The association's monthly housing affordability index measures the percentage of households that can afford to purchase a median-priced home in California. The index is the most fundamental measure of housing well-being in the state.

The minimum household income needed to purchase a median-priced home at $404,520 in California in December was $94,730, based on a typical 30-year, fixed-rate mortgage at 5.82 percent and assuming a 20 percent down payment. The minimum household income needed to purchase a median-priced home was up from $81,290 in December 2002, when the median price of a home was $338,840 and the prevailing interest rate was 6.10 percent. As a comparison, the minimum household income needed to purchase a median-priced home at $173,200 in the United States in December 2003 was $40,560.

At the national level, a seasonal decline in home prices and rising family income led to slightly improved housing-affordability conditions in the fourth quarter, according to the National Association of Realtors. The national association's composite housing affordability index during the fourth quarter of 2003 was up 2.6 percentage points and was 1.1 points below the index for the same period a year earlier.

The index shows the nation's typical household had 139.2 percent of the income needed to purchase a home at the fourth-quarter median existing-home price, which was $171,600. This index measures affordability factors for all homebuyers making a 20 percent down payment, with an index of 100 defined as the point where a median-income family has the exact amount of income needed to purchase a median-priced existing home. The fourth-quarter median family income was projected to be $53,996.

David Lereah, National Association of Realtors chief economist, said the seasonal decline in the median home price results from a normal shift in the market. "There's usually a higher ratio of singles and childless couples purchasing in the fourth quarter, and they generally buy more moderately priced homes," he said.

According to the Federal Housing Finance Board, the average effective mortgage interest rate for existing homes was 5.83 percent during the fourth quarter, compared to 6.11 percent in the fourth quarter of 2002. This is a weighted average interest rate between fixed and adjustable loans, including the cost of points, and represents a true bottom-line mortgage cost.

The association's first-time homebuyer affordability index shows that a typical first-time-buyer household, ages 25 to 44, with an income of $30,436, had 79.9 percent of the income needed to purchase a typical starter home with a 10 percent down payment. The national median starter home price was $145,900 during the fourth quarter.

The index shows the typical first-time buyer could afford a home costing $116,600, which is below the median price in most metropolitan areas. First-time homebuyers account for four out of 10 transactions, so they are still finding a way to get into the housing market, with a small starter house, a condo or some kind of shared arrangement.

Information provided in this column is presented by the Realtor members of the Silicon Valley Association of Realtors at www.silvar.org. Send questions on any topic to jnewton@jnpr.com.