No Ceiling in Sight for Valley Home Prices

Continued strong housing demand, limited supply and the popularity of high-priced digs helped ratchet up September single-family home prices in the San Fernando Valley to their highest levels in seven years, figures released Monday show.

Last month, the median price of a single-family home in the Valley was $225,000, a gain of 18.5% over the September 1998 figure of $189,900. It was the highest median price in any month since April 1992, when the median was $227,000.

“This is part of the revitalization of the market that’s continued for the past few years,” said Jim Link, executive vice president of the Southland Regional Assn. of Realtors, which issued the report on September sales. “It’s high demand and low supply. That’s when prices tend to go up.”

Nima Nattagh, research director for First American Real Estate Solutions, said continued strong sales of high-end homes also contributed to the September jump, and may give a slightly skewed picture of the average home appreciation.

“Larger and more expensive homes are more popular this year than last year, and that’s exaggerating the trend for appreciation rates,” said Nattagh, whose Anaheim-based research firm tracks home values nationwide. “For the L.A. area as a whole, the average appreciation rate is more in the tune of 10% to 11%.”

The Valley’s increased values were accompanied by increased demand, as evidenced in the September sales numbers. Bucking the seasonal trend in which sales often dip in the fall, more than 1,600 properties changed hands in September, a 16% jump from September 1998, and a 9% increase over August of this year.

Much of the housing strength continued to be in the condominium market, which saw a 32% leap in sales: 396 in September vs. 300 in September 1998. The median condo price, however, gained less than 2% in September, compared with the same month last year.

Single-family homes saw a 12.1% increase in number of units sold, with 1,229 homes changing hands last month, compared with 1,096 in September 1998.

That sales pace, local real estate experts said, is uncommon.

“Normally, we start to see activity start to trail off, usually right about now,” said Link. This year, he said, “people want to get that purchase in now, with interest rates going up.”

“We have had an unusually strong September.”

Further north, a nearly 18% drop in sales was blamed on the traditional fall slowdown.

In the Santa Clarita Valley, 217 single-family homes were sold, down 17.8% from the previous-year figure and 10% lower than August 1999. The median price rose by just over 7%, to $224,900, compared with September 1998.

In both areas, supply was described as limited, with Link suggesting that at the current sales pace, the San Fernando Valley has about a four-month supply of homes on the market.

Real estate experts offered mixed views Monday on how much recent increases in short-term interest rates affected September sales figures. The Federal Reserve has boosted rates twice in recent months, once in June and again in August, to try to head off inflation.

Link said some home buyers are jumping in now, wary that there may be more hikes in the months ahead.

“Interest rates are rising, which is part of the reason we’re seeing the market picking up,” said Link. “The fear of potentially higher rates has spurred some to make a purchase now.”

Nattagh noted that rate hikes tend to have a stronger effect on the refinancing market than on home sales.

And Gordon Reid Wallack, an attorney and real estate broker who has tracked sales in the Valley for more than 20 years, noted that with many Valley buyers moving up to more posh places, small variations in the interest rate have less of an effect.

“It always has some impact,” said Wallack, whose Encino-based firm handles matters related to real estate law. “If you’re trading up, it probably won’t matter much. If you’re trying to get into the market for the first time, it will have an impact.”

Wallack said he thinks that over the past few years, the Valley has regained some of its lost stature as a desirable destination. And that, he said, is helping fuel housing demand, which in turn notches up home prices.

“The Valley is coming into its own again,” said Wallack. “An hour north of here is not here. So it [a Valley address] becomes more valuable.”

Valley home values are now nearly 20% higher than they were at the beginning of the year.

Still, unlike some of the tonier neighborhoods on the Westside, the Valley is still more than 8% shy of its all-time valuation high of $244,000, set in April 1990. The recession of the mid-’90s and the Northridge earthquake combined to send Valley home prices into the tank, and the region has yet to fully recover.

“It’s taken awhile to rebuild,” said Leslie Appleton-Young, chief economist with the California Assn. of Realtors, who noted that the Silicon Valley passed its pre-recession price level in 1997.

“We are now kind of full-fledged into the economic recovery and growth in the San Fernando Valley,” she said. “It takes time for everybody to participate.”