Tumbling interest rates helped resales of California homes rise a modest 4% in November from the previous month, the first month-to-month gain since May, the California Assn. of Realtors said Thursday. But much of the housing market remained sluggish.
The higher sales of single-family, detached houses stemmed entirely from gains in Northern California. Sales in the Los Angeles, Orange County and Ventura regions all posted double-digit declines from the previous month. San Diego's sales were off 6%.
Moreover, statewide sales were down 0.4% from a year earlier, which included year-to-year declines in the Los Angeles and Ventura areas. But sales in Orange County and San Diego rose moderately from November, 1990, the realtors said.
The slight overall month-to-month gain "reflects a long-awaited response to favorable mortgage interest rates but does not suggest an immediate recovery in the state's housing market," said Leslie Appleton-Young, the association's vice president for research and economics.
Prices showed little change. The median resale price for a single-family house in November was $194,470, down 1% from October and up 1% from a year earlier, the association said. The median price in Los Angeles alone was $205,910, down 4% from the previous month, and it was $236,990 in Orange County, up 1%.
Lower mortgage rates and softening prices so far have not been enough to spark the housing market because the recession and job-layoff fears have hovered over many would-be home buyers, some real estate and lending officials said. Sales are reported to be particularly slow among existing homeowners looking to "trade up" to more expensive housing--because of their fears about the weak economy.
Steven McGough, Los Angeles regional loan manager for Glendale Federal Bank, said only 26% of the mortgage applications to his office in December were for home purchases, "not a major increase over what I've previously been seeing." The bulk were for refinancings of existing mortgages by homeowners taking advantage of the lower rates.
"People are very concerned about their ability to be employed and to make the mortgage payment," said Ira L. Cohen, senior vice president of ARCS Mortgage Inc., a Calabasas-based lending unit of Bank of New York.
"Our branches are reporting that they're seeing a slight increase in home buyers, but they tend to be first-time home buyers because of the opportunities with lower interest rates now," Cohen said.
Indeed, the lower rates are making housing affordable to more people, which could spur sales in the months ahead. In a separate report, the National Assn. of Realtors said its housing affordability index rose in November to its highest level in 17 1/2 years, meaning more Americans qualified for mortgages.
The index rose 5.7 points to 124.5. That means a family earning the median U.S. annual income of $36,584 in November had 124.5% of the income needed to qualify for a mortgage loan that covered 80% of a house priced at $97,800, the median home price that month.
On Dec. 20, the Federal Reserve slashed its discount rate by a full point, to a 27-year low of 3.5%, in another bid to stimulate the economy. Other rates have continued dropping in response, including those on conventional, 30-year fixed-rate mortgages, which now are near 8% from 9.5% and higher a year ago.
Those developments did little to help California sales in November. Overall, sales rose to a seasonally adjusted annual rate of 389,640 homes from 374,830 the previous month, but they were down from 391,290 a year earlier, the realtors said.
The condominium market was even weaker, with resales last month dropping 23% from October and 10% from a year earlier.
* MORE ON THE ECONOMY: D2
California Homes Sales
Home sales in the state rose slightly between October and November, the first month-to-month gain since May, but the market remains in a slump--showing a decline from November, 1990. Most of the month-to-month gain occurred in Northern California.
Percent change in sales activity from from Oct., '91 Nov., '90 Statewide (single family) 4.0% -0.4% Los Angeles -10.5% -8.1% Orange County -10.9% 9.0% San Diego -5.5% 13.0% Ventura -24.2% -14.1% Riverside/ San Bernardino -10.9% -7.7% Santa Barbara -29.8% -13.1% Northern Calif. 28.8% 16.8% San Francisco Bay Area -14.4% 0.8%
Source: California Assn. of Realtors