Affordable Orange County?
According to an article written by Jeff Collins, some good news and some bad news exists in Orange County housing market. But the good new is only slightly good news. Here is what I mean:
The good news: “Orange County homes are slightly more affordable now thanks to shrinking sales and plummeting prices, new data released last week showed.” The bad news: “But homes remain relatively unaffordable, despite the gains.”—Jeff Collins, Orange County Register, February 24, 2008, “Home affordability nudges up in O.C.”
The California Association of Realtors (CAR) housing numbers for the fourth quarter of 2007 show that only 28% of Orange County residents can afford an entry-level home. (CAR defines entry-level as a home that cost 85% of the median housing price.) More bad news from CAR: In fourth quarter 2007, first-time buyers who put 10% down with a 6.21% adjustable rate mortgage would need an income of $111,900 and would have a monthly payment of $3,730 (includes taxes and insurance).
Another measure of housing affordability in Orange County comes from the National Association of Home Builders and Wells Fargo Bank. Their index show that only 8.4% of the Orange County home sold in fourth quarter 2007 were affordable to those with median income (This number is in the mid $60,000s for Orange County).
My conclusion: Affordability may be improving, but we still have a long way to go!
The large amount of growth in California home values in 2002-2005 as shown by the maps put the current downturn into perspective. The current decline in home values is matched by the rapid increase in values in the recent past.
More fourth quarter 2007 CAR factoids:
* 46% of the Inland Empire residents can afford an entry-level home
* 33% of Californians can afford an entry-level home
* 28$ of Orange County residents can afford an entry-level home
* 27% of Los Angles County residents can afford an entry-level home
“A common measure of community-wide affordability is the number of homes that a household with a certain percentage of median income can afford. For example, in a perfectly balanced housing market, the median household (and the half of the households which are wealthier) could officially afford the median housing option, while those poorer than the median home could not afford the median home. 50% affordability for the median home indicates a balanced market.”—Wikipedia
Also, see Debbie post, “More Buyers Able to Afford A Home … Ya, Right.”
Mary J. McLaughlin said:
2/24/08
Affordable Housing. Our rent is based on the Median Income in Orange County, CA.
I question why http://www.huduser shows it is $$84,100 and another offiice states that it is $61,,700
We had the same in 2007 $78,700 and $60,600
Why the difference?
February 25, 2008 12:06 AM
southoctracker said:
I’ve always found this affordability statistic to be interesting…and perhaps a bit misleading, because it leads you to think that the 28% of people who can afford entry-level homes would actually want to buy one (first-time buyers perhaps?). In fact, the 28% who can afford it includes, I would guess, successful professionals well into their careers who either already own a home and aren’t moving, or would want to buy a home well above a starter home and can afford it.
It would be interesting if there were a way to tell what percentage of first-time buyers (or someone entering the OC real estate market for the first time from somewhere else) can afford entry-level homes. That would give a better idea as to the affordability of the area as it impacts the starter-home buyers, which in turn affects move-up buyers.
February 25, 2008 8:14 AM
Sylvia Walker said:
Mary,
I think that this is because median family income and median household income are calculated different and seen as two different numbers.
I was interested in understanding this more myself. So as chance would have it, I had already planned on looking into this and writing a post on it. Thanks for the extra incentive. It should be published on the Sweet Digs blog soon.
February 25, 2008 9:36 PM
Sylvia Walker said:
southoctracker,
You make some interesting points. Another subject that I have a lot of interest in and will be looking into more in the near future. I will keep your statements in mind when look into the matter more.
February 25, 2008 9:45 PM
Mick said:
28% can afford an so-called entry level home? Where are these 28%? They still seem waaaaaaaay too high.
March 12, 2008 8:15 PM
Sylvia Walker said:
I agree. Prices are still too high when compared to incomes. And as some economists are saying, this is why housing prices will continue to fall.
March 14, 2008 12:04 PM
Mary J. McLaughlin said:
07/15/08
I question why we were told that our children had to give us $500 a month to qualify for affordable housing. We have just learned that this was illegal. That put us on the 60% level, but qualified for the lower level.
By going on line, I discovered that the OCHA pays the remainder on the Section 8 Vouchers.
Management does not get paid a remainder on the 50% and 60% levels.
Isn’t this fraud?
July 15, 2008 10:52 AM