California Real Estate Market Continues to Cool
The downturn in the California housing market, which began more than a year ago, appears to be accelerating markedly as prices continued to decline in June and sales fell to their lowest levels in several years, figures released Wednesday show.
The pace of house resales statewide in June fell to an annualized rate of 443,451, their lowest level since 1986, according to the California Assn. of Realtors (CAR). Housing prices statewide fell for the third month in a row, after five years of steady year-to-year increases.
Sales in the Los Angeles and Orange County areas were off more than 20% from the year-ago levels.
“The market seems to have just died” in recent weeks, said Joan Wilson, a real estate agent for Grubb & Ellis in Mission Viejo.
The large drop in June is somewhat surprising because it occurred at a time when mortgage rates had stabilized, but the California economy as a whole is sputtering because of layoffs in the aerospace industry and a downturn in commercial real estate.
“People are asking if this is an aberration or a long-term trend,” said Joel Singer, executive vice president of the Realtors’ group. “If this lasts another month, then I think you have confirmation” of a sharp drop.
The California sales figures in June ran counter to the national trend. The National Assn. of Realtors reported Wednesday that sales of existing houses nationwide rebounded slightly in June.
Statewide median house prices, which until April had been rising since 1985, fell 2.3% in June compared to a year ago. The median price for a single-family detached home in California is now $194,821, double the national average but well below its peak of slightly more than $200,000 reached last year.
The median house price in the Los Angeles area is $215,029, 2.4% less than it was a year ago, and $247,078 in Orange County, 1.9% less than it was in June, 1989. Real estate experts say that would-be home buyers, sensing the market’s weakness, are waiting to see how far prices drop before jumping into the market.
“This is a classic buyers’ market in every sense of the word,” said Leslie Appleton-Young, the California Realtors’ group’s chief economist.
Today’s slumping housing market is similar to the early-1980s downturn that occurred after an unprecedented round of real estate inflation shook the state in the late 1970s. That round of sharp real estate price rises, followed by the most recent episode in the late 1980s, are the main reasons why California has such high home prices today.
Though the latest downturn has provided buyers with some relief, it has been traumatic for many sellers, who lulled themselves into thinking that California real estate was going no place but up. Some sellers continue to cling to unrealistic notions of what their homes are really worth, real estate experts say.
Today, instead of selling their houses quickly for whopping prices as they did two years ago, homeowners are slashing asking prices and are waiting months for deals to close, real estate agents say.
“Prices are being dropped from $25,000 to $200,000 depending on the price of the home,” said Barbara Knox, a sales agent on the Palos Verdes Peninsula for Prudential California Realty. She added: “If the homes are priced right, they’ll sell right away.”
The June pace of house resales of 443,451 represents how many single-family detached homes would be sold statewide in 1990 if that month’s rate persisted throughout the year. The June level is 5.2% below May’s pace and down 10.2% from June, 1989, CAR said.
On a regional level, the resale pace in June represents a drop of 21% in metropolitan Los Angeles, 24.3% in Orange County, and 22% in the San Francisco Bay Area compared to June, 1989. The resale pace fell a whopping 30.2% in Ventura County, where new-home construction and the high price of existing homes have cut deeply into the resale market, Appleton-Young said.
Even the pace of housing resales in the Inland Empire, a traditional bastion of affordable housing, fell 9.5% in June, CAR’s figures show.
Though CAR’s statistics account for sales of existing homes only, sales of new homes are also off and builders are using unusual marketing tactics to get rid of growing inventories.
Besides cutting prices, builders are giving sales commissions to brokers if they can sell the homes, said Wilson, the Mission Viejo real estate agent. When houses are selling well, builders generally market homes directly to buyers without going through a sales agent.
REGIONAL HOME SALES JUNE, 1990, REGIONAL ACTIVITY* Regional Sales Data Not Seasonally Adjusted
% Change % Change % Change in Price in Price in Sales Median from from Activity Area Price May, ’90 June, ’89 from May, ’90 Statewide California $194,821 -0.6 -2.3 -5.2 (Single-family detached) California 147,523 1.0 7.2 -8.8 (Condo) By Region Central Valley 121,871 3.8 25.0 7.2 High Desert** 103,750 -4.1 15.8 0.0 Los Angeles 215,029 -0.4 -2.4 -12.3 Monterey 222,142 -14.5 -1.7 12.8 Northern 150,816 -7.2 37.4 6.3 California Northern Wine 182,576 -0.8 14.1 7.1 Country Orange County 247,078 -3.9 -1.9 -3.6 Palm Springs/ 116,562 -10.3 5.3 20.9 Lower Desert** Riverside/San 133,833 0.7 8.2 4.7 Bernardino Sacramento*** 143,000 2.9 30.1 16.4 San Diego 187,890 3.9 1.7 -8.9 San Francisco Bay 266,997 2.6 -1.0 3.4 Santa Barbara** 231,521 2.4 -5.6 -11.1 Santa Clara 276,963 3.9 -3.9 -0.2 Ventura 242,805 1.9 -2.4 -9.0
% Change in Sales Activity Area from June, ’89 Statewide California -10.2 (Single-family detached) California -16.9 (Condo) By Region Central Valley 10.1 High Desert** 3.0 Los Angeles -21.0 Monterey -22.3 Northern 7.3 California Northern Wine 5.5 Country Orange County -24.3 Palm Springs/ 0.8 Lower Desert** Riverside/San -9.5 Bernardino Sacramento*** 14.3 San Diego -1.0 San Francisco Bay -22.0 Santa Barbara** -24.7 Santa Clara -25.6 Ventura -30.2
* Based on closed escrow sales of single-family, detached homes only (no condos). Reported month-to-month changes in sales activity may overstate actual changes because of the small size of individual regional samples. Movements in sales prices should not be interpreted as measuring changes in the cost of a standard home. Prices are influenced by changes in cost and changes in the characteristics and size of homes actually sold.
** Due to the small sample size in these areas, prices and activity changes may be overemphasized.
*** Source for Sacramento data: Sacramento Assn. of Realtors.
Source: California Assn. of Realtors