The median price of existing single-family homes in Orange County hit $167,894 in May, for an annual appreciation rate of 13%, but the number of resales plunged 21.9% from the level of a year earlier, the California Assn. of Realtors reported Tuesday.
The steep decline in county resale activity--for the second month in a row--contrasts sharply with increases in other metropolitan areas surveyed by the association, an indication that a growing number of potential buyers are being effectively priced out of the Orange County market.
"High housing costs are the Achilles' heel of Orange County," said Joel Singer, the association's chief economist. "High housing costs are going to temper housing sales activity, and ultimately, if not addressed, they'll temper economic growth in the county."
The median price of existing Orange County homes sold in May was almost $20,000 above the $148,947 recorded a year earlier and 23% higher than the $136,764 median reported in May, 1985.
Number of Resales Not Given
While Singer said May's 22% decline in reported resale activity may be abnormally high, figures from previous months confirm that resales in Orange County are running behind the level of activity in other areas of the state. The association declined to report the actual number of resales used in calculating the percentage decline.
Statewide, resale activity in May increased 20%, from 514,226 units in May, 1986, to 627,071 units last month. The state median price for existing single-family homes climbed to $138,497 in May, 1987, from $132,814 a year earlier, an increase of 4%. The state survey does not include information from the San Francisco area.
Association President Jack Paulson said the surge in state resale activity was spurred primarily by interest rates, which began to rise in March after reaching a nine-year low in the 9% range for conventional mortgages.
March's interest rate increase, which continued during April, apparently prompted many buyers who had been waiting for rates to bottom to jump into the market in time to close home purchases during May. Paulson noted that a typical home sale is completed in about 60 days.
But housing analysts speculated that in Orange County the impetus provided by rising interest rates may have been offset by the restraining effect of high prices.
"The real problem is that prices have gone up too fast," real estate analyst Sandy Goodkin said. "The affordability factor has almost disappeared in Orange County, with the possible exception of condos and some new housing."
Orange County's median single-family home price of $167,894 was the highest of any area included in the survey except Monterey, which reported a median price of $171,463. Ventura ranked third at $159,417, while Los Angeles was fourth at $139,977.
Goodkin said Orange County resales have declined in part because of competition from housing in Riverside and San Bernardino counties. The median resale price in those two counties was just $97,720 in May, with the level of resale activity up nearly 60% from a year earlier.
"Orange County has long been infatuated with itself," Goodkin said. "There's been a tremendous amount of competition from the Inland Empire, which the sophisticated Orange County builders felt was really a low-end, first-time-buyer market.
"It's turned out to be much more than that. It's the most severe competition that Orange County has."
Despite the apparent slowing of Orange County resales, analyst Al Gobar said he sees no signs of a potential collapse in county housing prices. In fact, Gobar said, recent plans for a growth-restraining initiative may cause prices to rise significantly in the future.
"If the no-growth initiative goes through, it will be hard for prices to go down," Gobar said. "I wouldn't go short on midpriced housing in Orange County."
Analysts said Orange County's declining resale rate may also reflect an acute shortage of available homes. Statewide, increased home buying has resulted in the lowest level of homes available for resale since the late 1970s.
The association said the inventory shortage is putting upward pressure on housing prices. It projected that prices will continue to rise statewide through the summer.