Housing affordability has vastly improved in some Golden State regions this year, but apparently not enough for most of California's first-time home buyers.

Affordability jumped by a whopping 12 points in costly Silicon Valley, and 5 to 9 points in other expensive counties in Northern California in October, thanks largely to record low interest rates plus flat and falling prices. Statewide, however, the percentage of first-time home buyers dropped to 35.6 percent this year from 39 percent a year ago, according to the California Association of Realtors' 2001 California Housing Finance Survey.

"The percentage of first-time home buyers has been trending down since 1995, when a little more than half of all homes were purchased by first-time buyers," said CAR president Robert Bailey.

"While affordability has improved somewhat in recent months, the lack of affordable, entry-level housing in most areas of the state is at a critical juncture for California," said Bailey.

The median price of homes rose 11.2 percent in November even as sales fell 12.4 percent, leaving about one in three California households able to afford a median-priced home.

"Homes listed under $400,000 are still selling strong. As pricing increases, the market softens a bit. New homes are selling briskly and values overall are steady to increasing. The upward pricing trend has slowed compared to last year with appreciation in real property expected to be around 8 percent," said Tom Peterson, an Orange County real estate agent and loan officer with All Star Financial and Park Place Real Estate Services reporting on RealtyTimes.com's Orange County Market Conditions Report.

Unfortunately, incomes of first-time home buyers simply haven't kept pace with the steady up tick in home prices -- a record medium $280,000 this year, up 16 percent from $241,250 last year.

While two-thirds of all home buyers earned $70,000 or more in 2001, compared to 57.3 percent last year, the median income of first-time buyers remained unchanged for the third year in a row at $60,000, according to the report.

"While 2001 was in many respects a year in transition for California's residential real estate market, several key indicators remained virtually unchanged from a year ago," said Leslie Appleton-Young, CAR vice president and chief economist.

"Time on the market was unchanged at four weeks, the price discount crept up from half a percent a year ago to 1.3 percent this year, and the median price continued to climb," she said.

It helps to have a home and existing equity to help foot the bill for a home in the expensive housing market.

Repeat home buyers comprised 64.4 percent of the state's home purchasers in 2001, up from 61 percent in 2000, said CAR, the survey found.

"The economy has slowed in the Los Angeles real estate market since August. With the September 11 attacks, the market was at a stand still. Within the month since September 11 consumer confidence is resurfacing and with the lowered interest rates buyers are re-emerging with great anticipation of great buys given the lower rates coupled with the easing of home prices," Coldwell Banker's Sibongile West in Los Angeles reported to RealtyTimes.com's Los Angeles Market Conditions Report.

Up north it was a different story.

"As we all drive through our various neighborhoods, I'm sure that we've seen a few 'For Sale' signs that have continued to sit for a few months now. This is an excellent indicator that now is a time to buy for ones self or to invest. With the buyer's market, and the current low interest, now is perhaps one of the best times to enter the market," according to San Jose broker associate Ton Dang's, San Jose Market Conditions Report on RealtyTimes.com.

CAR's annual survey asks real estate agents throughout the state about financing, property characteristics and buyer/seller demographics of their most recent transaction in the second quarter of 2001. This year's survey includes 1,081 responses and has a margin of error of plus or minus 3.1 percent.

Not related to first time home buyer concerns, the survey also found:

• Fewer buyers paid cash this year. California home purchases in 2001 were paid for entirely with cash 8.8 percent of the time, compared to 11.9 percent a year ago.

• Interest rates were lower. The median mortgage interest rate on new fixed-rate mortgage transactions was 7.25 percent in 2001, compared to last year's 8.25 percent median.

• More loans were fixed-rate loans. Fixed-rate loans comprised 87.7 percent of new first mortgages issued in California in 2001, compared to 80.1 percent last year. Adjustable-rate loans comprised 7.2 percent of California's new mortgages in 2001, compared to 14 percent last year.

• Mortgage bankers write most loans. Mortgage bankers issued 54.4 percent of California's new first mortgages in 2001, down slightly from 55.2 percent last year.

• Buyers preferred larger, single-family homes. California buyers in 2001 purchased single-family detached homes 79.1 percent of the time. Attached homes (condominiums and townhouses) were bought by 15.8 percent of purchasers. The median size of the typical home bought in California in 2001 was 1,600 square feet, compared to a median of 1,574 square feet in 2000.

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