Bucking Rising Mortgage Rates : Homes in State More Affordable Than 3 Years Ago

COSTA MESA —  Even with a recent rise in mortgage interest rates, housing in California is more affordable now than three years ago, with Los Angeles County showing the most improvement in the state, according to a study released Tuesday.

A typical California homeowner now spends 43.9% of his or her gross annual income on mortgage payments, TRW Redi Property Data reported. That compares to 46.5% in 1991. “Although home mortgage rates are increasing, they are still at lower levels than three years ago,” said Nima Nattagh, an analyst with the Riverside-based real estate data company. “That’s helped affordability.”

Other factors contributing to greater affordability include a reduction in home prices during the real estate downturn and rising income levels, said Nattagh, whose company tracked housing affordability in 47 California counties.

Though Los Angeles County is still one of the state’s least affordable regions for home ownership--No. 43 out the 47 counties surveyed--the typical buyer in the county can expect to spend 43.2% of his or her annual income on a mortgage now, compared to 53.1% in 1991. That change was the biggest of any area surveyed.

Orange County ranked 36th, with mortgage payments accounting for 41.0% of income. The size of an average mortgage, however, increased to $187,060 from $184,311--the largest in Southern California.

That compares to an average mortgage of $157,681 in the state now, up from $155,784 three years ago. The average mortgage in Los Angeles fell slightly to $172,249, compared to $175,886 three years ago.

“If you look at Orange County, you will see that the average size of a mortgage is higher,” Nattagh said. “But if you take into account the income levels, it becomes more affordable.”

Ventura County ranked No. 41 in the new study, and San Diego County was No. 42. In both areas, homeowners can expect to spend 42.4% of their incomes on mortgage payments.

Home ownership in the Inland Empire is much more affordable, TRW found, with San Bernardino County ranked No. 11 and Riverside County No. 20.

As in previous studies, the latest TRW report listed San Francisco as the most expensive place in the state to buy a home, with buyers there setting aside 54.1% of their income for a mortgage. Still, that was a significant improvement from three years ago, when San Francisco buyers were spending 63% of their annual income on mortgage payments, the study found.

If interest rates continue to rise, Nattagh said, California’s housing affordability could quickly return to levels of three years ago, when the average statewide rate for a 30-year, fixed-rate mortgage was 9.25%. It is now 7.98%.