MEASUREMENTS DON'T FIT L.A. NOW.

Byline: GREGORY J. WILCOX

There is a big contradiction lurking in California's residential real estate market, where strong price appreciation continues to rule.

That's evident comparing the findings in some reports released last week. Consider that:

--Prices are at record levels in the San Fernando Valley, most of Southern California and for the entire state.

--Sales are still strong versus year-ago levels.

--In the 2004 fourth quarter, the Golden State remained the least affordable place in the nation to buy a slice of the American dream.

Something doesn't add up. With prices so high and affordability so low, why haven't sales cratered?

Affordability calculators are probably out of whack.

``The real problem is the numbers are not realistic,'' said Alan Nevin, chief economist at the California Building Industry Association. ``They don't relate to reality.''

Nevin's comment followed the release of National Association of Home Builders/Wells Fargo Housing Opportunity Index that found that, during the fourth quarter of 2004, California was home to 19 of the 23 least-affordable metro areas in the nation. And Los Angeles and Monterey counties were the least affordable places to buy a house in the country.

But when fourth quarter sales are finally tabulated, Los Angeles County's market should be one of the best ever.

U.S. Census bureau information supports Nevin's take that, while prices have gone up, so have home ownership rates.

In 1989, part of the last great bull housing market, homeownership in California was 53.6 percent. It moved up slightly the next year and continued that trend as the market tanked and prices fell.

But, when prices began moving up in the late 1990s, so did ownership rates.

Last year, when prices hit record levels that were eclipsed last month, ownership in California averaged 57.1 percent, 10.3 percentage points under the national average. True, only two states, Hawaii and New York, had lower ownership rates.

But California's rate was still higher than the 47.9 percent of 1990, when prices were several hundred thousand dollars less than now.

And, in the Los Angeles/Long Beach metro area, ownership averaged 51.6 percent last year versus 47.9 percent in 1990.

``I don't put any stock in them at all,'' Nevin said of affordability indexes. ``The lower affordability goes, the higher the homeownership ratio goes. So there is something wrong with the numbers.''

What affordability calculators probably aren't calculating is the way people are buying homes.

In some cases, help from family members is easing the sting of high prices.

Nevin said affordability indexes don't take into consideration aid parents give children looking for their first home. There's been a big increase in home equity loans, and a lot of that money is going for home purchase. Other kinds of unearned income play a role, too.

Nevin's done it for one of his children and is currently in escrow on homes for two others.

Credit is still relatively loose and cheap, too, thanks to a prolonged run of low interest rates.

Homes are still expensive, though, and are probably going to get more so this year.

January started with appreciation rates of 20 percent or more in most areas of California, and the forecast calls for a softening into the mid teens sometime this year.

Of course, we've heard that before.

Jack Kyser, chief economist at the Los Angeles County Economic Development Corp., said that the way affordability is calculated doesn't take into account the number of loan packages today versus 15 years ago.

``There's constant fretting about the affordability, yet sales appear strong. What the affordability numbers don't take into account are the very innovative loan packaging that keeps things rolling.''

Gregory J. Wilcox, [phone]

greg.wilcox(at)dailynews.com