Chelan-Douglas Trends e-Newsletter

ALL HOMEBUYERS AFFORDABILITY ABOVE STATE -

Affordable housing through homeownership is has long been the stuff of the American Dream. Along with the financial benefits, homeownership usually brings significant social benefits for families. In 2016, the National Association of Realtors released a study titled Social Benefits of Homeownership and Stable Housing, presenting findings that support the importance of affordable housing. The research shows that homeownership boosts the educational performance of children, induces higher participation in civic and volunteering activity, improves physical and psychological health, lowers crime rates, and lessens welfare dependency.

In order for residents of Chelan and Douglas Counties to experience the benefits of homeownership, y of affordable housing must exist. One way of measuring the availability of affordable housing is through the Housing Affordability Index (HAI). The HAI is calculated and maintained by the Washington Center for Real Estate Research (WCRER) and measures the ability of a middle income family to make mortgage payments on a median price resale home. The HAI also assumes a 20% down-payment, 30-year fixed mortgage, and middle income for the area. The most important part of the HAI assumes lenders would fund the loan so long as the principal and interest payments do not exceed 25% of gross household income.

The easiest way to look at this indicator is that every time the HAI is at 100, a household will spend exactly 25% of their gross household income on principal and interest payments. Higher scores indicate more affordability than lower numbers.

Since the 25% of gross household income is a threshold for lenders, this indicator provides insight into both the ability of people to buy a home in an area, but also their ability to remain in the home and not fall behind in payments or in other aspects of life, such as transportation costs, putting food on the table, saving and investing, and medical costs.

Taking a look at the Housing Affordability Index for All Buyers on the Trends site, Chelan and Douglas Counties combined and individually have HAI scores above 100 and are considered affordable housing. The most current data from the fourth quarter of 2017 (17Q4), HAI scores for all homebuyers in:

  • The combined counties was 130.1, increasing from 87.9 since 07Q4.
  • Chelan County was 126.7, increasing from 86.1 since 07Q4.
  • Douglas County was 136.3, increasing from 92.3 since 07Q4.
  • Washington State was 118.2, increasing from 90.5 since 07Q4.

In other words, owner-occupied housing has become more affordable. These figures compare the beginning and end of the series, but HAI scores in the middle of this span show that housing generally higher than occurred at the beginning and end of this series. Excluding 17Q3, Chelan County hasn't had a HAI score this low since 10Q2, Douglas County since 11Q1, and since 08Q4 in the state. So, at the same time, very recent data reveal a downward trend in home affordability.

This finding is consistent with the insights from the Median Home Resale Value indicator on the Trends site. Chelan and Douglas Counties had a median home resale value of $314,100 for the third quarter of 2017, almost $50,000 less than Washington State at $363,200. But the median home resale value in the combined counties has increased by 60% since 13Q1.

JoAnna Holland, Broker with Century 21 and Director of Communications with North Central Washington Association of Realtors says, "Supply has decreased significantly causing the values to increase. [It's] pure supply and demand. With interest staying low over the last 5 years, people have had stronger buying power. This has helped our housing market, giving home owners the option to sell far higher than when they bought, allowing equity to help them purchase the next home."

While buying a home in Chelan and Douglas Counties is considered affordable for the middle homebuyers, this is not so much the case for First-Time Homebuyers. For these households, owner-occupied homes are much less affordable. And the HAI indicator for First-Time Buyers follows a very similar trend line with the state. The First-Time Buyers HAI during 17Q4 in:

  • The combined counties was 71.5, increasing from 52.1 since 07Q4.
  • Chelan County was 71.3, increasing from 49.9 since 07Q4.
  • Douglas County was 71.9, increasing from 57.5 since 07Q4.
  • Washington State was 68.3, increasing from 53.5 since 07Q4.

Holland mentions "First-time buyers do not have the cash gained from equity from a previous home so coming up with enough cash on their own to meet the requirements of a down payment more difficult to access."

Homeownership is a goal for many individuals and families for numerous reasons beyond the financial and social implications presented earlier. The HAI indicators gives essential insight into the affordability of housing within Chelan and Douglas Counties, important for families and for economic development efforts.

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