Southland Home Sales Hit 3-Year Low : Economy: The 23.4% plunge from August to September is a reaction to the Gulf crisis. And some believe that the worst is yet to come.
Home sales in Southern California plunged 23.4% in September compared to August--to their lowest levels in nearly three years--in the first hard evidence of how badly Iraq’s invasion of Kuwait has harmed the region’s already-weak housing market, according to figures released Wednesday by TRW Real Estate Information Services.
Sales plunged the most in San Diego County, down 27% from August, while Los Angeles County suffered a 22% tumble from the previous month and Orange County fell 24%.
The worldwide economic turmoil caused by the Aug. 2 invasion has driven up gasoline prices, mortgage rates and inflation, while sending consumer confidence into a tailspin.
“When you see a rise in inflation, you usually see a corresponding drop in consumer confidence when it comes to big-ticket items,” said Mark H. Obrinsky, senior economist at the Federal National Mortgage Assn. in Washington. “And houses are about as big ticket as you get.”
TRW indicated that the worst is yet to come because the invasion’s full impact is not reflected in the September sales figures. That’s because many buyers whose homes closed escrow in September had agreed to the purchases before the invasion began, said Ed Setzer, general manager of TRW Information Services. TRW’s data--including sales of new and existing homes--is derived from actual escrow closures filed with county recorders’ offices.
“October will be the first full month to show the negative effects that the current world unrest, higher oil prices and increased inflation rate have on Southern California home buyers,” Setzer said.
John Tuccillo, chief economist for the National Assn. of Realtors, said housing sales in September have been harmed more in southern and western states because that is where most U.S. troops sent to the Middle East are from.
“You don’t have as many people looking for houses, and those that are left behind are feeling the pinch,” Tuccillo said. He estimated that the national pace of housing sales in September and October will be 5% to 10% below August levels.
The turmoil came at an inopportune time for the Southern California housing market, which has been in a tailspin for more than a year following nearly two years of explosive growth and inflation.
Even prior to the Aug. 2 invasion, real estate sales were at their lowest levels in years, and housing prices were virtually flat. The market is expected to remain flat through next year, housing analysts say.
TRW’s monthly report tabulated the number of homes, including condominiums, sold in September in the counties of Los Angeles, Orange, San Diego, Riverside and San Bernardino. TRW Information Services, based in Anaheim, sells real estate information to investors, lenders and title insurance companies.
According to TRW, 19,331 homes were sold in Southern California in September, the lowest total since early 1988 and 28% lower than in September, 1989. The average price of a home in the five-county area was $208,215 in September, off 1.6% from August and up just 1.5% from September, 1989, the company said.
TRW’s numbers reflect the actual number of homes sold, unlike the monthly survey from the California Assn. of Realtors due to be released today that reflects the pace of sales based on statewide surveys.
PLUNGING HOME SALES IN SOUTHERN CALIFORNIA: Month-to-month percent change in total home sales, based on actual closings in five-county area. Source: TRW Real Estate Information Services.
