Wednesday, May 21, 2008
Inland foreclosures raise area's affordability
10:00 PM PDT on Tuesday, May 20, 2008By LESLIE BERKMANThe Press-EnterpriseHousing affordability has soared in Riverside and San Bernardino counties and much of California as a result of discounted foreclosed properties, concluded two separate reports released Tuesday by home builders and Realtors.The share of homes affordable to median-income families in the Riverside-San Bernardino-Ontario metropolitan area doubled to 26.9 percent in the first quarter of this year, up from 13.5 percent in the last quarter of 2007, according to a study for the California Building Industry Association. Inland Southern California ranks as the 19th least affordable metro area now, compared to 14th after the last rankings. Also the Inland region has become more favorable for first-time homebuyers, said the California Association of Realtors. Its report showed the percentage of households able to afford an entry-level home in western Riverside and San Bernardino counties rose to 57 percent in the first quarter from 46 percent the previous quarter and 37 percent a year earlier. The High Desert, which includes the Victor Valley, and Sacramento were the most affordable areas in California in the first quarter of 2008, while Monterey and the San Francisco Bay Area were the least affordable. In Riverside County, 57 percent of households had at least a minimum income of $46,450 necessary to qualify to buy the $244,040 entry-level home, assuming a 10 percent down payment, an adjustable interest rate of 5.65 percent and that first-time buyers typically buy a home equal to 85 percent of the prevailing median price.
In the Coachella Valley, 42 percent of households had incomes of at least $52,100 required to afford an entry-level home of $273,710, while 64 percent of High Desert households annually earned $35,620 necessary to buy an entry-level home priced at $187,130.
Narrow Window?
How long this new opportunity for homebuyers will last is uncertain.
Robert Rivinius, the home building association's president and chief executive, said affordability in California remains low and home prices will rise after the current glut of foreclosed homes is sold.
He noted that most affordability gains were in communities most affected by defaults on high-risk subprime mortgages and bank repossessions.
"Affordability in most major metro areas remains at or below 25 percent, and we need our state and federal lawmakers to look at ways to streamline the homebuilding process, restore credit to the market and ease regulations to make housing more affordable when the market corrects itself," Rivinius said in a prepared statement.
Gopal Ahluwalia, vice president of research for the National Association of Home Builders, said he expects home prices to start moving up in 2009.
Nick Manfredi, a professional real estate investor in Corona, said he doesn't expect the steady influx of foreclosures or price declines to end soon.
"I can't even buy right now because prices are decreasing so fast," he said, explaining he can't turn over a property before it becomes less valuable than what he paid for it.
Less Now Buys More
"Affordability is improving no matter what measure you would look at," said Chapman University economist Esmael Adibi.
Adibi said since home prices peaked in the second quarter of 2007, the percent of gross household income needed to make monthly payments for the median-priced home in Riverside and San Bernardino counties has dropped from 40 percent to about 28 percent.
He said he expects the median home price in Riverside and San Bernardino counties could drop another 6 percent to 8 percent over the next 12 months.
Combined with rising incomes, which he estimates will increase an average 3 percent this year, he said the region's housing affordability will further improve.
Even when home prices begin to rise, which he said could happen in the second half of 2009, the rebound will be very gradual and the gains in affordability will last, he said.
"Within the next year is a good opportunity for people to consider buying," Adibi said. "But they should buy something they plan to stay in for seven to 10 years. . . . You should buy something you can afford and a house you'd love to live in and not make money off of."Labels: Corona, Foreclosure, Home Prices, Inland Empire, Loan Modification, Moreno Valley, Murrieta, Real Estate, Riverside, Short Sales, Statistics, Temecula
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