HOUSING AFFORDABILITY AT RECORD LOW.

Byline: MUHAMMED EL-HASAN

Staff Writer

Los Angeles County was one of California's two least affordable regions for first-time homebuyers in the fourth quarter, according to a report released Thursday.

Nineteen percent of county households -- a record low for the county in this 4-year-old survey -- earned enough money to afford an entry-level home in California in the last three months of 2006, the Los Angeles-based California Association of Realtors said.

That's down from 21 percent in the same period in 2005. But the county's most recent affordability figure held steady compared to the third quarter of 2006. In the fourth quarter, a Los Angeles area household would need to have earned $101,040 in annual income to purchase a $498,510 home. The monthly payment, including taxes and insurance, would be $3,370.

The Santa Barbara area was the only California region tracked by CAR that matched Los Angeles' low affordability in the fourth quarter. Statewide, the affordability figure was 25 percent, down from 27 percent a year earlier.

CAR's First-time Buyer Housing Affordability Index based its findings on an adjustable interest rate of 6.36 percent and assumed a 10 percent down payment and a home price equal to 85 percent of the median price for an existing single-family, detached home.

Affordability fell year over year despite a continuing cooling of the housing market. An increase in the interest rate, from about 5.9 percent to about 6.36 percent, was the main reason for the annual drop in affordability statewide, said Robert Kleinhenz, CAR's deputy chief economist.

"That increase alone would be enough to decrease affordability by 2 percentage points in just about any market in California," Kleinhenz said.

Another reason for affordability's decline in Los Angeles County is that home prices keep rising, Kleinhenz said. The county's median price for an entry-level home in the fourth quarter of last year was about $15,000 higher than for the same period in 2005.

Except for Los Angeles County, home prices in virtually all California regions "pretty much leveled out" in the third or fourth quarters of 2005, Kleinhenz said. Los Angeles County's home prices began to flatten about six or seven months ago, he said.

"The bottom line is the urban coastal areas like Los Angeles County and the San Francisco Bay Area, that have not seen a lot of home building in the boom years, have seen their existing home prices hold up better than other areas that saw a lot of building activity in those boom years," Kleinhenz said.

At the other end of the industry spectrum, the High Desert and Sacramento regions were the most affordable at 41 percent. A High Desert household would have needed to earn $56,650 a year to have purchased an entry-level home costing $279,480 in the fourth quarter.

The most obvious indicator of the state's slowing housing market has been the decline in sales. That could change as the traditionally busy spring season ushers in a larger inventory of homes, said Robert Bailey, a past president of CAR.

"(As) we move into a more natural home buying season, I think you'll see the pace of sales start to climb up there," said Bailey, owner of Bailey Properties in Santa Cruz. "You'll have more buyer choice with the increasing inventory of homes."

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