HOME AFFORDABILITY UP IN QUARTER SITUATION STILL WORSE COMPARED WITH LAST YEAR.

Byline: GREGORY J. WILCOX Staff Writer

Affordability for first-time home buyers across California improved slightly in the third quarter from the previous three-month period, but fell 4 percentage points from a year earlier, a trade association said Monday.

Last month, 24 percent of the state's first-time buyers could afford an entry-level home costing a median $478,710, said the Los Angeles-based California Association of Realtors.

They would need an annual income of $98,890 to buy it and their monthly mortgage payment, including insurance and taxes, would be $3,300.

The association began its Housing Affordability Index (HAI) in 1984, a time when fixed-rate mortgages were the prevailing financing vehicle, a 20 percent down payment was required and the mortgage payment was equal to 30 percent of a household's income.

Since then the financial landscape has changed dramatically to include a wide range of mortgage products.

The new index reflects this as well as the current underwriting criteria. And the median price in the first time buyer index is 85 percent of the prevailing median price in markets tracked by the association.

This new data base dates back to 2002.

And it shows affordability in a steady decline, especially in Los Angeles County. At the index's starting point, 50 percent of the county's first-time buyers could afford the median priced house. In the third quarter this year, it sank to 19 percent.

Not much change is expected in the future, either.

``I don't think affordability will go down a lot but it won't go up anytime soon, either,'' said Robert Kleinhenz, the association's deputy chief economist.

In the third quarter affordability fell from a year ago in 16 of 17 markets tracked and remained flat in Northern California at 33 percent. On a quarterly basis affordability fell in three markets, increased slightly in seven and remained unchanged in the others.

Interest rates played a role in both the monthly and annual changes. Kleinhenz said interest rates in the third quarter were about one percentage point higher than a year ago but there was not much month-to-month movement.

The report showed that:

In Los Angeles affordability remained flat from the second quarter and fell 4 percentage points from a year ago. To buy the entry level house priced at the median $494,690 a family would need a minimum income of $102,190 and the monthly payment would be $3,410.

In Ventura County 22 percent of families could afford that first home, down from 23 percent in the second quarter and 26 percent a year ago. The entry level house cost a median $596,120, the qualifying income level was $123,150 and the monthly payment $4,100.

At 39 percent, the High Desert region, which includes the Antelope Valley was the state's most affordable market, unchanged from the second quarter but 10 percentage points under the year ago level. The median price of an entry level home was $282,050, the qualifying income limit $58,270 and the monthly payment $1,940.

The Santa Barbara area, at 14 percent, was the state's least affordable market. It took a minimum income of $131,280 and a monthly payment of $4,380 to buy an entry level median priced home costing $635,490.

The median price of all housing stock is expected to increase an annual 7 percent this year then fall about 2 percent next year, Kleinhenz said.

One big problem, he said, is that there has not been enough building in years past to keep pace with demand.

He gets no argument from Robert Rivinius, president and chief executive officer of the Sacramento-based California Industry Association.

Last week, the National Association of Home Builders/Wells Fargo Housing Opportunity Index showed that California had the lowest affordability in the nation.

``When will our legislators and our local policy makers finally realize just how serious our housing affordability crisis is, and start taking steps to restore the American dream to more California families?'' Rivinius said last week after the Home Builders/Wells Fargo index was released.

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