Enormous jumps in home prices in the last year made Orange County one of the nation’s most expensive markets, but the momentum behind those price increases appears to be slowing.
High prices have driven all but the most affluent buyers out of the market in many parts of the county, say brokers, builders and consultants.
With fewer people competing to buy houses, prices may soon reach a plateau where future increases come more slowly, these experts say.
“In terms of price, I think we’ve hit the threshold of pain,” said Matt Disston, a consultant at Research Network in Laguna Hills.
While the slowing trend is too new to show up in countywide statistical surveys, experts cite as evidence the fact that fewer buyers are camping out when groups of new homes go on the market; fewer buyers are bidding against each other for many used homes, and prices seem to be rising a little more slowly.
And in some areas, sales and price increases are slowing. In Irvine, for instance, 42 fewer used homes were sold in September than a year ago: 215 compared to 257, according to the Irvine Board of Realtors.
September home sales in Irvine also dropped from August sales, and the median price fell too, from $244,000 to $224,000. Drops in price have been very rare recently.
“The frenzy is over,” said Joan Wilson, a Grubb & Ellis broker in Mission Viejo.
“People are asking me if they should hold off and wait to buy in cases prices start to drop.”
The median price of a new house in Orange County reached $313,000 in the third quarter, according to the Meyers Group, a Corona consulting firm.
With far more prospective buyers than available houses, prices jumped about $10,000 a month over the last nine months, the firm said.
The median price of resale houses and condominiums reached $224,828 in August, or $54,000 more than a year ago, according to the California Assn. of Realtors. Only 17% of the county’s families have enough income to buy one after making a standard 20% down payment.
September was still a strong month, according to TRW Real Estate Market Information in Colton.
Nearly 14% more new and resale houses and condominiums were sold during the month than a year earlier, according to TRW. The average price rose 2.4% from August--to $216,162--even though the number of homes sold dropped slightly .
Home sales usually drop from August to September with the beginning of a new school year and the end of the traditional summer selling season. But this time the drop may signal something more, say housing experts.
“We’ve gone from an absolutely frenzied market, but it’s still a seller’s market and it’s still insane out there,” said Ken Agid of the Marketing Department, an Irvine consultant.
“You could say we reached a peak (in demand) in June or July, but the critical thing to understand is that demand still far exceeds the supply of housing.”
And it is not likely prices will actually fall, say the experts.
Orange County’s economy is creating so many jobs and the market still so crowded with buyers that only an economic catastrophe could push prices down much.
“Prices have become so outlandish that we’re seeing the beginning of a plateau,” said Sanford R. Goodkin, a La Jolla housing consultant. “But land is so scarce there’ll probably never be a big oversupply of housing in Orange County.”
Many builders have been hedging their bets for months by putting only a few houses on the market at a time. That way they don’t get caught with a lot of unsold houses in the event of a downturn.
But so far, while the crowds waiting outside their sales offices have thinned, there is still a buyer for nearly every house.
“This spring there was no inventory (of new houses) anywhere in Orange County,” said Peter Ochs, president of the Fieldstone Co., a Newport Beach home builder.
“There’s not much now, but at least there are a couple of houses here and there.”
While the last three groups of homes the company put on the market at Rancho Santa Margarita sold out, Ochs said salespeople noticed far fewer people lined up to buy the houses.
In the months before June, experts said many people jumped in the market for a house because they feared a slow-growth initiative on the June ballot would curtail housing construction.
But once the initiative was overwhelmingly defeated, hordes of buyers remained in the market, so desperate for a house they were following realtors even before the realtors stuck up a “For Sale” sign and in some instance bidding against each other for the same house.
Most of the people in the market these days are what the industry calls “move-up” buyers whose present houses have appreciated enough that the owners can take the equity and buy an even more expensive home.
Even these people, however, may be finally balking at the county’s sky-high home prices.
But some people in the industry say they aren’t yet convinced that the market has cooled off even a little.
In resale housing, Santa Ana brokerage Tarbell-Realtors sold even more houses this September than last, said chief executive officer Don Tarbell.
“This can’t continue through the fall, but so far I haven’t seen any slowing,” he said.
And some home builders remain unconvinced, too.
“Everybody (in the home building industry) I talk to has been nervous for the last six months because things have been too good for too long,” said Carl Akins, president of Akins Development Co. in Newport Beach.
But Akins says he has yet to see much evidence of even a slight slowdown in demand for new houses, citing a Laguna Niguel project where the company put 19 houses on sale last week. More than 650 people showed up.
“That tells me things haven’t changed much, although this is our first project in that area,” said Akins.
“It might be that we should have had 1,200 people there.”