Higher wages and seasonal price declines hold California housing affordability in check

• Thirty-one percent of California households could afford to purchase the $511,360 median-priced home in the fourth quarter, unchanged from third-quarter 2016 and up from 30 percent in fourth-quarter 2015.

• A minimum annual income of $100,800 was needed to make monthly payments of $2,520, including principal, interest, and taxes on a 30-year fixed-rate mortgage at a 3.91 percent interest rate.

• Forty percent of home buyers were able to purchase the $413,700 median-priced condo or townhome. An annual income of $81,550 was required to make a monthly payment of $2,040.

LOS ANGELES (Feb. 9) – Rising wages and seasonal price declines held California’s housing affordability steady in fourth-quarter 2016, even while interest rates rose moderately, the CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.) said today.

The percentage of home buyers who could afford to purchase a median-priced, existing single-family home in California in fourth-quarter 2016 remained at 31 percent, unchanged from the third quarter of 2016 but was up from 30 percent in fourth-quarter 2015, according to C.A.R.’s Traditional Housing Affordability Index (HAI). This is the 15th consecutive quarter that the index has been below 40 percent and is near the mid-2008 low level of 29 percent. California’s housing affordability index hit a peak of 56 percent in the third quarter of 2012.

C.A.R.’s HAI measures the percentage of all households that can afford to purchase a median-priced, single-family home in California. C.A.R. also reports affordability indices for regions and select counties within the state. The Index is considered the most fundamental measure of housing well-being for home buyers in the state.

Home buyers needed to earn a minimum annual income of $100,800 to qualify for the purchase of a $511,360 statewide median-priced, existing single-family home in the fourth quarter of 2016. The monthly payment, including taxes and insurance on a 30-year, fixed-rate loan, would be $2,520, assuming a 20 percent down payment and an effective composite interest rate of 3.91 percent. The effective composite interest rate in third-quarter 2016 was 3.76 percent and 4.07 percent in the fourth quarter of 2015. 

Homes were slightly more affordable in fourth-quarter 2016 compared to fourth-quarter 2015, when the affordability index stood at 30 and the median home price was $484,710. An annual income of $96,980 was needed to make monthly payments of $2,420. 

The affordability of condominiums and townhomes also was flat compare to the previous quarter. Forty percent of California households earned the minimum income to qualify for the purchase of a $413,700 median-priced condominium or townhome in the fourth quarter of 2016, and an annual income of $81,550 was required to make monthly payments of $2,040.

Key points from the fourth-quarter 2016 Housing Affordability report include:

• Compared to affordability in third-quarter 2016, eight of 29 counties tracked saw an improvement in housing affordability (Contra Costa, Marin, Napa, Los Angeles, Ventura, Monterey, Santa Barbara, and Madera), 10 experienced a decline (San Francisco, Sonoma, Orange County, Riverside, San Bernardino, Santa Cruz, Kern, Kings, Merced, and San Joaquin), and 11 were unchanged (Alameda, San Mateo, Santa Clara, Solano,  San Diego, San Luis Obispo, Fresno, Placer, Sacramento, Stanislaus, and Tulare).

• Only three (Contra Costa, Marin, Napa) of nine Bay Area counties recorded higher affordability numbers than the previous quarter, as higher earning Bay Area workers drove up home prices. Housing affordability results were mixed in Southern California but largely declined in Central Valley counties (Kern, Kings, Merced, San Joaquin).

• During the fourth quarter of 2016, the most affordable counties in California were Kings (56 percent); Kern (55 percent); San Bernardino (54 percent); and Fresno (50 percent).

• San Francisco (13 percent), San Mateo (15 percent), and Santa Cruz (17 percent) counties were the least affordable areas in the state.  

Housing Affordability slides (click link to open)

Affordability peak versus current
Annual required income peak vs. current
PITI peak versus current
CA housing affordability by quarter (2006-2016)

Leading the way…® in California real estate for more than 110 years, the CALIFORNIA ASSOCIATION OF REALTORS® (www.car.org) is one of the largest state trade organizations in the United States with more than185,000 members dedicated to the advancement of professionalism in real estate. C.A.R. is headquartered in Los Angeles. 

