Prices Drop, Sales Slow in State’s Housing Market
California’s housing market, only last year the source of spectacular price rises for those lucky enough to own, continues to worsen.
The median price of an existing home fell 3% statewide in October as the pace of sales suffered its sharpest decline since June, according to statistics released Tuesday. In Los Angeles and Orange counties, median prices rose moderately but fewer homes were sold.
The statistics reflect sobering new realities in the state’s housing industry, which began to slow last spring after about 18 months of torrid sales and inflation that sent home values soaring, particularly in coastal neighborhoods, where most people have been priced out of the market.
Some experts now believe that California housing, which has enjoyed robust times since the mid-1980s, is headed for harder times in the 1990s, particularly when a long-awaited recession finally arrives.
“If the nation goes into a recession, then California will do the same,” said Sanford Goodkin, a San Diego-based real estate expert.
The latest housing numbers, released by the California Assn. of Realtors, also provide the first statistical confirmation of the negative impact of the October earthquake on Bay Area real estate, where both prices and the pace of sales fell sharply.
October housing resales were generally sluggish in coastal areas, the figures showed, but were strong in moderately priced inland areas. Combine the two trends and the result was markedly lower housing resale prices statewide, real estate economists said.
The median resale price of a single-family house in California stood at $193,557 in October, off 3% from September, according to the trade group. It marked the steepest drop since the median price peaked at $202,650 in July.
At the same time, the Realtors group said, the pace of housing sales in October fell to its lowest level since June.
According to the group, 490,267 single-family houses closed escrow in October on an annual basis, meaning that is how many homes would have been sold in California during 1989 if the October pace continued all year. That pace was nearly 6% lower than in September, 1989, and almost 15% lower than in October, 1988.
Condominiums have increased in popularity, however, posting healthy gains in prices and year-to-year sales. Condominiums are particularly attractive to first-time buyers because they are far cheaper on average than single-family detached homes.
“Condos are definitely back,” said Leslie Appleton-Young, an economist for the Realtors group. The median price of a condominium in California stood at less than $145,000 in October.
The changing home-buying patterns meant that housing resales were lower in high-priced regions such as Los Angeles and Orange counties and higher in lower-priced areas such as Sacramento.
“Sales activity and price growth in less-expensive inland areas are reminiscent of last year’s heated activity in the state’s major coastal regions,” Jim Antt Jr., a real estate broker in Bakersfield, said. Antt is president of the California Assn. of Realtors.
The median price statewide fell because so many of the October sales occurred in lower-priced neighborhoods, economists said. The median price means that half the houses sold for more than that amount and half for less.
Real estate agents say homes in choice neighborhoods are not selling well today because homeowners are reluctant to cut their asking prices, hoping to reap the windfall profits that were the norm in Southern California in 1987, 1988 and early 1989.
“It’s taking sellers a while to learn that the party is over and adjust their prices downward,” said Joan Wilson, a real estate agent in Mission Viejo.
In Orange County, one of the most expensive housing areas in the nation, homes priced between $200,000 and $300,000 are selling. “What I am seeing is the properties that are priced right are the ones that are selling,” said Michael Nakulak, a real estate agent in Huntington Beach.
Builders are resorting to unusual tactics to boost sales of new homes, including offering 3% commissions to real estate agents. Real estate agents do not normally sell new homes, which usually are marketed directly to the buyer.
Builders are also offering to slash prices up to $20,000 in cases where it helps buyers cut the price of their existing homes and sell them, Wilson said. “When that happens, you know it’s not the best of times,” she said.
Although the median statewide price fell by 3%, prices held relatively steady in some coastal urban areas on the homes that actually did sell. In the Los Angeles area, for example, the median resale price in October was $222,842, up 0.4% from September.
In San Francisco, by contrast, the latest numbers reflect the turmoil caused by the Oct. 17 earthquake. The annual pace of housing resales fell nearly 27% in the Bay Area, while the median house price stood at $262,271 in October, down 1.4% from September.
ECONOMIC AFTERSHOCK--The Bay Area’s housing market is suffering aftershocks from the October earthquake. D1.
HOME PRICES DROP
The following figures are based on closed escrow sales of single-family, detached homes. Reported month-to-month changes in sales activity may overstate actual changes because of the small size of individual regional samples. Sales data not seasonally adjusted.
MEDIAN REGION PRICE Central Valley $103,600 High Desert * 95,178 Los Angeles 222,842 Monterey 250,641 Northern California 96,249 Northern Wine Country 173,906 Orange County 253,034 Palm Springs/Lower Desert * 112,692 Riverside/San Bernardino 129,920 Sacramento 121,017 San Diego 181,135 San Francisco Bay 262,271 Santa Barbara * 240,624 Ventura 251,364 CALIFORNIA (single family) 193,557 CALIFORNIA (condo) 144,504
PERCENTAGE CHANGE IN PRICE PRICE SALES SALES REGION FROM SEPT. 89 FROM OCT. 88 FROM SEPT. 89 FROM OCT. 88 Central Valley 4.5 18.6 4.3 25.4 High Desert * -2.6 13.6 13.6 16.9 Los Angeles 0.4 17.0 -3.9 -13.7 Monterey 1.9 24.8 -16.9 -23.4 Northern California 2.9 22.7 7.9 29.5 Northern Wine Country 2.7 27.6 -23.6 -11.5 Orange County 0.9 14.0 -12.3 -18.5 Palm Springs/ Lower Desert * 0.5 21.4 4.3 12.2 Riverside/San Bernardino -0.1 14.8 10.8 3.9 Sacramento 4.2 26.0 20.2 26.3 San Diego 2.4 16.7 3.4 33.8 San Francisco Bay -1.4 12.5 -18.5 -26.7 Santa Barbara * 6.0 -3.2 -15.2 -27.6 Ventura 2.4 9.1 12.6 -9.4 CALIFORNIA (single family) -3.0 8.4 -5.9 -14.8 CALIFORNIA (condo) 1.6 11.3 -1.1 23.5
* Due to the small size of the sample in these areas, price and activity changes may be overemphasized.
MEDIAN PRICES COMPARED
Here’s a comparison of median home prices by region for the months of October, 1989 and October, 1988:
REGION OCTOBER 1989 OCTOBER 1988 Central Valley $103,600 $87,323 High Desert 95,178 83,809 Los Angeles 222,842 190,519 Monterey 250,641 200,833 Northern California 96,249 78,438 Northern Wine Country 173,906 136,249 Orange County 253,034 222,036 Palm Springs/Lower Desert 112,692 92,857 Riverside/San Bernardino 129,920 113,220 Sacramento 121,017 96,034 San Diego 181,135 155,275 San Francisco Bay 262,271 233,060 Santa Barbara 240,624 248,683 Ventura 251,364 230,312 CALIFORNIA (single family) 193,557 178,499 CALIFORNIA (condo) 144,504 129,869
Source: California Assn. of Realtors
