Below is a graph of the San Francisco Housing Affordability Index. This market area has been a good leading indicator of the overall health of the U.S. Housing Market, since it is located close to both China and Silicon Valley. Historically, once this index drops below 15%, a market correction soon followed. The California Association of Realtors indicated that the Traditional Housing Affordability Index for the 2nd Quarter of 2016 for San Francisco was 13%, Marin County was 18% and San Mateo was 14%.
If there is one thing I can predict for sure, it’s that market conditions are constantly changing. Historically, we can see that any time the housing affordability index fell below 15% for the San Francisco market a correction in housing prices soon followed.
The NATIONAL ASSOCIATION OF REALTORS® affordability index measures whether or not a typical family could qualify for a mortgage loan on a typical home. A typical home is defined as the national median-priced, existing single-family home as calculated by NAR. The typical family is defined as one earning the median family income as reported by the U.S. Bureau of the Census. The prevailing mortgage interest rate is the effective rate on loans closed on existing homes from the Federal Housing Finance Board. These components are used to determine if the median income family can qualify for a mortgage on a typical home. Any significant increase in mortgage interest rates will have a severe negative impact on housing affordability.
DO NOT WAIT CALL THE MOWERY GROUP AT 951-313-1746 FOR YOUR FREE HOME EQUITY ANALYSIS.
The correction is already happening in other markets. In a recent CNBC article the Miami housing market the average sales price has fallen 7.5%.
Now, this prediction is based upon the current lending standards. If the government and banks loosened credit standards like they did in 2005 and 2006, they could fuel a further increase in the housing market. However, this is highly unlikely since the government is still paying for the last bailout.
If you are worried about losing your low property tax rate, you may be eligible to transfer your base year value to your new home using Proposition 60 or 90. Proposition 60 and 90 allows you to transfer your lower property tax rate to another property. Click here for more information.
Why choose the Mowery Group?
Donald L. Mowery, II is a top producing Real Estate Broker and Certified Residential Appraiser, specializing in serving the Foothill Communities of Southern California for over 26 years.
Mr. Mowery has also completed retrospective and current market value appraisals, rental surveys, and reports related to the impact of damages to real property. He has authored numerous articles for newspapers and journals including the Inland Daily Bulletin, Redlands Daily Facts, and The 909 Magazine.
Regarding his real estate transactions, he has successfully completed multi-millions in sales of both residential and commercial transactions including short/distress sales and marital dissolution sales.