Home prices in Orange County kept growing vigorously in February, but the number of houses sold plunged for the first time this winter, according to a report Wednesday.
The median price of homes sold in Orange County last month surged 14% from a year earlier, to $286,000. The percent increase was double the rate of increase in Los Angeles County, where the median price rose to $206,000.
The home value appreciation in both counties was broad-based, including condos and single-family houses. But new houses, which are in low supply, saw the biggest run-up in prices, jumping 34% in Orange County to $445,500.
But sales of Orange County homes fell 21% last month, the steepest drop since July. Analysts generally viewed the drop-off--homes sold in Los Angeles County also fell 7%--as a one-month blip partly attributed to low inventories.
Although some brokers are reporting signs of slowing, most agreed that it will take two or three months of sales decline to indicate a trend.
"I really don't think that's an indication of any turnaround or downturn in the market," said John Karevoll, an analyst at DataQuick Information Systems Inc. who prepared the report.
After analyzing a wide range of trends in the monthly housing report, including the financing and housing mix, Karevoll said he expects sales numbers to bounce back. "Come next month, we'll be back to the [sales] levels we had a year ago," he said.
Despite the weakening national economy and sagging stock market, analysts and brokers say buyer demand in the region has not softened. That's largely because job growth remains robust and interest rates have dropped in recent months.
Inventories are shrinking, which helps push up home values.
In Orange County, the latest figures showed there was only a 3.3-month supply of existing homes on the market, down from 4.1 months a year earlier, according to the California Assn. of Realtors. In Los Angeles County, there was a 5.2-month inventory, down from 5.8 months a year earlier.
Moreover, there are few moderately priced new homes for sale. In Orange County, only 15 newly built houses under $500,000 were available on the market in December, according to the Meyers Group, an Irvine housing research firm.
The tight supply could contribute to slowing sales. So could the recent plunge in consumer confidence.
Some analysts now say they expect the housing market in Los Angeles and Orange counties to begin softening as early as this spring.
"Given the decline of the stock market and the slowdown in the economy, one has to expect that this trend will slow down both sales and housing prices for the remainder of this year," said Anil Puri, dean of the School of Business and Economics at Cal State Fullerton.
Some brokers say they already are seeing what may be early signs of a cooling market.
"We're not going to see them selling as fast, or getting record prices," said Mike Cocos, a manager at ERA North Orange County. Homes are sitting longer on the market--what took three or four weeks to sell before is taking five or six weeks, he said.
Even so, he said there's still significant desire for entry-level homes costing $250,000 or more. Anything priced less than that is disappearing fast, he said, unless the home needs repair.
Analysts cite several factors that will help the housing market maintain its momentum.
Despite rising layoffs, unemployment remains low and job growth hasn't weakened much yet. Thus far, there aren't signs of rising financial strain among households in general.
Aside from few homes offered for sale, other indicators of a declining market were lacking in February. For example, the number of people entering the first stage of foreclosure declined in February in Orange County to 313, from 397 a year earlier. In Los Angeles County, the number dropped to 1,979, from 2,562 a year ago.
What's more, with mortgage rates inching downward, more households are qualifying for fixed-rate mortgages. The number of households using adjustable rate mortgages fell last month to 15.6% in Los Angeles County and to 18.2% in Orange County--the lowest totals in two years, according to DataQuick.
DataQuick's report showed that 2,707 homes were sold in Orange County last month, compared with 3,409 in February 2000. In Los Angeles County, 6,532 homes were sold last month versus 6,986 a year earlier. Most of the homes sold are existing houses.
* Sales chart, B4