DREAM OF HOME OWNERSHIP IS EXACTLY THAT RECORD-HIGH PRICES PUSHING CALIFORNIANS OUT OF MARKET.

Byline: Kerry Cavanaugh Staff Writer

It took just five minutes for Cleo Vasquez to size up the two-bedroom Tarzana condo: nice tile floor and fresh sage paint. But the master bedroom was too small for her two daughters to share, a bathroom sink stood in the hallway and the $334,000 price tag was at the very top of her budget.

Another reject, maybe the 30th or 40th in her year-long search for her first home.

Armed with an accordion file of listings, Vasquez sighs when she talks about the fear that record-high prices and rising interest rates will end her dream of home ownership.

``My daughters and I try not to get depressed,'' said Vasquez, 47, an office manager for a medical company. ``I'm dealing with it. I know what most of the obstacles are. I'm focusing on my goal.

``I wish it were more fair, but it's not. So I'm realistic about it.''

Vasquez is among a growing number of residents who find the American Dream of home ownership out of reach in Southern California. Since 2000, real estate prices have been hitting new highs, with prices doubling in some communities.

The median price of a home in Southern California - the point between the most and least expensive - stood at $541,110 for the quarter ending Sept. 30. A household needs an income of $126,820 to afford that home. That's nearly $75,000 more than the median for the region.

Just five years ago, the median home price was $227,293, meaning a household would need an annual income of $64,689. That assumes the traditional guidelines of a 20 percent down payment with a mortgage payment of up to one-third of your income.

Yet, the desire to own a home is so strong that many people are ignoring those guidelines. They find themselves making tougher choices about their finances and lifestyle than ever before.

How will they pay for that heavy mortgage? Should they move farther from work and commute? Should they wait and hope prices will fall?

``I think it's putting stress on families for a lot of reasons, especially the middle class,'' said Constance Ahrons, a professor emeritus of sociology at University of Southern California and former director of its marriage and family therapy training program.

``They are stretching themselves too far. So many families feel house poor,'' having spent so much on a home that they have little cash left over.

One in five new homeowners in California spends more than half their gross household income on a home loan. Half of new homeowners spend more than the federally recommended limit of 30 percent of household income on the mortgage.

That means more new buyers have little or no financial cushion if they can't work, develop health problems or can't meet the rising payments on an adjustable-rate mortgage.

``For many people, they can't tolerate any loss of income. It really puts them in stress,'' Ahrons said. ``The stress causes more conflict. If they're stressed about monthly bills, then they might be accusatory about spending. They end up fighting about a lot of other issues related to it.''

Newlyweds Darcy and Matt Woodworth have tried to balance the financial pressures of homeownership with their eagerness to own.

The two recently moved into their first home, a $267,000 two-bedroom house in Lancaster. Even though the High Desert is the most affordable region in the state, self-proclaimed worrywart Darcy, 37, agonized over whether they could afford the jump from their $650-a-month apartment to a $1,800-a-month mortgage.

``I've never been more freaked out or stressed out. I just wanted to jump in and do this. I wanted to take a shot. If we waited until next year, who knows what the prices would be.

``But I needed to be secure and know that this was doable.''

The Woodworths spent several months cleaning up their credit, saving and paying bills to qualify for the home, which is just under the median price in Lancaster. They bid on the first house they saw.

Matt Woodworth makes about $60,000 a year as a dispatch supervisor for a concrete company, and Darcy has a home business creating Hawaiian-themed decoupage, so they won't be totally cash-strapped, Darcy said. They'll cut back on travel, dining out and entertainment expenses.

``We deserve it. We're going to have privacy, a backyard. I can finally have a dog,'' she said. ``It's amazing. It's a buzz, kind of euphoric, but scared.

``It's all these emotions that I've never felt before.''

The Woodworths are considered traditional homebuyers - insistent on buying their first home, regardless of the real estate market and regardless of predictions that prices will slow or stall.

``Their motivation to buy in an increasingly expensive market is driven by concern that if they don't buy now, then prices are only going to get higher and they may not be able to buy,'' said Paul Prescott, who heads the home-building section for financial services company Deloitte & Touche.

``If they can scrape together a down payment and get the loan, then they'll buy.''

Other potential homebuyers have had to lower their expectations and adjust their ideal of the American dream in the face of high prices.

Barbara Gross, a marketing professor at California State University, Northridge, said homebuyers always have to struggle between what they can afford and what they want - but that tension is only exacerbated in the current market when affordability is so low.

Just 13 percent of residents can afford Los Angeles County's median- priced house at $564,000. You'd need to make $126,000 a year to buy that house.

``Many people go into buying a house with a rational mind. People may have in mind a price range they can afford, but then they fall in love with the house. They picture themselves living there and the life they can have if they can buy that house,'' Gross said.

``They're probably quickly getting disappointed and quickly having to adjust.''

Vasquez, the aspiring homebuyer, had to lower her expectations.

She's dreamed of her own house, with a fireplace, a driveway and a backyard. But, when the single mom started shopping last year, she soon realized the $400,000 houses in her budget were selling for $20,000 and $30,000 over the asking price.

Now she's searching for a two-bedroom condominium or town house in the $335,000 range, with a master bedroom large for her 15- and 25-year old daughters to share. But even downsizing her dream hasn't helped in her search.

Median-priced condominiums in Tarzana and Woodland Hills - close to her job and her daughter's high school - cost $373,000 to $400,000.

``Because of my daughters, I'm searching for a safe neighborhood,'' she said. ``There are places that cost a lot less, but I want a safe building.''

Vasquez probably could afford her dream house in Santa Clarita or Simi Valley, but she refuses to spend up to four hours a day on the road in traffic.

``I couldn't do that. The stress gets to me and the road rage.''

While Vasquez continues her search, other folks have weighed their choices and given up the dream - at least as long as prices remain high.

Jan Reck began hunting for a home in April, after rent for her two-bedroom house in La Verne jumped to $2,000 a month - an $800 increase from just three years earlier.

But the housing market in the foothill communities was daunting. A two- bedroom house in Pasadena cost $567,000, far more than the eighth-grade history teacher could afford.

Houses in the less-pricey Inland Empire seemed within reach, but not without a longer commute and lower living standard, she said.

So Reck, 51, gave up the search and is renting a quaint, historic house in Monrovia for $1,950 a month. She loves the place, but regrets her status as a renter every day.

``It was a big thing for me to think about,'' she said. ``Somehow there's that sense of failure, like, 'Haven't I grown up yet?'''

Staff writer Jason Newell contributed to this report.

Kerry Cavanaugh, [phone]

kerry.cavanaugh(at)dailynews.com