MORE SHUT OUT OF HOMES GAP BETWEEN INCOME AND QUALIFYING AMOUNT WIDENS.

Byline: Gregory J. Wilcox Staff Writer

Soaring prices in the third quarter forced home buyers to stretch their finances as never before and may have finally reached a point where creative financing might not offer much help, a trade group said Tuesday.

The gap between the median earned income and minimum qualifying income widened in all four major markets from a year ago, said the California Association of Realtors.

The association tracks the median income in these markets and computes how much income a household needs to purchase the median priced home in their region.

The third quarter brought a significant spike. For example, in the Southern California market the income gap soared 44.1 percent. At the same time the monthly mortgage on a median price home jumped 18.1 percent, the same amount by which the median price increased.

Nevertheless, sales remain on a record pace.

``We really struggle with putting these releases out because on the one hand it looks dire but you still have a really robust market,'' said Leslie Appleton-Young, the association's deputy chief economist.

The big gain was primarily driven by continued strong price appreciation in the Inland Empire, which still has some of the most affordable homes in the region, Appleton-Young said.

Creative financing like below-market-rate loans are also helping families buy more house for their money, she said.

However, those kinds of loans might be tougher to get in the future.

``What we're hearing from lenders is that they are going to start to tighten up now that price appreciation is slowing. They need to be extra careful ... of the risks involved,'' she said.

The association's survey showed that during the third quarter:

--In Southern California, the median household income was $52,580, but that was $74,240 short of the amount needed to qualify for a house priced at the median of $541,110.

--The Central Valley had the smallest income gap. The median income there was $41,460; that's $43,170 short of how much was qualified to buy a home priced at the median $361,090.

--The Bay Area had the biggest income gap, $100,670. There the median income was $68,520 and the median priced home cost $721,850.

--For all of California the median income was $54,140 but that was $73,810 short of qualifying for a $545,910 house.

Appleton-Young expects the income gap to continue to widen in the fourth quarter because both prices and interest rates are rising.

The association's analysis is based on a 20 percent down payment with a monthly mortgage payment no greater than 30 percent of a household's income. However, lenders have been making loans for months based on a bigger percentage of income servicing the mortgage debt.

Jack Kyser, chief economist at the Los Angeles County Economic Development Corp., said that so-called creative financing has been playing a bigger role in the market.

``What you hear is that regulators are sitting down with the lending institutions and talking about maybe pulling back on this.''

And that might slow the market, cool the price increases and maybe make it easier on buyers in the coming months, he said.

Gregory J. Wilcox, [phone]

greg.wilcox(at)dailynews.com

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Stretching the paycheck

SOURCE: California Association of Realtors

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