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STATE GETS LOW MARK ON HOUSING AFFORDABILITY DOWN TO 23%, ACCORDING TO REALTOR GROUP.

Byline: Gregory J. Wilcox Staff Writer

Rising prices drove housing affordability down to 23 percent in California in August and widened the gap between the state and nation to 33 points, a trade group said Thursday.

Last month the statewide Housing Affordability Index sank five percentage points from 28 percent a year ago, according to the Los Angeles- based California Association of Realtors. It was 26 percent in July.

The index measures the percentage of state households that can afford the median-priced home and is considered one of the best gauges of housing well-being in California.

``We really become concerned when affordability drops below the 20 percent figure and clearly we've been heading for that for quite some time,'' said Robert Kleinhenz, the association's senior economist.

In May 1989, affordability in California bottomed out at 14 percent.

In August it took a minimum household income of $93,490 to buy a home priced at the median record of $404,870. That's with a benchmark 30-year mortgage carrying an interest rate of 5.66 percent and a 20 percent down payment.

In August 2002 a household income of $82,150 was needed to buy a house priced at a median of $334,270. The interest rate then was 6.38 percent.

By comparison, the median price house across the nation averaged $177,500 last month and it took a minimum income of $40,990 to buy it.

Nima Nattagh, an analyst at FNC, which supplies real estate market information to the mortgage banking industry, agreed that this is cause for concern.

``It locks people out of the housing market,'' he said of declining affordability.

And the situation is not likely to improve.

The association's forecast for next year is for sales to soften while the median price, the point at which half the homes cost more and half cost less, increases 13 percent to a record $414,100.

As is typical, the farther away buyers are willing to live from major cities, the more they can stretch their purchasing power.

In the High Desert, which includes the Antelope Valley, the affordability index was 60 percent, down from 66 percent a year ago.

In Los Angeles County it was 24 percent, an annual decline of five percentage points.

In Ventura County affordability was 24 percent, down from 30 percent a year ago.

Santa Barbara remained the least affordable place in the state as only 14 percent of households could afford the median priced home.

Kleinhenz and Nattagh both think that interest rates will remain favorable for a while, which will help mitigate price increases.

The rate on a 30-year home loan fell to 5.23 in June, then increased to 6.3 percent in August before sliding back to 6.15 percent last month, Kleinhenz said.

And when rates do rise, buyers typically switch to less expensive adjustable rate loans.

Gregory J. Wilcox, (818) 713-3743

greg.wilcox(at)dailynews.com

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STATEWIDE HOUSING AFFORDABILITY FALLS

SOURCE: California Association of Realtors
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Title Annotation:Business
Publication:Daily News (Los Angeles, CA)
Article Type:Statistical Data Included
Date:Oct 10, 2003
Words:501
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