Emergency Savings - Affordability Challenges

One in Three adult Americans has no emergency savings.  I posted this blog in 2014, and I am sure it is true today.

According to this April 2014 article from HousingWire by Trey Garrison the housing industry will likely be impacted by the results of a new survey from NeighborWorks America, which serve as a stark reminder of affordability challenges. The survey found that almost 70 million working age Americans – about one-third – have no emergency savings. This highlights a primary problem facing potential homebuyers, as one in three homes are deemed unaffordable to the average buyer, and mortgage originations are reportedly at a 14-year low.

• Only 25 percent of American have enough saved to cover 30 days of living expenses.
• About one in five have enough savings to cover three months – about the average time of unemployment for many Americans – while 28 percent expect their emergency funds to cover a year.
• Approximately 29 percent of adult Americans have no emergency savings in place—whether to pay for the repair of a car that’s required to get to work, or fix a major household necessity such as a roof or furnace.
• Retirement and buying a home are the top savings goals at 28 percent and 13 percent, respectively.
• Just 5 percent of consumers say that they are currently saving to create a buffer in case of a financial emergency.
• 52 percent of people earning less than $40,000 said that they had no reserve.
  
  

Even though this is a nationwide study, California is not immune to the phenomenon obviously, and affordability concerns are certainly increased in areas of high prices like the Bay Area. I believe it is important to reflect on it.

Thank you for reading,

Francis

Silicon Valley real estate

Trends: Local prices and graphs.
A noteworthy local non-profit event:  Community Services Agency - in Mountain View

California: There's No Place Like Home

California - There's no place like home!

There has been much talk in the news about people leaving the Bay Area, and/or California for reasons of affordability and quality of life (commute, noise, lack of land etc...).
A California Association of Realtors Google Poll reports the following:

click for a larger picture.

Questions about real estate?  Text, or email me!

Francis

My Home Valuation tool
Detailed, local trends etc...
Current mortgage rates   (low!)

Renters Confidence Index - San Jose

Renters Confidence Index - see: San Jose

48% of renters are determined to buy a home within 5 years, in the San Jose region of California. However, more than 1/2 think it is not a good time now to buy, mainly because of prices. Still, 70% think that buying a home is the best long-term investment.

In particular, 56% of Millenials are determined to own a home, and about 75% of them are pretty confident that they will have the ability to afford a home in the future.  About the same number think it is the best long-term investment.

Source: Pulsenomics - Renter Confidence Dashboard - See: San Jose

Thank you for reading,
Francis

My Home Valuation tool
Detailed, local trends etc... 
Current mortgage rates   (pretty stable, and low.. )

California Home Price Fundamentals

California Home Price Fundamentals.

Check out this interactive map of the “Home Price Fundamentals” for California, and individual Counties.

The interactive tool is provided by the California Association of Realtors (CAR)

Some of these graphs are most interesting, like the one called “Years of Savings Required for Down payment”, which is now close to 20.  The one called “Price to Income Ratio” shows that it takes about 8.3 years of paychecks to purchase the median priced home in California right now.

 

If you look at the County of Santa Clara though, the figures are staggering: it takes over 11 years of salary to afford the median priced home, and it takes over 26 years of savings (at 6% of savings rate) to afford the typical 20% down payment.

It also shows that in California, if you are in the median, it takes about 59% of the yearly income to pay for your mortgage...

Thank you for reading,

Francis

Home Valuation tool
Detailed, local trends etc...
Current mortgage rates   (slight recent uptick)
A worthy local non-profit to remember: Community Services Agency in Mountain View.

Emergency savings - Affordability challenges

One in Three adult Americans has no emergency savings.

According to this April 2014 article from HousingWire by Trey Garrison the housing industry will likely be impacted by the results of a new survey from NeighborWorks America, which serve as a stark reminder of affordability challenges. The survey found that almost 70 million working age Americans – about one-third – have no emergency savings. This highlights a primary problem facing potential homebuyers, as one in three homes are deemed unaffordable to the average buyer, and mortgage originations are reportedly at a 14-year low.

