AFFORDABILITY STAYS LEVEL NUMBER ABLE TO BUY MEDIAN-PRICE HOUSING IN CALIFORNIA HOVERS AT 18 PERCENT.

Byline: Gregory J. Wilcox Staff Writer

In a sign that home prices may have peaked for now, the index measuring housing affordability across the state held steady at 18 percent in July, for the second consecutive month, the California Association of Realtors said Thursday.

The association's index, which declined an annual 9 points in July, is based on the percentage of households that can afford the median-price home. In June, the median price hit a state record of $469,170, then eased back to $463,540 in July.

Prices and affordability are expected to remain in their current range for the balance of the year.

``You've got that sort of shift in the market from the peak (summer) season, which tends to drive prices down,'' said Robert Kleinhenz, deputy chief economist at the Los Angeles-based association.

That does not mean that prices are likely to sink below year-ago levels anytime soon, though.

Last year the median price peaked at a then-record $404,870 in August - it's first time above $400,000. It did not get to that level again until December.

While it is typical for prices to move up and down from month to month, they've still made big annual surges into the summer, ranging from a high of 26.1 percent in May to a low of 20.7 percent in February. Kleinhenz expects annual price increases in the high teens to low 20 percent range for the rest of 2004.

That's the main reason affordability continues to sink on an annual basis.

But it does not look like affordability, now at its second-lowest level ever, will get to a record low this year, Kleinhenz said.

And affordability might not be as grim as the association's index indicates, either. The component related to qualifying for a home loan assumes that no more than 30 percent of a household's income can be used to support the monthly mortgage.

But in the real world, lenders use a 40 percent or in some cases 50 percent level. Applying that standard would increase affordability by roughly 11 percentage points, Kleinhenz said.

And even though affordability has slipped into the teens in much of the state, July's sales remained on a record pace. This suggests that the biggest impact from high prices is being felt by entry-level buyers.

Nima Nattagh, an analyst at Costa Mesa-based FNS, which supplies market information to the mortgage banking industry, agrees with Kleinhenz's assessment.

``Affordability will probably remain pretty stable over the course of the year,'' he said.

The association's report shows that:

--In Los Angeles County, affordability remained flat at 17 percent versus June's rate, and fell an annual 10 percentage points.

--In the Inland Empire, affordability slipped to 19 percent in July from 21 percent in June, and was down 17 percentage points annually.

--In the High Desert, which includes the Antelope Valley and remains the most affordable region in the state, affordability was 42 percent in July versus 43 percent in June, and was down an annual 21 percentage points.

--Affordability in Ventura County increased to 14 percent in July from 13 percent in June and was 13 percentage points under the year ago level.

--Affordability nationally was 53 percent in July, also unchanged from June and just 3 percentage points below the year ago level.

Nattagh said that July's numbers indicate buyers are starting to get a break.

``Supplies have increased over the last couple of months and that's bound to put (downward) pressure on prices,'' he said.

Gregory J. Wilcox, [phone]

greg.wilcox(at)dailynews.com