percent, just a slight dip under California’s overall Index. That translates to a minimum qualifying income of $55,800–and compares to an affordability index of 31 percent in the 4th quarter of 2007. Predictably, San Diego’s affordable real estate inventory continued to grow from the third to the fourth quarter of 2008–when the third quarter had an index a full five points lower than the next and stood at 51 percent.
Anecdotally, we are seeing a very congested market at the lower price points in San Diego’s North County. Investors are competing with anxious home buyers to snag these real estate bargains as soon as they hit the market–and for good reason. Rents and mortgage payments are as close to par as they have been since the last century. With tax benefits and potential tax credits, renters might become home owners for not much difference in monthly outlay.
Investors, on the other hand, can have tenants covering most of the mortgage and can hold their real estate investment until market conditions improve.
And that leaves real estate agents juggling multiple offers on just about all San Diego single family homes priced under $250,000. And from what I hear from Sacramento Realtor Gena Riede, market conditions there are also becoming more active as San Francisco and Bay area investors flock to the Sacraamento area to place multiple offers on multiple bargains.