Despite lower mortgage rates, upper middle-class Americans who bought homes or rented apartments in 1997 spent more of their paychecks on monthly mortgage and rent payments than they would have the year before, according to the accounting firm Ernst & Young.

The firm's annual study of housing affordability predicts that affordability in this market segment will decline rapidly in the next few years. The squeeze in affordability may put "some strain on mortgage underwriting criteria, as people with reasonably good incomes don't qualify for houses they would like to have," said Steve Friedman, national director for housing at E&Y Kenneth Leventhal, the real estate division of Ernst & Young.

Affordability has declined in metropolitan areas in California and New York, where tough restrictions on home building limit supply even as job and income growth spur demand, Mr. Friedman said.

Nationally, the median home has remained relatively affordable for several years as moderate interest rates and rising incomes have almost matched the effects of home price appreciation.

The National Association of Realtors said the median American family, which earned $43,920 in 1997, earned 29.5% more than needed to buy the median-priced home, which sold for $124,100 last year. Affordability was down slightly from 1996, when the median family earned 30.5% more than it needed to buy the median home.

"As house price growth remains strong and even accelerates, it is outpacing income growth for the first time in a decade," said Mark Zandi, chief economist of Regional Financial Associates, West Chester, Pa. "In a stable rate environment, that would result in declining affordability."

Still, Mr. Zandi said, housing would remain generally affordable for the next few years. Home prices are increasing about 6% annually, and income is going up about 5%.

Ernst & Young's survey is meant as a tool for companies to decide where it is cheapest to expand operations or relocate mid-level executives.

For the second year in a row, Oklahoma City was the most affordable city in the United States; its residents needed only 17.4% of the area's median income to live in a 2,200-square-foot detached home with four bedrooms, two-and-a-half baths, and a two-car garage or in a 1,200-square-foot luxury apartment, each in upscale neighborhoods. But even Oklahoma City had been more affordable in 1996, with residents needing only 16% of the median income for this housing.

The New York metropolitan area edged out San Francisco as the nation's least affordable housing market. To rent a house or apartment with similar amenities at yearend, a family in New York needed 41.8% of New York's median income. To buy the same kind of housing, a family needed 45.3% of the area's median income-giving the area a composite housing cost of 43.5% of median income, 2.4 percentage points more than in 1996.

Ranked by affordability, San Francisco was second from the bottom among 75 U.S. cities. There, a family needed 42.2% of the metropolitan area's median income to live in the same kind of housing, compared with 39.7% in 1996.

For its study, the accounting firm assumed mortgage payments on a 30- year mortgage with an interest rate of 7.25%-a full percentage point below its assumption in 1996-and a down payment of 20%.

As the study points out, families in these metropolitan areas often choose to live in smaller houses and apartments rather than spend almost half their monthly income on rent or mortgage payments.

Homeownership rates in markets such as New York are much lower than the national rate. But lately rents, too, have been spiking in these areas, Mr. Zandi said, "so it becomes a very difficult kind of calculation for households."

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