Traditional wisdom and guidelines state that housing payments become too burdensome when they reach 30% of household income (see my article http://www.californiahousingforecast.com/guestcolumn/2007/6/15/mortgage-loans-past-present.html ). If everyone followed this max 30% guideline, the median price of houses in California would be much lower today.  The willingness of taking on enormous debt loads has certainly contributed to the current housing bubble situation. Check out the American debt through Q3 2006;

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Americans are very poor at limiting their expenditures to reasonable levels, so much so that the monthly debt payments of the average American household now exceeds 100% of monthly income (see chart below).

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Obviously this level of debt is unsustainable. I don’t want to get too far off the point of this article, which is to share with you the current “Percent of Income Spent on Housing”. I have used the results of a study just released by The Joint Studies of Housing at Harvard University which analyzed Census Bureau data and come up with the percent of income spent on housing for the 101 largest metropolitan areas of the US (11 in California). 9 of the top 10 “highest % income spent on housing” are cities in California. Not NYC or Chicago or other big city, but 9 out of the top 10 right here. My graph below shows the percent of the households that exceed the max 30% guideline, and has a further breakdown in yellow (households spending between 30%-50% on housing) and red (households spending more than 50% of income on housing). Shocking!

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Lee Williams