The ability to buy for first-time buyers deteriorated by 1% quarter-on-quarter and by 0.1% year-on-year in Q1 2012, as inflation rose and earnings stood still.
Even though first-time buyer house prices are falling, the rising cost of living outweighed the positive effect this had on affordability.
Traditional measures have been suggesting that affordability improved for first-time buyers in Q1 2012 and now equates to levels last seen in 2003.
But these measures do not include living costs in their calculations, so they only give half the picture.
The Ability to Buy index assesses the full range of costs facing first-time buyers.
By including inflation, tax, National Insurance, essential living costs, average salaries and house prices themselves, the index provides a far more accurate measure of affordability for first-timers.
Factoring in the expected changes in house prices and earnings over the next two years means that first-time buyer affordability is unlikely to return to 2003 levels until 2014.
However, falling house prices are helping first-time buyers. The price of an average first-time buyer house fell by 1.2% year-on-year in Q1 2012 and is expected to fall by about 2.5% in 2012.
This means that both mortgage payments and the size of the deposit that first-time buyers have to raise will get smaller.
But in spite of this reduction, the burden on first-time buyers has not become any less. Payments still take up 55% of discretionary income and those wanting to buy in London have felt the impact of these worsening conditions most harshly.
The index reveals that people in London have to save nearly twice as long for a deposit as the rest of the UK. This is partly driven by the high rents in the capital, which account for around 75% of earnings after essentials compared to 50% in the rest of the UK.
Over the year, the ability to buy improved most in Northern Ireland, where it was 15% better, and the east of England, which saw an 11% improvement.
But it deteriorated most in London, where it was 18% worse than in Q1 2011, followed by the North East (-14%), Wales (-10%) and the South-East (-5%).
First-time buyers in London take an average of more than four years to save for a deposit, compared to around three years for the UK as a whole, and two and a half for Scotland.
Scotland is currently the most affordable part of the UK in which to buy a first home.
We know market conditions are tough for first-time buyers, but the index results show that in some geographical areas, things have improved. There is light at the end of the tunnel.
While the Monetary Policy Committee expects inflation to stay above its 2% target for longer than it previously thought, house prices are expected to fall by about 2.5% in 2012.
So even if the price of essentials continues to rise and earnings grow modestly in the same period, ability to buy is likely to improve.