While the rest of the country continues to experience a decrease in housing inventories (Trulia reports a decrease nationwide for the fifth straight quarter) the good news is that markets in San Francisco and San Jose are showing an increase in available housing.
Low inventory adversely affects affordability with first-time homebuyers needed to a lot 38.5% of their monthly income to their new home – 1.7% increase from 2015. Traditionally, lenders such as Fannie Mae use a 36% debt-to-income ratio, which can make the mortgage approval process more challenging for first-time buyers..
On average, trade-up and premium home buyers require just 25.5% and 13.9% respectively of their income to buy a home so they are not nearly as affected by low inventory.
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