May O.C. Housing Gain Could Signal Recovery
In what could be a sign that Southern California’s housing market is finally starting to rebound, Orange County’s May home values climbed 2.6% from the year before, the biggest jump in nearly two years, as sales increased 53%, according to figures released Thursday.
Home values, which have dropped about 20% during the last five years of California’s prolonged real estate downturn, have begun to stabilize in recent months. Orange County’s May price jumped 3.1% from the month before as median prices for new and existing homes increased $6,000 to $198,000.
Pent-up consumer demand, loan rate fluctuations, a boost in consumer confidence and increasing home values are helping to fuel the local housing market comeback, analysts said.
“The California economic upturn has finally reached the real estate market. I hate to use the word ‘recovery,’ but with these numbers, that’s what we’re having,” said John Karevoll, an analyst with DataQuick Information Systems in La Jolla.
“With sales this strong, some of those low-end distressed properties that have helped keep prices down will start getting absorbed,” he said.
A total of 3,865 homes in Orange County were sold last month, the highest number for any single month in nearly six years. A total of 3,885 homes were sold in August 1990.
Trends in Orange County echo those throughout Southern California, where home sales in April soared 40% from a year ago, the highest number of sales in this decade. Statewide figures for May are not yet available.
And, according to the California Assn. of Realtors, a statewide trade group, unsold statewide inventories, which are a widely watched barometer of housing demand, were at 7.6 months in April, down from a 8.4-month supply in March and lower than the 12.1-month inventory logged in April 1995.
“This low level of inventory suggests continued home price stabilization or increases throughout much of California in coming months, as the more limited supply of available homes is met by strong demand,” said Leslie Appleton-Young, vice president of economics for CAR.
During recent years as the state has been recovering from recession, the housing market has been the slowest sector to exhibit signs of strength. But now pent-up demand following the long recession is helping to drive the housing recovery.
After falling nearly 19% in Orange County during the downturn of the last five years, home values for resale homes alone increased 5% to $210,000 last month from the same time last year. Resale condominiums are still dragging down the county’s overall median home price.
“May was our best month in four or five years,” said James Joseph, owner of Century 21 in La Mirada. “We’re seeing a lot of fence-sitters who finally decided to jump off. Prices and mortgage rates helped drive that. They’ve realized the train is leaving now and they better get on it.”
Last month, Cindy Hall and her husband, Mark, sold their three-bedroom home in La Habra in less than two weeks. The couple were paid $205,000 for the home, $14,000 under the listing price.
“We had three or more buyers that were interested,” said Cindy Hall, who said the couple sold their home for $15,000 less than they bought it for in 1990. “It’s getting to be a good time to buy and sell a home.”
Increases in loan rates since early this year may have helped drive home sales activity, brokers such as Joseph said.
The rate on a conforming 30-year, fixed-rate mortgage in early April was 7.649% with two points. By early May, rates had increased to 8.113% for a fixed, 30-year-mortgage and by last week were 8.072%.
“There were a lot of people who thought rates were going down, but when rates went up they decided it’s time to buy before things get worse,” said Earl Peattie, publisher of Mortgage News Co. in Santa Ana.
At the large, gated residential community of Coto de Caza in South County, Tom Martin, vice president of sales and marketing, said sales were up 25% and four new neighborhoods with 300 homes are scheduled to open within weeks.
“Now is the time to get in this market,” said Martin. “We’re seeing a lot of interest. People have been waiting a long time.”
The state of California saw 425,400 homes change hands last year, constituting 11% of home sales nationally. For 1996, the National Assn. of Realtors projects home sales in California to climb to a 12% share of the national average, with 462,000 home transactions.
“The home sales figures show us that we are witnessing a solid, ongoing recovery in California’s housing market,” said CAR President Rick Synder.
* BY THE NUMBERS: May sales of county homes by ZIP Code and median price. D1
