It’s a Good Time to Sell or Buy : Study Shows ’92 O.C. Home Prices Highest for Most of Past 10 Years
Frank and Margaret Marcus breathed a big sigh of relief when escrow closed last month on the sale of their Rowland Heights home, which had languished in the multiple real estate listings for 14 months.
The couple didn’t much care that they had sold the property for $25,000 less than their original asking price. After all, Margaret said, they still made a $60,000 profit on the home they’d lived in since 1985.
And they used the profit to help buy a much bigger house in La Habra’s upscale North Hills section--a house they got for $50,000 less than its $355,000 listing price.
Realtors say stories like the Marcuses’ provide strong support for their argument that the depressed home prices and sluggish sales pace in most Southern California communities actually make this a pretty good time either to buy or to sell. There have been few hard numbers, however, to back up that claim--until now. A special study done for the Times Orange County Edition by TRW REDI Property Data shows clearly that average selling prices of single-family detached homes in Orange County during 1992 were higher than at any time in the preceding decade except 1989, 1990 and 1991.
Besides the breadth of its time span, the TRW REDI study is unusual because it presents the sales prices as dollars per square foot, which automatically adjusts the market for the bigger homes that were in vogue in the late 1980s and the consistently smaller homes that builders and resellers are putting on the market now.
The compilation of all single-family sales in the county during that 10-year period shows that 1990 was the height of the market in Orange County and the rest of the Southland and that price declines since then have been far less, based on dollars per square foot, than the 10% to 15% rates often cited these days, said Nima Nattagh, the TRW REDI analyst who prepared the study.
What that means is that people selling houses today are unlikely to lose money unless they bought after 1988.
Single-family homes in the county appreciated at an average of 17.1% a year through 1989, Nattagh said. Cumulatively, that’s a jump of more than 150% over six years.
If it is fair to call that period the boom, then the ensuing bust, by comparison, hasn’t really been all that dramatic. Orange County home prices have depreciated at an average of just 3% a year since the recession began in 1990, according to the TRW REDI figures.
That means the average 2,000-square-foot house sold in 1992 in the city of Orange--typical of 13 communities examined in detail--went for $283,600. In 1988, the typical home of the same size in the same city sold for $246,000--so a 1992 sale would have given the owner a gross profit of $37,000. (Real estate commissions would have taken as much as $17,000 of that.) In 1983, the average sale price of a 2,000-square-foot house in Orange was $165,200, so a 1992 sale would have meant a gross profit of $118,400.
Only if they had purchased in the three priciest years of the boom would last year’s home sellers have lost money: $10,000 from the 1989 average price of $293,600, $18,200 from the 1990 average of $301,800, $5,600 from 1991’s $289,200.
The study supports the cherished belief that coastal properties hold their value in a recession, but it also shows that Orange County’s highest-priced communities underperformed the rest of the market during the boom days.
In Laguna Beach, for example, where the average single-family home sold for $318.70 a square foot last year, the annual appreciation rate from 1986 through 1989 was just 12.3%, almost five points below the county average. And Newport Beach’s 1992 average price of $299.20 a square foot represented an annual gain of 13.3%, or nearly four points below the county mean.
But while the countywide average began declining three years ago, prices in those two beach communities continued climbing--an average of 14.1% a year in Laguna Beach and 13.3% a year in Newport Beach.
Danny Bibb, owner of Coast Newport Properties in Newport Beach, says the main reason that prices are holding up so well in that city is that only “mint-condition product in the best locations is selling now.”
During the boom, by contrast, eager buyers would grab almost anything with a “for sale” sign if it had a beach community address.
“What would have been only a small part of market in normal times is the whole market now,” Bibb said.
Another factor is that some of the homes selling along the coast are quite expensive.
Joseph Smith, owner of Monarch Beach Realty in Laguna Beach, sold a 10,000-square-foot oceanfront home in October, 1992, for $7.75 million--$775 a square foot. He followed that sale, which set a city record for price, with the $3.6-million sale of a slightly smaller house in the city’s Ritz Cove area. He also sold three homes for $1 million each during the same two months.
But even when the prices are in the more reasonable range of $300,000 to $750,000, Smith said, they are holding up better than those in inland communities “because we have no proliferation of new homes here, and we have a unique setting. . . . You take these solid factors, and you get positive appreciation.”
