CAR housing affordability index

[AK]

I’m not sure if this belongs in “Housing Market” or “OT: Humorous” …

The new CAR affordability numbers are out … believe it or not, 59% of first-time buyers in San Diego County can afford a home! Or can they?

Let’s take a look at the methodology …

http://www.car.org/economics/marketdata/ftbhaimethodology/

—————————

THE ASSUMPTIONS AND METHODOLOGY USED TO CALCULATE C.A.R.’S HOUSING AFFORDABILITY INDEX FOR FIRST TIME BUYERS (HAI-FTB)

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. … 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.

(OK, fair enough so far.)

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.

(OK, as long as you take PMI into account at some point in the calculation … let’s make a note of that for later.)

Step 3. INTEREST RATE: A FIRST-TIME BUYER is assumed to finance the home purchase with an adjustable rate mortgage (ARM). … Beginning in the first quarter of 2009, the FTB-HAI incorporates an effective interest rate that is based on the one-year, adjustable-rate mortgage (ARM) from Freddie Mac’s Primary Mortgage Market Survey (PMMS).

(1-year ARM … Are you on crack?)

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.

(OK, let’s say this is one of the three homes in California with no Mello-Roos, HOA, or other fees.)

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.

(OK, this is a fricking joke. Even assuming the hypothetical buyer has no car payment, student loans, etc. … there is NO FRICKIN’ WAY you could qualify at 40% DTI, on a 1-year ARM, at 10% down. And what about PMI? You think the bank’s giving that away for free?)

[4plexowner]

“NEVER FORGET THIS: The NAR is a trade group, not a legitimate source of independent data. They are biased, not credible, and to be blunt, essentially behave as PR flacks who will say ANYTHING if they think it will help their members make a quick buck. They are not a credible economic organization, they are not legitimate researchers, they are nothing more than hired guns pushing their members’ agenda — even when it is destructive to America.”

http://www.ritholtz.com/blog/2009/07/more-nar-nonsense/

Ritholtz wrote this about the NAR but it is equally applicable to the CAR

“PR flacks who will say ANYTHING if they think it will help their members make a quick buck”

[4plexowner]

“NEVER FORGET THIS: The NAR is a trade group, not a legitimate source of independent data. They are biased, not credible, and to be blunt, essentially behave as PR flacks who will say ANYTHING if they think it will help their members make a quick buck. They are not a credible economic organization, they are not legitimate researchers, they are nothing more than hired guns pushing their members’ agenda — even when it is destructive to America.”

http://www.ritholtz.com/blog/2009/07/more-nar-nonsense/

Ritholtz wrote this about the NAR but it is equally applicable to the CAR

“PR flacks who will say ANYTHING if they think it will help their members make a quick buck”

[4plexowner]

“NEVER FORGET THIS: The NAR is a trade group, not a legitimate source of independent data. They are biased, not credible, and to be blunt, essentially behave as PR flacks who will say ANYTHING if they think it will help their members make a quick buck. They are not a credible economic organization, they are not legitimate researchers, they are nothing more than hired guns pushing their members’ agenda — even when it is destructive to America.”

http://www.ritholtz.com/blog/2009/07/more-nar-nonsense/

Ritholtz wrote this about the NAR but it is equally applicable to the CAR

“PR flacks who will say ANYTHING if they think it will help their members make a quick buck”

[4plexowner]

“NEVER FORGET THIS: The NAR is a trade group, not a legitimate source of independent data. They are biased, not credible, and to be blunt, essentially behave as PR flacks who will say ANYTHING if they think it will help their members make a quick buck. They are not a credible economic organization, they are not legitimate researchers, they are nothing more than hired guns pushing their members’ agenda — even when it is destructive to America.”

http://www.ritholtz.com/blog/2009/07/more-nar-nonsense/

Ritholtz wrote this about the NAR but it is equally applicable to the CAR

“PR flacks who will say ANYTHING if they think it will help their members make a quick buck”

[4plexowner]

