Rising Rates Cause Dip in Move-Up Sales
Sales of Southern California homes dipped last month as rising interest rates caused a number of affluent buyers to delay purchasing homes.
A total of 28,781 new and resale houses and condos changed hands in July, down 1.8% from the previous month and the same month last year, according to Acxiom/DataQuick, a real estate information service.
Despite the dip, last month still ranks as the third-highest sales count, topped only by June 1999’s 29,305 sales and July 1998’s 29,303 sales.
“When interest rates go up, some people put off a purchase decision,” said John Karevoll, an Acxiom/DataQuick analyst. “Those who take a wait-and-see attitude tend to be part of the discretionary buying group in the move-up and prestige markets.”
Last month’s pause in activity didn’t escape the attention of Southland Realtors.
“Things slowed down and got very quiet in early July,” said Barbara Shoag, an agent for Robert Weil Associates in Long Beach. “But then the phone started ringing again, and now open houses are busy and there are more offers.”
Added Stephanie Vitacco, a top San Fernando Valley broker with Fred Sands Realtors: “We’re still in a very good market, but it’s not the craze it was in April. . . . you could say we’re no longer zooming ahead at 75 mph but we’re still going at a healthy 55 mph.”
The current market, according to both women, is a good one for homes that are priced realistically for their size, location and condition.
“Some sellers feel that the market is stronger than it actually is,” added Shoag. “Those homes are not selling in this market.”
A key factors in the current housing market is the mortgage interest rate, which crept above the 8% mark at the beginning of this month for the first time in more than two years.
In some cases, according to Karevoll, rising interest rates can trigger entry-level and mid-level buyers to jump off the fence and into home ownership out of fear that rates will continue to rise and get away from them.
Riverside and and San Bernardino counties, for example, are known for their affordable housing stock, and they were also the only two counties to post gains in year-over-year sales counts for July.
Not only does Karevoll expect a surge in entry-level and mid-level purchases, he also believes that move-up and prestige buyers, who may have paused in July, followed through with their purchases this month.
“As a result,” he said, “we expect August numbers to go up and September’s as well.”
The median price paid for a home in the Southern California region, which includes Los Angeles, Orange, Ventura, San Diego, Riverside and San Bernardino counties, was $194,000 last month, the second-highest ever and a 3.2% increase over the $188,000 figure for July 1998.
Median home prices for individual counties ranged from a low of $134,000 in San Bernardino County to a high of $238,000 in Orange County.
Riverside County, meanwhile, posted the biggest year-over-year price increase for July. The median price rose 10.7% last month to $155,000, compared with $140,000 a year ago.
Because of a shift in market mix, Karevoll explained, the 3.2% year-over-year increase in the median home price understates the current rise in home values, which are increasing about 8% annually.
Buyers spent $6.332 billion last month, the second highest amount ever spent in a single month and right behind June’s $6.658 billion record.
The “typical” mortgage payment on a median-priced Southland home, assuming a 30-year fixed 20% down mortgage, was $1,052 in July, up from $964 a year ago.
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July Home Sales
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County No. Sold No. Sold Pct Median Median Pct July ’98 July ’99 Chng July ’98 July ’99 Chng Los Angeles 11,196 10,945 -2.2% $190K $191K 0.5% Orange 5,259 4,828 -8.2% $229K $238K 3.9% San Diego 5,014 5,006 -0.2% $196K $206K 5.1% Riverside 3,172 3,319 4.6% $140K $155K 10.7% San Bernardino 3,000 3,106 3.5% $130K $134K 3.1% Ventura 1,662 1,577 -5.1% $224K $230K 2.7% So. California 29,303 28,781 -1.8% $188K $194K 3.2%
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