Motivated Buyers Fueling Surge in O.C. Home Sales : Real estate: First-time and move-up shoppers found enough incentives for a 1.1% increase in 1993, a reason for optimism.

After nearly four moribund years, Orange County’s housing market seems poised for a turnaround.

A gradual increase in home-sales activity late last summer was clearly a trend by the final quarter of 1993: Figures just released show that nearly 31,000 homes, condos and townhouses changed hands during the year. Almost two-thirds of those transactions were in the last half of the year. That strong finish pushed 1993 ahead of 1992 by 1.1% for the county’s first annual home-sales increase since 1989.

A window of opportunity for buyers has opened because home prices have been falling since the recession began three years ago, and interest rates are the lowest in more than a decade. An economic recovery would slam that window by pushing up property values--and that possibility is prompting potential buyers to act now.

Those rushing in are as diverse as Enrique and Cecilia Farias, who are about to close escrow on a duplex in central Santa Ana and will become landlords where they previously rented; and Jeff and Lia Brouelette, who recently moved out of a Costa Mesa apartment and into a townhouse in Foothill Ranch, one of South Orange County’s newest planned communities.

“We are seeing (sales) improvements in almost all the price ranges,” said James Righeimer, a Fountain Valley real estate broker. “It begins at the starter level because people are finally seeing that what they can buy that first-time home for is so much cheaper than it was just a few years ago. And when the first-timers buy, the people they buy from become move-up buyers and the market starts recovering.”

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Enrique Farias says he is “very, very happy” to be part of that turnaround.

The 34-year-old beverage buyer for Newport Beach Country Club has rented ever since moving here from Mexico 15 years ago. But he has always wanted to buy, and, though his gross income is only $24,000 a year, he has been setting aside money every month. Several years ago he used most of his savings to buy a home in his native Sahuayo--a town about two hours south of Guadalajara. That investment enabled Farias and his wife, Cecilia, 34, to move quickly when the owner of the Santa Ana duplex they rent defaulted on his loan last year.

The Fariases got in touch with real estate agent Ernesto Campos, who specializes in foreclosed properties for Century 21 Casa Grande Realty in Santa Ana and was representing Home Savings of America in the sale of the duplex.

“I have looked before,” Enrique Farias said, “but I found that the ads didn’t always tell the truth. I would go to see the salesman, and he would tell me all kinds of other costs that were not in the ad, so I couldn’t qualify. But this one was all there.”

Even so, Farias said, he probably wouldn’t have made an offer had it not been for Campos’ assurance that he could become a homeowner and a landlord at the same time.

“There are a lot of duplexes and multiple units for sale and in foreclosure” in central Orange County, Campos said, “and whenever I can I encourage people to get into one so they can be investors, too.” A majority of such units are low enough in price that they qualify for backing by the Federal Housing Administration, Campos said, “and FHA gives higher loan limits for duplexes, so it can be easier to qualify.”

Latino buyers have made up a sizable chunk of central Orange County’s first-time market in the past year, Campos said. “For the most part, our buyers are pretty conservative. They are really scared about that first home. We see as we fill out loan applications that these are buyers who have no credit cards, they pay everything in cash, and their down payments usually come from savings. My job is to educate them to the benefits of buying.”

For the Fariases, Campos put together a plan that called for the couple to buy in partnership with Enrique Farias’ brother, Alberto. Combining their earnings gave them an annual family income of $48,000, and that, plus an FHA allowance of $700 a month--$8,400 a year--for rental income from the second unit enabled them to qualify for the loan.

They will make sacrifices to be property owners. Alberto Farias probably will move in with his brother’s family to reduce the partners’ monthly expenses for the first year--but the net result will be a big tax benefit, lower housing costs and a stake in the community.

“We wanted to buy to stop paying rent and have something of our own,” Enrique Farias said. “This is a good thing that has happened for us.”

The Brouelettes also think ownership is a good idea.

The couple celebrated their first anniversary in December, in part by moving into their first home--all according to a plan they developed before their wedding.

“We set a goal of having our own place within two years,” said Lia Brouelette, 24.

