Torrid temperatures took some of the steam out of the red-hot San Fernando Valley real estate market in August, contributing to the first monthly decline in single-family home sales since February, a real estate trade group said Monday.
Despite that breather, economists and real estate analysts predict that the housing market will remain strong through the end of the year, tempered mainly by a lack of inventory.
And unlike financial markets, the housing market is expected to suffer little fallout from either the Asian economic crisis or blistering reports on alleged presidential misdeeds.
One economist foresees a nationwide slowdown in the housing market next year, but 1998 is still shaping up as the best year for the area's real estate market this decade.
"The market is still extremely busy," said Bud Mauro, president of the Southland Regional Assn. of Realtors, which reports monthly on sales of single-family homes and condos. "We could use a bit of a break."
In August, 1,207 single-family homes closed escrow, up nearly 13% from a year ago, but down 8.3% from July of this year. And July was only one sale better than June, signaling a cooling.
Condo sales also fell by 8.3% from July's tally of 315. August condo sales were up 16% over August 1997.
Home sales typically slacken during the summer, as would-be home buyers decide they would much rather vacation with the kids.
Mauro said that the regular seasonal dip was compounded by the Valley's sizzling summer, particularly July and August when record temperatures were reached six times.
"People were hiding indoors," said Susan Jones, an agent with Fred Sands' Northridge office. "Unless you were desperate for a house, who was going to go out there?"
Shirley Svorny, director of the San Fernando Valley Economic Research Center at Cal State Northridge, said she thought the Valley would have "bucked the seasonal housing pattern," given its strong job market.
Figures show that Los Angeles County, which had lagged behind the state in job growth, has gained ground impressively this year. In May, nonfarm jobs advanced at an annual rate of 2.7%.
"Job growth has continued to be strong in [Los Angeles] County," Svorny said. "And that puts upward pressure on housing prices and housing sales."
Though Valley home values have been rising for most of this year, August marked the second straight monthly decline in the median price for a single-family residence--the first back-to-back drop this year.
The median price was $195,000, down 4.4% from July but still 11% greater than August 1997. That follows a nearly 2% drop in the median price between June and July. Even with the decline, $195,000 represents the highest August figure since 1993.
Two major events that have buffeted financial markets--the economic crisis in Asia and the sex scandal surrounding President Clinton--have yet to show up on the housing radar screen.
In fact, Robert Barr, senior economist with Fannie Mae, the nation's largest source of home mortgages, said the Asian crisis has helped the real estate market by lowering interest rates significantly as investors pulled out of global markets and moved to U.S. Treasuries.
The rate on a 30-year fixed mortgage stands at 6.7%, and has been below 7% for a record 13 straight weeks.
Still, Barr predicted a cooling in the housing market nationwide, as the increase in available houses outstrips population growth.
"We right now have a very, very strong housing market nationwide," Barr said. "It's so strong that it's not sustainable given the . . . growth in population."
"New home sales, existing home sales and housing starts have reached phenomenally high levels and all three will pull back," Barr said, predicting a 6% drop next year in both housing starts and existing homes sold.
Locally, Mauro said high inventory is not the problem. Association figures show that active home listings, which chart only existing homes, are down 3.4% compared with August 1997 and down about 1% from July.
"I think if we stay in this pattern of low inventory, sales may sag for the rest of the year," Mauro said.
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August Home Slump
For the first time since February, Valley home sales declined. But experts aren't worried; sales are still up over 1997 and August slumps are not unusual.
Aug. 1998: 1,207
Aug. 1997: 1,070
Source: Southland Regional Assn. of Realtors
August Valley Home Sales
North West - 1998 Avg. Price: $242,400
1997 Avg. Price: $207,400
1998 home slaes: 240
North East - 1998 Avg. Price: $137,700
1997 Avg. Price: $121,600
1998 home slaes: 192
South East - 1998 Avg. Price: $313,700
1997 Avg. Price: $280,700
1998 home slaes: 268
South Central - 1998 Avg. Price: $276,700
1997 Avg. Price: $226,100
1998 home slaes: 223
South West - 1998 Avg. Price: $333,800
1997 Avg. Price: $287,700
1998 home slaes: 284