According to the California Association of Realtors (C.A.R.) the number of households who can afford to buy and entry level home in the State increased to 24 percent at the end of the second quarter this year.  Considering what has been happening in our Sacramento market the increase of only 1 percent from a year ago was surprising.

In the article, C.A.R., states, “The minimum household income needed to purchase an entry-level home at $504,080 in California in the second quarter of 2007 was $101,550, based on an adjustable interest rate of 6.29 percent and assuming a 10 percent down payment. First-time buyers typically purchase a home equal to 85 percent of the prevailing median price. The monthly payment including taxes and insurance was $3,380 for the second quarter of 2007.”

The Sacramento area had an affordability index of 44 percent, the second highest in the state behind the High Desert region which posted 45 percent.  For Sacramento this is an increase of 7 percent from a year ago and 1 percent from the end of the first quarter.  The first-time median price for a home in Sacramento at the end of the second quarter was $302,980.  The monthly payment including taxes and insurance was $2,030 and the income needed to qualify for a loan was $61,030.  To give you an idea of how that compares the State numbers at the end of the second quarter stood at 24 percent of the households able to buy and entry level home with a median price of $504,080.  The monthly payment on that home would be $3,380 and income to qualify stood at $101,550.  It could be worse, if you live in Marin County, according to C.A.R. you need income of over $188,000 to qualify for loan to buy an entry level home.

To read the full article and see how all of this is calculated and see how other parts of the State compare to Sacramento, see C.A.R. reports entry-level housing affordability at 24 percent in California.

In other news, I checked the latest inventory of available homes over at HousingTracker and was not surprised to see there are still more homes coming on the market.  As of the week ending August 27^th, inventory stood at 18,844, up 185 from a week ago and 2.1 percent in the last month.  In the past six months inventory has increased a staggering 40.9 percent.  Compared to last year when we hit record highs but had started to decline by this time, the increase is 3.4 percent. 

The median asking price as of August 27 was $375,000, down from $379,500 a week earlier and down 2.6 percent in the past month.  For the full year the decline in the median asking price, according to HousingTracker, has been 12 percent.

Based on what I am seeing in my business we are seeing inventory increases later in the year as a result of the “mortgage loan crisis.”  This week alone I have had three inquiries from potential clients asking me to help them with a “short sale.”  All three are homeowners who would like to stay in their houses but can’t afford to make the payments on homes that are worth less than what they owe.  At the same time, I met with a prospective buyer yesterday who has decided to sit on the fence a bit longer because he believes he can buy cheaper next year. 

C.A.R. just recently reported that California sales were down almost 23 percent this July from last year.  Until the inventory of available homes starts to fall the pressure on sellers is to continue to lower their prices.  My optimistic side says that we should start to see a decline in inventory in the week after Labor Day and the market will pick up as we move through September.  If the number of foreclosures and “short sales” continues to pump up inventory through September we may see an acceleration in prices falling.  Only time will tell.