Home Prices in O.C. Climb as Sales Drop
Typical home prices in Orange County surged in April to a record $262,000, 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 both Orange and Los Angeles counties, reflects the region’s thinning supply of affordable homes as well as rising interest rates.
Mortgage rates have been inching steadily higher in recent months, and on 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 in 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 glassmakers to furniture retailers.
Last month the median price of homes sold in Orange County jumped 13% from a year earlier--the highest percentage gain since August 1998 and the third straight month of double-digit increases.
Los Angeles County’s median price--the point at which half the homes sell for more and half for less--rose a more modest 4.3% from April 1999, to $195,000, near an all-time high, according to a report released Thursday by DataQuick Information Systems, a La Jolla research firm.
Despite the higher prices, the number of new and used houses and condos sold last month dropped by 8% in Los Angeles County and were off a whopping 13% in Orange County, compared with year-ago figures. In March, the sales numbers in both counties were up moderately.
Rapidly rising prices, coupled with higher interest rates, have locked out 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 buying 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 as much as half a point next week. Economists say the Fed believes slower housing sales are needed to cool the economy’s sizzling growth and thwart inflation. Nationally, home sales have been showing signs of slowing.
Sales Slowdown May Brake Prices
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. For homes priced from $200,000 to $400,000 and in attractive neighborhoods, sellers are getting multiple offers, said Pam Winton, a broker at Century 21 All-Pro in Anaheim.
“When you have demand and not enough supply, houses are selling as quickly as they come up,” said Marty Rodriguez, who owns a Century 21 brokerage in Glendora.
Connie Mack recently lost out on a house in Anaheim Hills because she took too long before deciding. So when a four-bedroom house in Yorba Linda came on the market, she jumped at it, accepting the full list price of $329,000.
“We gave them the price they were looking for, in fear of losing the house,” Mack said.
Although the latest inventory figures by county were not available, statewide there is about a three-month supply of homes, according to the California Assn. of Realtors. Experts say a nine-month supply is typical. Supply also is being constrained by a shortage of home construction because of land-use restrictions and fewer buildable lots.
“I have never seen inventory this thin in the prime selling season as right now,” said Michael Dreyfuss, an agent with Prudential California Realty in Corona del Mar, which specializes in luxury properties.
Throughout Orange County, 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 attracted 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.
The latest housing sales drop is a positive, said Nima Nattagh, an analyst at First American Real Estate Solutions, an Anaheim research firm.
“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.”
* BY THE NUMBERS
Latest home values in O.C., arranged by ZIP Code. B4
