Home Buyers Push Price Ceiling Higher
Orange County’s housing market, the priciest in Southern California, ignored a weakening national economy to reach record prices both for December and for all of last year, according to a survey released Tuesday.
Throughout 2000, the county’s housing market pushed up monthly prices by double-digit rates 11 times and ended with an overall annual median price of $271,000, rising nearly 13% from a year earlier, according to DataQuick Information Systems Inc., a La Jolla research firm.
For December, the median price--the point at which half the homes sold for more and half for less--hit $292,000, or more than 13% higher than the previous December. For 43 straight months, county housing prices have increased on a year-to-year basis.
A cut in the interest rate this month could give an additional boost to the housing market, even though a slowing national economy is leading to some layoffs and more cautious consumer spending nationwide. How high prices can go and for how much longer they can rise is uncertain, but experts say there is no sign of a real estate slowdown yet.
“I think we’re seeing an increasingly stronger market,” said John Karevoll, the DataQuick analyst who completed the report.
In Los Angeles County, for instance, the median price remained strong in December at $205,000, which helped to push its annual median price to a record $199,000, according to DataQuick. The previous annual high was $193,000, in 1991.
Recent regional reports that show unemployment declining, incomes growing and construction falling short of demand across the Southland lead Karevoll to believe that the housing market will be able to maintain its current pace.
“The depth of the market is a lot stronger than anyone anticipated,” he said. “It’s more of the same for the next three or four months. There isn’t anything that indicates any corner has been turned.”
The rate of increase for existing home prices should slow down only slightly this year in Orange and Los Angeles counties, said Esmael Adibi, an economist at Chapman University. With interest rates dropping and jobs being created at a quick pace in the region, demand for new homes will remain high, he said.
But other economists are more cautious, saying weakness in the national economy will dampen Southern California’s economy by midyear. Concerns over capital investments, consumer spending and foreign trade will probably lead to lower employment growth nationally, and that would gradually affect the Southland, said Tom Lieser, a senior economist at UCLA’s Anderson Forecast.
“We would not be immune, but we would be spared from the worst effects,” Lieser said.
The nation’s housing market, like the Southland, has remained resilient despite an eroding economy. The National Assn. of Realtors expects a 2.5% increase in resales this year to more than 5 million houses, the second-highest level on record.
Overall, the regional housing market “won’t measure up to what people have come to enjoy, but it will be a relative good year nonetheless,” said Mark Zandi, chief economist at Economy.com, a West Chester, Pa., consulting firm. He expects the gains in median prices to be about half what they were last year.
But mortgage rates, which have fallen to about 7%, their lowest in two years, will help keep Southland buyers in the market for homes.
New buyers like Brandon Portnoff, jumped into the market. Portnoff, 25, toured Ladera Ranch, a master-planned community in south Orange County, and agreed to buy a two-bedroom, 2 1/2-bath townhome for more than $250,000.
Home Sales Are on the Decrease
Talk of a nationwide recession didn’t faze him, he said. “It wasn’t real significant,” Portnoff said. “I don’t have a lot of money invested in stocks and mutual funds, so the concerns weren’t going to affect me directly.”
His purchase helped bump up sales of new homes in December, a month when builders typically seek to clear out inventory.
Overall, however, December sales in both counties decreased slightly from a year earlier, which analysts attributed to a relative scarcity of new and existing homes on the market.
The number of homes sold in Orange County slipped to 4,147 last month from 4,272 the previous December, a decrease of nearly 3%, DataQuick reported. For the year, there were 49,889 homes sold in the county in 2000, down slightly from 50,154 homes in 1999, DataQuick said.
In a breakdown of December prices, DataQuick found that the median price of new homes rose 17% to $419,000, while condominium prices grew more than 15% to $183,500 and existing houses sold for a median of $290,000, a 9% increase.
The higher prices pushed up ownership costs. With a 10% down payment and a 30-year fixed-rate mortgage at 6.8%, the monthly payment for a median-priced home in Orange County was $1,718 last month, compared with $1,633 a year earlier, DataQuick said.
A slower growth in home prices, economists said, would produce a needed cooling effect for more moderate income families to enter the market, analysts said.
“We would not expect a real estate recession or major downturn, but the bottom line will be probably lower rates of price [increases] than what we saw last year,” said Lynn Reaser, a chief economist at Banc of America Capital Management in St. Louis.
“And a lower rate . . . may prevent California’s housing market, particularly in Orange County, from becoming further and further priced out of the reach of potential home buyers,” she said.
The monthly DataQuick study reports on home sales that closed in December, reflecting agreements between sellers and home buyers over the previous 30 to 60 days.
A similar report is expected to be released later this week for Ventura, Riverside and San Bernardino counties.
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Orange County Home Sales
In December, the median home price rose to an all-time record of $292,000. Sales totaled 4,147, a 3% decline from the year-earlier period. Sales, median price and median price per square foot for new and resale homes and condominiums by ZIP Code:
Source: DataQuick Information Systems
