Real Estate News

The California Association of Realtors releases a quarterly analysis of the difference between the median household income in California and the qualifying income needed to purchase a median-priced, single-family home for the state and for select regions within the state.

This is called the Homebuyer Income Gap Index™ (HIGI).

Last year, in the first quarter of 2004, California households with a median household income of $52,320 fell $41,360 short of the $93,680 qualifying income needed to purchase a median-priced home at $406,390.

This year, in the first quarter of 2005, California households earning the median annual income of $53,540 are $60,380 short of the $113,920 annual income needed to qualify for a loan for a median-priced home in the state, priced at $488,600

So as we look at these numbers, we see that the median annual income has risen $1220 while the qualifying income needed to purchase a median-priced home has risen a staggering $20,240!

In calculating affordability, the association assumes a 20 percent down-payment. CAR considers a monthly payment affordable if the payment, including taxes and insurance, is no more than 30 percent of a household's income.

"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," CAR President Jim Hamilton said.

"At $100,000, the household incomes of repeat home buyers are much greater than the population as a whole," said Hamilton.

"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."

He says for those repeat buyers, the income gap can fall as low as $23,320.

The Bay area had the highest gap in the state at $92,930. Potential homebuyers there had a median household income of $67,770 but needed qualifying income of $160,700 to purchase a median-priced home at $689,240.

Southern California households on average fall nearly $60,000 short of the qualifying annual income needed to buy a median-priced home at $477,660.  Median household incomes there are $52,050 which is less than half of what it would take to afford a median-priced home.

Potential homebuyers in the Central Valley, with a median household income of $41,040, had the smallest income gap at $32,660. They need a qualifying income of $73,700 to purchase a median-priced home at $316,100.