Average Price for Homes Declines 9.1% in October

Average home prices in Orange County dropped 9.1% in October to $236,421 from $260,180 a year earlier, although prices throughout the rest of Southern California remained fairly stable.

The Orange County price decline was most pronounced in the resale market, where the average price--the lowest in 20 months--was down 11.3% to $229,221 from $258,389 in October, 1989, according to TRW Real Estate Information Services.

For the five-county region, total sales in October were down 21% from a year earlier but were up 10% from September.

Real estate experts said the softening of prices contributed to last month’s resurgence of home sales.

New home prices throughout the Southland have been falling for several months as builders, desperate to reduce their building inventories, have been offering inducements ranging from free back-yard landscaping and cash rebates to new luxury cars and steep price reductions.

And now realtors are starting to report significant rollbacks of resale prices as well.

“We’ve seen listed prices come down $50,000, even $60,000 in the past month or so,” said Martha Jansen, owner of Century 21 offices in Fullerton and Yorba Linda.

Orange County’s plummeting resale prices are especially important because, with home prices in the county among the highest in the nation, the stagnant new home market is dependent on resales.

Most new home buyers in the county find the cash for their down payment in the equity they pull out of their old home, but high resale prices have stalled activity in that portion of the market for months.

So while October home sales in the region still were far below the year-earlier level, declining prices helped bolster Orange County’s market. Sales of 3,582 new and used homes and condominiums were off only 0.3% from 3,593 sales in October, 1989.

The month’s 3,066 resales in the county were down 5% for the 12-month period but up 7.8% from 2,843 in September.

Overall prices in the five Southland counties fell 3% in October from September, TRW reported, with Orange County’s 3.9% decline for the month again the sharpest drop in the region.

With the situation in the Mideast still unsettled and a growing number of economists openly talking about a fourth-quarter recession, industry insiders generally believed October sales “would be as bad as, or worse than, September’s,” said Ed Setzer, vice president of TRW Real Estate Information Services.

San Bernardino, Riverside and San Diego counties all showed slight to moderate price appreciation from October to October, ranging from 0.6% in San Diego county to 7.1% in Riverside. The combined average sales price of new and resale homes in Los Angeles County dropped 0.8% over the 12-month period.

“Frankly, we’re a bit surprised at the resiliency and vitality of the Southern California housing market,” he said.

But one month’s figures aren’t the basis for a forecast of great things to come, cautioned Milt Naylor, executive vice president of Grubb & Ellis Residential Brokerage Services’ Pacific Southwest Region. “There are a lot of buyers out there, but a lot of them are still waiting to see if we’ve hit bottom,” he said.

Clive Hoffman, director of the Mortgage Institute of California, said he does not see any signs of a massive recovery in home sales.

“We are still seeing an explosion of prospective equity borrowers,” he said. “And that seems to indicate that people are not moving into new homes like they were two years ago. Instead, they still are taking out equity loans to improve their existing homes. And that is symptomatic of slow sales of new and existing homes.”

Still, October’s price declines are a welcome occurence because they will help break down the buyer resistance that has helped stall the real estate market, Naylor said. A total of 21,208 new and resale homes and condominiums changed hands during October in the five Southland counties, up from 19,331 sales recorded in September but still well below the 26,671 sales that closed in October, 1989.

Sales dropped from October to October in all five of the counties, with Orange County posting the best comparison as its tumbling prices pulled some shoppers back into the market. San Diego County posted the steepest drop in sales over the year, down 34.9%; Riverside County sales plunged 32.5%, and sales for the 12-month period were off 19.3% in Los Angeles County and 16% in San Bernardino County, TRW reported.

But sales were up in each county when compared to September levels, with increases ranging from 4.1% in San Diego County to 13.6% in San Bernardino County.