L.A. Home Prices Back to Pre-Recession Peak
Rising Los Angeles County home prices have at last reached the high-water mark achieved in 1991 before the region plunged into a recession that sent values plummeting and left many people owing their lenders more than their homes were worth.
Los Angeles County homes are now generally valued at what they cost before the downturn sent county real estate prices falling 25% in the early 1990s, according to a report released Monday by DataQuick Information Systems Inc., a La Jolla research firm.
Despite predictions of a national slowdown in real estate sales, the median Los Angeles County home price rose to $203,000 in June, matching the all-time high set in May 1991, DataQuick said. In Orange County, the median price rose 13% over a year ago to $273,000.
“Everyone’s been expecting the market to taper off, but the numbers clearly indicate that the market is still strong,” said John Karevoll, the DataQuick analyst who completed the study.
During the recession, a number of housing developers went bankrupt, along with some institutions that provided mortgages for home buyers. Many people who owed more than their houses were worth simply gave the keys back to their lenders and walked away.
Some older workers who were laid off in the rough economy sold their homes for what they could get and moved out of state, further depressing the market. First-time owners often couldn’t sell their homes, demolishing the move-up market.
Economists predicted in recent months that home prices in Los Angeles County would surpass the previous record high sometime this year. The report comes as welcome news to many owners, whose homes have been slow to record higher values, even though a long stretch of economic prosperity has lifted almost every other county in the state above previous home price peaks.
“The local economy is healthy, is creating jobs at a rapid pace, so people have the wherewithal to buy housing,” said Jack Kyser, an economist at the Los Angeles Economic Development Corp. “But we really haven’t built enough new housing in Los Angeles County to keep up with population growth, and that puts added pressure on all home prices.”
Although the county is still about 97,000 jobs short of its peak in the early 1990s, the Los Angeles economy has recorded significant growth since then.
The housing report will bolster confidence for some sellers, creating optimism that their home will sell if put on the market as a stream of good economic news continues, Kyser said. “Declining unemployment, reports of labor shortages and home prices going up--if it’s not nirvana, it’s pretty close.”
But other economists downplayed the report. “I don’t think it’s going to do much,” said Rajeev Dhawan, director of econometric forecasting at UCLA Anderson Forecast. “People need to see some real gains. It’s kind of a bogus milestone.”
It’s also worth noting that when inflation is taken into account, prices still have a way to go before they are equivalent to those of the last real estate peak. Statisticians calculate that $203,000 in 1991 dollars would be worth $250,913 today.
Smaller and mid-size homes recorded a sharp gain in the Los Angeles market last month, Karevoll said, boosting sales and curbing prices overall from going higher. In fact, he added, home prices in Los Angeles County would have risen 7% to 8% over a year ago, as a higher proportion of expensive homes would have driven prices higher if more entry- and moderate-level buyers had not purchased a house.
That trend in Los Angeles County, however, is just the opposite in Orange County, where prestige homes have been boosting sales figures, leading to the county’s shattering four overall median price records in the last six months. Since January, median prices on homes 2,500 square feet or larger have risen by more than 11% in Orange County. But prices for homes less than 1,000 square feet have increased by 7.5%.
In Orange County, sales rose by less than 1% to 5,167, still the seventh-highest amount recorded by the La Jolla research firm since it started compiling records in 1988. The slight increase occurred despite strong figures a year before. Sales, in turn, jumped by more than 7% in Los Angeles County to 11,383, the highest level in nearly 11 years, DataQuick said.
In coming months, Karevoll said, the housing market should continue to record robust gains, reflecting high job growth, household income and other fundamentals that propel the regional economy. “There are no ominous factors that indicate anything is going to change,” Karevoll said.
He predicted that the overall median price, the point at which half the homes cost more and half cost less, by December will be $215,000 in Los Angeles and $285,000 or higher in Orange County.
Real estate brokers said the market favors sellers. Despite stretching their asking prices, brokers said homes in many neighborhoods continue to sell.
“There are more buyers than sellers still,” said Richard Daskam, a broker at Coldwell Banker Alliance in Los Alamitos, who sells mostly in Lakewood and Long Beach. But rising prices continue to affect buyers’ ability to qualify for mortgages, making them question more often “whether it’s the right time to buy or not.”
The monthly DataQuick study records home sales that closed during the month, reflecting agreements between sellers and home buyers over the previous 30 to 60 days. A median price, determined by analyzing all completed transactions, shows the value gained or lost by the typical home during the month.
In Los Angeles County, new-home prices rose by nearly 5% compared with a year ago to $300,000, existing houses gained more than 2% to $210,000, and existing-condominium prices declined nearly 3%, falling to $155,000.
Using the median price for all homes sold in June, the typical mortgage payment in Los Angeles County, assuming a 30-year fixed loan with a 10% down payment, rose to $1,316, or $100 more than the same month last year, DataQuick said.
Barring an economic collapse, analysts said, the market should remain healthy. “All indications were that buyers would be getting skittish from prices or interest rates or tight availability” in the local market, Karevoll said. “But we’re not seeing any signs of thin ice here.”
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Return to Pre-Recession Prices
Home prices in Los Angeles County climbed back from the depths of the recession in the early 1990s to match the previous peak as confident Southland buyers shrugged off predictions of a weakening economy.
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May 30, 1991: $203 million
June 30, 2000: $203 million
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Source: DataQuick Information Systems
