First-time Buyer Housing Affordability Index Methodology

There are all kinds of incentives for first time home buyers right now. It has never been a better time to buy especially if this is your first time getting into the market!  Below is the methodology that is used to calculate C.A.R.’s (California Association of REALTORS) Housing Affordability Index for first time home buyers.

Step 1. MEDIAN PRICE: C.A.R.’s housing affordability index is based on the median price of existing single-family homes sold from C.A.R.’s monthly existing home sales survey. Starting in 1987, this survey is based on reports of closed escrow sales from 80 Boards or more of REALTORS® and multiple listing services around the state. Prior to 1987, the survey was based on reports from 45 Boards. A FIRST-TIME BUYER is assumed to purchase a home at a price equal to 85 percent of the prevailing median price for existing homes.

Step 2. DOWNPAYMENT: A FIRST-TIME BUYER is assumed to make a 10 percent downpayment. Therefore, the loan amount needed to purchase a home would be 90 percent of the median home sales price.

Step 3. INTEREST RATE: A FIRST-TIME BUYER is assumed to finance the home purchase with an adjustable rate mortgage (ARM). This is represented by the effective composite ARM for previously occupied homes, which is reported monthly by the Federal Housing Finance Board.

Step 4.The monthly payment for PRINCIPAL, INTEREST, TAXES AND INSURANCE (PITI) is computed as the sum of three parts:

-Monthly mortgage payment, based on the terms of the mortgage in Steps 2 & 3.
-Monthly PROPERTY TAXES are assumed to be 1 percentof the median home sales price divided by 12.
-Monthly INSURANCE PAYMENTS on the house are assumed to be 0.38 percent of the median home sales price divided by 12.

The results of these three calculations are added together to findthe PITI or total monthly payment for a household that buys the median priced home.

Step 5. It is then assumed that the monthly PITI can be no more than 40 percent of a household’s income. Thus, the monthly housing payment is divided by .4 to come up with the MINIMUM INCOME NEEDED TO QUALIFY FOR A LOAN on the median-priced home.

Step 6. Starting in 1988, data for the distribution of households by various income ranges was obtained from Claritas. INCOME DISTRIBUTION figures were developed based on the projected percent change in the annual median household income. Prior to 1988, household income utilized in the housing affordability index was based on projections by C.A.R. using the 1980 census data as a base.

Step 7. The minimum income amount calculated in Step 5 is multiplied by 12 to determine the minimum annual income needed to qualify. This amount is compared to the income distribution of households. The percent of the households with incomes greater than or equal to the minimum income becomes the HOUSING AFFORDABILITY INDEX FOR FIRST-TIME BUYERS (HAI-FTB).

NOTE: The quarterly HAI-FTB for a given geographic area in a particular quarter is based upon the quarterly median price for that area as well as the quarterly income distribution for that area.

Truckee Real Estate Sales Stats

The chart below shows sales information for the Truckee area this past week. The information was taken from our local multiple listing service and is good for the dates of March 8-14, 2009.

AREA	Current homes/ condos		# Shrt Sals	# REO	Low	High	Avg.	Avg. days listed	SFR Pend-ing	Sold SFR
Tahoe Donner	137	28	13	2	$315K	$2,550K	$887,032	146	14	5
Sierra Meadows/ Prosser	31	1	4	1	$339,500	$4.5 mil.	$861,296	150	5	0
Lahanton	28	0	1	0	$1,300K	$4,695K	$2,473,107	219	0	0
Gray’s Crossing/ Old Green.	28	2	2	2	$600K	$3,995K	$1,829K	231	1	0
Northstar	39	87	0	0	$699K	$3,400K	$1,393,769	236	2	0
Alpine M./ Squaw Vly.	46	113	0	0	$539K	$4,900K	$1,669,163	213	0	0
Donner Lake	30	7	2	0	$319,900	$3,950K	$1,168,243	165	1	0
Glenshire/ Devonshire	43	0	14	1	$295K	$2,950K	$715,681	199	5	1

Tahoe Donner Weekly Market Update

Lots of activity again this week in Tahoe Donner. We have seen quite a few price reductions in the past few weeks as sellers are trying to take advantage of the last couple busy weekends of the summer. There were 27 price reductions on listed properties in Tahoe Donner this week! 4 single family homes and 2 condos went into escrow this week. There are now 23 homes and 2 condos in escrow in Tahoe Donner. Of the homes that went pending, 2 of them were listed over $1.2 million. 3 homes and 2 condos sold this week. The lowest home sold for $407,000 and the highest sold for $690,000. The average list to sales price for these homes was 98%. 9 new homes came on the market this week in Tahoe Donner. These ranged in price from $359,900 to $1,299,950. There are currently 183 homes listed in Tahoe Donner. The market absorption rate is currently 12.5% and there is about 8 months of inventory remaining.