Home Sales Across O.C. Drop 26.2%
Housing sales in Orange County dropped 26.2% during the first quarter, bedeviled by a triple hex of torrential rains, rising interest rates and uncertainty over the county’s financial problems.
Sales of new and used homes during the first three months of this year totaled 5,677 units, a decline of 2,014 units from last year’s first quarter.
The falling numbers dragged county home sales down almost to recession levels, but economists said the dismal news shouldn’t be taken as a sign the entire economic recovery is falling apart.
“It’s not really surprising, but it shouldn’t be worrisome,” said Esmael Adibi, director of the Chapman University Center of Economic Research.
People are still nervous, he said, because of the county government’s decision in December to file for bankruptcy after the treasurer’s office lost $1.7 billion in risky investments.
“They are uncertain about the future of the schools”--an important subject for home buyers because many have school-aged children, Adibi said. “But we think there is going to be a gradual increase in sales all through the year.”
Still, the numbers are puzzling, said industry analyst Nima Nattagh of TRW REDI Property Data in Riverside, which tallies the sales data.
“If you take away the seasonal factors (weather and a normal reluctance to buy homes just after Christmas and before income tax time), January and February still were the lowest months since 1988,” Nattagh said.
For March alone, home sales dropped 25% to 2,417 units from 3,235 sold in March, 1994.
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John Unroe, chief executive of JAMS/Endispute, a nationwide judicial arbitration company headquartered in Orange, said that the state of the housing market played a minor part in his recent decision to cancel a planned move to San Francisco, where the company has a big presence.
“I haven’t talked to a realtor or really looked into what the value of my house might be,” he said, “but it probably isn’t the best time to try to sell.” Unroe and one other top JAMS official had planned to relocate to San Francisco to establish a corporate headquarters there, leaving 35 employees at the office in Orange.
Resales account for 80% or more of the county’s total residential real estate market, and it is only when there are profits from those sales that new homes sell. So as people such as Unroe decide to keep their front lawns free of “For Sale” signs, they start a ripple that extends well beyond their own spots in the economic pond.
“I think interest rates have to be at the top of the list” of causes for the first-quarter sales decline, TRW analyst Nattagh said. “And that makes me think there is some fundamental weakness in the market that won’t let us sustain the momentum we saw in 1994.
“But there are no real clear signs, and I am finding it difficult to reconcile the numbers with other economic data.”
That other data, said First Interstate Bank economist Adrian Sanchez, includes a healthy rate of employment and income growth throughout Southern California. The state Employment Development Department reported two weeks ago that employers in Orange County added 13,500 new jobs to their payroll between February, 1994, and February, 1995.
Sanchez and other economists maintain that the entire region is experiencing a slow but healthy recovery from the longest and deepest recession since World War II.
“This has been a very unique situation because employment started recovering in a lot of industries even as housing sales remained flat or were in decline,” Sanchez said. “So this time housing hasn’t had that big an impact, and the numbers we are seeing for the first quarter shouldn’t either.
“But when the housing market does start coming around, it will add a lot of power to the recovery,”
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The weak first-quarter sales have pushed housing prices down, interest rates have started receding from their November high of nearly 9.2% and the weather is improving--all events that should help push sales higher in ensuing months, Adibi said.
It was good news like that a year ago that made the first quarter of 1994 the best the county’s housing industry had enjoyed in six years. A total of 7,691 new and used homes were sold during the three-month period for a 38% gain from 1993. This year’s drop, though, brought the total to just slightly above the 1993 level.
The fact that prices have fallen--the first-quarter average of $235,905 is down 1.2% from $238,846 a year earlier--actually should help boost sales by making homes in the county more affordable.
The average price for March alone fell even more, 3.5%, to $234,463 from $243,045 in March last year.
“And there is a pent-up demand that is building,” Adibi said. “So there should be positive signs by mid-year.”
* HOME SALES FIGURES: D7
