More Can Afford to Buy Homes : Real estate: A national survey finds affordability at its highest level since 1974. A state index also shows gains in California.

Low mortgage rates and rising incomes have made home ownership more affordable nationally than at any time in the last 18 years, a new survey shows.

And in Southern California, although the real estate market remains in a slump, affordability has also reached the highest levels in years, according to a separate report.

The National Assn. of Realtors said its housing affordability index hit 127.0 for the third quarter of 1992, up from 119.4 in the previous quarter and 110.6 a year ago.

It means that an American family with the median income of $36,612 had 127% of the income needed to qualify for a mortgage on the median-priced home of $103,500. It was the highest point the index had reached since the second quarter of 1974.

The affordability index assumes the family has a 20% down payment. It’s a big assumption, and a false one in many cases.

“For this to be the best buying time in a generation--with interest rates down and housing costs down--is incredibly frustrating for people who don’t have a down payment,” said Kathleen Williams, a clinical psychologist who now lives in Pasadena.

But Williams is one of the lucky ones. She will move into a her new home in Altadena this weekend, a purchase she said would have been impossible if her parents hadn’t been able to lend her most of the money for the down payment.

John A. Tuccillo, NAR’s chief economist, said the trade group will present a “more sophisticated” index next January that will take the down payment problem into account.

Tuccillo said falling interest rates were the biggest factor in the affordability improvement. Thirty-year, fixed-rate mortgages averaged 7.88% in the third quarter, down from 9.31% a year earlier.

“We haven’t seen rates this low since gasoline was 38 cents a gallon,” he said.

For potential first-time home buyers, affordability was a more serious problem. NAR’s separate index for such buyers was only 83.4, meaning that the typical renter made only 83.4% of the income needed to qualify for an $88,000 starter home, assuming a 10% down payment.

Dorcas T. Helfant, NAR president, said of the affordability survey: “This is very good news, but there are still many first-time home buyers who remain locked out of home ownership.”

She called on Congress and President-elect Bill Clinton to promote home ownership through such measures as allowing first-time buyers to tap individual retirement accounts or 401(k) retirement plans for down payment funds.

Separately, the California Assn. of Realtors reported that 32% of California households were able to afford the median-priced ($196,500) single-family home as of September. That was the highest statewide affordability number since June, 1987, and was up from 26% a year earlier, a spokeswoman said. CAR calculates its index differently than the national trade group.

In Los Angeles, CAR’s affordability index was also 32%, up from 21% in September, 1991. Orange County’s index was 37%, compared to 25% in 1991. The index for Riverside/San Bernardino was 44% versus 36% in 1991.

“I’m both heartened and saddened,” Steven M. Friedman, director of real estate services for Ernst & Young in Los Angeles, said Monday. While rising affordability is good news for people who are hoping to buy, the flip side is eroding equity and eroding confidence among those who already own homes, he said.