California home prices still unaffordable

The San Francisco Chronicle reports:

Despite recent declines in the cost of California real estate, median home prices remain unaffordable throughout the state, according to a report by a liberal research and advocacy group calling on the governor and state lawmakers to confront the issue.

The authors of "Locked Out 2008: The Housing Boom and Beyond," the study released today by the California Budget Project of Sacramento, said median incomes aren't enough to buy median-priced homes in every county it studied, 36 of the state's 58. The report assumes homes are out of reach if households have to dedicate more than 30 percent of their income to housing costs, the level above which the U.S. Department of Housing and Urban Development says people may have difficulty affording necessities such as food, clothing and transportation.

More than half of homeowners with a mortgage exceed that level in California, according to a 2006 survey by the U.S. Census Bureau. The lack of affordability is acute in the Bay Area, where the earnings required for purchasing a median-priced home is more than double the median household income in every county but Contra Costa and Solano, the California Budget Project said.

"While the softening (real estate market) has put tens of thousands of families out of their homes and many thousands more are threatened with foreclosure, it's actually had little effect on housing affordability," said Scott Graves, senior policy analyst with the group and lead author of the report, during a conference call. "Housing continues to be out of reach for many California families."

The housing downturn and credit crisis sparked by last summer's rising default rates have driven down the state's median price for new and resale homes and condos by 16.9 percent, from $484,000 in May to $402,000 in December, research firm DataQuick Information Systems said.

But that's offered little relief for residents who saw prices rise more than 140 percent since March 2000, when the median stood at about $200,000, and nearly 200 percent from 1989, the California Budget Project said.

Conditions aren't much better for the state's renters, who pay the second-highest rates in the nation, behind Hawaii. California's monthly median rent is $1,029, according to the Census Bureau survey.

The government bureaucrats should step out of the way,things will become more affordable when prices go much lower.