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December 3, 2004
Housing Outpaces Income Buyers Fall
Thousands of Dollars Short of Affording Home
By Gregory J. Wilcox -- Daily News; Los Angeles, Calif
More troubling news for house hunters surfaced Thursday as households earning
the median income fell $55,370 short in the third quarter of qualifying for a
loan to buy the median-priced home, said a new index compiled by a Realtors' group.
In their initial Home Buyer Income Gap index, the California Association
of Realtors said that the gap widened 47.9 percent from the level it
would have been at in the 2003 third quarter.
In the July through September period it would take an income of $108,310 to
buy a house priced at the median $462,510. But the median income in the state
was $52,940.
It would take a monthly payment of $2,710 to service the debt on a 30-year,
fixed-rate mortgage. That's with an interest rate of 5.82 percent and a 20
percent down payment.
However, the association says sales remain on a record pace this year despite
low affordability.
First-time buyers are bearing the brunt of house-price sticker shock.
"I still think it's really discouraging news. It means that more and more
first-time buyers will look inland, in the Central Valley or out of state,"
said Leslie Appleton-Young, the association's vice president and
chief economist.
The association has crunched these numbers before, but this is the first
time it has released them in an indexed format.
It will be a quarterly assessment of the difference between the median
household income and the qualifying income needed to purchase a median-priced,
single-family home for the state and selected regions.
The new index showed that:
Statewide at the end of the third quarter of 2003, the gap was $37,440.
The median household income was $51,630, the median house price was
$385,720 and the qualifying income $89,070.
In Southern California for the 2004 third quarter, the gap was $55,830
and the median income was $51,510. The median home price was $458,380
and the qualifying income minimum was $107,340. The monthly payment
would be $2,680.
House hunters in the Central Valley, where the median income was $40,640,
encountered the lowest income gap, $27,030. The median- priced home here
cost $288,960 and the qualifying income was $67,670 with a monthly payment
of $1,690.
The San Francisco Bay Area had the highest gap in the state at $82,910.
Potential buyers need a median income of $68,430 but needed to earn at
least $151,340 to purchase a median-priced home at $646,280. Their
monthly payment would be $3,780.
The index shows that the housing market is being dominated by repeat
buyers. And despite inventory increasing over the past several months
and prices moderating, Appleton-Young said she is hearing buzz that
the market heated up again in November.
"It will be an interesting year," she said of 2005.
Nima Nattagh, an analyst at AVM Fusion, a company that builds
statistical tools for lenders, said one reason sales are still high
despite low affordability is that buyers have a wide range of financing
options.
But high housing prices and incomes that are not keeping pace could
develop into a chronic problem for the state.
"Clearly employees don't look at affordability in California as anything
positive. As far as the state is concerned, this is a big negative," he
said.
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