When the real estate market suffered (along with many real estate agents) in 2007 and 2008, the thing that got me through was being able to help so many folks in the education and service industries buy their first homes when most of them never thought they would ever be able to buy here on the Peninsula.
I helped teachers, firemen, police officers and nurses buy homes in Seaside, Monterey and even Carmel and those folks are still really happy today because they’re sitting on a long term investment unlike any other.
Housing affordability conditions for all buyers reached a milestone in the first quarter, according to the National Association of Realtors.
NAR’s composite quarterly Housing Affordability Index rose to a record high of 205.9 in first quarter, based on the relationship between median home price, median family income and average mortgage interest rate. The higher the index, the greater the household purchasing power.
This is the first time the quarterly index broke the 200 mark; recordkeeping began in 1970.
NAR President Moe Veissi believes market conditions are optimal for homebuyers and says “For those with good credit, we’ve never seen better housing affordability conditions or market opportunities than we see at present.” Although home prices are stabilizing and sales are rising, some buyers still have to jump through a lot of hoops to convince a lender that they are creditworthy, even for a mortgage that would be well within their means.
This is especially true for self-employed buyers.
Actually, home sales would be much higher if lending standards would return to normal.
The index shows the median income family, earning just under $61,000, could afford a home costing $325,500 in the first quarter, which is more than double the national median existing single-family home price of $158,100. The median monthly mortgage principal and interest payment for a median-priced home would take only 13.5 % of gross income.
A companion index measuring the ability of first-time buyers to purchase a home also set a record, with the first-time buyer index reaching 135.8 in the first quarter.
Assumptions for the first-time buyer index include a lower income, at 65% of median family income, a starter home costing 85% of the median price, and a down payment of 10%.
This index means the typical entry-level buyer could afford a home costing $182,500, which is well above the overall median price. (not locally of course, as the median price home in Seaside for example is $276,450 and $533,361 for the peninsula)
It’s never been easy to buy a first home because of the cash required for down payment and closing costs, but conditions for first-time buyers who are able to get a mortgage have never been better.
Most first-time buyers choose a loan with a lower down payment, often an FHA-insured loan with 3.5 % down, and some use the VA program with no down payment.
Both home prices and mortgage interest rates are expected to edge up modestly as the year progresses, but housing affordability will remain very favorable with the median-income household well positioned to afford a median-priced home. For all of 2012 the index is projected to set an annual record, averaging 191 for the year. Keep in mind this is national numbers not local.
So remember, whether you're a first-time homebuyer or a current home owner looking to downsize there are properties available in the Carmel/Monterey Peninsula market.
© Patty Ross, KRXA Radio Show - June 1, 2012
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