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Majority of Californians make less than half the income needed to buy a home
LOS ANGELES -- California households are making less than half the income necessary to buy a median-priced home in the first quarter of 2005. Statewide households, with a median household income of $53,540, are $60,380 short of the $113,920 qualifying income needed to purchase a median-priced home at $488,600 in California, according to the California Association of Realtors (C.A.R.) Homebuyer Income Gap Index (HIGI) report for the first quarter of 2005. The association's HIGI is a quarterly analysis of the difference between the median household income and the qualifying income needed to purchase a median-priced, single-family home in the state and for selected regions within the state. The HIGI is calculated with the same assumptions used to generate C.A.R.'s monthly Housing Affordability Index (HAI); a 20 percent down payment and a monthly payment for principal, interest, taxes and insurance (PITI) that is no more than 30 percent of a household's income. For Southern California, the median-priced home was $477,660, which required a qualifying income of $111,370 to make the monthly PITI payment of $2,780. However, the median household income for Southern California was $52,050, leaving an income shortfall of $59,320. "These numbers are particularly troubling for would-be first-time homebuyers, who often are locked out of homeownership because of the lack of affordable homes for sale," said C.A.R. President Jim Hamilton. "While home sales statewide continue to surge, the California real estate market is being dominated by repeat homebuyers, who account for three out of four home purchases in the state." The HIGI for California increased 44.9 percent during the first quarter of 2005 compared to the first quarter of 2004, when the gap stood at $41,660, the median household income was $52,320, and qualifying income needed to purchase a median-priced home at $407,710 was $93,980. "At $100,000, the household incomes of repeat homebuyers are much greater than the population as a whole," Hamilton said. "Repeat buyers also are able to take advantage of equity gains in their current homes, with many making a down payment on their new home that's frequently greater than 20 percent. "For those repeat buyers, the income gap can fall as low as $23,320. Even though repeat buyers fare better than first-timers, that's little consolation to Californians spending a significant portion of their income servicing their monthly mortgage," Hamilton added. According to the report, potential homebuyers in the Central Valley, with a median household income of $41,040, had the smallest income gap at $32,660, and needed a qualifying income of $73,700 to purchase a median-priced home at $316,100. The San Francisco Bay area had the highest gap in the state at $92,930, where potential homebuyers had a median household income of $67,770 but needed qualifying income of $160,700 to purchase a median-priced home at $689,240.
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