You may notice that a lot of national housing news seems to center on California. There's a very good reason why.

According to USINFO.State.Gov, the U.S. Department of State's Bureau of International Information Programs, 10 percent of the U.S. population resides in California. One out of every nine Americans is a Californian, and by 2006, one out of every eight U.S. residents will live there. It's the most populous state in the union, as well as the most urban. It also has one of the lowest affordability ratios in the country, an all-time low of 15 percent. That means that only 15 percent of Californians -- the ones who make $128,270 or more, can afford a median-priced home, priced at $543,980, as of November 2005, three times that needed to buy a median home in the rest of the U.S.

The housing market in California has seen double-digit increases for four years, which suggests to some that it's certainly booming and to others that it may be in a bubble.

To give you an idea of how popular it has become to live in California, in 1968 the median home cost $23,210. The median home in the U.S. cost $20,100.
Difference: 14.9 percent higher in CA than the US median

By 1999, the median California home was $217,510 while the median U.S. home was $133,300.
Difference: 63.2 percent higher

By 2004, the median California home had more than doubled to $450,990 while the U.S. median home had merely skyrocketed to $185,200.
Difference: 143.5 percent higher!

What's captivating is that California is growing, but only tepidly. In fact, it's been losing population for years. While it's still the nation's most populous state at 35.9 million, as of 2004, it loses more residents to other states than it gains in foreign immigration.

The U.S. Census Bureau has noted that many fast-growing states such as Nevada and Arizona were attracting Californians, which outmigrated 755,000 between 1995 and 2000. California was the nation's fifth fastest growing state during the 1980 to 1990 period, but dropped to the nineteenth position during the 1990 to 1994 period. Its population is still growing, but the rate of growth has declined each year since 1990, and its 1993-94 growth rate of 0.7 percent was well below the national average of 1.0 percent, says the Bureau.

The reason? "California has experienced increasing rates of net domestic outmigration since 1990. Its 1993 to 1994 net domestic outmigration rate reached 1.4 percent, the highest of any State, and represented a net loss of 426,000 migrants to other States. Only its high rates of net international migration and natural increase are allowing California a modest growth rate."

California has enough of a population that it spills into other states, especially when prices get out of reach for some homebuyers. Others want to cash in their housing chips and place their winnings in Las Vegas, Scottsdale, or other cities.

Leslie Appleton-Young, chief economist for the California Association of Realtors says that anecdotally speaking, one-third of relocating families going to Las Vegas are from California.

What happens, suggests Appleton-Young, is that when prices get too high in the state, people tend to move inland, as they are currently doing in Sacramento. Others move out of state.

A decade ago, while recovering from a number of earthquakes, fires, floods and a horrific housing recession, equity-rich Californians poured their money into much-cheaper Texas, bringing with them such novelties as "spa cuisine," bottled water slings, and thongs (both kinds.)

So, what happens in California matters to the rest of the nation.

That's why when California housing experts such as the California Association of Realtors' and Appleton-Young announce a housing trend, the nation takes notice, especially of the state's paradoxes.

For example, the state is reporting double-digit appreciation of home prices for its 2006 forecast, yet, affordability in the state has hit new lows. If affordability is too low for most to be able to afford homes, why is California still booming?

Quite simply because demand is there.

Explains Broderick Perkins, Deadline News , "The paradox could be explained by continuing 30 to 40-year low interest rates, the "wealth" effect of maturing Baby Boomer buyers and sellers, the increasing use of higher risk adjustable and interest-only loans, investment and tax benefits, and the tight markets for homes, particularly on the California coastline."

Perkins points out that California grows by 230,000 to 250,000 households annually, a growth rate of about 1.5 percent. Baby Boomers, those aged 41 to about 67, account for about 40 percent of the market, and will continue to impact sales and affordability, says the C.A.R.

"But while homesellers were enjoying record profits, homebuyers were in a desperate race to jump in," he says. "In another paradox, first-time homebuyers usually drive any housing market, but the California market appears to defy gravity as first-time homebuyers dropped to below 30 percent of the market for the first time since 1979."

(First-time homebuyers are typically 30 to 40-years old, half are married and one-third are single. Singles are pooling their resources to co-own properties, raising the two or more individual homebuyer rate to 13.2 percent. Typical first-timers earned $75,000 annually and bought historically high median priced homes of $401,500. The average median sales price of homes sold in California was $460,000, 27.8 percent higher than in 2003, says Perkins.)

The most important reason for buying, says C.A.R., is the desire to stop renting, cited by nearly 49 percent of first-time buyers. Investment/tax reasons for buying were cited by 13 percent and 11 percent purchased because they wanted a "better location."

Higher prices forced first-timers to borrow 33 percent more money in their first mortgages than last year, or to take on a second mortgage actions which increased 36.4 in 2003 and 57.2 percent in 2004. Down payments dropped 27.6 percent to $18,450.

"What jumped out at me," says C.A.R.'s chief economist Leslie Appleton-Young, "was that the percentage of first-time buyers was low, 26 percent -- that's the lowest that number has ever been since 1979. It's a testament of the affordability hurdles that first-timers face, and the 22 percent price appreciation -- that's the highest price since 1979."

Appleton-Young agrees these figures look like a perfect real estate storm brewing, and what she calls the "substitution effect" as buyers look to buy where they can afford, even if that's inland or out of state.

"We will see price appreciation not in coastal high-end but in the central parts of the state as people move inland in pursuit of affordability," predicts Appleton-Young.

It's expected that the median home price in California will increase 10 percent to $575,500 in 2006 compared with a projected median of $523,150 this year, while sales for 2006 are projected to reach 630,610 units, falling 2 percent compared with 2005.

The last time affordability was so low, California housing lost value and took years to recover. According to Local Market Monitor, Los Angeles homes topped the market at $220,200 in 1990. By 1996, they were worth $176,300, a 20 percent loss, not counting what the houses would have been worth if they had kept pace with inflation. The homes would have lost more than 34 percent of their value, according to CNN journalist Les Christie's calculations.

However, prices in Los Angeles and across the state rebounded exponentially following the bust and as much as 103 percent in the last five years. By July 2005, the median price of a home in Los Angeles was $543,890, but affordability had fallen to 14 percent.

Did affordability issues cause the housing bust in the '90s, and is it about to happen again? No, says Appleton-Young.

"The market peaked in 1989 and then for several years, it didn't plummet, but got relocated inland," she says. "Then we went into strengths in different areas, and then we had a recession. For six years, there was a decline in some areas, but some areas declined as little as five percent. I don't think housing will create a recessionary environment."