Orange County Home Cost Soars to New High : Median Price Jumps 4% to $219,542 in July Despite Signs That Market May Be Cooling Off
The nation’s priciest housing market became even more expensive in July as the median price of an Orange County home jumped more than $8,000 to a record $219,542, the California Assn. of Realtors reported Wednesday.
At the same time, however, indications are that this year’s buying frenzy may have begun to abate. Orange County sales plunged 17.6% after a 25% surge in June, and brokers said fewer buyers are lining up to bid on newly listed houses.
Joel Singer, the trade group’s chief economist, said that while seasonal factors may have contributed to the sales drop, soaring prices and increasing mortgage rates may at last be driving some buyers out of the Orange County market.
“If the pattern we’ve experienced this July continues for another month or two, there could be a leveling off of this superheated environment,” Singer said.
The decline in activity in Orange County contrasts with other areas of the state, where sales increased 2.7% for the month, according to the association. The statewide median price rose 2.9% to $172,347 in July. That compares to a July, 1987, price of $142,224.
The median price of a typical single-family detached home in Orange County rose 4% from June’s median of $211,038, and is up 28.1% from $171,397 in July, 1987, the association said.
Typically, sales statewide decline about 10% in July after increases in May and June, when many families close deals to be moved by the start of the school year, Singer said.
While Orange County’s unusually sharp drop in July is not conclusive evidence that the local housing market is cooling off, Singer said the county is likely to be one of the first areas in which the turn will occur because spiraling prices have drastically reduced the number of people who can afford to buy.
“There’s got to be a retrenchment at some point in the near future,” Singer said.
Several Orange County real estate brokers said they did not detect a significant decline in July activity, although some said sales have begun to slow in August.
“In the last three weeks, there has been a significant change in the frenzy level,” said Robert Licata, vice president and district manager in Irvine for Grubb & Ellis. “The pendulum has swung back to the middle.”
Licata said he expects to see a 10% to 12% decline in business for August. He said $250,000 houses that typically attracted five or more bids two months ago now draw about two bidders, although the decline in demand has not yet caused prices to soften.
The anticipation of rising interest rates, which has helped fuel the home-buying spree in recent months, may have about run its course in higher-priced areas of the state, said Kathleen Cooper, chief economist at Security Pacific National Bank in Los Angeles.
Average rates on fixed mortgages, which fell as low as 9% in 1987, have climbed to about 10.75% from about 10% two months ago.
Cooper said she expects mortgage rates to rise between a half and a full percentage point by early next year, reflecting efforts by the Federal Reserve Board to pursue a restrictive monetary policy in response to mounting inflation. “There comes a point when higher rates, combined with the affordability issue, come into play and make it difficult if not impossible for home purchases to be made,” Cooper said.
High Rates Slowed Market
In years past, the Orange County housing market has tended to slow significantly when mortgage rates climbed above 12.5%, said Kelly McDermott, a vice president at Market Profiles, a Costa Mesa market research firm.
On the other hand, McDermott said, the Orange County market is being supported by large numbers of Japanese and Korean home buyers, who represent as much as 50% of buying activity in some high-priced areas of the county.
Pat McCurdy, a real estate broker with Century 21 in Irvine, said the decline in sales reflects a lack of available resale homes more than it does a reduction in buyer demand, although she reported a slightly bigger supply of homes in August than earlier in the summer.
“You can’t sell houses when there is nothing to sell,” she said.
Some observers have said that June’s 25% increase in sales may have reflected concern that passage of a slow-growth initiative would further restrict supply and drive prices higher. The initiative, however, was defeated June 7.
The combination of soaring prices and rising interest rates will make it even more difficult for first-time home buyers to crack the Orange County market.
Out of Reach for Many
In June, only 20% of Orange County households could afford to buy a typical single-family home, the Realtors association reported. The trade group has not yet calculated similar figures for July.
And July’s 4% price jump is likely to keep Orange County at the top of the national ranking. The National Assn. of Realtors recently reported that Orange County had edged out Honolulu and New York as the nation’s most expensive housing market during the second quarter.
Both trade associations calculate median prices of single-family detached homes offered for resale through real estate brokers. The figures do not reflect sales of new houses, attached housing or homes offered for sale without a broker.
HOME PRICES, SALES ACTIVITY IN STATE
MEDIAN SALE PRICE JULY SALES ACTIVITY % Change % Change Region July 1988 July 1987 % Increase From June Frm Yr Ago Orange County $219,542 $171,397 +28.1 -17.6 +10.0 Los Angeles $188,210 $152,100 +23.7 +0.2 +9.8 San Francisco $208,110 $175,029 +18.9 +3.1 +5.0 San Diego $150,000 $128,554 +16.7 -15.2 +12.7 Sacramento $99,365 $87,616 +13.4 -18.0 -17.7 Riverside/ $108,392 $97,208 +11.5 -15.5 +2.4 San Bernardino Ventura $205,494 $161,655 +27.1 +5.1 -15.2 California $172,347 $142,224 +21.2 +2.7 +8.2
Source: California Assn. of Realtors MEDIAN RESALE HOME PRICE IN ORANGE COUNTY 1987 $167,663 1988 $219,542
