Below is a release from the Southland Regional Association of Realtors in the San Fernando Valley properly illustrating the cost of delaying purchasing a residential property.
The most recent iteration of a local guide illustrates perfectly why waiting to buy a home can be a bad idea: a prospective buyer who a year ago decided to wait today would pay a higher price and need 16.1 percent more income to buy a median-price single-family home in the San Fernando Valley.
A year ago April the median priced local home sold for $630,000; this April the median price came in at $697,000—a $67,000 difference, the Southland Regional Association of Realtors reported.
Consequently, the minimum annual income needed to qualify for a loan to buy the same home rose from $131,750 in April 2017 to $153,012, a 16.1 percent leap, according to SRAR’s most recent “Income-to-Loan Guide.”
The guide offers benchmarks for prospective buyers on the key numbers in a home purchase. In that same period, interest rates for loans on previously occupied homes jumped from a national average of 4.11 percent to this April’s 4.66 percent. Two years ago the interest rate stood at 3.83 percent.
These increases favor home sellers, but buyers are feeling the pinch.
“The solid gain in home prices added roughly $150 billion to housing wealth during the month,” said Lawrence Yun, chief economist for the National Association of Realtors. “But the continuing run-up in home prices above the pace of income growth is simply not sustainable.
“From the cyclical low point in home prices six years ago,” he said, “a typical home price has increased by 48% while the average wage rate has grown by only 14%.”
Rising interest rates also do not help with affordability.
“More supply is needed to level out home prices,” Yun said. “Homebuilding will be the key as to how the housing market performs in the upcoming years.” Here’s a breakdown of the main numbers used in development of the home and condominium income to loan guides. Keep in mind that hundreds of properties sold for more and hundreds sold for less than the median price, which gives prospective buyers an idea about how much home they can afford. For personalized, specific numbers, always work with a Realtor.
• San Fernando Valley Single-Family Homes
Assuming the buyer made a downpayment of 20 percent, an 80 percent loan of $557,600 would be needed to finance April’s median priced home of $697,000. April’s national average effective mortgage rate of 4.66 percent would require a monthly mortgage payment of $2,879. Add in property taxes of $726 per month along with the typical insurance monthly premium payment of $221 for a total monthly housing payment — known as PITI — of $3,825. PITI stands for principal and interest, plus taxes and insurance.
• San Fernando Valley Condominiums
The median price of condos that changed owners during April was $435,000. A loan of $348,000 would be needed to finance 80 percent of the purchase price, assuming a downpayment of 20 percent. At the national average rate of 4.66 percent, the monthly payment on that loan would equal $1,797. Monthly property taxes would be $453 and insurance $138, for a monthly PITI of $2,387.
To qualify for the loan, lenders would want to see a minimum annual income of $95,495. A year ago the same condo required a minium income of $81,566 — a difference of 17.1 percent.
Yes, sitting on the fence sometimes makes sense. Just know that, in this market, everyday spent waiting translates into a predictable requirement— more cash!
WAGE GROWTH, STEADY PRICES BUOY AFFORDABILITY
Higher wages and lower seasonal home prices combined to push California’s housing affordability higher in the first quarter of 2018, compared to the previous quarter, the California Association of Realtors reported recently.
The percentage of homebuyers who could afford to purchase a median-priced, existing single-family home in California in first-quarter 2018 edged up to 31 percent from 29 percent in the fourth quarter of 2017, but down from 32 percent in the first quarter a year ago.
This is the 20th consecutive quarter that the index has been below 40 percent. California’s housing affordability index hit a peak of 56 percent in the first quarter of 2012.
C.A.R.’s Housing Affordability Index measures the percentage of all households that can afford to purchase a median-priced, single-family home in California. A minimum annual income of $111,500 was needed to qualify for the purchase of a $538,640 statewide median-priced, existing single-family home in the first quarter of 2018. The monthly payment, including taxes and insurance on a 30-year, fixed-rate loan, would be $2,790, assuming a 20 percent down payment and an effective composite interest rate of 4.44 percent.
Condominiums and townhomes also were more affordable in first-quarter 2018 compared to the previous quarter with 39 percent of California households earning the minimum income to qualify for the purchase of a $449,720 median-priced condominium/ townhome, up from 38 percent in the fourth quarter. An annual income of $93,090 was required to make monthly payments of $2,330
If you are in the Los Angeles area, have any questions or real estate sales or financing needs, feel free in contacting me.
Ron Henderson GRI, RECS, CIAS
President/Broker
Multi Real Estate Services, Inc.
Gov’t Affairs Chair – California Association of Mortgage Professionals
BRE #00905793 NMLS #310358
www.mres.com
ronh@mres.com
Specialist in the Art of Real Estate Sales and Finance
Real Estate market, mortgage rates, Los Angeles, San Fernando Valley, Conejo Valley, Simi Valley, Woodland Hills, West Hills, Calabasas, Chatsworth
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