If you have been following the real estate market in the past few months, you are aware that there is a significant increase in sales activity.   Buyers who have been sitting on the fence are coming out of the woodwork to compete for lower priced properties.

So what is the root cause of this purchasing activity?   Well they are a combination of several factors, including the low interest rates, first time home buyer incentives, but ultimately, I believe it has to do with the First Time Buyer Affordability Index.   What exactly is the Affordability Index?  It “measures the percentage of households that can afford to purchase an entry-level home in California” according to California Association of Realtors (CAR).  Now more Californians are able to afford an entry level  home than those who are unable.     

This number is important because it had gone down to 26% for California in Q2 of 2007.   In Q1 of 2009, these number had increased to 69% for California and 62% in Santa Clara County!   First time home buyers who were priced out of the market are now finding due to the market correction, their household income is now permitting them to buy a home.     

It would be interesting to find out the numbers for Q2.  

Steve Mun, Silicon Valley Realtor

www.stevemungroup.com