Guidance for The Movement in the Real Estate Market

Market Snapshot—How much can you afford?

This article prepared by the California Association of Realtors states that:

Although this information is from May, I believe that this data and information is still very useful for helping you understand how quickly a market can change.

In the month of April, the median home price in California was $402,760 which was up 28.9% percent from April of 2012. This increase is the fourteenth consecutive month of a year-over-year increase. It is also the highest price gain since February of 1980. The price increases are a direct result of low inventory levels, multiple offers, and bidding wars

Although the increases of prices have improved the health of the real estate market, many buyers have become frustrated with the process of purchasing real estate. Many of the homes listed are still going to cash investors. Investors understand that even as prices increase, there is still a 32% difference between buying a home and then renting it out producing a positive cash flow. If you are currently a potential home buyer, it is important to acknowledge that you are competing with a lot of buyers whom can purchase properties at all price ranges, offering cash or financing at a quick close. For a seller that is presented the choice of accepting an offer from an individual who is obtaining FHA financing versus an All Cash Investor, it is difficult to believe that they will accept the FHA financed offer unless other factors are present.

The price gains have also led to a 12 point decline in the California Housing Affordability Index. Basically, this means that in 2012, 56% of Californians could afford to buy a home at the median home price, but now as of the first quarter in 2013, only 44% of Californian can. As of the first quarter with a median home price of $402,760, your principal and interest payment is estimated to be $1,922 which means the qualifying income would have to be approximately $76,000 per year.

View original article by California Association of Realtors