New-Home Sales Decline 30% Statewide in 3rd Quarter

New-home sales in California plunged 30% in the third quarter from a year ago, providing the strongest sign yet that the once-resilient housing market is unraveling fast and could add to the current economic turmoil.

The report Tuesday by Meyers Group surprised analysts. Although sales were expected to fall sharply in expensive markets such as the Bay Area and Orange County, the third quarter saw steep sales drop-offs in more moderately priced areas such as Sacramento and the Central Coast.

By comparison, sales in Los Angeles County and the Inland Empire held up fairly well--a striking contrast to what happened during the recession last decade.

The Sept. 11 attacks accounted for only about 10% of the overall sales decline; sales statewide were eroding early in the June-through-September period, especially for luxury homes, said John Burns, an analyst at the Irvine research firm.

Meyers Group did not compile the overall median price of new homes statewide, but regional breakdowns indicate a significant slowdown in most areas and big outright declines in the Bay Area.

In recent years, new-home prices statewide climbed rapidly as builders opted to put up more expensive homes during California’s vast wealth creation.

But consumers have become increasingly wary of making big purchases, even as mortgage rates have fallen to near-historical lows, and some sellers have begun to lower their list prices. Increasing job losses also have crimped confidence and sales.

Economists said the latest report suggested that the housing market is now likely to be a drag on the economy rather than the cushion it has been until now.

Esmael Adibi, an economist at Chapman University, said the weakness in the housing market may very well slow an economic recovery.

Despite the sales drop-off, economists do not foresee significant declines in home prices in Southern California. Stephen Levy, an economist at the Palo Alto-based Center for the Continuing Study of the California Economy, said that low inventory and lingering demand for homes, plus falling mortgage rates, helped prop up prices.

New homes represent about 15% of the housing market, but they are generally much more expensive. Existing-home sales in California have been weakening as well; September sales dropped 17% statewide from a year ago. As home sales have slowed, builders have cut back on new projects. The number of new permits pulled, a measure of building planned, declined in June, July and August, the latest month available.

Tuesday’s new-homes report showed that the brunt of the housing market decline is being felt in Northern California, where sales in the third quarter overall fell 42%. Sales in the Bay Area, which includes San Francisco and the San Jose area, fell 45% and sales dropped 39% in Sacramento.

“Real estate is the next big thing to go in the Bay Area,” said Ted Gibson, chief economist at the state Department of Finance. “The whole thing is supported by IPOs [initial public offerings] and stock options and the like, and that’s gone away.”

In Southern California overall, new-home sales fell 20%, with transactions tumbling 37% in Orange County and 32% in San Diego County.

Sales in Los Angeles County declined 13% in the third quarter from a year ago, and they dropped 5% in the Inland Empire. New-home sales in Ventura County were off 30% in the third quarter.

The median price of new detached homes sold in Orange County in the third quarter was $469,000, up 6% from a year ago. In Los Angeles County, a typical new detached home fetched $319,000 in the third quarter, a 14% increase from a year ago.

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Times staff writer James S. Granelli contributed to this report.