No Hope For Those Caught in the Middle

Consider this. In the city of Alhambra, California, they have guidelines that spell out who qualifies for first-time homebuyer assistance. The guidelines are much like those in any American city, used here merely as an example to point out one of the problems faced by many families in the current housing market.

The possibilities seem promising. If you meet Alhambra's guidelines, you may qualify for a generous $35,000 in assistance on your downpayment, help that can greatly lower your interest rate and your monthly payments. But perhaps the most important bar that must be crossed to obtain that assistance is that of the income level. For a two-person household, you can't make more than $52,900 a year to get this benefit. A four-person household can't make more than $66,100 per year.

What this means is that you're going to be hard pressed to qualify for a loan to buy a house worth more than $300,000, depending upon your credit score. In fact, the guidelines spell out that your ceiling is $338,200. And, by the way, you can only finance on a fixed-rate loan. It's a requirement.

The question savvy home shoppers have already askes is: Where is this house located? It would truly be a feat in the Los Angeles metropolitan area, of which Alhambra is part, to find a single-family home that could house four people for $338,200, especially considering that the median for the state is more than half a million.

Of course, none of this even begins to address the problem faced by the middle class, none of whom qualify for first-time buyer programs because their incomes are too high. It's all to clear when you see this snippet from a Business Week story published July 10:

In California, the situation has long been the worst: Only 17 percent of households could afford a home with a median price tag in April, according to the California Association of Realtors.

By May, the median home price in California climbed to $522,590 -- more than double the price in most other states. To buy the typical home with monthly payments of $3,067, a California family would need to earn about $122,700 to qualify for a conventional loan.

That's the reality. You have to make more than $122,700 to afford to buy the median-priced home. But you can't get any assistance if your family of four makes more than $66,000 per year. The situation leaves those in-between people no hope of buying a house.