About two in 10 Californians who bought a home within the past two years spend more than half of their income on housing, while over half spend more than 30 percent of their income on housing, according to a study released this week by the Public Policy Institute of California, a nonprofit, nonpartisan research organization.

In a report titled, “California’s Newest Homeowners: Affording the Unaffordable,” the institute explores how residents in the state are able to achieve home ownership given radical home-price increases. The home-ownership rate in California, at 59 percent, remains one of the lowest in the nation, the report states. Only New York, at 54 percent, and Hawaii, at 57 percent, have lower rates. The national average is about 70 percent. The rate of home ownership for householders ages 25-29 in California is about 25 percent, compared to about 40 percent for the nation as a whole, the report also states.

Nationally, about 29.1 percent of homeowners spend more than 30 percent of their income on housing, while about 10.6 percent spend more than 50 percent, the report states. The U.S. Department of Housing and Urban Development recommends that homeowners spend less than 30 percent of their income on housing costs.

“Higher debt-to-income ratios are possible because more and more lenders are forgoing the fiscal practice of limiting housing costs to no more than 30 percent of income. Instead, they are qualifying buyers for loans that consume 40 percent and even 50 percent of their income. Additionally, increasing numbers of home buyers are opting for variable and interest-only loans – loans that allow buyers to minimize their initial monthly payments but make them vulnerable to increases in payments if and when interest rates rise,” the institute reported.

Since 2000, 18 of the 20 metropolitan areas in the United States with the greatest housing appreciation have been in California, the report also notes. “Yet, as prices reach record highs, so do sales. In fact, home-ownership rates appear to be at their highest level in decades: In 2003, 59 percent of Californians owned the home they lived in – the last time there was a comparable peak was in 1960, when 58 percent owned their homes.”

Also, the report found that Californian’s are using more than just creative financing to get into the housing market. “We find that Californians are quite resourceful when it comes to home ownership, and that they are employing multiple strategies to gain entrance into the housing market,” said Hans Johnson, a research fellow at the institute who co-authored the study with research associate Amanda Bailey.

Report authors noted a migration trend across the state, from pricy coastal regions to more affordable inland regions. Between 2000 and 2003, the annual flow of migrants from the rest of California to the Sacramento region was almost double, and to the northern San Joaquin Valley almost triple, what it was in the 1990s, according to the report. “People are also making do with less space: Nearly one-third of the state’s recent home buyers bought houses with two or fewer bedrooms, compared to only one-fourth of long-term owners. Finally, a substantial number of recent buyers were previous owners who sold their homes and used the equity from the sale to buy a new home.”

Some other report findings:

  • Among the state’s recent homeowners with low or moderate incomes, three-fourths spend more than 30 percent, and one-third spend more than 50 percent, on housing.

  • The counties with the greatest share of homeowners spending over 30 percent of their income on housing are Santa Cruz, Monterey, San Francisco, San Luis Obispo and Santa Barbara.

  • The median income of Californians who have owned their home for two years or less is significantly higher than the incomes of those who have owned for 10 or more than 10 years ($68,000 to $60,000).

  • Recent home buyers in California are no more likely to rely on two incomes than their counterparts in the rest of the nation (44 percent for both), but more likely to rely on two incomes than renters in the state (31 percent).

  • The percentage of 30- to 34-year-olds who owned their homes rose from 38 percent to 41 percent from 2000-03.

  • About 72 percent of recent California home buyers are white or Asian. Latinos make up a significant share at 22 percent, while African Americans lag behind at 4 percent.

  • Californians who are married and have children account for 37 percent of recent home buyers, while single parents account for about 9 percent.

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Send tips or a Letter to the Editor to glenn@inman.com or call (510) 658-9252, ext. 137.

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