HOUSING AFFORDABILITY IS IMPROVING
Why Is This Important?
The affordability of housing affects a region’s ability to maintain a viable economy and high quality of life. High housing costs in a region force people away from the region’s core in search of cheaper housing, which results in longer commutes, less family time, and more traffic congestion.
The current mortgage crisis has resulted in the added burden of housing foreclosures. Foreclosures occur when homeowners cannot meet their mortgage payments. Thus, an increase in foreclosures is an indication of financial stress among households due to any variety of factors, including job loss, income decline, and adjustments of variable rate mortgages. Trends in home prices indicate the desirability of a region, as well as its underlying economic security and expected continuing viability.
How Are We Doing?
In 2008, Solano County homeowner households are slightly better off in terms of housing financial burden than homeowners in the San Francisco Bay Area and California. In that year, 40 percent of Solano County homeowner households had housing costs in excess of 35 percent of household income compared to 42 percent in the San Francisco Bay Area and 43 percent in California. From 2007 to 2008, both the Bay Area and Solano County experienced a 1 percent decline in the number of homeowner households for which housing costs accounted for 35 percent or more of household income; California remained steady at 43 percent. Overall, the percent of Solano County homeowner households with housing costs in excess of 35 percent of income experienced a significant increase of 10 percent from 2005 to 2006, and then had a slight adjustment (5%) downward from 2006 to 2007. This same increase from 2005 to 2006 can be seen in the San Francisco Bay Area and California though less dramatic (4% and 5% respectively). However, from 2006 to 2007, San Francisco Bay Area and California continued the upward trend.
Foreclosure activity in Solano County has slowed from the previous high in 2008, although the number of foreclosures in the first half of 2009 is still historically high. So far there have been more foreclosures in the first half of 2009 than all of 2007. However, this is less than the 5,300 foreclosures in Solano County and 238,400 foreclosures in California in 2008 – a high for both regions.
Related to the foreclosure activity, home affordability has drastically increased over the last year. In 2008, 46 percent of potential first-time homebuyers in Solano County could afford to buy a median priced single family home, an increase of 29 percent from 2007. Home affordability was the lowest in Solano County in 2006 when only 15 percent of potential firsttime homebuyers in Solano County could afford to purchase a median-priced home.
Rental Affordability has remained steady. While the county’s average rent increased slightly by 1.4 percent in 2009, since 2002, the average rent in Solano County has declined 6 percent. Home sales activity is recovering from the drop off during housing market crash, though prices have yet to recover. The peak year for both home prices and number of sales came in 2005 for Solano County. By June 2009, the number of home sales in Solano County had increased by 80 percent over the first half of 2008. Of the cities in Solano County, Vallejo had the highest average number of home sales between 2002 and June 2009. The increased volume of sales suggests that housing prices should soon begin to recover, as there is typically a lag between volume of sales and housing prices.