CALIFORNIA ASSOCIATION OF REALTORS®
Traditional Housing Affordability Index
Fourth quarter 2016

C.A.R. Region	Housing  Affordability Index	Median Home  Price	Monthly Payment Including Taxes & Insurance	Minimum  Qualifying Income
CA SFH	31	$           511,360	$               2,520	$           100,800
CA Condo/Townhomes	40	$           413,700	$               2,040	$             81,550
Los Angeles Metropolitan Area	34	$           463,050	$               2,280	$             91,280
Inland Empire	46	$           317,710	$               1,570	$             62,630
S.F. Bay Area	25	$           797,170	$               3,930	$           157,140
US	58	$           235,000	$               1,160	$             46,320
S.F. Bay Area
Alameda	22	$           779,500	$               3,840	$           153,650
Contra-Costa	39	$           550,000	$               2,710	$           108,410
Marin	20	$       1,149,500	$               5,660	$           226,590
Napa	26	$           620,000	$               3,060	$           122,210
San Francisco	13	$       1,353,000	$               6,670	$           266,700
San Mateo	15	$       1,300,000	$               6,410	$           256,250
Santa Clara	22	$       1,005,000	$               4,950	$           198,100
Solano	45	$           392,500	$               1,930	$             77,370
Sonoma	26	$           589,000	$               2,900	$           116,100
Southern California
Los Angeles	28	$           503,400	$               2,480	$             99,230
Orange County	22	$           745,160	$               3,670	$           146,880
Riverside County	41	$           356,380	$               1,760	$             70,250
San Bernardino	54	$           251,100	$               1,240	$             49,500
San Diego	26	$           593,040	$               2,920	$           116,900
Ventura	31	$           629,860	$               3,100	$           124,160
Central Coast
Monterey	27	$           507,000	$               2,500	$             99,940
San Luis Obispo	25	$           566,550	$               2,790	$           111,680
Santa Barbara	21	$           681,340	$               3,360	$           134,300
Santa Cruz	17	$           800,000	$               3,940	$           157,690
Central Valley
Fresno	50	$           237,300	$               1,170	$             46,780
Kern (Bakersfield)	55	$           225,810	$               1,110	$             44,510
Kings County	56	$           215,170	$               1,060	$             42,410
Madera	49	$           229,790	$               1,130	$             45,300
Merced	48	$           230,720	$               1,140	$             45,480
Placer County	46	$           434,720	$               2,140	$             85,690
Sacramento	45	$           324,300	$               1,600	$             63,930
San Joaquin	43	$           324,570	$               1,600	$             63,980
Stanislaus	48	$           276,000	$               1,360	$             54,400
Tulare	49	$      212,680	$               1,050	$             41,920

r = revised

CALIFORNIA ASSOCIATION OF REALTORS®
Traditional Housing Affordability Index
Fourth quarter 2016

STATE/REGION/COUNTY	Q4 2016	Q3 2016		Q4 2015
CA SFH	31	31		30
CA Condo/Townhomes	40	40		39
Los Angeles Metropolitan Area	34	34		32
Inland Empire	46	46		45
S.F. Bay Area	25	26	R	24
US	58	57		58
S.F. Bay Area
Alameda	22	22		22
Contra-Costa	39	37	R	38	R
Marin	20	19		17
Napa	26	25		21
San Francisco	13	14		11
San Mateo	15	15		14
Santa Clara	22	22		20
Solano	45	45		46	R
Sonoma	26	27		28	R
Southern California
Los Angeles	28	26		27
Orange County	22	23		21
Riverside County	41	42		39
San Bernardino	54	55		53
San Diego	26	26		25
Ventura	31	30		26
Central Coast
Monterey	27	25		25
San Luis Obispo	25	25		26
Santa Barbara	21	20		20
Santa Cruz	17	18		21
Central Valley
Fresno	50	50		49
Kern (Bakersfield)	55	56		55
Kings County	56	57		61
Madera	49	47		48
Merced	48	50		55
Placer County	46	46		44
Sacramento	45	45		46
San Joaquin	43	44		46	R
Stanislaus	48	48		45	R
Tulare	49	49		54

