FOR MANY OF THE AREA'S RESIDENTS, California seemed the perfect place to find their dream home. But now it seems California is the place where people only dream of owning a home. According to the California Association of Realtors' January Affordability Index, only 18 percent of Californians can afford a median-priced home at $485,700, which is five points lower than a year ago. This current level remains well below the national average of 55 percent in January.

Rising prices are to blame, as the median price of a single-family home in California increased 20 percent from the previous year. Assuming a 20 percent down payment and an average effective mortgage interest rate of 5.78 percent, a Californian needs a minimum household income of approximately $113,340 to purchase a median-priced home. In the rest of the country, an average home buyer needs a household income of $44,100 to purchase a median- priced home at $189,000.

The affordable housing crisis has policy-makers scrambling to find a solution as economic concerns about the state's ability to attract new workers mount. Sacramento County, for example, adopted an affordable-housing ordinance in December, which requires builders to sell 3 percent of new homes for well below market price—even as low as $75,447. Builders are in an uproar, as California represents roughly 35 percent of public builders' profitability, according to 2003 figures. The Building Industry Association of Superior California filed a lawsuit against the county, contending that the ordinance is illegal because it unfairly taxes home buyers who can afford higher prices because builders will have to raise prices on market-rate homes to make up for their losses on the mandated affordable housing.