Regional Spotlight: Tighter Market, Assistance Programs Make Valley Houses More Affordable

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RISMEDIA, June 5, 2007-(MCT)-Two years ago, David and Renee Sisty tried moving from Squaw Valley to Fresno, hoping the family income of about $50,000 a year would allow them to get their feet in the door.

But with home prices so high, they couldn’t find a home appropriate for them and their four children, David Sisty said.

“There was just no way we could afford them,” the 38-year-old electrical contractor said.

Now the Sistys are once again shopping for a Fresno home, and — armed with financial help from a city of Fresno home buyer assistance program — they’re feeling much more optimistic.

“Houses are a lot more affordable than they were two years ago, especially with all the programs for us people that don’t make a ton of money,” he said. “We’ll definitely be able to find a house — it’s just about finding a house to suit us.”

After years of seeing their buying power eroded by rising home prices, moderate-income home buyers in Fresno are starting to see some relief.

That’s according to the California Association of Realtors’ First-time Buyer Affordability Index, which tracks the affordability of homes for median-income buyers across many regions in the state.

The association’s most recent index released in May has some good news for Central Valley home buyers — affordability is improving in the region for the first time in two years.

For the first quarter of 2007, the affordability index for the Central Valley stood at 41%, indicating the percentage of median-income residents who can afford a median-priced home in the region.

That’s up from 38% in the same quarter in 2006, and is the highest the index has been since the first quarter of 2005, when it stood at 42%.

The Central Valley also remains one of the most affordable regions of the state for first-time home buyers, with a median home price of $285,000 in the first quarter of 2007, down from $297,000 in the same quarter last year, the index reported.

That’s much lower than the statewide median price of $480,000 for the first quarter of this year. Only the High Desert region has lower median home prices, the index reported.
There’s a simple explanation for rising affordability, said Anthony Gamber, president of the Fresno Association of Realtors.

“The market is tightening up,” he said. “Sellers are getting more realistic” about the prices they can demand, and builders of new homes are offering more and more incentives to lure buyers.

In fact, this year has seen the first fall in median home prices in the Fresno market since 2004, he said.

According to the affordability index, Fresno County is even more affordable than the Central Valley region as a whole, with an affordability index of 44% for the first quarter of 2007, up from 41% in the same quarter last year.

Median home prices in Fresno fell to $242,000 in the first quarter of 2007, down from $251,000 in the same quarter last year, the index reported.

For Gamber, a real estate professional with 27 years of experience in the Fresno market, the trend reflects a return to normalcy.

“Affordability is an issue where it wasn’t before,” he said, speaking of the relatively flat housing markets of past decades. While the real estate boom of the past several years has been a driver of the region’s economy, “it is putting some people out of the market, which is sad.”

David Mendoza, executive director of the Community Housing Council of Fresno, agreed that moderate-income Fresno residents are seeing their housing options expand in this buyer’s market.

“There’s more negotiating, whereas three or four years ago the sellers picked who they wanted,” he said. “There is affordability for people that have jobs and are earning a decent wage.”

But he cautioned that the region’s rising affordability for median-income residents wasn’t trickling down to the region’s poorer residents, who still struggle to find homes they can afford.

Doug Heffner, owner of Integrity Lending Group in Fresno, pointed out that falling home prices can be offset by rising interest rates.

“Right now we have a lot of supply on the market,” he said. “People are waiting for the demand to flow, so prices are coming down. But in the last week, rates have popped up.”

Another factor that could work against increasing affordability is the tightening of credit standards that has followed the collapse of the subprime mortgage industry.

“If you were a live body a year ago, even two years ago — if you placed a mirror under your nose and it fogged up, you could get a home loan and get into a house,” Heffner said of the lax standards some lenders pursued.

Unfortunately, the collapse of the subprime industry has taken some options away from first-time home buyers, said Ken Neufeld, a veteran real estate agent with London Properties.

“There are good subprime lenders and bad lenders,” he said. “I don’t think we should paint all subprime mortgages with the same brush. There were some good subprime loans that aren’t being made anymore.”

Given that median home prices in the Fresno area are still much higher than they were a decade ago, “a little uptick in affordability doesn’t affect the number of people we’d like to see,” Neufeld said.

That’s why first-time home buyers need to learn about all the options available to them, such as the city of Fresno’s home buyer assistance program that the Sistys are using, or state and federal assistance programs, Neufeld and other real estate agents stressed.

While the Central Valley is one of the least expensive housing markets in the state, it isn’t the only region to see increasing affordability this year, said Robert Kleinhenz, deputy chief economist with the California Association of Realtors.

But while regions from San Diego to Sacramento have seen affordability increase, statewide affordability actually fell slightly this year, driven almost entirely by continuing price increases in urban Southern California and the San Francisco Bay Area, he said.

Indeed, while the association’s forecast for the rest of 2007 sees home sales continuing to decline, it’s possible that statewide median prices could continue to rise, driven by the state’s most expensive markets, Kleinhenz said.

But he said it’s likely the Central Valley won’t be seeing home prices going up through the rest of 2007.

Copyright © 2007, The Fresno Bee, Calif.
Distributed by McClatchy-Tribune Information Services.

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