One other Orange County city that posted appreciation rates instead of depreciation since the recession began is Santa Ana--a community that has little of the ambience of the beach cities. What it does have is the county’s largest stock of entry-level housing and prices that are substantially below the norm, said Daniel Slater, whose company, Orange Associates Realtors in Orange, specializes in the Orange and North Santa Ana markets.
The Santa Ana surprise is part of a trend that shows up in the TRW study--one that seems to counter the realty industry’s gospel of location. For while not going up, prices in two other central Orange County cities--Westminster and Garden Grove--have fallen less since 1990 than in the more prestigious communities of Fullerton, Orange, Anaheim and Lake Forest.
The reason is the same as in Santa Ana.
“We are still providing homes for first-time buyers in these communities, and I am talking about single-family homes that are selling for the price people are paying for condos in other areas,” said Pat Neal, owner of Pat Neal Associates in Garden Grove and president-elect of the California Assn. of Realtors.
Many home purchases in the central county during the past two years have been by first-time buyers, she said, and they don’t fit the typical profile.
“They’re not younger buyers, they’re couples in their early 30s who have pretty high incomes but just never saved enough to buy in the 1980s,” when high interest rates and ever-increasing prices required much larger down payments than are needed today.
That is what really is driving whatever market there is today, realty agents say.
“This is a good time to buy, with such low interest rates and a lot of sellers who have to sell,” said Darlene Ragland, the Prudential of California Realty agent in Fullerton who represented the Marcuses.
“And it isn’t the worst time to be a seller, either. Prices are really only off by 5% or so unless you are trying to get a totally unrealistic price,” she said.
“The problem is, it is still taking a long time for people to realize that it’s a good time to buy.”
From Boom to Bust?
A study done for The Times Orange County Edition by TRW REDI Property Data indicates that home prices in Southern California doubled during the real estate boom years in the 1980s but have fallen by as much as 9% since 1990. Ventura County had the biggest jump in home prices between 1980 and 1990 at 129%, followed by Los Angeles at 124%, and Orange at 108%. But prices have dropped since 1990, with Ventura and Orange counties the biggest losers at 9% and 6%, respectively. Price per square foot Orange 1992: $143.0 Los Angeles 1992: $151.4 San Diego 1992: $120.5 Riverside 1992: $90.0 San Bernardino 1992: $92.3 Ventura 1992: $135.0
Source: TRW REDI Property Data
Reality Check in Home Prices
People who bought homes after 1988 are losing money in today’s market, though there are some bright spots. In Orange County, 25% of the cities surveyed actually showed price increases. Prices are presented in dollars per square foot, which automatically adjusts the market for trends in bigger or smaller homes.
Orange County Comparison
South Orange County bucked the trend of home prices dropping after 1990. Price per square foot: North: Anaheim, Brea, Fullerton, Orange: $139.5 Central: Garden Grove, Huntington Beach, Irvine, Santa Ana: $145.8 South: Laguna Beach, Lake Forest, Newport Beach, San Clemente: $234.7
Average Home Prices
Of the 16 Orange County cities surveyed, 75% experienced eroding home prices after 1990. Only Laguna Beach, Newport Beach, San Clemente and Santa Ana had steadily increasing prices. In price per square foot:
City 1984 1986 1988 1990 1992 Anaheim $78.6 $86.4 $114.6 $140.8 $133.2 Brea 78.1 87.3 114.6 141.5 140.8 Fullerton 82.0 92.0 122.3 152.5 152.3 Garden Grove 78.2 87.7 117.9 145.6 139.8 Huntington Beach 91.0 102.2 142.6 170.1 163.9 Irvine 101.1 104.0 130.1 188.2 186.6 Laguna Beach 160.3 168.3 189.1 244.6 318.7 Lake Forest 84.3 88.7 113.9 139.8 132.8 Newport Beach 135.8 161.6 203.7 249.2 299.2 Orange 84.4 90.8 123.0 150.9 141.8 San Clemente 101.2 105.0 142.0 186.7 188.1 Santa Ana 50.6 56.7 75.8 90.8 93.1
Source: TRW REDI Property Data; Researched by DALLAS M. JACKSON / Los Angeles Times
