HOUSING AFFORDABILITY AT 23 PERCENT IN L.A., STATEWIDE.

Byline: Gregory J. Wilcox  Staff Writer

Housing affordability tumbled in California during December, dipping to 23 percent statewide and in Los Angeles County amid rising prices, an industry tracker reported Thursday.

In Los Angeles County, affordability declined an annual 8 percentage points and was unchanged from November, according to the California Association of Realtors.

Affordability is measured by the percentage of households that can afford the median-priced home in their community and the association considers it the most fundamental measure of the market's well-being.

Statewide affordability fell an annual 5 percentage points in December and slipped 2 percentage points from November.

In contrast, affordability nationwide was 57 percent in December, down just 1 percentage point from a year ago.

Affordability bottomed at 14 percent in California during May 1989. The median-priced house cost $201,020 then, but interest rates averaged 10.46 percent.

Rates are more than 4 percentage points lower now, but that median- priced home is twice as expensive. The median price is the point at which half the homes sold are less expensive and half more expensive.

Robert Kleinhenz, deputy chief economist at the association, said that a 1 percentage point increase in the interest rate for a 30-year mortgage begets a 4 percentage point decline in affordability.

In December 2002, that rate averaged 6.10 percent and in 2003, it fell to 5.82 percent. Normally, affordability would have gotten better.

``It is that very steep price appreciation that is really having an adverse impact upon the index,'' he said.

It's even worse for first-time buyers. The index assumes a 20 percent down payment, which can be hard to raise for first-timers considering the price environment. They either opt for low-down-payment loans, which result in a bigger monthly payment, or go the adjustable rate route, which can be a gamble.

And it will get worse before it gets better, even though interest rates are not expected to move much, at least for the first half of this year.

``I think we've got a situation in the December numbers that will be repeated in the months to come,'' Kleinhenz said.

During December, the minimum household income needed to purchase a median-priced home in December was $94,730, based on a typical 30-year, fixed-rate mortgage at 5.82 percent and assuming a 20 percent down payment. The income requirement was up $81,290 in December 2002, when the median price of a home was $338,840.

The income requirement averaged $40,560 across the country in December.

``Generally it is recognized that affordability has taken a hit, but I think that's one of the reasons why lenders have come up with fairly innovative mortgage packages,'' said Nima Nattagh, an analyst at FNC, a company that provided real estate market information to the mortgage banking industry.

Gregory J. Wilcox, [phone]

greg.wilcox(at)dailynews.com