ORANGE COUNTY IN BANKRUPTCY : O.C. Home Sales Plunge 40% as Bankruptcy Pains Worsen
In a clear sign that Orange County’s bankruptcy is still paralyzing the housing market here, home sales dropped by nearly 40% last month from the year before.
April’s decline is the fourth straight month of falling home sales in the county, where drops have been much steeper than in nearby Los Angeles and Riverside counties, according to TRW REDI Property Data, a real estate data company in Riverside.
“When you compare Orange County to other counties, this drop is substantial. And there is only one difference about Orange County from those areas: the bankruptcy,” said Anil Puri, head of the economics department for Cal State Fullerton. “Bankruptcy has had a substantial psychological impact on buyers here. People are just holding back on making financial decisions.
Of the houses that did sell, April prices were up slightly from a year ago: from an average price of $237,496 to $239,579, an increase of 0.9%.
Throughout Southern California earlier this year, home sales were down due to rising mortgage rates and record rains. Still, Los Angeles County reported a decline of only 6.7% for the first quarter and Riverside County saw a 13.6% decline, while Orange County’s home sales tumbled 26.2%.
Only San Diego County, which had a major defense manufacturer close down during the quarter, had a more severe drop, of 31%, TRW reported.
Puri called the deep declines in Orange County part of the bankruptcy’s fallout. He pointed out that Orange County’s economy is growing and unemployment is down, both of which should stimulate home sales.
“It’s a huge drop,” said Bruce DeVine, regional economist with the Southern California Assn. of Governments. “It shows there are a lot of middle-class people in Orange County just sitting tight right now because of the bankruptcy.”
For the past three months, Chuck Alvord has been trying to sell his $785,000 Corona del Mar home to move to a different home in the area. Alvord has seen lots of lookers but no buyers.
“There was a lot of talk about the market being sluggish, but we just wanted to sell,” said Alvord. “Some people we talk to are worried about the bankruptcy, but mostly it’s those people coming from other areas into the county.”
After home sales fell during the first quarter, real estate specialists hopefully predicted the market would improve during April and that 1995 would be a strong year for sales as buyers regained confidence.
They also said sales would improve because weak first-quarter sales would push housing prices down and interest rates had started receding from a November high of more than 9.2%.
But with the drastic April decline, the worst drop since January, real estate watchers say that the health of the local real estate market depends on whether the county can solve its own fiscal crisis, created when its investment pool lost nearly $1.7 billion in value due to risky investments.
Industry analyst Nima Nattagh of TRW REDI blamed the poor sales figures on a sluggish housing market.
“We thought things would start to improve by now,” said Nattagh. “This shows a fundamental weakness in this market.”
Thomas Kunz, regional director for Orange County for Century 21 of the Pacific, said local buyers were concerned about the economy and are taking a wait-and-see attitude, due to the bankruptcy and the overall local economy.
“There are still signs of layoffs in the area,” he said, “but I think as we start to move into the summer months, sales will at least pick up to the level of last year.”
(BEGIN TEXT OF INFOBOX / INFOGRAPHIC)
Sales Slumping
Orange County home sales have dropped 30% compared with the same four-month period a year ago. January to April home sales, for 1994 and 1995: (see newspaper for graph)
April, 1995: 1,962
Source: TRW REDI Property Data
* THE BREAKDOWN
Figures on fourth straight month’s drop, by ZIP code. D6
