Home Sales, Prices Jump in L.A., Orange Counties
Home sales and prices in Los Angeles and Orange counties grew vigorously last month, providing further evidence that the region’s resilient housing market is increasingly cushioning the blows of a weakening economy.
Despite the energy crisis, layoffs and malaise on Wall Street, median home prices shot up 7% in Los Angeles County and 10% in Orange County from January a year ago, according to a report released Tuesday by DataQuick Information Systems Inc., a La Jolla research firm.
Sales were brisk, rising 8% in Los Angeles and 5% in Orange, as the market was buoyed by declining mortgage rates, strong equity gains and still-robust demand from a broad spectrum of borrowers. The increase marks several months of year-to-year gains in homes sold, despite declining sales of new and existing homes nationally in recent months.
The sustained vitality of the Southern California housing market has surprised analysts, who say housing could be a critical factor in staving off a possible recession in the region.
Strong home sales and appreciation enhance consumer confidence, put more money in people’s pockets and boost a range of industries from mortgage bankers to glass manufacturers and furniture retailers.
“There may be a slowdown in the works, but right now, we can’t find it,” said John Karevoll, the DataQuick analyst who compiled the report. “The numbers look strong.”
A decade ago, a housing market held together by a thin glue of speculative investing and overbuilding tore apart and helped push the region into a deep recession. But this time, economists see the reverse: Strong population growth, under-building and more gradual home appreciation bode well for sustaining a healthy housing market.
“Southern California remains shockingly upbeat given the plethora of bad economic events that have battered the state over the past several months,” said Mark Zandi, chief economist at Economy.com in West Chester, Pa.
Zandi estimates that housing accounts for 15% of the nation’s economy and usually makes up more in California because of higher real estate values.
A significant downturn in housing nationally has led to nearly every recession since World War II, he said. “If housing is doing well, it’s very hard to imagine the broader economy will fold.”
Other economists predict that slower growth and lower consumer confidence in Southern California will soften the housing market in the coming months. But the drop-off will be moderated by pent-up demand for housing, they said.
“While sales may not grow very much, they’re not likely to drop off either,” said Ted Gibson, an economist at the state Department of Finance.
The DataQuick report, for instance, cataloged 6,614 homes sold in Los Angeles County, the most for any January since 1990. In Orange County, 2,746 homes were sold last month, compared with 2,607 the previous January.
The median price of a home sold last month in Los Angeles County was $200,000, just $5,000 off its record high in December. In Orange County, the median price--the point at which half the homes are sold for more and half for less--rose 10% from a year earlier to $276,000, but was $16,000 lower than December’s record, DataQuick said. Prices typically decrease from December to January because fewer new homes are sold.
Sales have been stimulated by a number of factors, analysts said.
The Federal Reserve cut interest rates twice in January, leading to the lowest mortgage rates in two years. Job and population growth have remained high in the region, far outpacing new housing starts. And renters are looking to gain tax advantages by purchasing homes.
Realtors said those factors also have helped keep buyers in the market well into this month.
Jennifer Rodriguez and her husband, Oscar, combed Long Beach, Lakewood and Cerritos for a home. But the 23 houses they viewed in their price range were either too small, in undesirable neighborhoods or already sold.
Finally, in Cypress, they found a four-bedroom, 1 1/2-bath home for $239,000. They beat by a day another bidder, who offered $3,000 more, all in cash. “We just got really lucky,” said Rodriguez, 28, a Tustin accountant.
Agents say the market is particularly strong for homes priced under $500,000. In some cases, buyers are purchasing homes that lack some of the amenities they seek because they fear that nothing else will be available while interest rates are low.
“Buyers are in more of a panic than they were before,” said Richard Daskam at Coldwell Banker Alliance Realty in Los Alamitos.
In Santa Monica and around West Los Angeles, agents said they have begun to detect hesitancy from a number of potential buyers. Some fear a strike in the entertainment business, and others have been shaken by failures and layoffs among dot-coms. Whatever the reason, they are looking for less-costly homes.
“A few people said they’d be ready at the start of the year, but they’ve now said, ‘Call me back in a few more months,’ ” said Linda Semon, an agent at Coldwell Banker Santa Monica. “It’s really a good market, but there are buyers holding back.”
Lower mortgage rates have reduced monthly payments. With a 10% down payment and a 30-year fixed mortgage at 6.6%--the average rate in January for Los Angeles County--the monthly payment for a median-price home in Los Angeles County fell $72 a month from a year earlier to $1,148. In Orange County, the figure fell 8% to $1,584 a month.
Conventional mortgage rates have fallen under 7% this year, the first time they’ve broken through that level since early-1999. How much lower rates can drop, however, depends on the next turn for the U.S. economy overall, and whether the Fed continues to ease credit.
The DataQuick report covers home sales that closed in December, reflecting agreements between sellers and home buyers in the previous 30 to 60 days. A similar report is expected to be released later this week for Ventura, Riverside and San Bernardino counties.
