Housing Prices Soar in State, Cool in Northeast in Quarter
Housing prices skyrocketed in California in the first three months of 1989 despite rising mortgage interest rates, but markets cooled in the Northeast, a real estate trade group said Tuesday.
Meanwhile, home prices in many Midwestern industrial cities posted healthy appreciation rates and real estate in oil-producing states showed a spotty recovery, the National Assn. of Realtors said.
The median price of an existing home in the San Francisco area soared to $243,900 in the first quarter, meaning half sold for more and half sold for less. That represented a 31.8% increase from a year ago and was the steepest appreciation rate among 83 metropolitan areas surveyed by the trade group.
Japanese Fuel Boom
In fact, California accounted for the top five appreciation rates in the nation. Home prices in Orange County shot up 30.2% to a median of $237,900. In Los Angeles, prices rose 26.3% to $201,000; in San Diego, 21.9% to $163,900; and in Riverside-San Bernardino, 21.6% to $116,000.
That compares to the 3.4% increase to $91,600 for the median-priced existing home for the entire United States.
A healthy diversified economy, population growth and foreign investment, particularly from the Japanese, are fueling the boom in California, according to economist Mark Zandi of the WEFA Group, a Bala-Cynwyd, Pa., forecasting firm.
He and other analysts said, however, that the West Coast market may be in danger of overheating.
“I would be concerned . . . that at this point it’s speculatively driven and that the bubble may be about to burst,” Zandi said. “Californians seem to have no concern for the amount of debt they’re taking on. They seem to think home prices can continue escalating forever.”
“My guess is you’re getting close to the end of this very rapid price appreciation in California,” said economist Mark Obrinsky of the Federal National Mortgage Assn. “I think in this case the reason is going to be mortgage rates as much as anything else.”
Some Areas Decline
Fixed-rate mortgages started out the quarter averaging 10.77% and jumped nearly half a percentage point to 11.19% by the end of the period. One-year, adjustable-rate mortgages went from 8.49% to 9.31%. In the first quarter a year ago, mortgage rates were falling.
Northeastern cities continued to be some of the most expensive places to live, but home prices in New York City and its suburbs; Boston and Worcester, Mass.; and Hartford and New Haven, Conn., either fell or rose only modestly.
New York area prices--the fifth highest in the nation, after San Francisco, Orange County, Honolulu and Los Angeles--fell 2.8% to $181,700.
The five least expensive areas in the country were: Peoria, Ill., $42,000; Spokane, Wash., $50,200; Mobile, Ala., $50,900; Oklahoma City, $52,300, and Akron, Ohio, $56,000.
In Texas, the median price of houses and condominiums in Houston recovered 4.5% to $62,900, while the median rose 2.7% to $88,400 in Dallas.
A number of Midwestern cities, bolstered by a resurgence in manufacturing caused by last year’s boom in export sales, posted strong appreciation rates, including Chicago, up 7%, Columbus, Ohio, up 11.6%, Indianapolis, up 10%, and St. Louis, up 9.9%.
Nationally, sales dropped to a seasonally adjusted annual rate of 3.82 million units, down 6.6% from the last quarter of 1988.
Twenty-eight states and the District of Columbia posted declines, while 22 states recorded increases.
