According to the California Association of Realtors and their First Time Buyer Housing Affordability Index, 23% of San Francisco households can currently afford to purchase a home priced at 85% of the local median. Their assumptions: $693,840 purchase price, 10% down, 5.69% financing (ARM), monthly payment of $4,420 (including taxes and insurance), and a household income of $132,550.
That’s up from 18% affordability a year ago, up from 16% the year before that, and up from 9% prior to C.A.R. redefining how their index is calculated.
As you might recall, it was two years ago that C.A.R. changed their 24-year-old index to reflect a down payment of 10% (down from 20%), a monthly payment of no more than 40% of a household’s income (up from 30%), and a short-term adjustable rate mortgage (versus long-term fixed). The rational at the time:
In the more than two decades since the CALIFORNIA ASSOCIATION OF REALTORS® first conceived the HAI, the mortgage finance landscape has changed dramatically. The range of mortgage products available to buyers as well as underwriting criteria has changed.
C.A.R. developed the new index measuring affordability for first-time home buyers to better reflect the realities of today’s real estate market.
Now about the new new realities and underwriting criteria two years later (today)…
∙ Entry-level housing affordability increases 50 percent [C.A.R.]
∙ Affordability Is Up! (But Not Really) [SocketSite]