October Home Prices Up 6.1% in County

Orange County home prices rose 6.1% in October from a year ago, a climb expected to continue even as the market weathers its annual autumn cool-down.

The median price of $244,000--half of the homes sold for more, half for less--was a notch below September’s record $245,000, but still $14,000 higher than a year before.

And October was the 29th consecutive month that the median price exceeded year-earlier figures, according to Acxiom/Dataquick Real Estate Systems Inc., a La Jolla-based firm that tracks Southland home prices.

“Even though the rate of growth seems to be slowing a bit, home values are still going up in the 6% to 8% range,” said John Karevoll, an Acxiom analyst who compiled the report. “It may not be exciting, but it’s a safe environment for potential home buyers or sellers. The levels of uncertainty are lower than any time I can remember.”

The number of homes sold was virtually unchanged from the previous October, at about 3,900.

Analysts said the economy continues to churn out far more jobs than housing, keeping demand, and therefore prices, at or near historic highs.

But that doesn’t mean prospective buyers are willing to pay any amount to purchase a home, agents say. Instances of multiple offers on a property are scattered rather than commonplace.

“Prices have gone up so much that buyers are balking at these prices. I think sellers now have to get more realistic,” said James Joseph, who co-owns a Century 21 office that serves north Orange County.

“I know people would like to read prices went up 30% or something,” Joseph added. “But the bottom line is this is a healthy, sustainable market.”

Prices of previously owned homes recorded the highest gains last month, rising 8.3% to $260,000, a $20,000 jump for the year. It was the fourth consecutive month the median price of resale homes was $260,000 or higher.

Condominium prices rose 5.4% to $159,750. New homes, when compared with record figures from a year ago, declined 3% to $344,500.

With consumer confidence still soaring, stocks still surging and Orange County’s economy still showing significant job growth, Karevoll expects the overall median price will rise above $250,000--possibly as high as $260,000--by year’s end.

The market is appreciating at a uniform rate, Karevoll said, as entry-level properties have moved in sync with prestigious ones, in terms of prices and sales. Home prices per square foot--considered a good measure of the market--rose 8% over a year ago to $158. The percentage change is the lowest since January 1998, underscoring slower growth in October, Karevoll said.

As interest rates have moved higher this fall, analysts said the only ones affected are entry-level buyers. More affluent buyers, they said, are more resistant to interest rate fluctuations.

In October, 40% of buyers opted for adjustable-rate mortgages rather than fixed-rate loans. Over the past two years, as the market showed signs of rebounding from the recession earlier this decade and interest rates dropped to historic lows, only 15% of home buyers were using adjustable-rate mortgages.

But the trend toward these flexible-rate loans, which allow buyers to get pricier homes at a lower initial interest rate, indicates that more consumers are stretching to qualify for loans.

At the current median price of $244,000, a 30-year fixed mortgage at 7.54% interest, assuming a 10% down payment, runs $1,540 per month. That compares with a $1,663 monthly payment a decade ago during the last housing boom. At that time, home prices were lower than today, but interest rates were higher.

“Even with the rising interest rates, it’s still a strong market,” said Patrick Knapp, an agent with Re/Max Real Estate Services in Newport Beach. “If sellers are asking a fair and reasonable price, their home will be sold.”