Southern California's sizzling housing market steamed right through the normally quiet month of October as more homes sold in Orange and Los Angeles counties than in any month since 1990. Prices rose solidly in all housing categories as well.
Experts said pent-up demand has been unleashed by three powerful forces: rock-bottom interest rates, baby boomers trading up to larger homes, and the widespread belief that finally, after years of disappointment, home prices are really rising again.
In Orange County, 46.5% more homes sold last month than in October 1996, according to figures released Thursday by Acxiom/DataQuick Information Services, a real estate information firm. The median sales price was $208,000--8.9% higher than a year earlier and the highest since August 1994.
In Los Angeles County, where the market has recovered more slowly in many areas, overall home sales were up 19.9% from a year earlier, while the median price rose 6.8% to $172,000.
Last month's heavy sales were all the more impressive because they occurred outside the spring and early summer months when buyers tend to warm up to home purchases and turn out in droves.
Indeed, October typically is the fourth slowest month in the year for home sales.
"It's hope--that's what's driving the market," said Jeff Stokes, a Coldwell Banker agent in Pasadena who noted that cash-flush buyers from the booming entertainment industry are buoying sales the way aerospace engineers once did.
He said buyers are purchasing "fixer-upper" houses and condominiums for quick repair and resale--a speculative form of investment that last paid off before recession gripped the economy and swatted down home prices in the early 1990s.
"Interest rates are low, the economy looks good. The stock market could tank, and that could hurt, but people have to have a place to live," Stokes said.
Even if the winter is a wet one, driving home buyers inside, it's likely to put the home-buying spree on hold for only a few months, Stokes said.
Bad weather "might slow things down a little bit," he said. "It has been slow here for the last week, that's for sure. But they'll just buy later."
For much of the 1990s, only lower-priced housing in Southern California showed much resilience. Recently, sales and prices of luxury homes began going up.
But real estate experts say all types of housing, including mid-level "trade-up" homes that had been a sluggish segment of the market, are now showing healthy sales.
"There's activity in virtually all categories and all areas," said John Karevoll, a DataQuick statistician.
Analysts say that although home values have rebounded in most neighborhoods, homes are typically selling for far less than at their peak prices in 1989 and 1990.
And as yet, they see no duplication of the feeding frenzy for Southern California homes that astonished the nation in 1987 and 1988.
In August 1988, 14,118 homes were sold in Los Angeles County, and 6,160 in Orange County, Karevoll said. Last month, Los Angeles County's sales totaled 9,146 and Orange County's 4,173--only about two-thirds of that record volume.
But the number of available homes is shrinking, putting pressure on buyers to snap up houses that meet their requirements. The California Assn. of Realtors estimates that there were enough homes for sale in Los Angeles County in September to last for 5.7 months, compared with an 8.9-month backlog a year earlier.
In some areas, such as South Orange County, low inventory has created a powerful sellers' market, as Lorna and Michael Savage can attest.
The Savages bought a two-bedroom, 1,500-square-foot Laguna Beach house in 1990, the year prices peaked.
Needing more room in October 1994, when their second child was born, they listed it for sale for less than they had paid--then endured 18 months in which they received only one serious offer, which they rejected as far too low.
They had planned to add more bedrooms to their ocean-view house this year--until the telephone started ringing with brokers urging them to try again for a sale, and their agent said the local inventory had plummeted.
So they put their home up for sale on a Monday last month, had an open house the next Sunday--and received a full-price offer the following day. They then quickly entered escrow on a home twice the size in Laguna Niguel, with a pool, spa and an elementary school they especially admire.
Lorna Savage said that "give or take a few thousand," they recouped their entire purchase price of seven years ago, plus the more than $15,000 in repairs and upgrades they had invested.
"We were amazed," she said. "Because when we originally listed it [in 1994], we were sure we were going to lose."
Short supplies of homes have left some agents scrambling for clients--sometimes to the irritation of residents.
William J. Popejoy, the former savings and loan boss and Orange County chief executive who now runs the state lottery, said the guard at his gated housing complex in Newport Beach is complaining that agents have been trying to bluff their way in--something that last happened in 1988 or '89.
"He said, 'I can't believe it. All of these real estate types trying to get in. And they're knocking on people's doors and telling them they've got buyers if they want to sell,' " Popejoy said.
Walter Hahn, a consultant for E&Y; Kenneth Leventhal Real Estate Group in Newport Beach, said Orange County workers began shaking off recession-related fears about their prospects three years ago.
Now, with entertainment and other industries generating high-paying new work in Los Angeles County, workers there are feeling equally good about their jobs, he said.
That confidence, and the belief that housing prices are moving firmly higher, is causing the flood of home purchases, Hahn said: "It's a huge pent-up demand."
Jeff Meyers, whose Orange County-based Meyers Group is a consultant for residential builders, said new-home construction can't keep pace with that demand. He said he's telling his clients to expect a minimum price increase on homes of 5% next year, with increases of 10% in much of Orange County and more upscale parts of Los Angeles County.
Meyers said a housing market is considered balanced when a new-home building permit is issued for every 1 1/2 new jobs. Right now, Orange County is creating three jobs for every permit; Los Angeles County, six jobs for every permit.
"When you have that kind of relationship, something has to give," Meyers said. "And typically, it's [higher] price and sales volume."
He said buyers believe real estate is again a viable investment--and many of them are baby boomers who are hitting their peak earnings years and have been waiting for the right time to trade up.
The creation of well-paying jobs in South Orange County has meant an influx of such buyers into cities there.
Bob Chapman, who heads a Coldwell Banker office in Laguna Beach, said he is seeing double-income couples, each earning $60,000 or $70,000 in high-tech jobs, moving in from Irvine and other inland cities.
He said that even with the low inventory, buyers are still being cautious. Many are educating themselves about the market by checking properties out on the Internet before approaching agents, and price increases so far have been modest, he said.
"It has not gotten to the point where it's a frenzy. It's not out of control," Chapman said.
* WARM OCTOBER
O.C. sales and median prices for new homes and resales are broken down by ZIP Code. D1
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Full Market Rise
The increase in Orange County home sales occurred across the market. Price increases repeated the pattern. October's 4,173 home sales were the highest monthly total since September 1989. October sales and price changes compared with October 1996:
New houses and condos:
Sales increase: 24.7% (605)
Price increase: 18.0% ($265,000)
Sales increase: 41.7 (2,721)
Price increase: 10.6 ($220,000)
Resale condos 90.8 (847) 6.6 ($130,000)
Total sales: 46.5 (4,173)
median price: 8.9 ($208,000)
Source: DataQuick; Researched by JANICE L. JONES/Los Angeles Times