O.C. Escapes Statewide Plunge in Home Resales
As California’s residential real estate market continued cooling in July, with sales of existing houses falling to the lowest level in 4 1/2 years, Orange County sales and prices held stable for the month, an industry trade group reported Monday.
Sales of single-family homes in the county slipped only 0.1% from June to July, contrasted with a 5.3% decline statewide. For the 12 months ended in July, however, the sales pace in Orange County tumbled 18.7%, whereas the decline statewide was 15%.
Although the appreciation was nowhere near the staggering double-digit rates of 1988, the median price of a resale home in Orange County rose 0.5% in July, to $245,798 from $244,671 in July, 1989. But last month’s price was 0.5% lower than the $247,078 median reported for the county in June, according to Calif Assn. of Realtors.
In Southern California, only the desert resort areas and the much lower-priced Riverside/San Bernardino area posted price increases over the year before.
At the same time, the number of new homes being completed and added to the Southland residential market is soaring, a university research group reported Monday.
The total number of unsold new tract homes in the six Southern California counties rose 45.3% to 18,069 units at the end of June, from 12,437 units at the beginning of the year, according to the Real Estate Research Council of Southern California, which is sponsored by Cal Poly Pomona.
The increase in unsold new homes was particularly high for San Bernardino and Los Angeles counties. Orange County builders put nearly 1,000 new homes into the market during the first half of the year--a 45% increase, to 3,029 units in July from 2,090 units in January. The July inventory level was the county’s highest since November, 1985.
Real estate specialists say that the soaring supply of unsold new homes is contributing to the slump in resale activity.
The statewide decline in housing prices continues a trend that began four months ago. The median price of a resale house in California is now $194,099, or 3.7% less than in July, 1989, according to the California Assn. of Realtors.
The price dip is particularly troublesome for those who bought houses at the peak of the market in 1989 and are facing large losses if they have to sell in today’s softening market.
The California housing market peaked in the first half of last year and has generally declined ever since. The decline has accelerated in recent months, marked by the first year-to-year declines in housing prices since the mid-1980s.
As soft as the housing market has become, however, it “is probably going to get worse over the next six months,” said Kenneth Rosen, chairman of the Center for Real Estate and Urban Economics at the University of California at Berkeley. Economists blame the uncertainty in the Middle East that has placed a cloud over the entire U.S. economy.
According to the realtors association, the pace of housing resales statewide fell to an annual rate of 419,943 in July, off 15% from a year ago and down 5.3% from June of this year. The sales figures reflect how many homes would be sold in 1990 had the July pace continued all year.
The pace of housing resales has not been this slow since December, 1985, according to Leslie Appleton-Young, chief economist for the realtors association. She said resale levels will probably continue dropping in August.
Barring a severe recession, the California housing market should remain weak for another 18 months before it begins to recover, Rosen said. About 450,00 single-family houses will be sold in California in 1990, he predicted.
However, if there is a severe recession, it will send the residential real estate market into a tailspin not seen since the dark days of the early 1980s, when home prices in California fell as much as 10% on a year-to-year basis, Rosen said. The market hit bottom in 1982.
The latest figures show that the overall value of single-family detached homes in greater Los Angeles has dropped 4.5% since July, 1989. The median price of a house sold in the Los Angeles area last month was $215,533, compared to $225,616 in July, 1989.
Prices dropped slightly in the San Diego area compared to year-ago levels, to $186,182 from $187,159.
Economist Appleton-Young pointed out that the increasing coolness in the housing market has come at a time when the outlook for buyers is far more favorable than it was a year ago. The supply of houses is up, prices are down and mortgage rates have been stable, she said, but picky buyers are holding back.
“What strikes me is that despite the improvements (for buyers), people are reluctant to buy a home,” she said.
Although the housing market in an undeniable slump, most real estate economists say there is no reason for alarm--yet.
Tough times will not come until the pace of housing resales falls below 350,000 annually, about where it was in 1981, according to Michael S. Salkin, manager of real-estate risk assessment for First Interstate Bank of California.
“We’re nowhere near a catastrophic level yet,” Salkin said.
MEDIAN HOME PRICES BY METROPOLITAN AREA
‘89-’90 % Change Percent from Region July 1990 July 1989 Change June ’90 Orange County $245,798 $244,671 +0.5 -0.5 Los Angeles 215,533 225,616 -4.5 -0.2 San Francisco 266,116 270,998 -1.8 -0.3 San Diego 186,182 187,159 -0.5 -0.9 Sacramento 148,700 115,002 +29.3 +4.4 Riverside/San Bernardino 133,578 126,372 +5.7 -0.2 Ventura 240,140 252,451 -4.9 -1.1 California Average 199,099 201,653 -3.7 -0.4
Source: California Assn. of Realtors
