Heat Wave Hits Housing Market

By DARYL STRICKLAND

Sept. 14, 2000 12 AM PT

TIMES STAFF WRITER

Led by spectacular gains in the new-home market, the median price of Orange County houses and condos sold last month jumped by 14% from a year earlier to a new record of $274,000.

The surge in August capped a strong summer that analysts said bodes well for homeowners in the coming months. As the county heads into the slower-selling fall season, analysts said there appears to be a clear path to more record-setting prices through December and probably even longer.

The number of houses sold in Orange County picked up last month after dropping 21% in July, a change now seen by analysts as a hiccup.

Lately, more buyers have been induced to jump back into the market because 30-year mortgage rates have been declining in recent weeks, falling back down under 8% after rising through the spring to a peak of 8.6% in late May.

“Consumer confidence has risen to near record levels again, and buyers see this as a good time to get a home before prices go even higher,” said David Chapman, an analyst at Haskell & White LLP,

an Irvine accounting firm that specializes in the real estate industry.

“I think this is the way the rest of the year is going to look,” said John Karevoll, an analyst at DataQuick Information Systems, the La Jolla research firm that released the report Wednesday. “The numbers are sustainable, and we will have a couple of more record highs in prices before the end of the year.”

DataQuick said the median price of homes sold in Los Angeles County also had a healthy appreciation last month, climbing by more than 7% to $205,000. That surpassed the previous high of $203,000 in May 1989 that was matched this June.

In Orange County, 4,729 new and existing houses and condos closed escrow last month. Although just 3% higher than a year earlier, that figure represented the highest number of home sales in more than a decade.

DataQuick compiles actual closings, reflecting overall market activity and agreements to purchase struck over the previous 30 to 60 days.

Analysts said the supply of houses, especially affordable homes, remains very low. But demand remains strong, thanks to the vibrant economy.

David Lereah, chief economist at the National Assn. of Realtors, a Washington, D.C., trade group, said he expects mortgage rates to remain stable or decline in the coming months. That should help lift home sales as more first-time buyers are drawn into the market.

Even so, the big price gains in markets such as Orange County have shut out more and more families. Based on income estimates and mortgage rates, only 27% of Orange County families can purchase an existing home, according to recent reports from the California Assn. of Realtors. In Los Angeles County, fewer than 40% of consumers can afford a home.

John Burns, an analyst at the Meyers Group, an Irvine real estate research firm, thinks the affordability rate will fall even lower, especially as new home prices are projected to move higher.

Last month, stronger sales of new homes, which are generally more expensive than existing ones, pushed up the overall median home price. In Orange County, new home sales rose by a whopping 17% from a year earlier, while existing houses recorded a slight sales decline, slipping 3%, to 2,948, compared with the same period last year.

Analysts said more buyers are choosing new homes because the number of existing homes for sale are near all-time lows. And builders have increased their output this year, although new home building continues to badly lag consumer demand.

Builders, however, are putting up ever more expensive homes, out of reach of most buyers. Indeed, the median price of a new Orange County home sold in August was $400,250--up 22% from a year earlier. Existing houses jumped more than 13% to $295,000 and existing condos rose more than 11% to $181,250.

The price gap in Orange County between new and existing houses now stands at $140,000, and it appears to be widening.

Because of such higher-priced home sales, typical home buyers in Orange County last month were looking at paying a monthly mortgage of $1,731, compared with $1,690 in August of 1999, according to DataQuick, which made its calculation based on a 30-year-fixed loan with a 10% down payment.

Even so, with the economy humming along, homeowners generally appear to be managing their payments.

In Orange County, those entering the first stage of foreclosure declined to 373 in August, from 425 a year earlier. In Los Angeles County, early-stage foreclosures declined to 2,136 last month, from 2,308 in August of 1999.

(BEGIN TEXT OF INFOBOX / INFOGRAPHIC)

Through the Roof

O.C. home prices surged at the end of summer.

New homes

Median Price Aug. ‘99: $328,000

Median Price Aug. ‘00: $400,250

Existing houses

Median Price Aug. ‘99: $260,000

Median Price Aug. ‘00: $295,000

Existing condos

Median Price Aug. ‘99: $162,500

Median Price Aug. ‘00: $181,250