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Thoughts on California Housing Affordability Index

Topic: Home buying

While certain markets in California have seen some pricing stabilize, pushing the Affordability Index lower, there still are many Southern California sub-markets that remain at historically high levels of affordability. As an example, while the rest of the State was at about a 60% average in Q4 of 2009, all of Riverside County was experiencing affordability levels of over 70%. Riverside and parts of San Bernardino counties still have very good affordable priced new homes, much better than the higher urbanized centers in the State.

New home sales continue to improve, especially for first time buyers and those who could take advantage of the tax credits. It appears that the State is well on its way to extending the State tax credit, which is planned to include credits for both new and resale homes. The combination of the lowest historical pricing, low interest rates and tax credits, make the current market an excellent buyers market and a great time to purchase a new home.

Although sales of new homes have been improving, historically the number of sales are well below the last 15 year average, at around 60% lower. New home supply has been reduced significantly over the last 12-18 months and we can see supply in some sub-markets will not be able keep pace with the current recovery and demand. This seems to also be the case for finished lots for builders. The finished lots in prime market areas have been aggressively pursued by the big builders and the remainder supply is located in mostly the secondary market areas.

What does all this mean? The balance between supply and demand has certainly improved and overall pricing has stabilized, meaning that those who need a home should be out shopping. Interest rates and tax credits will likely be good for this year, but hard to say for the future.

If you would like more information about how the housing market, connect with the building industry experts at Builders Development Group. BDG is a home building company in California which collaborates with the industry's best talent. Real estate development expert, Michael Vairin, is the driving force behind Builders Development Group.

by Michael Vairin


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