With prices continuing to rise, California households earn far less than the minimum salary needed to buy a median priced home. Read more...

By Gregory J. Wilcox

Daily News, Los Angeles

RISMEDIA, August 4 – (KRT) – With prices continuing to rise, California households earn far less than the minimum salary needed to buy a median priced home, a trade group reported this week.

The median income across the state averaged $53,840 in the second quarter, $70,480 less than the $124,320 salary needed to qualify for a house priced at the median of $530,430, said the Los Angeles-based California Association of Realtors.

Statewide the gap widened 28.3 percent from the like period a year ago.

In Southern California, where the median price averaged $510,000 in the second quarter, the median income was $52,310 and the qualifying amount was $119,530. That leaves a gap of $67,220.

The association began tracking the disparity between paychecks and income qualifying requirements in last year's first quarter and it's widened ever since.

Not surprisingly, less expensive areas, like the Central Valley, have a narrower gap while more expensive areas, like Southern California, have a wider gap.

For example, in the Central Valley the median household income was $41,250 and a median priced home, the point at which half cost more and half less, was $344,330. The qualifying income was $80,700, leaving a gap of $39,450.

No reversal of this trend is in sight, either.

"This time next year, assuming that home prices go up ... and interest rates go up I would imagine the income gap will be higher than it is at the present time," said Robert Kleinhenz, the association's deputy chief economist.

The association's Housing Income Gap Index is based on the same model used to track affordability. It assumes a 20 percent down payment and the fact that a household won't spend more than 30 percent of its income on housing.

But neither have tracked reality. Housing sales are ahead of last year's record pace for the year's first half amid rising prices.

Kleinhenz notes that the qualifying ratio is more than 30 percent in lots of instances today, trade-up buyers are able to make substantial down payments and there are a variety of loan products available.

"That should be troublesome," he said of how buyers are managing to get into the market.

Jim Link, executive vice president at the Southland Regional Association of Realtors in Van Nuys, said that the San Fernando Valley market didn't lose traction in July.

"There aren't any real signs of cooling off. I'd say the rate of appreciation, while still high, is not going up as fast but the buyer demand is still there."

Copyright © 2005, Daily News, Los Angeles

Distributed by Knight Ridder/Tribune Business News.