by Calculated Risk on 8/18/2005 11:24:00 AM

The Mercury News reports: Home buyers get comfy with debt.

One out of five recent buyers have committed more than half their total earnings to homeownership, according to a new study. Slightly over half of home buyers in the past two years spend more than 30 percent of their total income on housing, exceeding a level recommended by the U.S. Department of Housing and Urban Development.

Because the study was based on data from 2003 and 2004, the situation now can only be worse because home prices have continued to rise dramatically since then.

If I remember correctly, the limits for borrowers with perfect credit were approximately 33% of income for housing and 40% of income for total debt not long ago. Now one in five of recent buyers are over 50% just for housing. That seems like extremely loose lending practices.

The Public Policy Institute of California, in a study released today, reports that Californians are strategizing and willing to be house poor as never before.
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They've been helped by low interest rates and lenient lenders. But more than anything, their success in buying homes results from being inventive and ready to spend an awful lot of their earnings on owning a home.

Here is the PPIC report: California's Newest Homeowners: Affording the Unaffordable