The Wall Street Journal Reports The Housing Crisis is Over! Is It?
May 25th, 2008 categories: Buying San Diego Real Estate, San Diego Real Estate News, Selling San Diego Real Estate
Breaking News
For a change we are hearing some good news being reported in the news. It would only be natural that it should first be reported in the Wall Street Journal. As the voice for San Diego Real Estate, it pleases me greatly to share this good news as first reported in the journal and now in The Real Estate Text Book.
One caution. Before you go out and begin using your mortgage again as an ATM machine and borrowing money against your equity to redecorate the house, it would be beneficial to read the entire Wall Street Journal story and keep it in perspective by tempering it with your own empirical evidence.
The Good News
But at least some “Good News” is finally being reported! Actually, I have been seeing strong signs of increased Buyer activity here in the San Diego Housing Market and that usually indicates that Buyers are now coming back in the market and I predict more will be planning on taking action soon.
Is there Light At The End Of the Tunnel
The main reason we might be finally seeing the light at the end of the tunnel with the housing crisis is that housing affordability has increased. Here in San Diego over the last year in the first quarter 2007 the HAI ( Housing Affordability Index ) stood at 23 and the first quarter of 2008 it increased to 41. With interest rates remaining low and the affordability increasing, this is the best combination of good news to help kick-start the market. There are still some mortgage guidelines that are giving a bit of trouble for Buyers but I expect those will be getting fixed soon.
California Housing Affordability
Here in California where things have always been more expensive, housing affordability for the first time in a lot of years is actually increasing. Home values have adjusted downward and that is now beginning to greatly increase the affordability. According to an updated economic forecast from our own economist with our California Association of REALTORS who tracks all this, read this excerpt from our most recent news bulletin about the changes here in California.
First Time Home Buyer Housing Affordability Index
“The percentage of households that could afford to buy an entry-level home in California stood at 44 percent in the first quarter of 2008, compared with 26 percent for the same period a year ago, according to a report released Tuesday by C.A.R. C.A.R.’s First-time Buyer Housing Affordability Index (FTB-HAI) measures the percentage of households that can afford to purchase an entry-level home in California. C.A.R. also reports first-time buyer indexes for regions and select counties within the state. The Index is the most fundamental measure of housing well-being for first-time buyers in the state.”
The article goes on to say that ” the minimum household income needed to purchase an entry-level home at $356,350 in California in the first quarter of 2008 was $67,830, based on an adjustable interest rate of 5.65 percent and assuming a 10 percent down payment. First-time buyers typically purchase a home equal to 85 percent of the prevailing median price. The monthly payment including taxes and insurance was $2,260 for the first quarter of 2008.”
“At $67,830, the minimum qualifying income was 30 percent lower than a year earlier when households needed $96,500 to qualify for a loan on an entry-level home. Recent decreases in home prices and mortgage rates have brought affordability into better alignment with income levels of the typical California household, where the median household income was $50,700.”
” The First Time Buyer Housing Affordability Index [ FTB-HAI ] in California rose 11 percentage points in the first quarter of this year compared to the fourth quarter of 2007 due to a .56 point decrease in the mortgage rate and a 14.3 percent decrease in the entry-level median home price.”
Market Watchers
If you are a Buyer that has been watching the market for the right time to hit the bottom of the curve as the market conditions improve, this may be it. I expect over the next couple months that we will see many more Buyers coming back into the market and perhaps even buying up a significant percentage of the inventory.
What Can Sellers Expect In This Market
If you are a current seller or a seller that has been holding back coming to market, the good news for you is that there are going to be more buyers in the market place. The not so good news remains that prices have been depressed and will likely remain so for years to come. And you can count on the Buyers expecting the prices to remain low for quite some time and they will be looking for opportunities of the best improved homes at the lowest prices. So it must realized that the old values we knew back as late as 2004 and 2005 are no longer our reality and you can fully expect that it will be years before home values return to those levels. But if you have to sell, you will have Buyers.
The Best News For Sellers
The best news of all for sellers is, if you are planning to buy another home to replace the one you are selling, you will also find that the housing value of your new home to be more within the range of your affordability.
Courtesy of William Johnson The San Diego Real Estate Text Book
Good Blog. I will continue reading it in the future. Nice layout too.
Aaron Wakling
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Eric Hundin
Thank You Aaron for dropping by. Looking forward to having you as a subscriber.
Hi Eric, Thank you for the very nice comment. You are most welcome to come by anytime. I look forward to having you as a subscriber to the blog.
Although I believe the volume of real estate transactions will increase, I’m not convinced that prices have stabilized in many of the formerly red hot housing markets. In the Sacramento area, an extremely large percentage of the sales are bank owned properties. Banks are slashing prices to move inventory, but they are barely keeping up with all of the new foreclosures. The good news is that we are at the peak of the ARM loan resets, so I believe the situation will begin to improve next year.
Jan McNulty
Quartz Real Estate Appraisal
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Cheers! Sandra. R.