O.C. Housing Market Also Had a Bad Year
Orange County’s 1995 housing market suffered its biggest annual loss in four years, with sales falling 15.3% and the average price dropping $9,000, according to statistics released Thursday.
But even as the housing numbers confirm a year most homeowners and home builders would love to forget, lower mortgage rates and early indications of an improving economy are fueling predictions of a real estate revival for 1996.
Decreasing bankruptcy fears, job growth and pent-up housing demand could drive up both home prices and sales in 1996, analysts said.
Chapman University predicts that homes will appreciate 1.4% in Orange County this year, the first increase in at least five years. UCLA predicts a 3.1% increase in values throughout the region.
This is good news for a cautiously optimistic real estate industry and for beleaguered homeowners who suffered a terrible 1995.
The median price of a home slid 4.5% to $193,000 from $202,000, according to Dataquick Information Systems, a La Jolla-based data firm. (Median means half the homes sell above and half below that price.) A total of 30,748 new and existing homes were sold in Orange County during 1995 compared to 36,284 the previous year, the firm said.
It was the most dramatic annual sales decline since 1991, when sales dropped 16.5%. In 1992, sales dropped 9.8% from the previous year, but went up 15.4% and 17.7% in the two succeeding years.
Some of the lowest home prices and interest rates in a decade failed to get wary potential home buyers to sign the dotted line last year. Torrential rains early in 1995 coupled with lingering economic uncertainty and fears related to the county’s unprecedented bankruptcy filing all hurt the housing market.
“1995 was the year we were done in by the bankruptcy,” said Walter Hahn, director of real estate consulting for E&Y; Kenneth Leventhal Real Estate Group in Newport Beach. “But we’re going to get back on the growth track this year.”
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The current 30-year fixed-rate mortgage loan averages 6.96% with 1.8 points, the lowest in two years. While some experts see a low rate as one of the elements necessary for a real estate renaissance, others are more cautious.
“Lower mortgage rates just haven’t been the stimulus they have been in the past,” said Earl Peattie, president of Mortgage News Co., a data service in Santa Ana.
He noted that mortgage rates dropped all during 1995 without any appreciable increase in sales. “Just look at the year we had, especially in Orange County with the bankruptcy and so many people losing equity in their homes,” he said.
The real estate downturn here has left hundreds of thousands of Southern Californians owing more on their homes than they are worth. Many are unable to move into larger homes, keeping the real estate market stagnant.
But even with the year’s poor showing, at the south coast division of Kaufman & Broad Corp., California’s largest home builder, company President Roland Osgood is guardedly optimistic. Kaufman & Broad has at least seven new projects in south Orange County..
“Everything’s positive--interest rates are falling and prices are firming. I think it will be a good year, though not a great year,” Osgood said.
One real estate broker in the coastal communities predicted that a lack of existing homes on the market there will help drive up prices in 1996.
“We need homes to sell. We have buyers,” said Patricia J. Forester, owner of Waterfront Homes, which markets houses in Newport Beach and other coastal communities. “I think the bankruptcy impact was overstated and created too much fear. 1996 will be better, maybe even as high as a 20% increase in sales.”
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Brokers, builders and buyers all have differing views on how much the bankruptcy affected the market last year. But everyone agrees that the near approval of the bankruptcy recovery plan and other efforts are helping calm fears in the real estate market.
“1995 was the most psychologically driven year I have ever seen. Everything from the O.J. Simpson trial to the bankruptcy--everyone was just in bad moods. It was a bad luck year,” said Tom Martin, vice president of marketing and sales at Coto de Caza, a 4,000-acre master-planned community in South County.
Martin hopes to sell about 300 homes in four new single-family housing projects being built at Coto de Caza this year.
“If we can get the psychology going and get the ball rolling again, things will improve. Everyone in the industry is hopeful but cautious that this will be a better year,” he said.
Like many sellers, Linda Ferguson put her three-bedroom home in Irvine on the market priced to sell. It was offered at a $30,000 discount from what she paid in 1993.
After being on the market for several months, the home is in escrow now, and she believes the market is improving.
Said Ferguson: “I really think things are starting to take a turn for the better.”
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Down Cycle
Orange County’s 1995 housing market suffered its biggest annual loss in four years, as several factors combined to weaken the market. *--*
Median Mortgage Jobless Sales price rate* rate January 1,707 $194,000 9.1% 5.4% February 1,800 191,000 8.9 5.1 March 2,531 196,000 8.5 4.7 April 2,143 195,000 8.3 5.4 May 2,528 193,000 8.1 5.9 June 3,100 199,000 7.5 5.5 July 2,540 198,000 7.5 6.0 August 3,162 190,000 7.7 5.5 September 2,803 193,000 7.4 5.1 October 2,762 189,000 7.4 5.2 November 2,669 195,000 7.3 5.2 December 3,003 190,000 7.0 N/A
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Key events: Record rainfall and uncertainty caused by the county bankruptcy keep potential buyers away.
Key events: Orange County voters on June 27 reject Measure R, a half-cent sales tax increase intended to solve the county’s bankruptcy woes.
Key events: U.S. Bankruptcy Court ruling allows Orange County’s $2-billion suit against Merrill Lynch to proceed.
* Average, 30-year fixed conforming loan
Source: DataQuick Information Systems, Mortgage News Co., California Employment Development Department; Times reports, Researched by JANICE L. JONES / Los Angeles Times