“NEVER FORGET THIS: The NAR is a trade group, not a legitimate source of independent data. They are biased, not credible, and to be blunt, essentially behave as PR flacks who will say ANYTHING if they think it will help their members make a quick buck. They are not a credible economic organization, they are not legitimate researchers, they are nothing more than hired guns pushing their members’ agenda — even when it is destructive to America.”

http://www.ritholtz.com/blog/2009/07/more-nar-nonsense/

Ritholtz wrote this about the NAR but it is equally applicable to the CAR

“PR flacks who will say ANYTHING if they think it will help their members make a quick buck”

[jpinpb]

How can you tell they’re lying? Watch to see when their lips move.

Yeah. Old. But still so applies.

I like the way each one is broken down and explained.

In conclusion: Now’s a great time to buy!

[jpinpb]

How can you tell they’re lying? Watch to see when their lips move.

Yeah. Old. But still so applies.

I like the way each one is broken down and explained.

In conclusion: Now’s a great time to buy!

[jpinpb]

How can you tell they’re lying? Watch to see when their lips move.

Yeah. Old. But still so applies.

I like the way each one is broken down and explained.

In conclusion: Now’s a great time to buy!

[jpinpb]

How can you tell they’re lying? Watch to see when their lips move.

Yeah. Old. But still so applies.

I like the way each one is broken down and explained.

In conclusion: Now’s a great time to buy!

[jpinpb]

How can you tell they’re lying? Watch to see when their lips move.

Yeah. Old. But still so applies.

I like the way each one is broken down and explained.

In conclusion: Now’s a great time to buy!

[DWCAP]

Please dont forget that they are kinda cherry picking their numbers there.

Step 1, 85% of median home price. This would make sense in a normal market with normal distribution, but (assuming they are talking about Q1 median) we had anything but a normal median. Janurary had what, 55% foreclosure sales? Feb wasnt far off. Even now it is ‘down’ to 35%. The only things selling are the low end, and these guys are gonna buy 15% below that? I thought CAR/NAR was always complaining how foreclosures are unfairly underpriced already.

Step 3, interest rates. Umm, lowest in recient history and totally manipulated. Not really their fault, but not telling the whole story here either.

[DWCAP]

Please dont forget that they are kinda cherry picking their numbers there.

Step 1, 85% of median home price. This would make sense in a normal market with normal distribution, but (assuming they are talking about Q1 median) we had anything but a normal median. Janurary had what, 55% foreclosure sales? Feb wasnt far off. Even now it is ‘down’ to 35%. The only things selling are the low end, and these guys are gonna buy 15% below that? I thought CAR/NAR was always complaining how foreclosures are unfairly underpriced already.

Step 3, interest rates. Umm, lowest in recient history and totally manipulated. Not really their fault, but not telling the whole story here either.

[DWCAP]

Please dont forget that they are kinda cherry picking their numbers there.

Step 1, 85% of median home price. This would make sense in a normal market with normal distribution, but (assuming they are talking about Q1 median) we had anything but a normal median. Janurary had what, 55% foreclosure sales? Feb wasnt far off. Even now it is ‘down’ to 35%. The only things selling are the low end, and these guys are gonna buy 15% below that? I thought CAR/NAR was always complaining how foreclosures are unfairly underpriced already.

Step 3, interest rates. Umm, lowest in recient history and totally manipulated. Not really their fault, but not telling the whole story here either.

[DWCAP]

Please dont forget that they are kinda cherry picking their numbers there.

Step 1, 85% of median home price. This would make sense in a normal market with normal distribution, but (assuming they are talking about Q1 median) we had anything but a normal median. Janurary had what, 55% foreclosure sales? Feb wasnt far off. Even now it is ‘down’ to 35%. The only things selling are the low end, and these guys are gonna buy 15% below that? I thought CAR/NAR was always complaining how foreclosures are unfairly underpriced already.

Step 3, interest rates. Umm, lowest in recient history and totally manipulated. Not really their fault, but not telling the whole story here either.

[Author]

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