GAP IN HOMES, INCOME SHRINKS BUYERS GET SOME RELIEF.

Byline: Gregory J. Wilcox Staff Writer

In what looks to be a small break for buyers, the gap between the medium household income in California and the money required to buy a home fell in the final three months of 2004 from the third quarter, a trade group reported Tuesday.

However, the spread in the Homebuyer Income Gap Index is still significant versus year ago levels, said the California Association of Realtors.

In last year's fourth quarter a minimum household income of $109,320 was required to buy a home priced at the median of $474,920. However, the median household income was $53,240, or a gap of $56,070. That's 41.6 percent higher than in the final three months of 2003, but it increased only 1.3 percent from the third quarter.

And in the July through September period, the gap increased an annual 47.9 percent.

The association began compiling the index in the first quarter of 2003 as another way of highlighting the high cost of housing in California.

The full-year picture shows that buyers are starting to get some breathing room from record prices.

For example, in the initial report on the first quarter of last year the income gap increased an annual 45 percent. Then it soared 64.8 percent in the second quarter before dropping.

That's because prices smoothed out in the last half of the year.

From the first quarter to the second quarter, the gap jumped 32 percent but then only moved up 1.3 percent in the third quarter.

Prices spiked in the first part of last year as inventory fell to record lows. Product has been building, though, easing pressure on prices because buyers can be more selective.

``When you get into January and February, listings start to rise,'' said Robert Kleinhenz, deputy chief economist at the association.

And there certainly seem to be more ``For Sale'' signs in the ground now than a year ago, he said.

And even though prices and household incomes appear to be market breakers, homes sales remain at a strong level although expected to be slightly under a year ago.

That's because some owners who have rode the appreciation wave cashed out and traded up or bought second homes and lenders have developed innovative loan products that help offset the income gap, Kleinhenz said.

``There are so many loan programs out there today that enable people to qualify (for a loan),'' he said.

But families looking for their first house are still feeling squeezed.

In Southern California during the fourth quarter the median income was $51,780. That was $55,050 short of the minimum household income of $106,830 required to buy a home priced at the median $460,210, the association said.

By comparison, buyers in the Central Valley, with a median household income of $40,840, had the smallest income gap at $28,730, and needed qualifying income of $69,560 to purchase a median-priced home at $299,670.

The San Francisco Bay Area had the highest gap in the state at $84,690 and the highest median price at $656,690.

Jack Kyser, chief economist at the Los Angeles County Economic Development Corp., said the market has simmered down, which should also work in favor of buyers.

``First of all people aren't as frantic as they used to be, '' he said. ``And the economy is probably doing much better than anybody imagines.''

Gregory J. Wilcox, [phone]

greg.wilcox(at)dailynews.com