Home-buying salary gap wider (in CA)

[question everything]

Los Angeles Daily News

Home-buying salary gap wider
Incomes not keeping up with rising prices
By Gregory J. Wilcox
Staff Writer

Wednesday, August 03, 2005 - 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 Tuesday.

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.

(snip)

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.

(snip)


http://www.dailynews.com/Stories/0,1413,200~20950~2992447,00.html#

Gregory J. Wilcox, [phone] [e-mail]

[Deja Q]

1. And the more the masses cannot buy means the sooner the crash.

What's left to say? This is what they want: collapse and chaos.

But have they figured out enough human nature to prevent the chaos?

[kahleefornia]

2. interest-only mortgages for everyone!

My broker said they're perfectly safe! hahaha

[pinotnoir]

3. true

this is very true....
I have a small ranch style house (built in the 70s)...
bought it in 1993 for 150k... the house next door to me (in worse condition) just sold for 615k after being on the market for a week...
I have no idea how poeple just entering the market can afford to buy a place....

[newyawker99]

6. Hi pinotnoir!!

Welcome to DU!! :toast:

[SoCalDem]

4. We paid $81K in 1982 for our house.

It appraised at $299K in Feb, and that was BEFORE the "fixes"..roof, new AC, kitchen upgrade, yard, dead tree removed, yard building, patio, paint..

We are just praying that the bubble holds a little while longer, so we can get enough when we sell to buy a manufactured home and plunk it down somewhere cheap..

Of course EVERY time we have sold a house it was a buyers' market, and every time we have BOUGHT, it seems to be a sellers' market :grr:

[question everything]

9. I think that this is how California will finally slow the inflow

of newcomers.

I think that most people who buy these expensive homes trade up. This means, they can put a lot more down than the traditional 20%. Their mortgage is lower and thus they can qualify even if their income would prevent them from qualifying for a traditional mortgage.

But someone just starting over will be locked out of the market.

I remember reading, in 1989 during the previous rush, how one professor was offered an academic position at Stanford but finally had to turn it down because he could not afford the housing market.

[LibDemAlways]

5. Those interest only mortgages are keeping the

whole damn thing afloat -- for now. I know a couple who recently bought a newer McMansion for over a million. They took out an interest only mortgage for close to the full amount. They are using the exorbitant rent money they are getting from renting out their older, almost paid for home to make the monthly payment. Plus they have to come up with ten grand a year for the property taxes on the new place. These people have a good income, but no way are they millionaire types.

I suspect they will soon end up owing more than than the new place is worth when the market tanks.

The whole thing sounds very risky to me.

[question everything]

10. I think that we should all be concerned with the optional interest only

mortgage.

These are worse than the interest only since with the optional, interest can change every month while the payment remains fixed. The difference in the interest payment is added to the loan amount.

But the brokers and lenders that provide these loans do not serve them. They then sell them to investors and I have to wonder who these investors are. May some of them be insurance companies and banks and other supposedly financial institutions? What happen when the home owners do default on their loans in 5 years? Would there be a ripple effect across the financial world, affecting our personal saving and retirement accounts?

[getmeouttahere]

7. And it's not like salaries are going up...

and more jobs are being created. It doesn't take an economist to figure out that this whole house of cards is unsustainable.

[carnie_sf]

8. Waiting

for the bubble to burst