Orange County Is Only Area in State Where Home Sales Dipped
Orange County was the only area in California to post a decline in home sales during the first quarter of 1989, a trade group reported Tuesday, providing evidence that the frenzied seller’s market of the last year may have come to an end here.
The county’s median house price jumped to $237,900 during the first 3 months of the year, according to the National Assn. of Realtors. Orange County ranked as the nation’s second most expensive housing market, behind the San Francisco Bay area’s $243,900 median price.
A separate study by the California Assn. of Realtors listed Orange County as the only area of the state where sales dipped. The national trade group’s report showed that the county shared that distinction with a majority of states.
First-quarter sales fell 0.6% in Orange County from the same period in 1988, contrasting sharply with increases of 15% in Los Angeles and 22.3% for the entire state, the state trade group reported.
Nationally, 28 states and the District of Columbia reported lower sales for the first quarter, according to the national association.
“Obviously if interest rates go up any further, we’ll see moderation in the California housing market. That’s happening in Orange County already,” said Leslie Appleton-Young, director of research and economics at the California board.
Orange County is already being characterized as a buyer’s market by some real estate agents, who note that houses aren’t selling as fast as they did last year. Back then, houses sold almost as soon as they hit the market, sometimes for more than the listing price.
“Sales of median-priced homes in Orange County have slowed down,” said William F. Cote, president of Cote Realty & Investment Co. in Newport Beach. “No doubt about it.”
Nationally, some of the most expensive areas of the country experienced big sales declines in the first quarter of 1989. New York, Massachusetts and the District of Columbia all saw housing sales drop more than 8%, the trade group reported.
Meanwhile, less expensive markets saw some of the biggest increases in the number of homes sold. For instance, West Virginia was the biggest gainer, with a 61.3% percentage increase in sales compared to the first quarter of 1988.
Real estate observers attributed the sales slowdown in Orange County and many states to high home prices and rising interest rates, both of which have pushed housing beyond the grasp of many first-time buyers.
Orange County’s median home price was up 30% from $182,668 in the same period a year earlier and 5% higher than $226,362 for the fourth quarter of 1988.
“Price gains in Orange County have been very, very strong,” Young said. “I think we finally see that that is starting to have an impact on the sales volume.”
Exacerbating the problem of high prices is a sharp rise in mortgage interest rates, which have increased by nearly 2 percentage points during the last 6 months.
“The combination of high prices and higher mortgage interest rates make it increasingly difficult for a family to justify a move to a bigger or new home,” said Glenn Crellin, an economist with the national Realtors board.
‘Harder to Qualify’
Rising rates hit particularly hard at first-time buyers, many of whom are already strapped for cash. “Higher interest rates increase the cost of financing and make it harder to qualify for a mortgage,” Young said. “That is impacting first-time buyers.”
For each percentage point increase in mortgage rates, monthly payments rise about 72 cents for every $1,000 borrowed. As a result, the payments on a median-priced home in Orange County are about $270 higher than they would have been 6 months ago.
“That’s quite a difference and more than many first-time buyers can afford,” Cote said. “To qualify for a home in that range is far more difficult today than it was 4 months ago,” he added.
Some economists expect the Federal Reserve Board to relax its grip on the nation’s credit supply later this year, allowing mortgage interest rates to fall. But if the Fed keeps rates at current levels to combat inflation, the decline in Orange County home sales could be an omen of a lasting slowdown, officials said.
“The next couple of months will be critical,” Young said.
The state board’s figures reflect sales of existing single-family detached houses handled by real estate brokers, while the national study also includes attached housing such as condos. Neither group surveys new home sales.
PERCENTAGE PRICE INCREASE IN HOUSING
1st Quarter % Increase From 1989 Price 1988 1st Qtr. 1.San Francisco Bay Area $243,900 31.8 2.Orange County 237,900 30.2 3.Los Angeles 201,000 26.3 4.San Diego 163,900 21.9 5.Riverside/San Bernardino 116,100 21.6 6.Tampa/St. Petersburg/Clearwater 71,700 19.1 7.Honolulu 236,000 19 8.Albany/Schenectady/Troy 102,100 17.4 9.Raleigh 102,000 16.3 10.Rochester 84,200 15
Source: National Assn. of Realtors
