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California and the West

Percentage Able to Afford Homes Falls

Prices put pressure on California residents. Also, Countrywide's CEO says U.S. market may have peaked.

October 07, 2005|From Times Wire Services

The percentage of California households able to afford a median-priced home in the state fell to 14% in August from 18% a year earlier, the lowest level since records began in 1989, according to a report released Thursday.

Also, the head of the nation's largest mortgage lender said Thursday that the U.S. housing market may have peaked and regions such as southern Florida and Las Vegas may see a "substantial reduction" in condominium values.

In its monthly report on housing affordability, the California Assn. of Realtors said fast-rising home prices across the state have put increased pressure on California residents, who needed a minimum household income of $133,800 to buy a home at August's median price of $568,890.

That calculation was based on an average mortgage interest rate of 5.87% and assumed a 20% down payment with conventional financing.

As a comparison, the minimum household income needed to purchase a median-priced home at $220,000 in the United States in August was $51,740, the group said.

The Santa Barbara region, where 6% of households were able to afford to buy a median-priced home, was the state's least affordable market, the real estate trade group said.

In an interview with Bloomberg News while attending a Business Council meeting in Kiawah, S.C., Countrywide Financial Corp. Chief Executive Angelo Mozilo said the housing market was showing signs of cooling.

"I have been doing this for 53 years, and it seems we are topping out," Mozilo told Bloomberg. A strong economy and low unemployment mean single-family housing prices probably won't drop, he said.

New-home sales in August fell by the most since November, a sign that rising mortgage rates and higher energy costs may be cooling demand.

The 10-year Treasury-note yield, used as a mortgage benchmark, has climbed more than 0.5 percentage point in the last four months. Still, sales of previously owned homes surged in August and prices reached an all-time high.

"I don't see a substantial discount" in single-family home prices, although the gains in recent years probably will level off in areas where inflation has been climbing, Mozilo said.

The same can't be said for condominium prices.

"You could see substantial reduction in values in the condo market" in areas of "high speculation," such as Broward and Dade counties in Florida, and Las Vegas, he said. "You could have a 20% reduction."

Manhattan apartment prices fell 13% in the third quarter, the most in 16 years, according to an Oct. 4 report from Miller Samuel Inc., the borough's largest appraiser. Some housing experts saw the drop, which came after prices had soared 30% in the previous three months, as evidence the most expensive market in the U.S. may have peaked.

Countrywide, based in Calabasas, produced about $121 billion of loans in the second quarter, up 21% from a year earlier.

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