Home Prices End the Year on a High Note

Typical home prices in Orange County surged to a record $258,000 last month, dwarfing the previous high and capping another banner year for the real estate industry.

December’s median home price, the point where half the homes sold for more and half sold for less, rose 9% from the previous year. It marked the 31st consecutive month in which housing prices in Orange County surpassed year-earlier levels, the research firm Acxiom/DataQuick Information Services reported Monday.

For the year, the median price of all existing and new houses and condos sold in the county increased 6%, a considerably slower pace than the 13% price surge in 1998.

Still, the median home price in the county last year climbed even higher into record territory, to $240,000--up from $227,000 in 1998 and well above $218,000 in 1991,

the level before housing prices in the county skidded.

“It’s an unspectacular, but record-breaking year,” said John Karevoll, an Acxiom/DataQuick analyst who prepared Monday’s report.

Karevoll said that given Orange County’s strong job growth, a key driver of housing demand, home prices are expected to rise as much as 9% annually “well into this year and beyond.”

The latest report shows Orange County’s housing market remains more buoyant than Los Angeles County’s.

Based on preliminary data, the median home price in Los Angeles County advanced 4% in December from a year earlier, to $192,000. For the year, the median price in Los Angeles County rose 2% to $188,000, edging closer to its annual peak of $193,000 in 1991.

Throughout last year, home prices in Orange and Los Angeles counties recorded steady gains. But in November and December, sales of new homes saw a sudden spike, as builders sought to clear inventories before the end of the year. That helped push up overall home prices.

In December, a total of 4,272 homes and condos were sold in Orange County, a 1% decline from a year earlier, which was the strongest December on record.

For the year, condos in Orange County saw the biggest percentage gain in prices, up 7.4% to $160,000. The median price of resale houses last year was $257,000, up 7.1%. The price of new homes grew 5.7%, to $332,000.

Even though Orange County’s housing prices ended the year by growing at a slower pace than the previous year, analysts said that resulted partly from a larger number of sales of entry-level properties. Sales of condominiums in Orange County totaled nearly 13,000 last year, the highest in more than a decade.

One of the driving forces in home sales throughout the state has been the stock market. More people have been using proceeds from the stock market or borrowing from their 401(k) or other retirement plans for down payments.

In Orange County, about one of every five homes bought in the third quarter last year were financed partly by stock market proceeds, according to a survey by the California Assn. of Realtors, a Los Angeles-based trade group.

“There is extra cash and extra wealth to support higher prices in Orange County,” said G.U. Krueger, an economist at the Realtors’ group.

In Los Angeles County, the stock market figured in about 13% of the purchases in the third quarter, the survey said.

Robust Economy Is Driving Market

Housing analysts said the market remains strong in Orange County because of the robust economy and strong buyer confidence. Moreover, the thinning inventory of houses has propelled the market in recent weeks. That’s enabled sellers to reap premium prices in many cases, said Patrick Knapp, an agent at ReMax Real Estate Services in Newport Beach.

“Now, the overpriced and high-priced homes--whatever is left on the market--[are] now selling because there’s nothing else left,” Knapp said.

In some cases, sellers have benefited by making more realistic listings.

Michael and Kathryn Andersen initially put their Foothill Ranch home on the market last summer. They paid $221,000 in 1997 for their three-bedroom, 2 1/2-bath home, which has a backyard that borders the Cleveland National Forest and has a canyon view.

Eager to start a family, the Andersens wanted to trade up, seeking an opening price of $300,000. But after going several months and seeing little interest, they cut the price to $294,000 and then to $289,000. That led to a sale earlier this month at $280,000--still a big premium over what they paid.

“We weren’t desperate to move out, and we ended up getting a good price,” said Michael Andersen, 37, who works at a Ralphs distribution center in Riverside County.

But even as stock market gains have enabled more families to acquire homes, the overall home affordability rate in Orange County has dropped six percentage points over the past year to 32%.

Based on household income distributions in the county, that means 54,000 additional families in Orange County last year could not afford to buy a median-priced house. And only one out of five households in Orange County could afford to purchase a new home.

Buyers in Orange County who put 20% down on a median-priced home with a fixed rate, 30-year mortgage at 7.5% interest would be looking at a monthly payment of $1,633, or $309 more than just a year ago, said Krueger of the realty group.

Analysts said that given the kinds of houses being built, the affordability rate probably will get even smaller.

“What’s coming on line is geared toward upper incomes,” Krueger said. “The problem is there’s not enough housing being built.”

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YOUR NEIGHBORHOOD

Home prices for December are broken down by ZIP Code. B3

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Orange County Home Sales

December’s median home price of $258,000 was $22,000 higher than a year ago. The greatest price increase came in new homes, which rose in value by 7.6% to $358,000--a $26,000 increase in a year’s time. December was the 31st month in a row that prices exceeded year-earlier figures. Sales, median price and median price per square foot for new and resale homes and condominiums by ZIP Code:

(charts)

Rising Values

Orange County median home prices have recorded a sharp gain since 1996.

* Includes new and existing houses and condos

1995: $193,000

1999: $240,000

Dec. 1999: $258,000

Source: U.S. Department of Commerce