CAR affordability index

[waiting hawk]

Just added this to my site so dont mind the tone.

C.A.R. (California Association of Realtors) Took 8 months to come out with their new and improved affordability index which it has been stating since 1984. These guys sure can come up with any way to prop up this market. Their new “gauge” of measurement is a complete joke.
Differences are:
* Using 85% of the median price (v. median price)
* PITI of 40% of household income (v. 30%)
* 10% down payment (v. 20% down payment)
* Adjustable rate mortgage (v. 30 yr fixed)

What a bunch of idiots.

http://www.car.org/index.php?id=MzY0ODc=

[bgates]

I really don’t get how they calculate an affordability % for 1st-time buyers. Their old affordability index, I thought, just looked at how many people had an income such that the monthly nut on a median-priced home would be less than 30%. But how do you find the income distribution for first time home buyers? And if they are deriving their numbers by looking at the people who are in fact buying homes, aren’t they in effect saying that 70% of first-time homebuyers can’t afford the homes they’re buying, even under the new BS affordability index guidelines?

[powayseller]

Yeah, I saw that. They call it the First Time Buyer HAI, the FTB-HAI. With all their tweaking, this index is twice as high as the regular HAI. (Higher HAI means more people can afford a median priced home; a value of 100 means every resident can afford the median priced home). Voila, housing is more affordable than we all thought. Nothing to see here, just move along.

I would cut them a little slack if they would compute this index back to 2000, when the 10% or less down was getting popular. As it is, we’ve got HAI until 2005, and then a magical higher HAI starting in 2006. Twisted number crunching is what it is!

[no_such_reality]

Ah lying with statistics.

I like it. It’s affordable if you can buy something 15% below median. Heck median is even below average so…

Maybe next month they define affordable to be based on buying a starter condo… of course, that’s not quite as easy to spin with the rationale babble they have.

Does anybody have stats on what percentage of people with PITI payments at 40% get into trouble?

[JES]

These guys would give the likes of Joseph Goebells a run for his money when it comes to propaganda. Like Powayseller mentioned, we are now supposed to believe that twice as many 1st time buyers can afford a home as compared to the general public? Are there no laws to hold these people accountable for their misleading reports, advice and comments? Other industries, like financial services for example, are replete with regulations!

[JES]

[powayseller]

The NAR is not loved by the people they are supposed to represent. A realtor told me they are useless, the people on the board just bide their time, and their only function is collecting dues and selling forms (contracts, rental forms, etc.). I guess if they keep up the facade that real estate is a great investment, they can gather more dues from realtors joining the business, and sell more forms.

[JES]

It simply amazes me powayseller. A couple days after news came out that San Diego prices were down 1% year over year, I read more than one comment from NAR folks in articles that in their opinion prices would have moderate gains this year, between 5-10% appreciation!

[sdrealtor]

CAR=California Association of Realtors
NAR=National Association of Realtors

There is a difference and while median prices should not rise in CA they could on a National basis. Its a big world.

[JES]

It was probably CAR comments that I read since they referenced San Diego…

[speedingpullet]

Hehehe 😉

I love the way, even after ‘moving the goalposts’ in data collection, they still can’t get more than a 23% affordability number.

That’s still 3 out of 4 people who can’t afford to buy…

[powayseller]

I have a way to get affordability to 65%. Assume a 40% downpayment, a 1.5% intro teaser rate, buy the median priced condo in National City. Voila! All we have to do to sustain this is build more condos in NC and lower lending standards so everyone can keep getting teaser rates.

[JES]

I think that it should be computed based on the assumption that the loan will be a 1-month interest only, that the buyer should be ‘allowed’ to overstate income by 100%, and that mello roos and HOA taxes don’t count as monthly costs. Additionally, median income for the area should be tweaked to reflect illegal earnings that go unreported such as gambling proceeds and Del Mar horse track winnings. We all know that most people here win a few k there every summer, and also go to Vegas and win anywhere from 5-10k. On top of that, we all receive gift money from relatives for birthdays and holidays and we should add that to the value as well. And why aren’t we including cash withdrawals from credit cards? Surely that should count as income as it helps make housing more affordable. Lastly, housing really is more affordable because we have to count the home equity line that the buyer will get the week after they close. That will really help cover payments…

[Author]

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