Home Sales in State Fall 9.1% During Month

Home sales in California dropped 9.1% in January as consumers played a waiting game, hoping interest rates would decline further.

The statewide median price of an existing home rose 1.4% for the month to $147,281, further dampening sales, according to figures released Wednesday.

“After the stock crash, potential home buyers watched mortgage rates drop sharply, inch up a bit, and then fall back somewhat during December,” said Dale Colby, president of the California Assn. of Realtors.

“While we saw a slight increase in home sales during December as a result of lower rates, a substantial number of buyers anticipated that there would be a further decline in rates and decided to wait and see what happened after the first of the year,” he said.

However, instead of declining, rates increased. During the first week of January, the average fixed-rate home mortgage was 10%, up from the 9.98% offered in the first week of December, according to the Federal Home Loan Bank Board.

Rates Have Dipped

At the same time, the average adjustable-rate mortgage increased from 8.14% during the first week of October to 8.28% in November and 8.36% in December before backing down to 8.32% in January.

The good news, said the trade group’s chief economist, Joel Singer, is that rates have dipped subsequently and a further reduction is likely.

Currently, fixed-rate mortgages are averaging 9.75%, and “we expect to see a 9.5% rate appear, at least for a short period,” Singer said.

On adjustable-rate loans, a number of institutions have lowered introductory “teaser” rates to around 7%.

“Rates are coming down in the money markets in general,” Singer said. “There is increasing competition to make loans. There is greater capacity to make loans than there is demand. This works to the benefit of consumers.”

These lower rates will give some boost to home sales, Singer said.

Sales of existing homes in January were off 9.1% from December, 1987, to an annual rate of 483,518 units. That was 3.3% lower than the January, 1987, rate.

San Francisco homes were listed as the costliest at $176,055, up 0.6% for the month, followed by Ventura at $175,651, up 2.7%, and Orange County at $173,333, down 3.5%. In Los Angeles, the median price was $159,190, up 3.8%, San Diego at $131,041, down 2.2% and Riverside-San Bernardino at $93,944, down 4.6%.