r = revised

Do a Foundation Check: 5 Things to Watch For

Take a closer look at the home’s foundation before buying, says Matt Stock, president of U.S. Waterproofing, based in the Chicago area. 

An undisclosed structural foundation repair could leave a new buyer facing a price tag of $20,000 or more.

“We’ve seen foundations sink 8 inches,” says Stock. “That was a $150,000 repair for the homeowner.”

Stock offers the following tips on how to detect foundation issues on your own and when to call in an inspector for further investigation:

1. Does it smell like mold or mildew? A foundation leak could be the cause.

2. Look for cracks in outside foundation outside and cracks in brickwork. Do you notice a leaning or tilting chimney?

3. Investigate the driveway and garage door too as well as the concrete patios looking for cracks as well.

4. In the basement, are there signs of water damage (e.g. peeling paint; chalky deposits left after water dries)?

5. Do doors or windows stick when opening/shutting? That is a tell tale sign of foundation damage.

If you suspect any issues, be sure to have a licensed home inspector do a thorough inspection of the foundation.

“The last thing we want people to go through is a surprise $30,000 foundation repair charge upon moving into their dream home,” Stock says.

Posted in Remodeling Adviser, by Melissa Tracey on February 6, 2017

http://styledstagedsold.blogs.realtor.org/2017/02/06/do-a-foundation-check-5-things-to-watch-for/

Consumers More Optimistic About Housing

More Americans are showing optimism toward their personal finances and the housing market, a reversal to a five-month decline.

Read more: Optimism Grows Among Sellers, Buyers

In particular, Americans are more upbeat about home prices, home selling, their rising household incomes, and they’re less scared about losing their jobs, according to Fannie Mae’s Home Purchase Sentiment Index, a survey of 1,000 Americans in January about their attitudes toward housing.

“Three months after the presidential election, measures of consumer optimism regarding personal financial prospects and the economy are at or near the highest levels we’ve seen in the nearly seven-year history of the National Housing Survey,” says Doug Duncan, senior vice president and chief economist at Fannie Mae. “However, any significant acceleration in housing activity will depend on whether consumers’ favorable expectations are realized in the form of income gains sufficient to offset constrained housing affordability. If consumers’ anticipation of further increases in home prices and mortgage rates materialize over the next 12 months, then we may see housing affordability tighten even more.”

Here’s a closer look at some of the findings from the latest survey:

• 42% of Americans believe home prices will increase, a month-over-month uptick of 7 percentage points in January.
• 69% of Americans say they are not concerned about losing their job, a 1 percentage point increase from December 2016.
• 15% of Americans say now is a good time to sell, a 2 percentage point month-over-month increase.
• 15% of Americans who say their household income is significantly higher than it was 12 months ago, a month-over-month increase of 5 percentage points.
• 29% of Americans who say now is a good time to buy a home, a 3 percentage drop from December 2016 and a new survey low from May and September 2016.

Source: Fannie Mae

Sellers See Biggest Profits Since 2007

Homeowners who sold in 2016 saw an average home price gain since purchase of $38,206 – or a 21 percent, on average, increase since purchase, ATTOM Data Solutions repots in its Year-End 2016 U.S. Home Sales Report. That's up from an average 13 percent gain in 2015, and it is the highest increase since 2007.

