Real Estate Information

San Diego Housing-affordability index gaining

A silver lining to San Diego County's falling home prices emerged yesterday as an index showed housing affordability approaching the 50 percent mark for the first time in 15 years.

A report from the National Association of Home Builders showed that 44.6 percent of homes sold in the fourth quarter of 2008 were affordable to households earning the county's median income of $72,100.

The highest San Diego has ever reached was 48.2 percent in the first quarter of 1994 at the depths of the last recession. The latest reading compares with 38.7 percent in the third quarter of 2008 and 14.3 percent in the fourth quarter of 2007.

Nationally, the index rose to 62.4 percent, up from 56.1 percent in the third quarter and 46.6 percent at the end of 2007.

Falling home prices and very favorable mortgage rates both contributed to the housing affordability gains seen in the fourth quarter of 2008

The index assumes home buyers make a 10 percent down payment, with 28 percent of household income set aside for principal, interest, taxes and insurance.

Meanwhile, La Jolla-based MDA DataQuick reported that home prices continue to fall in Southern California. Overall, the median for the six-county region stood at $250,000, down 39.8 percent from January 2008's $415,000.

The firm had reported earlier this week that San Diego County's median home price had sunk below $300,000 for the first time in seven years. The $280,000 median for January was 34.7 percent below year-ago levels.

Analysts said the continuing decline reflects the preponderance of low-cost foreclosed homes, which represented 55 percent of all San Diego resale houses and condos sold in January.

In San Diego and the rest of Southern California, sales volume continues to increase as buyers look for bargains. There were 15,227 sales throughout the region, up 52.5 percent year-over-year, and 2,459 in San Diego County, up 34.7 percent.

The next year should provide for a period of stabilization in the market.  Low prices and low interest rates has attracted many would-be buyers to the San Diego areas recently and should continue to provide them with the opportunity to “get in” to the California real estate market at prices they did not feel possible just a few years ago. 

Once stabilization occurs, we'll probably work our way back to be one of the least-affordable cities because of the strong demand for Southern California life style.

The Housing and Economic Recovery Act of 2008 was just signed by President Bush with some amazing benefits for first time homebuyers. Call everyone you know who wants to buy their first home (or who hasn't owned one in three years), this is too good to miss - it's a $7,500 tax CREDIT (not deduction but a credit).

If you have not owned a home in three years, you qualify as a first time home buyer. If you buy a home after April 9, 2008 and before July 1, 2009, you qualify for this credit. Call your friends who just bought a home since April 9th and tell them they may take $7,500 off their tax bill if they qualify. It has to be your principal residence, so rentals do not count.

The tax credit is 10% of the cost of the home, up to a maximum of $7,500. This is not an additional deduction that lowers the amount of income to be taxed, it is a tax credit. In other words, you take $7,500 off your tax bill. But there is a catch; the credit you receive now is actually an interest-free loan that must be repaid.

The loan has no interest, and will be paid back over 15 years. You get the credit on your 2008 taxes, but you start paying it back on your 2010 taxes that are due in 2011, so you get at least two years without a payment. You pay back 6.67% of the credit each year, so for a $7,500 credit the payment is $502.50 per year. If you stay put for 15 years, you pay it off with no interest.

What happens if you sell the house? You pay the balance back at the closing. So, you get $7,500 now, and pay the rest of it back if you make money on the sale of your house. What happens if you do not make enough money when you sell your house? They forgive the rest of the debt.

Other restrictions stipulate that you have to buy your first house in three years before July 1, 2009, not have super high income, not use bond financing and buy anywhere in the US.

If you'd like to learn more about this program, please call me!