O.C. Home Values Rose 18.1% in ‘98, Lead U.S.

Thanks to a strong regional economy and low interest rates, home values in Orange County grew 18.1% last year, outranking every other major metropolitan area in the nation, a real estate research firm reported Friday.

Ending the year with a flourish, Orange County’s rate of appreciation was more than double the U.S. average of 8.0%. As a result, county homes are again worth more than what is owed on them, recovering all of their losses from the deep slump earlier this decade, said Nima Nattagh of First American Real Estate Solutions, which conducted the survey.

The county has attracted fast-growing, high-paying technology jobs in recent years, leading to record low unemployment. High income growth and single-digit interest rates have led to soaring consumer confidence.

“All of that is leading to a boost in demand for housing, and has translated into the spectacular rate of appreciation we’ve seen in the housing market,” Nattagh said. Further large gains likely cannot be sustained because the economy’s growth eventually will slow, Nattagh said. He predicts year-over-year gains of 5% to 6% in Orange County over the next three months.

Overall, California cities dominated the rankings of 37 metropolitan markets, with seven finishing in the top 12 as measured by appreciation.

San Diego ranked third with a 16.0% appreciation rate. Oakland was fourth at 14.0%; San Jose, fifth, at 13.4%; San Francisco, sixth, at 13.3%; Los Angeles tied for 10th, at 8.4%; and Sacramento, 12th, at 7.5%.

Riverside-San Bernardino wound up 34th, at 3.8%. Homes in the Inland Empire are worth 23% less than they were in 1990, the last peak year for housing values, the report said.

The survey also pointed out that the typical home in Los Angeles-Long Beach is worth 19.7% less than in 1990.

The report is based on 2.4 million repeat sales, measuring the appreciation of homes that sold at least twice since 1990. Rather than reporting a median price for each market, as several other studies do, it tracks the rate of gain. The survey is based on 50,393 homes in Orange County.

In Orange County, First American’s report confirms what many others have shown: that housing values soared in 1998.

The National Assn. of Realtors reported earlier this month that Orange County posted the second-highest median price in the nation last year at $264,500, trailing only San Francisco’s $325,800.

A survey by Acxiom/Dataquick showed that median home prices in 1998, meaning half sold for more and half sold for less, hit an all-time high of $226,000. For 20 consecutive months, Orange County homes recorded year-over-year price gains.

In addition, Acxiom/Dataquick’s results show that most Orange County’s homes have recovered their lost value.

“The negative equity phenomenon is a thing of the past in Orange County as a result of the appreciation Orange County has seen over the past two years,” Nattagh said.

But Michael Carney, who heads the Real Estate Research Council at California Poly Pomona, said that while south and coastal parts of the county have regained their value, north and central parts still have yet to surpass their previous peaks.

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Price Surge

Led by an 18% surge in Orange County, home values in the United States rose on average 8% in 1998. Six of the 10 hottest markets were in California. For the decade, however, Orange County homes are still running slightly below their 1990 values. The top markets, percentages based on resale value of same homes that have sold at least twice:

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1997-98 1990-98 Area % Change % Change Orange County 18.1% -0.1% New York 17.3% 7.5% San Diego 16.0% 3.5% Oakland 14.0% 9.1% San Jose 13.4% 28.7% San Francisco 13.3% 20.6% Boston 11.0% 18.1% Seattle-Bellevue-Everett 10.5% 46.8% Denver 9.7% 95.9% Los Angeles-Long Beach 8.4% -19.7% Detroit 8.4% 68.0% California* 10.1% -6.4% U.S.** 8.0% 17.9%

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Other California Markets

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1997-98 1990-98 Area % Change % Change Sacramento 7.5% -12.1% Riverside-San Bernardino 3.8% -23.1%

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* Includes only eight California areas

** Does not include 10 states with nondisclosure laws, including Texas

Source: First American Real Estate Solutions