She and Jeff, 26, chose a townhouse in John Laing Homes’ Vineyards development at Foothill Ranch. The condo is in one of the newest communities in the county--tucked into the base of the foothills of the Santa Ana Mountains at the terminus of Portola Parkway. As with many brand-new developments, theirs is a few miles from the nearest shopping malls, theaters or restaurants--though a supermarket just opened a new neighborhood center.

The relative isolation is one reason many of the homes there are what marketing mavens call “value-priced.” The Brouelettes paid $163,900 for theirs. Pooling incomes--he is an accountant, she is a loan processing officer at a savings and loan--gave them a qualifying annual income of $55,000. The $12,300 down payment came from savings.

Why did they choose to deplete their cash reserve to buy a house now? Because they concluded that interest rates and prices won’t go much lower, Jeff Brouelette said. “We started looking last summer just to see what was out there because interest rates seemed so low, and we saw a lot of nice homes in Aliso Viejo and Rancho Santa Margarita, and that perked our interest.”

The Brouelettes, who both work in Newport Beach, had been paying $800 a month to rent a one-bedroom apartment in Costa Mesa. After a 5% down payment, their monthly mortgage payment--including property taxes and $150 for homeowner association dues--is $850.

“We’re very happy with the house” and with the financial deal, which includes a first-time buyers’ break on the mortgage interest rate, Lia Brouelette said. “It’s great to be an owner.”

Said Jeff: “After our income tax savings from deducting interest, we’re within $50 a month of what it cost us to rent. And here we have a pool and a recreation room, and we’re building equity.”

The continued health of the real estate market in a developed region like Orange County, however, depends on move-up buyers too--people who already own houses but are ready for something newer, bigger or in a better location.

And in 1993, for the first time since 1989, there was a marked increase in move-up sales.

Among buyers in that market segment are Kevin and Yayoi Christiansen, who found that low interest rates, eager mortgage lenders and reasonable prices made it hard to justify keeping an older home that they have outgrown.

“We got into the market now because of opportunity,” said Kevin, 33. “We live in a house I bought in 1986, before we were married, and we’ve always wanted to have a brand-new one.”

The Christiansens--he is 33, she is 32, and both work as computer programmers in Santa Monica--want to stay in Orange County. And the Westminster area, Kevin said, “is just about the only part of Orange County we can look at and still have a reasonable commute--if you can call an hour each way reasonable.”

When the couple saw the sign for CenterStone Co.’s new single-family home development last summer in a field near the Seal Beach Naval Weapons Station, they decided “to jump at it,” he said. “We had this fear that, if we didn’t take this opportunity, there might not be any more coming along.” CenterStone’s development of 46 homes is the first new tract in Westminster in almost 20 years.

The couple also have seen prices of homes in their current neighborhood start to creep up after losing value for most of the past three years, “so we know that things are starting to turn a little,” Yayoi Christiansen said.

The couple’s combined annual income hit $100,000 last year, and they could have afforded bigger and more expensive homes, Kevin said. “We did look at one development in Cypress with bigger lots, but the houses were almost $100,000 more.”

Said Yayoi: “One reason we decided on CenterStone is that we wanted to step up but not be stretched.”

The Christiansens have reserved their house with a $1,000 deposit but haven’t opened escrow yet--that step is scheduled for next month--and have not yet applied for a loan.

Bill Geller, a sales agent with Sterling Realtors in Fountain Valley, which is handling sales for CenterStone, said that even though nothing has been built at the site, 10 of the 46 homes have been reserved--a positive signal that there is a market for move-up housing.

To finance their deal, the Christiansens plan to sell their house to Kevin’s brother for $170,000. That’s about $10,000 below market value, but because they aren’t using a real estate agent, the couple figure they’ll net about the same: about $80,000. “It’s a good deal for us and a good deal for him,” Kevin said.

“The house we have now took all my savings, and I had to use credit cards to buy furniture. We don’t want to do that again.”

John Shumway, president of Market Trends, a Costa Mesa real estate consulting firm, said stories like those of the Christiansens, Brouelettes and Fariases “are what is happening out there. After four years of doldrums, the market is starting to coming back. People have a better feeling about the economy and are reassessing their priorities. Things have been bad for four years, and they’ve been saving. But now a lot of them think it’s OK to spend, they’ve saved enough for a down payment, and there’s a strong desire in most of us to buy a new home.”

