March Resale Home Prices Level Off Here, Surge in Other Areas of State

The number of homes sold in California set a 2-year record in March, as fear of higher interest rates caused buyers to flock to the market in Orange County and other metropolitan areas, the California Assn. of Realtors said Monday.

Home prices, meanwhile, leveled off in Orange County while rising in other parts of the state. The median price of a detached resale home in the county edged up to $238,807 in March, a 0.6% increase for the month and 24.9% for the year, the trade group said.

The statewide median price jumped to $196,097, up 2.5% from February and 27.2% from March, 1988.

If March’s sales pace continues, 638,000 houses will have changed hands statewide by the end of the year, the trade group said. That’s an 8.4% increase from February sales and a 20.7% jump from March, 1988. It was the biggest sales month since December, 1986.

The group tracks sales and prices of homes sold on the resale market by Realtors. Its median price figures exclude new homes and attached housing, such as condominiums.

The California market in March was “dominated by home buyers making their purchase earlier than usual . . . to preempt higher mortgage rates,” said Leo Saunders, a Walnut Creek Realtor and president of the statewide trade association.

Interest on fixed-rate mortgages rose to an average 10.81% in early March, from 10.79% in early February, the group said. Adjustable-rate mortgages rose to an average 9.27%, from 9.04%. Rates have continued to rise, with most fixed-rate loans now well above 11%.

Orange County sales rose 9% in March from a year earlier, the trade group estimated. They were up 42.6% in San Francisco, 24.2% in San Diego and 5.1% in Los Angeles.

Despite the month’s spurt, experts said this year’s sales will probably be slower or about the same as last year’s, and price increases will be smaller.

Last year’s market was so strong that many observers figured that it is due for a breather this year. March’s moderate increase in prices appears to bear them out.

Although the March sales figure in Orange County was up a whopping 61.5% from February, the trade group said the average for the first quarter shows no increase in sales from last year.

Sales picked up in March as warmer weather heralded the arrival of the traditional home-buying season. That’s not unusual; sales rise steeply every year from February to March. Last year they rose 37%.

And it does not signal a return of last year’s frenzied market, which pushed prices in the county to among the highest in the nation.

“People who are trying to go for a new high price selling their house are definitely running into resistance,” said Tom Baron, owner of a RE/MAX franchise in Irvine. “There are definitely buyers out there, but in many cases they’re not willing to pay these prices.”

Compared with last year, when sellers often got multiple offers for their homes almost as soon as they hit the market, it now takes up to 2 months for most homes to sell in Irvine “if they’re priced at where the market peaked last fall,” Baron said.

Higher interest rates could also put a crimp in the market. As rates rise, fewer people can qualify to make the mortgage payments, with the sky-high housing prices in many California markets already pricing many potential buyers out of the market.

In the area covered by the East Orange County Board of Realtors, for instance, the number of families able to afford a typical resale house dropped 1.5 percentage points to 25.5% during the month, the board reported Monday.

The decline occurred even though the median price for such houses--$195,000--was unchanged from February in the cities covered by the board: Tustin, Orange, Santa Ana, Villa Park and Anaheim Hills.

In Mission Viejo and Saddleback Valley, sales of houses priced at more than $350,000 are starting to slow, said Tom Cannon, a senior vice president at Grubb & Ellis Co.

Houses priced at less than $250,000 are still selling almost as fast as they were last year, he said.

But the bigger and more expensive houses are not appreciating as quickly, so Cannon expects the average price increase for all types of houses to be much lower this year than in 1988.

“I think you’ll see about the same number of houses sold at the end of this year,” Cannon said. “But prices? They won’t go up nearly as much this year as they did last year.”

March’s median price of $238,807, for instance, was up a whopping 25% from $191,191 in March, 1988. But the March price was up just 0.6% from February’s $237,409, according to the Realtors association.

The San Francisco area posted a much larger 3.2% gain in home prices during March and had the highest median resale home price in the state, $249,508.

Los Angeles saw an even larger 5.7% price gain to hit a median of $210,029. And San Diego increased 4.8% to $166,984.

MEDIAN HOME PRICES IN AREAS OF STATE

% Change % from Region Mar. 1989 Mar. 1988 Change Feb. 89 Orange County $238,807 $191,191 +24.9 +0.6 Los Angeles $210,029 $162,945 +28.9 +5.7 San Francisco $249,508 $190,963 +30.7 +3.2 San Diego $166,984 $136,483 +22.3 +4.8 Sacramento $101,400 $89,444 +13.4 +3.2 Riverside/San Bernardino $119,884 $96,536 +24.2 +3.8 California Average $196,097 $154,130 +27.2 +2.5

SOURCE: California Assn. of Realtors