The biggest drop that we have seen in terms of overall activity is one of the things that I have been concerned about (and that we continue to hear about in the news) and that is the entry-level buyer. We keep hearing that first-time homebuyers are not participating in this market and the data would seem to support that claim. Because these buyers are missing from this market, the result has been a decline in the demand for housing in our middle market, where most of activity happens. Just look at the chart below and see the drop we in had in the activity level in sales from $400,000 and below.
This market over the last two years has made up over 32% of the total sales in all of Ventura County, yet in October, it only accounted for just under 18% of our total number of sales. We need to see this market return, otherwise it stagnates the move-up activity and really begins to shut down the real estate markets. In order for this to happen, we will have to see a drop in the First-Time Homebuyer Affordability Index (FTHB HAI). The FTHB HAI is made up of three basic ingredients: Median Home Price, Median Income and Average Mortgage Rates. All three of these have dropped dramatically during the period of time when the real estate/mortgage markets crashed around 2006. The good news is that values and mortgage rates all came down but the problem is that so did the Median Incomes in California. Below, you can see how all three factors were affected during this period of time.
Median Price
Average Mortgage Rates
Median Income
While we have seen the California Median Income recently come up off of its lows, we did not hit the bottom until the 1st Quarter of 2012. In order for things to improve for First-Time Homebuyers in areas like Camarillo and Thousand Oaks and Moorpark and Simi Valley and Oxnard and Ventura, we have to see the Median Incomes rise faster than either Mortgage Rates and/or Median Prices. This means jobs, jobs, jobs! We need better jobs and we need more jobs. We need our college graduates to get to work. Once this starts to improve, I am confident the market will continue to look a lot more normal.
Have a great day and don't forget to let me know if there is anything I can do to help you, your family or friends with any of their real estate needs.