The largest metro areas to see the highest average percent gain since purchase for home sellers in 2016 were:

• San Francisco, Calif.: 69% gain
• San Jose, Calif.: 69%
• Santa Rosa, Calif.: 52%
• Los Angeles, Calif. 49%
• Seattle, Wash.: 48%

The median home sales price across the country in 2016 was $218,175, according to ATTOM Data Solutions, which is up 6.8 percent from 2015. Of the 201 largest metro areas with populations of at least 200,000, 179 of the areas posted a year-over-year increase in home prices. Twenty-seven of the metros posted double-digit year-over-year price gains. Notably, the following cities posted the highest gains:

• Tampa-St. Petersburg, Fla.: up 14%
• Jacksonville, Fla.: 12.9%
• Portland, Ore.: 12.1%
• Denver, Colo.: 11.3%
• Orlando, Fla.: 10.1%

Meanwhile, the following counties had the highest actual median home prices in 2016:

• New York County (Manhattan), N.Y.: $1,400,000
• San Francisco County, Calif.: $1,175,000
• San Mateo County, Calif.: $1,075,000
• Marin County, Calif.: $950,000
• Santa Clara County, Calif.: $860,000

Source: RealtyTrac

President Trump Seeks to Dismantle Dodd-Frank

President Donald Trump reportedly will sign an executive action Friday to scale back the regulatory system that was put in place in 2010 in response to the financial crisis. The Trump administration has set out to remove what it views as regulatory burdens by overhauling mortgage financing giants Freddie Mac and Fannie Mae and easing lending regulations.

Read more: After Election, What Happens to Housing Issues?

"Americans are going to have better choices and Americans are going to have better products because we're not going to burden the banks with literally hundreds of billions of dollars of regulatory costs every year," Gary Cohn, White House National Economic Council director, told The Wall Street Journal. "The banks are going to be able to price product more efficiently and more effectively to consumers."

President Trump is to order a sweeping review of the Dodd-Frank Act rules, which will include a close look at how the government supervises big financial firms that aren’t traditional banks, Cohn says. Cohn says that existing regulations under Dodd-Frank have made it too difficult for banks to lend and has limited consumers’ choices of financial products.

Cohn says the Trump administration also is planning to overhaul mortgage finance giants Fannie Mae and Freddie Mac, which have remained under the government conservatorship since the financial crisis.

"This is a table setter for a bunch of stuff that is coming," Cohn says.

The changes are expected to be met with some criticism, particularly among Democrats, who have argued in the past that the regulations protect the average borrowers as well as investors from abusive practices. They have pushed for tighter controls on banks and lenders in response to the subprime mortgage crisis.

"I'm not sitting here saying we want to go back to the good old days," Cohn told The Wall Street Journal. "We have the best, most highly capitalized banks in the world, and we should use that to our competitive advantage. But on the flip side, we also have the most highly regulated, overburdened banks in the world."

Source: “Trump Moves to Undo Dodd-Frank: White House Says Banks Burdened By Rules After Financial Crisis,” The Wall Street Journal (Feb. 3, 2017) [log-in required] and “Trump to Order Review of Dodd-Frank, Halt Obamas Fiduciary Rule,” Bloomberg (Feb. 3, 2017)

Guess Which Country Has the Biggest Homes

Americans love their personal space. A new study by Point2 Homes finds that U.S. homes provide the most space per person when considering house sizes across countries. Americans enjoy 45 percent more personal space than the Brits or the French and 70 percent more space than homeowners living in Spain.

However, Australia still nudges out America when it comes to actual home size. Americans have the second largest homes among the nine countries studied, coming in at 1,901 square feet. Australians boast the largest at 2,032 square feet.

Point2Homes surveyed 29,000 people across nine countries -- the U.S., Canada, United Kingdom, France, Germany, Spain, Mexico, Brazil, and Australia. Though they're living small, it seems Brits dream as big as their cousins down under. On average, respondents in the U.K., Australia, and Mexico identified a "good-size home" as one that contained more than 2,501 square feet. Americans settled on a smaller size to define this aspiration, between 1,501 and 2,000.

Source: “Home Sizes in the U.S.: Expectations vs. Reality,” Point2 Homes (Jan. 30, 2017)