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 sent home values soaring, particularly in Orange County and other coastal areas, 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 that the October earthquake had on the Bay Area real estate market, 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 California realtors trade group. The decrease marks the steepest drop since the median price peaked at $202,650 in July. In Los Angeles and Orange counties, median prices rose moderately but fewer homes were sold.

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’s 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, though, have increased in popularity, posting healthy rises 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, noted in a statement. Antt is president of the California Assn. of Realtors.

In Orange County, sales fell an estimated 12.3% from September to October, the largest drop since July’s 12.8% decline. The numbers, not adjusted for seasonal fluctuations in sales, in part reflect a slowdown in sales that occurs every fall.

And Orange County real estate brokers, traditionally optimistic, said the drop doesn’t presage any big changes in the market for the coming year. In fact, they say, sales have been relatively steady and normal this year after last year’s unusually brisk market, when buyers bought nearly every house for sale in a matter of days. Compared to last October, sales this October were down an estimated 18.5%.

“Compared to 1988, yes, sales are slower,” said Robert W. Horton, a Grubb & Ellis Co. senior vice president in Irvine. “But 1988 was an unrealistic year anyway.”

The drop in sales, however, meant prices in the county didn’t rise much by California standards. The month saw only a 0.9% increase in the median price of a home, to $253,034.

The price, however, rose 14% during the year, from $222,036.

The slackest markets in the southern half of the county, said Horton, are where there has been a lot of construction of new homes. In neighborhoods like Laguna Niguel, for instance, “they’re having difficulty because they’re overbuilt.”

Things are also quiet in Mission Viejo, said Gary Thomas, owner of the RE/MAX franchise there.

“Last year every house on the market got snapped up, and when they were gone you had nothing left to sell,” Thomas said. “This year we’re carrying a lot more inventory, it’s true, but our sales are also better.”

One unmistakeable sign that things are slower this year is new home sales in Riverside County, said Heidi Gothard of the Meyers Group, a consulting firm.

Those sales are down because that market’s main customers--people in Orange County who already own homes--can’t get the kind of sky-high prices they got last year for their homes and hence aren’t selling.

“It’s not that these people can’t sell, it’s that they can’t get the prices they want,” Gothard said. “If they weren’t greedy, they could drop their price $20,000 and sell right away.”

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 sold for less.

Real estate agents say homes in tonier 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 are selling if priced between $200,000 and $300,000. “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 don’t normally sell new homes, which are usually 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.

Though 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 reflected the turmoil caused by the October 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