Orange County's real estate market did more than warm to the weather this summer: It sizzled.
The pace of sales set new records: in June, July and August 15,067 homes sold. Prices set records too. The median rose to its highest points ever, hitting $231,000 for the three-month period.
It was the heat wave many Orange County homeowners had been awaiting.
Many current homeowners and potential home buyers are still sorting out what the boom in the market means for them. Some are waiting for things to settle down before making their moves--to sell or buy--or deciding to stay put. Some who moved quickly in the hot market are still absorbing the impact of the moves they made.
Others are trying simply to get to know their new neighbors.
In some areas, the turnover in ownership was huge. In Laguna Niguel, where the median price was $290,000, 752 homes changed hands in the three-month period.
Median prices and sales rates varied widely throughout the county. In the 92662 area of Newport Beach, the median price of the seven homes sold was $745,000. In the 92701 area of Santa Ana, the median price of the 127 homes sold was $122,000.
Overall, median prices, the midpoint figure that homes sold for, moved briskly upward. The countywide median, for instance, soared by $10,000 in June to $236,000, the highest point ever in Orange County.
Sometimes, homes were on the market for only days before sellers came to an agreement with their pick of buyers.
The rate of sales surged too, crashing through the 5,000 mark in June and July for the first time in a decade. Sales leveled off in August, but still remained 18% ahead of a year ago, according to Acxiom/Dataquick Information Systems.
"By most accounts, across the board, buyers and sellers and brokers should be fairly happy at this point," said Bill Cote, owner of Cote Realty in Newport Beach. "It's been a good year."
Throughout much of the decade, Orange County's real estate had slumped. Mired in an economic rut, home values plummeted and sales slowed. Some wondered if their houses would ever appreciate to the point they could be sold for a profit.
In remarkable fashion, homeowner's patience paid off.
The market in the county turned the corner in early 1997, and by midyear was showing a consistent upward pattern.
For 15 consecutive months, home prices have risen in year-to-year comparisons.
Buoyed by thriving consumer confidence, a prospering high-tech industry and falling mortgage interest rates, the Orange County market has enjoyed a boom it hasn't seen since the late 1980s.
One reason: Buyers can afford more house today than they could a decade ago.
The monthly payment on a $236,000 home, for instance, assuming a 30-year fixed-rate loan at 6.73% and a 20% down payment, would be $1,214. Ten years ago, when interest rates topped 10%, the median-priced home of about $220,000 came with a $1,696 monthly payment.
With the economy luring well-paid professionals to the county, home sellers were flooded with multiple offers from buyers willing to pay full price, and then some, for houses.
"I have buyers and can't find the homes," said Michael Dreyfus of Prudential California Realty in Newport Beach, who estimated he had at least six buyers for every house, including one family that bought a $600,000 home in Newport Beach sight unseen.
"Three years ago, I had houses but no buyers."
New home builders also found themselves swamped with potential buyers for the limited number of houses under construction. At one new model showing in June, 1,300 people signed up to receive more information on 104 homes being built in Irvine.
That number was whittled to 500 pre-qualified buyers. One woman, trying to improve her odds, pulled out her checkbook and offered to pay nearly $600,000 for two houses in cash. Her offer was rejected.
Though these times have sometimes been trying for buyers, for homeowners who are seeing housing values move higher, this year has been bliss.
Existing homes in the county rose 18% in value from April through June alone, about twice the national average, according to First American Real Estate Solutions. The rate was the fastest among the 37 markets the firm measures nationwide. While median prices cooled slightly from June to August--from 15% to 13% above year-ago levels--the August median of $230,000 was still the second-highest ever posted.
As more people realize their homes have positive equity, analysts said, even more homes will be placed on the market. The lull in August is seen as normal end-of-summer slowing, not the beginning of a downward trend.
Not that there aren't factors out there that could rock the boat--or even capsize it. Financial woes in Asia and other global markets, the volatile U.S. stock market and political uncertainties are all question marks. But, barring a dramatic and widespread collapse of the economy, analysts expect home sales and median prices to continue their forward pace.
Many forecast the housing market will continue to grow well into 1999.
The outlook for resale homes is strong because as homes appreciate, more families will be inclined to move into larger houses, a decision they may have been postponing for years.
"As people find themselves in a situation where they are walking away with money, I think a lot of potential sales will be loosened up," said John Karevoll, an analyst for Acxiom/Dataquick.
In addition, resale condos will be bolstered by those unable to afford other kinds of housing, especially recent college graduates in their first jobs, Karevoll said.
He expects home sales to continue at their current levels at least until year's end and sees prices increasing as well. "The worst-case scenario is that there will be a leveling off," Karevoll said.
New homes also are expected to sell well as demand continues to exceed supply, analysts said. A possible catch: Some potential buyers may experience "sticker shock" if prices continue to escalate as rapidly as they have and turn their attention toward resale homes.
Still, with strong job and income growth in Orange County, and a healthy rate of sales across the board in all income categories, the real estate market is expected to continue growing at a steady pace, analysts said.
"I've been rather surprised by the strength of the recovery in Southern California, and in Orange County in particular," said Nima Nattagh, a First American analyst.
Says Nattagh: "Orange County will continue to be one of the top-performing regions in the country."
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10 most active ZIPS:
Laguna Niguel 92677 752 R. Santa Margarita 92688 528 Lake Forest 92630 488 Aliso Viejo 92656 464 Mission Viejo 92692 461 Laguna Hills 92653 377 Huntington Beach 92648 376 Mission Viejo 92691 375 Trabuco/Coto 92679 368 Westminster 92683 299
10 priciest ZIPS
Newport Beach 92662 $745,000 Newport Beach 92661 $700,000 Corona del Mar 92625 $657,500 Irvine 92714 $608,500 Newport Beach 92657 $532,500 Newport Beach 92660 $495,000 Yorba Linda 92670 $494,500 Villa Park 92861 $475,000 Laguna Beach 92651 $457,000 Newport Beach 92663 $369,500
Source: Axiom Dataquick
Market Hot Spots
Home sales for June, July and August were highest in South County, where eight of the top 10 hottest-selling ZIP Codes are located. ZIP Code 92677 in Laguna Niguel was by far the leader with 752 sales.