Hey Buddy, Can You Spare $74,000?

If you're a member of a household in California that earns the median income, you're $74,000 short of qualifying for a 30-year, fixed-interest mortgage on the median-priced home, according to a news release from the California Association of Realtors. With the median income set at $54,140, that means you're making about $26 an hour, or 136 percent less than necessary to get into the median-priced home.

That means you'd have to work 36.5 hours of overtime every single week (assuming you'd be paid time and a half) just to make up the difference. That means no vacation time off and no sick days. All told, you'd be working 76.5 hours a week, which would leave you an average of 13 hours a day (including weekends) to sleep, shower, eat, shop, visit the doctor (if you can afford the doctor), and travel to and from work.

Yeah, they're right. There's no bubble here. This is all perfectly normal.

Here's an excerpt from the CAR release:

California households, with a median household income of $54,140, are $73,810 short of the $127,950 qualifying income needed to purchase a median-priced home at $545,910 in California, according to the California Association of REALTORS® (C.A.R.) Homebuyer Income Gap Index™ (HIGI) report for the third quarter of 2005, released today.

The Association's Homebuyer Income Gap Index™ is a quarterly analysis of the difference between the median household income and the qualifying income needed to purchase a median-priced, single-family home for the state and for select regions within the state. The HIGI is calculated with the same assumptions used to generate C.A.R.’s monthly Housing Affordability Index (HAI): a 20 percent downpayment and a monthly payment for principal, interest, taxes and insurance that is no more than 30 percent of a household’s income.

The Homebuyer Income Gap Index™ for California increased 33.7 percent during the third quarter of 2005 compared with the third quarter of 2004, when the gap stood at $55,220, the median household income was $52,940, and qualifying income needed to purchase a median-priced home at $461,850 was $108,150.

According to the report, potential homebuyers in the Central Valley, with a median household income of $41,460, had the smallest income gap at $43,170, and needed a qualifying income of $84,630 to purchase a median-priced home at $361,090.

The San Francisco Bay Area had the highest gap in the state at $100,670, where potential homebuyers had a median household income of $68,520 but needed a qualifying income of $169,180 to purchase a median-priced home at $721,850.

— The Boy in the Big Housing Bubble