FIRST-TIME BUYER HOUSING AFFORDABILITY INDEX STANDS AT 23 PERCENT

The percentage of first-time buyers in California able to afford a median-priced home stood at 23 percent in the second quarter of 2006, compared with 30 percent for the same period a year ago, according to C.A.R.'s newly developed First-time Buyer Housing Affordability Index (FTB-HAI).

The minimum household income first-time buyers needed to purchase a home at $482,000 in California in the second quarter of 2006 was $98,720, based on an adjustable interest rate of 6.48 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 $3,290 for the second quarter of 2006.

At 39 percent, the High Desert region was the most affordable C.A.R. region in the state, followed by the Sacramento region at 38 percent.

Santa Barbara was the least affordable region in the state at 14 percent, followed by San Luis Obispo at 17 percent.C.A.R. began producing its Housing Affordability Index (HAI) in 1984. At that time, fixed-rate mortgages were the prevailing form of financing a home purchase, and the calculations used to produce the HAI reflected a 20 percent down payment.

The methodology also assumed a monthly payment for principal, interest, taxes and insurance that was no more than 30 percent of a household's income.

In the more than two decades since C.A.R. first conceived its Housing Affordability Index, the mortgage finance landscape has changed dramatically. C.A.R. developed the new index measuring affordability for first-time home buyers to better reflect the realities of today's real estate market.

**Taken from the California Association of Realtors Bulletin, dated August 23rd, 2006.