Saturday, November 13, 2004

I haven't blogged on the California housing bubble in a couple of weeks. My last post was comparing the California bubble to that in London which now seems to be deflating. Considering the National Association of Realtors is releasing its metropolitan area housing data for the third quarter on Monday, I thought I'd give you all a little preview.
Anthony Downs, a senior fellow at the Brookings Institution in Washington, D.C., who has been researching issues at the California Public Policy Institute since July, recently wrote that state prices are running 10 times ahead of household incomes, compared with a national ratio of 4-to-1.

"To me, this imbalance foreshadows a sharp, near-term slowdown in California housing-price escalation," Downs said.

As if to underscore that point, the California Association of Realtors yesterday reported San Diego's September affordability index at 11 percent, up slightly from the record low of 10 percent for the previous two months.

The number means that only 11 percent of local households earn the $132,800 necessary to buy the median-priced home with a 20 percent down payment and a 30-year, fixed-rate loan at 5.7 percent. However, nearly three-quarters of current buyers are picking adjustable-rate loans at lower rates and making far less than a 20 percent down payment.
In Los Angeles:
Only 17 percent of households could afford Los Angeles County's $459,660 median-priced home in September, according to the California Association of Realtors' Housing Affordability Index, which was released Thursday. While it was a 7-percentage-point dip from a year ago, the index for the county held steady at a 14-year low for the fourth consecutive month.
In the Bay Area:
Of the country's 50 biggest cities, homeowners in San Jose stand the greatest chance of seeing their homes plunge in value, according to PMI Mortgage Insurance Co., of Walnut Creek, a subsidiary of The PMI Group, Inc.

But there's some good news attached to the "risk index" ranking of 509 -- it's down slightly from the summer quarter.

The national average for the fall is 186, which implies a 18.6 percent probability of an overall house price decline, measured within the next two years and across the 50 largest housing markets. That's up from an index of 171 in August. . . .

San Jose, Oakland, and San Francisco are three of the top five MSAs at the top of the risk index list.
The percentage of households in California able to afford a median-priced home stood at 19 percent in September, a 5 percentage-point decrease compared with the same period a year ago when the Index was at 24 percent, according to a report released today by the California Association of REALTORS(R) (C.A.R.). The September Housing Affordability Index (HAI) increased 1 percentage-point compared to August, when it stood at 18 percent.
More analysis on Monday.


At 6:27 AM, Blogger Mark said...

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