• Only 25 percent of American have enough saved to cover 30 days of living expenses.
• About one in five have enough savings to cover three months – about the average time of unemployment for many Americans – while 28 percent expect their emergency funds to cover a year.
• Approximately 29 percent of adult Americans have no emergency savings in place—whether to pay for the repair of a car that’s required to get to work, or fix a major household necessity such as a roof or furnace.
• Retirement and buying a home are the top savings goals at 28 percent and 13 percent, respectively.
• Just 5 percent of consumers say that they are currently saving to create a buffer in case of a financial emergency.
• 52 percent of people earning less than $40,000 said that they had no reserve.
  
  

Even though this is a nationwide study, California is not immune to the phenomenon obviously, and affordability concerns are certainly increased in areas of high prices like the Bay Area. I believe it is important to reflect on it.

 

Thank you for reading,

Francis

 

Silicon Valley real estate

Trends: Local prices and graphs.
A noteworthy local non-profit event:  Coalition on Homelessness, SF

Effect of interest rates on affordability...

December 2013 U.S. Economic and Housing Market Outlook
Freddie Mac released its U.S. Economic and Housing Market Outlook for December showing that housing affordability is being challenged as the year comes to an end.

Highlights from the Freddie Mac Study show that:

• At a 4.4 percent interest rate for a 30-year fixed-rate mortgage that prevailed in the third quarter of 2013, more than 70 percent of the country remained affordable. All of the North Central region remained affordable, while just 36 percent of the West remained affordable.
• At a 5 percent rate (and no change in prices/income) approximately 63 percent of the country would be affordable, at 6 percent mortgage rates 55 percent would be affordable, and at 7 percent mortgage rates only 35 percent of the country would be affordable.
• On the plus side, existing homeowners' housing payment-to-income ratio has fallen to an average of 7.9 percent, its lowest level since 1980, a positive sign for sustainable homeownership.

See an interactive map of housing affordability, depending on interest rates.

Thanks for reading,
Francis

Silicon Valley real estate specialist
Detailed, local trends etc...
Current mortgage rates

Great local Nonprofit in the Valley:  Community Services Agency.

Why it is a good time to buy real estate...

Real estate is positioned well for the future...

From our Coldwell Banker blog...
* "Baby boomers are in their prime real estate buying years and are 78 million strong.

* The Pew Research Center reports minority homeownership levels still have room for improvement. The gaps between white and minority households remain significant with homeownership rates for Asians (59.1 percent), African-Americans (47.5 percent) and Latinos (48.9 percent) well below the 74.9 percent among whites.

* Immigrants are moving to the U.S. by the tune of 1.1-1.5 million a year depending on the source. These are legal immigrants who add value to our country and society. They need housing.

* Echo boomers will likely have similar economic impact in coming years that their baby boomers parents have had through their lives. Echo boomers are born between 1977 and 1994 and are 73 million strong and according to the Joint Center for Housing Studies at Harvard University, 4 million turn 21 each year.

* Household formation is also an important statistic. The Joint Center for Housing Studies at Harvard University projects at least 1.25 million households will be created annually from 2010-2020 and will be led by the echo boomers.

* Between 2010 and 2020, the Census Bureau projects U.S. household growth to be in the range of 1.25 to 1.5 million per year, which will create an additional demand for housing. This should equate to a demand for 12.5 -15 million total new households during this decade.

* People move for lifestyle. There have been 4 million marriages and a record more than 8 million babies born in the last two years indicating there is demand for housing. Many of these growing families have not bought a home and are either renting or living with family as they save for a down payment. We know there is pent up demand." ....


Why is now a smart time to buy?

"I.I.I.P. Inventory, interest rates, incentives and price. In most markets around the nation, home inventory has increased giving buyers a greater choice. At the same time, mortgage rates remain at near historic lows and home prices have seemingly stabilized. 2010 saw median prices increase slightly by 0.2% to $172,900. This has made home affordability the best since at least 1973 and maybe ever."

Thanks for reading, and let me know how I can help, always!
Francis
Silicon Valley Real Estate
Los Altos Specialist

Rates:
Mortgage rates: Week ending 8/4/2011 30-yr. fixed: 4.39 fees/points: 0.8% 15-yr. fixed: 3.54 fees/points: 0.7% 1-yr. adjustable: 3.02% Fees/points: 0.5% (Source: Freddie Mac)