Buyers Caught in High-Price Snag

HELP may be on the way for squeezed middle-class home buyers. Sequoia-high housing costs in many parts of the country are raising fears of a generation of Americans unable to afford a piece of the American dream.

As a result, governments both big and small, as well as corporations and even unions, are fashioning programs to help.

Most are stingy on providing direct aid, but all have a similar goal in mind: To bring homeownership within the reach of more Americans, particularly first-time buyers.

``More and more states and localities are getting involved in homeowner assistance,'' says William Apgar Jr. of Harvard University's Joint Center for Housing Studies.

Consider this community of eucalyptus trees and red-tile-roofed homes north of San Diego. Escondido, like most of southern California, has watched housing prices move so far out of sight that they are not visible even with binoculars.

The median price of a home in San Diego County is now $175,000, while the median income is $36,000. Result: Only 22 percent of all households in the area could qualify for a loan to buy a median-priced home.

So city officials here recently came up with a novel idea to help first-time buyers. When a developer came to the city for approval to build a condominium complex, city officials, who have been trying to slow growth in the area, agreed to the project, provided the developer did something in return.

That turned out to be a program in which the builder will underwrite the down payments on one-quarter of the condo units. The city will give the project fast-track approval. The money the company saves from this, about $550,000, will make up the down-payment pool.

``It is a small bite out of the problem,'' says Carla DeDominicis, the city councilwoman who devised the program. ``But it is a bite.''

Up in liberal Berkeley, Calif., where a two-bedroom ``fixer-upper'' might fetch $400,000, community officials have taken a different approach. The city's finance department is trying to induce local banks and savings and loans to offer residents below-market interest rates on home mortgages.

The carrot: The city will deposit up to $700,000 of the its money in the one that offers the highest rate of return and cut-rate mortgages to first-time buyers.

The reason for all this creative maneuvering is painfully familiar. Rising housing prices in the 1980s, coupled with more stringent mortgage standards and, until recently, higher interest rates, has left many prospective buyers renting and ranting.

The burden falls most heavily on first-time purchasers. A recent study by the Joint Center for Housing Studies showed that, among people between the ages of 25 to 29, the percentage of those owning their own homes dropped from 43.3 percent in 1979 to 36.2 percent in 1987.

Nor does the situation seem to be getting much better. Interest rates have moderated in recent months, and, in some parts of the country, housing prices have too; but affordability remains a problem.

Sticker shock varies from region to region, with the most expensive homes - and highest incomes - being on the coasts. As usual, California leads the platinum parade. According to the National Association of Realtors, three of the five most expensive areas for median-priced homes are here: San Francisco (No. 1), Orange County (No. 2), and Los Angeles (No. 4).

As the din from angry home buyers has risen, so has the political attentiveness. In Congress, at least six measures to encourage home ownership are in various stages of consideration.

The most ambitious is a comprehensive housing bill put forward by Sens. Alfonse D'Amato (R) of New York and Alan Cranston (D) of California. For first-time home buyers, it proposes using tax-deferred savings plans like individual retirement accounts to raise money for down payments without suffering tax penalties. It would also ease restrictions on mortgages insured by the Federal Housing Administration.

With Congress preoccupied with the US Housing and Urban Development Department scandal and savings-and-loan bailout, however, no major housing bills are likely to move quickly.

``I think we will see a comprehensive housing bill,'' says Floyd Williams, a lobbyist for the National Association of Home Builders. ``I just don't think we will see it this year.''

Some states don't want to wait. Michigan will start an innovative program later this summer that will allow first-time buyers to earn tax-free interest on savings invested in state-issued bonds, provided the proceeds go toward buying a residence. Maine has just begun a program to help home buyers meet closing costs.

A growing number of corporations, meanwhile, are assisting employees in buying and selling homes, while even one union is getting into the act. Last winter, the Hotel and Restaurant Employees Union Local 26 in Boston negotiated a labor contract in which an employer agreed to contribute to a housing trust for workers, though the precedent-setting deal must get congressional approval.

Despite all these efforts, owning a home is likely to remain elusive for many Americans.

``A lot of these initiatives are well structured and well intentioned,'' says Harvard's Mr. Apgar. ``But they don't reach a lot of people.''

Median Home Costs Market Cost San Francisco $243,900 Orange County, Calif. 237,900 Honolulu 236,000 Los Angeles 201,000 Greater New York City, including

northern N.J. and Long Island 181,700 Boston 178,500 New Haven, Conn. 166,700 Hartford, Conn. 165,500 San Diego 163,900 Washington, D.C. 143,700 Source: National Association of Realtors