Housing: Buy now — if you can afford it By Roger Ruvolo

Homebuyers beware — Inland Southern California is a tough market for you — and each month it’s getting tougher.

May numbers from CoreLogic reveal that median prices have risen year over year in Riverside County ($330,000 to $356,000) and San Bernardino County ($285,000 to $310,000). These are within a few points of all-time highs.

Moreover, notes Andrew LePage, CoreLogic research analyst, “the nearly half-a-percentage-point rise in mortgage interest rates over that period means the principal and interest payment for that median-priced home has risen more than 12 percent.”

Sales of newly-built homes are about 43 percent below the long-term average, CoreLogic reported, meaning most of the 6,467 homes sold in May were resales.

And note, one in 5 of the homes being sold in the Inland area is being bought by an absentee buyer, a group LePage said is made up of mostly investors and some vacation homebuyers. Investor purchases likely are being turned into rentals. In recent months, rental prices in the Inland area have also increased sharply.

Scott Beloian of Westcoe Realtors says the CoreLogic numbers square with his recent experiences in the real estate market.

New home sales are off, Beloian said, “because the cost to build is too high. That’s what makes the current market different from the one before, during the boom, when the cost to build was less. You saw construction on every corner. Now you see it, but not nearly as much.”

These factors affect affordability, which has become a bigger problem each month since the housing market began recovering from the calamitous crash of a decade ago. Mortgage payments have been eating up an ever-larger share of disposable income.

Let’s say you can afford a 5-percent down payment of $17,800. A $356,000 home bought with a 30-year mortgage at 3.67 percent interest would cost the buyer $2,153 a month. A $330,000 home would cost $1,872 a month. These figures are from an online calculator offered by Trulia.

The median household income in the Inland area is $56,615, according to Onboard Infomatics. Homebuyers, then, would spend about half their income on housing.

“Overall I’d say affordability is already a factor — and it’s going to be a factor,” Beloian said. “There’s going to need to be some kind of correction to balance these things out. Something’s going to have to give.”

 

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