Despite Recent Dip, Housing Prices Soared Over 20 Years : Real Estate: Slowing aids first-time buyers. But some predict investment will not match inflation.
If you didn’t buy a house or a condominium in 1970, too bad.
If you bought residential real estate in the San Fernando Valley, and still own it, you would have an eightfold increase on your investment, according to statistics released by the San Fernando Valley Board of Realtors on Monday. That is a much better return than the threefold gain registered by the Dow Jones average of 30 industrial stocks over the same period, excluding dividends.
Between 1970 and 1989, the average resale price of combined residential property--single-family houses and condominiums--in the Valley soared from $31,100 to $255,242, the board said. The Dow climbed from 800.36 to 2,753.20. And much of the gain in housing prices came in the last two years.
But it has been a different story recently. The housing market locally and nationwide has cooled dramatically, and in December, prices and sales of single-family houses declined in the Valley. Sales of single-family houses tumbled 28%, to 708 from 977 in November, and sales dropped 32% from 1,033 in December, 1988, the board said.
The average price in December slipped 2% to $308,500 from a record high $313,100 in November, but still marked a 10% rise from $280,200 in December, 1988.
The condominium market fared about the same. Condominium sales last month fell 26%, to 284 from 383 in November, and were down 23% from a year earlier. The average resale price of a condominium inched up from $154,200 in November to a record high $154,700 last month, and was up 15% from $134,900 a year ago.
The softening of the local housing market, although less severe than in some parts of the country, nonetheless is being felt. As the number of unsold houses has swelled, some real estate brokers have begun offering cash bonuses, vacations, lottery tickets and other incentives to buyers’ brokers in an effort to peddle houses more quickly.
In spite of their efforts, the supply of housing has swelled. Although the 9,758 single-family houses and condominiums listed for sale last month were down 11% from November, the number was still up a whopping 64% from the 5,935 listings a year earlier, when residential property sold quickly and at top dollar.
Sales also have dropped off even though mortgage interest rates have been stable in recent months. Rates on conventional 30-year, fixed-rate mortgages have, in some cases, dipped below 10%, down from the 11% to 12% rates that prevailed last spring.
And despite the lofty price gains tallied over the last 20 years, some economists predict that even in Southern California, average housing prices will appreciate no more than 4% to 5% a year for the next couple of years. That could mean housing, as an investment, might not match inflation. But the smaller price gains would be good news for prospective buyers, especially first-time homeowners.
The board is more optimistic about rising prices. “We expect to see a 10% to 12% increase in the average price in 1990,” board President Becky Roberts said in a statement. “That will still be ahead of inflation, giving owners a nice appreciation, but it won’t lock out so many prospective buyers so fast.”
Whoever is right, it would not be the first time housing prices have cooled in the Valley. In 1982, for instance, the average residential housing price in the region fell to $138,982 from $140,757 the previous year, as the country suffered an economic recession.
A slowdown in unit sales also would not be new. The sale of 17,310 single-family houses and condominiums in the Valley last year was the sixth highest in the board’s records and well below the record high 19,964 sold in 1979. During the last 20 years, annual sales have dropped as low as 6,598--again, in the recession year of 1982.
The Valley realty board, California’s largest, reports sales of houses and condominiums by its members in the area from North Hollywood to Agoura. Its figures do not include most new residences.
