Stretched to the max in California

Chris Palmeri

How is it that the number of homes sold in California keeps going up even as housing prices rise? The Public Policy Institute of California asked that question and got this answer: People are spending an ever larger portion of their income on mortgage payments. The U.S. Dept. of Housing and Urban Development recommends that homeowners pay no more than 30% of their income on housing costs. But according to the Insitute's latest survey more than half of all new home buyers in California are paying more than 30%. One in five are paying more than half of their income to finance their home. That's even more astonishing because many of these same buyers are using interest only, adjustable rate loans to lower their payments. As rates rise and the interest only periods end, those buyers could end paying an even larger chunk of their income. The Golden State may be creating a new class of citizens who are land rich, but cash poor.

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