“Buyers buy based upon payment, and those payments are still highly affordable relative to their incomes,” he said. “Even with 100 basis point swing, there’s still plenty of room in that [affordability] index.”

The concern, however, has been that as mortgage rates rise, home prices would necessarily fall, as buyers lose purchasing power. That may not be the case, according to a new analysis.

(Read more: Map: Tracking the US real estate recovery)

“History shows that a rapid rise in interest rates tends to have little correlation with home prices. Rather, rising rates are more likely to contribute to a decrease in home purchase volume and an increase in the market share of adjustable-rate mortgages,” wrote Mark Palim in a Fannie Mae commentary.

Article source: http://www.cnbc.com/id/100890224

“Buyers buy based upon payment, and those payments are still highly affordable relative to their incomes,” he said. “Even with 100 basis point swing, there’s still plenty of room in that [affordability] index.”

The concern, however, has been that as mortgage rates rise, home prices would necessarily fall, as buyers lose purchasing power. That may not be the case, according to a new analysis.

(Read more: Map: Tracking the US real estate recovery)

“History shows that a rapid rise in interest rates tends to have little correlation with home prices. Rather, rising rates are more likely to contribute to a decrease in home purchase volume and an increase in the market share of adjustable-rate mortgages,” wrote Mark Palim in a Fannie Mae commentary.

Article source: http://www.cnbc.com/id/100890224

The shift in the sales mix is also largely due to a drop in the number of distressed homes for sale. Foreclosures and short sales made up just 22 percent of home sales in November, according to the Realtors, the lowest share in five years. Much of that is due to a lack of supply on the distressed side, as investors continue to compete for these properties to take advantage of the still-lucrative rental market.

The Realtors claim the distressed share of sales will continue to decline in 2013, due to fewer seriously delinquent loans, but banks are now ramping up foreclosures of long-delayed delinquent loans, so there could be another bump in that supply before it finally falls dramatically. Bank repossessionsjumped 11 percent month-to-month in November and saw the first annual increase since 2010, according to RealtyTrac.

Overall, the supply of all homes nationally is at its lowest level in 7 years,, just 4.8 months’ worth at the current sales pace.

(Read More: Best US HousingMarkets for Buyers and Sellers)

“With the homebuyer affordability index near multi-decade highs combined with decent job creation at the same time renting has gotten more expensive — all lead to a continued improvement in sales,” writes Peter Boockvar of Miller Tabak. “This said, sales are still 30 percent below the bubble highs and are still where they were in 1998, both pointing to the degree of possible improvement ahead but also evidence of the damage that was done where historically the pace of recovery takes time.”

(Read More: New Nightmare forHome Builders: Not Enough Skilled Workers)

Article source: http://www.cnbc.com/id/100331527

The study by Chicago’s Center for Neighborhood Technology, released Tuesday, adds transportation costs to the usual measure of affordability – housing prices. It concludes that the average Bay Area household spends 48 percent of its income on housing and transportation. And while it probably doesn’t seem like it – especially at the gas station – the cost of transportation in the Bay Area is the second lowest among major metropolitan areas, behind only New York.

Affordability, according to the study, is a combined housing and transportation figure below 45 percent.

Scott Bernstein, the center’s president, said the affordability index aims to provide planners, decision makers and everyday folks with information about the true costs of choosing where to live. This year’s survey, based on figures from the Census’ American Communities Survey, has been updated to include about 89 percent of the nation’s population.

Often, Bernstein said, people in search of more affordable housing will head to the distant suburbs where real estate is cheaper but won’t always consider that transportation is costlier because driving distances are longer and public transportation is often unavailable.

“You think you’re buying a cheap house 30 miles out,” he said, “but it’s 10 o’clock at night, and you need a gallon of milk. You have to get in your car, drive out of your subdivision down a two-lane road, get on the freeway and drive 10 miles. You just spent a gallon of gas to get a gallon of milk.”

The study allows visitors to the center’s website, www.cnt.org, to see and compare the costs in 180,000 neighborhoods. Not surprisingly, denser communities with access to public transportation fare better than far-flung suburbs.

In the Bay Area, for instance, San Francisco households spend 39.5 percent of the average income in the region on housing and transportation compared to 41 percent in Oakland, 43 percent in Berkeley, 50 percent in San Rafael, 51 percent in Antioch and 59.1 percent in Brentwood.

Jennifer Yeamans, a lifeline and equity planner for the Metropolitan Transportation Commission, has used affordability data from earlier versions of the study and compared it against Bay Area foreclosure data, finding far more foreclosures in areas with high transportation costs. She also points out that the parts of the Bay Area in which real estate prices have remained most stable are those with walkable neighborhoods and better access to transit.

Bernstein said he hopes planners will use the study information to help design better communities that don’t require households to own multiple cars.

“I would really be thrilled,” he said, “if someone would wave a wand and require that these numbers be listed right next to the sales prices of homes.”

The research should be used, Yeamans said, to help people realize the trade-offs in choosing where to live, not to drive everyone toward settling in an urban community with a BART station down the street.

“This is an opportunity for people to truly understand what their preferences cost,” Yeamans said. “Some people prefer to live in low-density areas, some prefer to live in walkable neighborhoods. That’s not to say everybody should do this or everybody should do that.”

What it costs to live in Bay Area

The typical household spends this percentage of the average Bay Area income on housing and transportation combined:

San Francisco: 39.5%

Santa Clara: 47%

Alameda: 47%

Napa: 50.7%

Contra Costa: 52.8%

San Mateo: 53.3%

Solano: 54%

Sonoma: 55.2%

Marin: 56.3%

Source: Center for Neighborhood Technology

Michael Cabanatuan is a San Francisco Chronicle staff writer. Twitter: @ctuan. mcabanatuan@sfchronicle.com

This article appeared on page C – 4 of the San Francisco Chronicle

Article source: http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2012/02/28/BATV1NDJAQ.DTL