The percentage of California households that can afford to buy a median-priced home has neared a record low, according to a report released Thursday.
The percentage fell to 16 percent in May from 17 percent in April and 19 percent a year earlier, according to the report by the California Association of Realtors.
"The record low was 14 percent set back in May and June of 1989," said Robert Kleinhenz, an economist with the group.
"We've been under 20 percent for a year now," Kleinhenz added, noting the effect of the lengthy run-up in home prices in California, which has one of the hottest homes market in the United States.
"We may see some further increases in the median price itself in the next few months and it may push affordability down one or two percentage points."
A persistent shortage in housing, a growing population and home buyers taking advantage of low long-term mortgage rates and increasingly popular interest-only mortgages have fueled a sharp rise in home prices in California in the past four years.
The state's median price in May for an existing single-family home of $522,590 marked an 86 percent increase from $281,330 in December 2001.
The California Association of Realtors forecasts the median home price to rise 16 percent to a new record of $523,150 this year.
Because home prices in California have almost doubled since late 2001, many analysts are concerned a "bubble" has formed in the state's housing market and believe it is overheated and home prices will flatten or slump.
Other believe California's housing market will be immune from a sharp correction in the near term because its economy and job growth are recovering from the long high-tech downturn at a steady pace.