Interest Rates Spark Increase in Home Sales : Orange County: February surge of 15% prompts speculation by realtors that the market is heading for a full-scale rebound.
Lower interest rates and a flood of anxious, late-winter deal-seekers helped sales of single-family homes in Orange County surge more than 15% in February, according to a report released Tuesday.
The increase, which was not wholly unexpected, prompted Orange County realtors to speculate that it is an early sign the sluggish real estate market is heading for a full-fledged rebound.
“Traditionally, increases happen every year at this time,” said Tom Williams, president of the Southern California division of Coldwell Banker Residential. “I wouldn’t automatically put much credence to it, but . . . 1992 is going to be a much better year than 1991.”
The number of previously owned homes sold in Orange County was up a healthy 15.6% from January, according to the monthly survey released by the California Assn. of Realtors. And home resales outpaced those of the same month last year by 19.2%, it said. This resale rate was surpassed by only one Northern California county.
But the jump from January in the number of closed escrows was tempered by reports of a continued drop in existing home prices in Orange County, said Chris Taylor, an economist for the Los Angeles-based trade group.
The county’s median-price home--which means half of the homes sold went for less, half for more--was $230,930, down 2.1% from $235,850 in January, Taylor said. That figure is down more than $21,000 from a high of $256,990 in May, 1990, just before the recession began to take hold.
And with interest rates inching up toward double digits again, the home resale market in Orange County could see a slower-than-hoped-for recovery with home prices continuing to be flat, Taylor said.
“Right now it’s hard to pinpoint a trend” toward recovery, she said. “In the next few months you will see if there’s any strengthening of the market.”
Taylor said that many unsold homes above $300,000 are left languishing on the market and that the overall economy is still too weak to make long-term predictions.
Nevertheless, the monthly survey shows that Orange County has fared better than most other areas in the state.
“California’s housing market continued on the road to recovery,” said association president Chuck Lamb. But other areas continued to suffer from the depressed market.
Sales in Los Angeles, for instance, fell 6.9% from the previous month and only exceeded February, 1991, sales by 7.9%, Taylor said. And February escrow closings in San Diego and Riverside counties fell more than 10% from January, the survey showed.
Santa Clara County was the only county that showed a higher home resale jump between January and February than did Orange County, with sales increasing 16.5%.
Local realtors said they have been inundated with activity from home buyers driven to the market by low interest rates and a desire to take advantage of low- to moderate-priced homes on the market.
The drop in the median price of an existing home sold in February results from a “contraction of the market,” in which higher-priced homes are dropping in value while lower-priced homes are selling almost as fast as they are put on the market, said Frank DiLauro, a Saddleback Valley realtor who is reporting brisk sales.
“I’d say that this is the best time to buy,” DiLauro said. “There are a lot of people out there jumping on the bandwagon.”
Orange realtor Dan Slater agreed: “I’m swamped. I’m really busy.”
But real estate economist Taylor warned that the rebound may be only an aberration and that any real indication the market is gaining strength will come only after the county posts increases for four consecutive months.
She pointed to a post-Persian Gulf War “mini-boom,” in which home resales for last March rose 53.3% from the previous month and April resales rose an additional 27.2% from the previous month--growth that was not sustained.
The rest of the year showed repeated losses, she said.
Home Sales: Prices Down, Volume Up
The median selling price of an existing home in Orange County peaked in May, 1990, at $256,990 and has declined sharply since the start of the recession. February’s median price of $230,930 was only slightly higher than the median of $229,120 in December, 1990, when the recession was in full swing.
Home Prices
February, 1990: $243,290
February, 1992: $230,930
Sales Volume
While declining home prices and interest rates mean bad news for some, it’s good news in terms of the number of escrows closed. They’re rising for the first time in two years.
Percent change from previous February: Feb. 1990: -10%
Feb. 1991: -34/4%
Feb. 1992: 19.2%
