Residents 'Stretching' to Buy in Marin
Marin's housing market is as dependent on first-time and "move-up" buyers as is any other housing market; in this respect Marin is no different and therefore it is at as much risk as any other housing market. This article in (surprisingly enough) the Marin IJ discusses just how at risk is this group of Marin buyers. Naturally, the IJ does not give serious attention to the potential downside of this nor what happens when easy credit goes away.
Some choice quotes:
Some choice quotes:
"The wallets of Marin residents might be fuller than those in much of the state, but people are still stretching themselves thinner than ever to afford homes here, a private policy research organization reported today."
"The study from the Public Policy Institute of California indicated that more than half of California residents who bought a home within the past two years spend more than 30 percent of their total income on housing. In the Bay Area, including Marin, that number is 44 percent."
""Even in Marin, where incomes are higher than in most places, people still have to stretch to get in because housing prices are so high," said Hans Johnson, the study's co-author and a research fellow at the institute."
"The median household income in Marin is $94,410, the highest in the state, according to joint tax returns filed with the state Franchise Tax Board in 2003. But the median home price is also far and away the highest in the state, at $910,000 for single-family homes and $806,000 for all homes in July, according to La Jolla-based DataQuick Information Systems."
"That's because most buyers in Marin are "move-up buyers," or those who have owned a home elsewhere already and have made enough profit in the sale of that home to move a level or two in the market, according to Leslie Gavin, a private mortgage banker with Wells Fargo Bank in San Rafael."
"Still, the June housing affordability index from the California Association of Realtors reported that just 10 percent of Marin households today would be able to buy a median-priced home in Marin. That's down from 12 percent in May and 13 percent in June 2004."
""Most of my clients are pretty comfortable," she said. "But sometimes you get a buyer who just needs to get in the market so badly that they're going to stretch themselves, which is not always the most comfortable position for someone to be.""
"In those cases, buyers typically finance 95 percent of the cost of the house and have a debt-to-income ratio - the percentage of income used to pay for the house - of above 40 percent."
"The income to home-prices ratio isn't much different than it was two years ago, Johnson said, but if mortgage interest rates rise and prices flatten or decline, the bet by homeowners going to great financial lengths to buy becomes risky."