House Prices Continue Climb as Sales Drop
Housing prices in Los Angeles and Orange counties streaked higher last month, but the number of homes sold fell sharply, signaling to analysts that the market may be cooling down as it heads into the prime home-buying season.
The drop-off in buyers in April reflects the region’s thinning supply of affordable homes as well as rising interest rates. Mortgage rates have been nudging steadily higher in recent months, and Thursday the average 30-year fixed-rate mortgage nationwide was reported at a five-year high of 8.52%--up nearly a quarter of a point from just last week and from 7.1% a year ago.
Economists said the April sales data did not necessarily mark a turning point in the region’s housing market, which has enjoyed robust growth amid a strong economy and healthy income gains for many families. Weaker housing sales would have a widespread effect on the economy, touching everyone from mortgage bankers to glass makers to furniture retailers.
Last month the price for a typical home sold in Los Angeles County rose 4.3% from a year earlier, to $195,000, near an all-time high. And Orange County’s median price--the point at which half the homes are sold for more and half for less--surged 13%, to a record $262,000, according to a report released Thursday by DataQuick Information Systems, a La Jolla research firm. Data for other counties are to be released later.
Despite the higher prices, the number of new and existing houses and condos sold last month dropped by 8% in Los Angeles County and were off a whopping 13% in Orange County. In March, the sales numbers in both counties were up moderately.
Rapidly rising prices, coupled with higher interest rates, have locked out more and more families who cannot afford the average-priced home. And in the high-end market, the volatile stock market has cut into buyers’ confidence.
“What I’m starting to see more often than not is some concern on the part of buyers that the market may have reached a peak in values,” said Patrick Veling, analyst at Dynamic Marketing Resources Inc., a Fullerton research firm.
Brad Blackwell, who heads the home lending group at Washington Mutual, the state’s largest mortgage lender, said the market remains very strong. But he noted, “There simply are not enough properties for people to buy, particularly at the low end.”
In the near term, even more first-time and move-up buyers may hold off purchasing a home because of high mortgage rates and increasing signs of slower economic growth.
This week’s sudden jump in fixed-rate mortgages reflected expectations that the Federal Reserve will bump up key short-term interest rates by as much as a half-point next week. Economists say the Fed believes slower housing sales are necessary to cool the economy’s sizzling growth and thwart inflation. Nationally, home sales have been showing signs of slowing.
The Southland’s housing market, which took a pounding during the first half of the 1990s, is at an earlier stage than the nation’s. But if the pace of sales continues to slacken, the supply of homes available for sale will probably increase, ultimately putting a check on prices.
Many say that’s healthy for the market.
“I don’t anticipate the market will be at the frenzied level we’ve seen in the first half of this year,” said Washington Mutual’s Blackwell. “If anything, we will see a market in the second half that’s more in balance, which is good news for home buyers.”
Others in the industry said it was too early to say a shift was occurring.
John Karevoll, the DataQuick analyst who prepared Thursday’s sales report, said there obviously is a point at which home prices rise too high and buyers have trouble qualifying. “But we’re not there yet,” he said. “At some point down the line, things will level off. But right now I don’t see it happening.”
Real estate agents generally said buyer demand remains brisk. Marty Rodriguez, who owns a Century 21 brokerage in Glendora, said dwindling supplies have put pressure on buyers to place higher bids on homes.
One client, she said, recently bought a home by paying $5,000 above the $329,000 asking price because he feared being outbid. “When you have demand and not enough supply, houses are selling as quickly as they come up,” Rodriguez said.
Although latest inventory figures by county were not available, statewide there is currently about a three-month supply of homes, according to the California Assn. of Realtors. Experts say a nine-month supply is typical.
In the high-end market, however, there are more signs of slowing sales.
In Orange County, for example, there are enough houses priced at $700,000 or more to last 20 to 28 weeks--compared with a 12-to-16-week supply as recently as February, according to research by Dynamic Marketing.
Bill Ristow, a broker at ReMax Realty Center in Yorba Linda, said that in January he sold a home in the Big Canyon area of Newport Beach for $1.3 million. In four weeks, the home garnered four offers and sold for only $7,000 less than the asking price.
But another home, priced at $1.59 million, or $100,000 over what the current owners paid only a year ago, has languished on the market for 20 weeks without receiving a bid.
“The market has changed day and night on the high end already,” Ristow said.
Nima Nattagh, an analyst at First American Real Estate Solutions, an Anaheim research firm, sees the latest housing sales drop as positive.
“The decline we see today is not the sign of an unhealthy market,” he said. “It’s a decline relative to the hectic pace we saw last year, and the year before.”
