April 2022
Housing affordability worsened as home prices rose
According to C.A.R.’s Housing Affordability Index (HAI), only about one-fourth of all Californians could afford to purchase the $786,750 statewide median-priced home in 2021, down a couple percentage points from 2020. A minimum annual income of $144,400 was needed to make a monthly payment of $3,610, including principal, interest, and taxes on a 30-year fixed-rate mortgage at a 3.16% interest rate.
By ethnic groups, Black and Latino households that can afford to buy are half of that of whites (34%) while 40% of Asians could buy a median-priced home. Since then, all factors that contribute to the HAI have moved in a way that we can only assume have deteriorated California’s housing affordability.
Millennials account for more transactions than any other group
According to the National Association of Realtors (NAR) latest home buyers and sellers’ generational trends report, the Millennials bloc, now aged 23 to 41, are accounting for more transactions than any other age group: 43 percent of home sales, up from 37 percent the year prior.
Baby Boomers made up largest share of home sellers at 42 percent, and the share of Millennial sellers is on the rise, increasing 4 percentage points over last year to 26 percent. However, 27 percent of younger Millennials (aged 23 to 31) stated that saving for a down payment was the most challenging step towards homeownership.
Legislation that taxes Homeownership up to 25%
The California Association of REALTORS® strongly OPPOSES Assembly Bill 1771, authored by Assemblymember Chris Ward, which attacks private property rights by imposing up to a 25% tax on the gain from selling a home or other real property -- diminishing freedom to move or relocate, housing supply, economic security, and opportunity to grow intergenerational wealth for new homebuyers.
Assembly Bill 1771 by Assemblymember Chris Ward attacks property rights with a proposed tax on the sale of a home in the first seven years after purchase. If the home were to be sold within the first three years, the tax would impose a punitive 25% tax. This legislation would result in higher prices due to a reduced supply of homes. AB 1771 will also limit wealth-building opportunities for California’s new and more diverse population of homeowners.
I believe we all agree to disagree, but if you oppose this proposed assembly bill, contact your state representatives to reject this legislation.
Sellers! These are features buyers demand and can live without
In Realtor.com® 2022’s new homebuyers report, they found that people across the U.S. are finally starting to return to the office, go on vacations, and restart their lives in earnest. And as peak homebuying season begins, it seems at least some of the perks-turned-must-haves remain.
No. 1 on the list, a swimming pool continues to be the most popular search term so far this year. Even as people slowly begin their return to the office, many workers are choosing to continue working from home at least a few days a week. And they want a view. It does not matter if it is a river view, lake view, or golf course view. Buyers want something nice to look at in between endless Zoom meetings.
The indoor-outdoor lifestyle goes beyond views, with people looking for more outdoor activities to keep in shape and work off that quarantine 19. Some of these activities include golf, tennis, and basketball.
As buyers look for space to work as well as some privacy, having a home office—or two—has become a necessity for some. A library is another popular search term, to ensure there is a designated desk area. Outbuildings—detached structures like a garage or shed that could potentially be turned into a quiet working space—is another popular search term this year.
But it is not just indoor space homebuyers are looking for; big lots and backyards are also important to them. Entertaining outdoors and gardening became popular pastimes over the past couple of years, and they are set to continue into 2022.
One of the biggest things buyers want these days is a property that does not need updates. That includes a new roof and updated kitchen, among other things. Everybody wants turnkey, they want a big, open kitchen, and they want it all done for them. Construction delays and rising prices mean doing renovations will be more costly than in previous years, and the timelines for getting the work done can be burdensome.
5% Mortgage rates on the horizon?
Mortgage rates have been rising quickly over the past month. A year ago, the 30-year fixed-rate mortgage was 3.18%. Last week, it averaged 4.67%, according to Freddie Mac. Mortgage rates surged more than 90 basis points in March alone. And 55 mortgage rates may be here sooner than many housing analysts had originally predicted.
Several leading housing economists believe 30-year fixed rates may hit 5% within the next month, while others believe that landmark will come later this year. Lawrence Yun, chief economist of NAR, says he believes the higher mortgage rates will cool the market somewhat in the coming months.
2022, 1st Qtr. Stats for Santa Cruz, Monterey & the Bay Area
Comments: Overall a 29% avg increase in new listings for all three counties along with an average 70% increase in sales from Feb to March. The median price in Santa Cruz County rose 16%, Monterey County rose almost 13% and in Santa Clara County (surprise, surprise) it declined. The days on market declined while the list to sales price increased in Santa Cruz. In Monterey, it was similar but not as significant and in Santa Clara in 2022, the days on the market increased and the list to sales price dropped. Is this a sign of the market changing? Things usually start in the Bay Area and then move down the coast to Santa Cruz and Monterey.
A note from a prominent Bay Area real estate attorney, for whatever reason, buyers continue to cancel ratified contracts that were written without any contingencies and without any deposit being paid. They also continue to do so without consulting a qualified California real estate attorney before taking these potentially drastic actions. The two primary reasons for these cancellations are that the buyer is unable to obtain the institutional financing that they hoped would be available to close the transaction and/or the buyer develops cold feet about moving forward at the purchase price.
(Display of MLS data is deemed reliable but is not guaranteed accurate by the MLS)
