It has been a while since we had a look at the local affordability index, and now that we’ve got all of the data for 2012, it seemed like a good time to take another look.
As a reminder, the affordability index is based on three factors: median single-family home price as reported by the NWMLS, 30-year monthly mortgage rates as reported by the Federal Reserve, and estimated median household income as reported by the Washington State Office of Financial Management.
The historic standard for affordable housing is that monthly costs do not exceed 30% of one’s income. Therefore, the formula for the affordability index is as follows:
For a more detailed examination of what the affordability index is and what it isn’t, I invite you to read this 2009 post.
So how does affordability look as of December? Thanks to still-crazy-low interest rates, pretty good:
I’ve marked where affordability would be if interest rates were at a more sane level of 6%. The picture is decidedly less appealing in that scenario, but still not dire.
Here’s a look at the index for Snohomish County and Pierce County since 2000:
Now if only there were actually homes available to buy.
+10
I bet the King county affordability curve wouldn’t be shifted much lower than the other counties if it was a graph of condos.
Rate this comment:
0 
0
Priced to sell: http://www.redfin.com/WA/Sammamish/12-210th-Pl-NE-98074/home/22716024?src=insider-report
THIS WILL BE ON THE FINAL.
Rate this comment:
0 
0
RE: Erik @ 1 –
Especially With Home Owners Fees [like $612/mo for a cheaper Renton condo] Added In
I’d add too, the numerator of Tim’s equation includes the top 5% household incomes [they are the $100-200K household incomes in Seattle that "might" qualify for an average $400-500K SFH] that essentially aren’t in the market anyway, most already bought in years ago. They skew the average household income way too high for a real estate application. There are transplant senior worker household incomes coming to Seattle looking for homes too and qualify, albeit there’s about as many leaving Seattle to transplant somewhere else too.
Nope, ya have to go to those dismal average Seattle $50K Y Gen first time buyer household incomes to really understand today’s sales application; the rest of America does….that’s why the avearge sales price nationally is like $190K.
But yes, the transplants with high incomes are still unlucky buyers in this recent underwater inventory shortage for choices and getting a decent deal.
Rate this comment:
0 
0
By softwarengineer @ 3:
That shouldn’t affect the median that much. It might affect the mean more, but not the median.
Just to demonstrate, if you remove all the SFR properties in King County that sold for over $1,000,000, that would reduce the volume by almost exactly 5%. Eliminating those $1,000,000 plus sales only reduces the median by about $10,000.
In any case, there are far more than 10% of people who have absolutely no interest in buying a house, and presumably at least half of those are below the median, so they would offset and impact of the high income people.
Some numbers from NWMLS sources, but not compiled by or guaranteed by the NWMLS.
Rate this comment:
0 
0
I’ve seen some really nice condos in Seattle that i’d like to remodel and sell. The problem with one in particular is that it has like a $80k special assessment.
My questions is this… Is that special assessment negotiable? If I could reduce those assessments I could buy them.
Rate this comment:
0 
0
RE: Erik @ 5 – did u say condo? Don’t walk away!!! RUN!!! For so many reasons including the assessment.
Rate this comment:
0 
0
Yeah, I thought it may be an less expensive way to buy, fix and sell for someone that doesn’t have a lot of money. This way you can remodel in a prime zip code without tons of money.
Rate this comment:
0 
0
RE: Erik @ 5 –
The special assessment is likely why they are selling in the first place. Its probably already priced in to the offering price already I suspect; especially if it seems underpriced for the area. If they have a ton of equity in the place and the financial wherewithall you could ask them to pay assessment before you close than pay a higher (negotiated) price on your unit provided it appraises out okay but I’m guessing that’s not what you have in mind. And most people selling with a special assessment are selling to avoid it; in some cases because they can’t afford it.
Rate this comment:
0 
0
RE: Erik @ 5 – It might go even higher if a lot of people don’t pay.
Rate this comment:
0 
0
RE: Erik @ 5 –
And this is the reason to avoid socialized aspects of home ownership (e.g. condo, townhome or even detached with a HOA that likes to charge monthly assessments.)
A couple of ways I can see things going wrong:
You get some clowns on the board that are extremely short sighted cheapskates and neglect routine maintenance (for the low current regular assessment) which ends up causing a huge problem down the road (say by not keeping up with exterior washing, painting, etc that results in rotting siding). The other end of the spectrum is also possible – you get clowns on the board that insist on going with over priced material that is out of character, and incurring a huge capital expense that has very long pay back periods.
Stay in control of your own destiny…..only buy SFR without a HOA.
Rate this comment:
0 
0
The thing about this area is…well..it kind of sucks. The weather alone should drive the average person far away.
The main reason we increased our population is because in the 90s Californians could sell their houses and use a third of that to buy a Seattle area house. (Thus our suburbs became full of cash toting loudmouths and spoiled, narcissistic kids for two long decades.)
Now that is inverting and before the real crash happens any non native has to be thinking..what am I doing here?
Rate this comment:
0 
0
[...] we looked at the affordability index last week, Let’s have an updated look at the “affordable home” price [...]
Rate this comment:
0 
0