One emotion that seems to have taken a back seat, however, is the speculative fervor that helped fuel the market in the late 1980s.

“People are more conservative now,” said Margaret Goedeke, chief executive of Donmar Ltd., a Newport Beach real estate brokerage. “They are not buying the maximum amount of house they can qualify for, like they did in the ‘80s. They’re not pushing the price envelope.”

1993 Home Sales

December was the biggest Orange County home-sale month in 1993, with those in the $175,000-$250,000 range being the top sellers. The average price for all 12 months was $242,515.

Price range Jan. Feb. March April $0-100,000 16 18 33 32 $100,001-175,000 514 535 646 804 $175,001-250,000 607 608 761 906 $250,001-325,000 281 248 304 384 $325,001-400,000 113 106 189 166 $400,001-600,000 90 77 130 137 $600,001-$1 million 30 41 31 54 More than $1 million 9 3 6 11 Total 1,714 1,704 2,159 2,549 Average price $243,892 $237,839 $240,312 $240,390

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Price range May June July Aug. $0-100,000 26 38 27 27 $100,001-175,000 788 848 816 864 $175,001-250,000 964 1,048 998 1,038 $250,001-325,000 409 464 452 451 $325,001-400,000 161 213 199 213 $400,001-600,000 133 186 147 174 $600,001-$1 million 68 60 58 61 More than $1 million 14 14 7 11 Total 2,616 2,934 2,756 2,889 Average price $243,791 $246,813 $242,103 $245,119

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Price range Sept. Oct. Nov. Dec. %of Total $0-100,000 33 23 30 44 1.2 $100,001-175,000 827 805 864 952 30.9 $175,001-250,000 988 933 964 1,133 36.5 $250,001-325,000 469 430 440 482 16.1 $325,001-400,000 230 183 214 220 7.4 $400,001-600,000 140 140 146 167 5.6 $600,001-$1 million 52 33 56 60 2.0 More than $1 million 13 10 7 12 0.4 Total 2,829 2,621 2,775 3,137 -- Average price $246,414 $238,743 $242,109 $240,373 --

Source: TRW Redi Property Data; Researched by JANICE L. JONES / Los Angeles Times

* Buyers: Enrique and Cecilia Farias and his brother, Alberto. Family income: $48,000 a year. House: 8-year-old duplex on South Flower Street in central Santa Ana. Size: Each unit is 1,280 square feet with two bedrooms, 2 baths, two-car garage. Down payment: 3.5%, from savings and sale of a house in Mexico. Loan program: FHA first-time buyer. Features: Adjustable mortgage with 3.5% first-year rate, capping at 10%. FHA credits 95% of rental income from second unit to qualifying income. Price: $194,000. Mortgage payment: $1,300 a month. Rental income: $700 month. Tax benefit: $300 a month. Rent before buying: $1,800 a month. Net gain from buying: $900 a month. * Buyers: Jeff and Lia Brouelette. Family income: $55,000 a year. House: New condo in Vineyards development at Foothill Ranch. Size: 1,350 square feet with three bedrooms, 2 1/2 bathrooms, a two-car garage. Price: $163,900. Down payment: 7.5% from personal savings. Loan program: FHA first-time buyer. Features: Builder prepaid adjustable mortgage to get 3.5% first-year rate, 4.0% second-year rate. Mortgage caps at 10.0%. Mortgage payment: $814 a month. Association dues: $150 a month. Tax benefit: $150 a month. Rent before buying: $800 a month. Net change from buying: -$14 a month. * Buyers: Kevin and Yayoi Christiansen. Family income: $100,000 a year. House: New single-family detached, in Westminster Size: 1,900 square feet with four bedrooms, three bathrooms, two-car garage, 3,500-square-foot lot. Price: $260,000. Down payment*: 20% from sale of previous residence. Loan program*: Conventional. Features*: 7.25% fixed rate for 29 years. Mortgage payment*: $1,750 a month. Association dues*: Less than $75 a month. Tax benefit*: $450 a month Mortgage payment on current home: $725 a month. Tax benefit of current home: $200 a month. Net change from moving up*: -$850 a month. * Because the Christiansens have not yet opened escrow or applied for a loan, these figures are projections. Sources: Individual buyers and their real estate agents; Researched by JOHN O’DELL / Los Angeles Times