LOS ANGELES – Soaring home prices in California haven’t deterred first-time buyers from entering the market in record numbers, and many of them are going to extraordinary lengths to dive in, according to a study released today.
Californians are increasingly sinking more than half their incomes into mortgage payments, taking on enormous debt, forgoing down payments and signing interest-only or adjustable-rate mortgages, according to the study by the Public Policy Institute of California.
Although California still lags behind most states in terms of home ownership, the buying frenzy has lifted it to its highest level – 59 percent – since 1960, the study found.
The statewide median home price in July was $451,000, with median prices in San Francisco hitting $606,000 and in Southern California $469,000, according to real estate research firm DataQuick Information Systems.
Many first-time buyers are low- and middle-income families or young investors who wouldn’t be able to afford such expensive homes without bucking traditional financing guidelines, said Hans Johnson, lead author of the study.
“I thought what we would find was that it was only people who had equity or very high incomes who were getting into the market,” Johnson said. “But that’s simply not true,” said Johnson.
More than half of Californians who purchased a home in the past two years ignored federal guidelines and spent more than 30 percent of their income on housing. One in five spent more than 50 percent of their income.