Existing-Home Sales Rise in O.C., Slump Elsewhere
Bucking both a statewide and national sales slump, Orange County home resales in July climbed 7.2% from June, the California Assn. of Realtors reported Monday. Sales were up 12.9% compared to July of 1990.
Orange County’s median sales price of resale homes rose 1.8% to $244,890 in July, up from $240,540 in June, but that figure was 0.4% lower than in July, 1990, when the median price of a home was $245,890.
Nationally, sales of existing homes fell 6.7% in July--ending five consecutive months of sales increases--as the housing market in California as a whole continued to show weakness.
Home sales nationwide fell to a seasonally adjusted annual rate of 3.35 million units in July, down from 3.59 million June, according to the National Assn. of Realtors.
California home sales, which had slipped a month before the national downturn, dropped again--this time by 9.5%--as July sales plummeted in inland markets such as Sacramento, Riverside and the Central Valley.
However, Orange County went against the tide--a phenomenon that was welcome by local real estate brokers. “We’re up 34% from this time last year, and up 16% from June to July,” said Bill Plattos, general manager of FirstTeam Real Estate in Costa Mesa, one of Orange County’s largest real estate companies.
Attributing the boost to lower mortgage rates and to the current buyers’ market, Plattos said: “This is the best time to buy in nine years.”
Don Tarbell of Tustin-based Tarbell Realtors also saw sales shoot up 16% from June to July. “You’ll find that true with most of the brokers in the area,” he said.
Tarbell cited an upsurge in the relocation of Los Angeles residents attracted by housing values in Orange County. “A lot of people are finding that they can afford a much nicer home here than they can in Los Angeles,” he said.
The national picture is less rosy. Although last month’s sales decline left nationwide home sales 0.9% higher than last year and 0.8% higher than July, 1990, in California, tighter mortgage-lending standards as well as a standoff between buyers and sellers over high home prices are apparently taking their toll on the housing market, experts say.
“The pent-up demand for housing that occurred in April has slowed down because of tighter lending standards,” said James Z. Pugash, director of Montgomery Securities Real Estate in San Francisco. “A lot of builders are telling us that this has become a significant obstacle to home sales.
“There’s also been a shift in the nature of the demand for housing. Most of the activity is at the entry level and at the very high end of the market. . . . In the middle, there’s an affordability problem” with few homeowners trading up from less-expensive homes, Pugash said.
Despite sputtering home sales, which are considered a leading economic indicator, most economists are still predicting a modest economic recovery overall.
Citing a huge 10.7% increase in factory orders for durable goods posted in July, many experts believe that the stimulus for the economy will come from higher overall consumer spending--which accounts for more than 50% of the economy--rather than from home sales, which make up only 3.4% of the nation’s gross national product, according to the Commerce Department. (The GNP is a measure of the value of all goods and services produced in the United States.)
Lower mortgage rates, which began falling earlier this month toward their lowest levels in four years, could help revive home sales, experts say. As of Aug. 23, 30-year, fixed mortgage rates were down to 9.26% nationally and 9.36% in California. Both figures are the lowest since March, 1987, according to HSH Associates, a Butler, N.J.-based publisher of mortgage information.
“If mortgage rates drop, they will only increase housing affordability,” said Harley E. Rouda, president of the National Assn. of Realtors.
Rouda added that a slight rise in home prices suggests that there is less pressure on sellers to lower their prices to close sales. The national median price of an existing home sold in July rose to $103,000, or 1% higher than a month earlier and 5% above the year-ago median price of $98,100, the association said.
But consumers seeking home loans are finding fewer major lenders in the market, as banking companies such as BankAmerica Corp. and Security Pacific Corp. merge. What’s more, financial institutions have ended the “easy qualifier” loans of 18 months ago, where home buyers could get a mortgage with as little as 5% down and little documentation of income.
In addition, many consumers no longer believe that owning a home will pay off in the long run.
“I think that there are a lot of people who are questioning the investment potential of home ownership in the 1990s,” said Richard Peach, deputy chief economist of the Mortgage Bankers Assn. in Washington. Instead, he said, some consumers may be opting to put more of their money into the stock market or mutual funds.
Peach cautioned that such an attitude could prove misplaced in the long term as the inventory of housing dwindles, causing home prices to rise rapidly again. Interest rates could also climb, he said, if the Soviet Union and Eastern Bloc countries, as expected, step up demand for credit to rebuild their devastated economies.
SOUTHLAND HOME RESALES AND PRICES
The pace of home resales in the Southland’s coastal counties picked up in July from the same month a year ago. The increases ranged from 12.9% for Orange County to 38.3% in Ventura County, contrasted with the statewide average increase of less than 1%. Prices were up slightly, except for a small decline in Orange and Ventura counties.
MEDIAN PRICE SALES* Pct. Chg. Pct. Chg. July ’90 July ’90 Region July 1991 to July ’91 to July ’91 Orange County $244,890 -0.4 +12.9 Los Angeles $220,800 +2.4 +16.4 San Diego $192,050 +3.2 +18.0 Riverside/ $140,830 +5.4 -14.8 San Bernardino Ventura $234,300 -2.4 +38.3 California Average $206,670 +7.0 +0.8
* Figures based on closed escrow sales of single-family, detached homes only. Prices are influenced by changes in cost and by the characteristics and size of homes actually sold.
Source: California Assn. of Realtors
