Undaunted Buyers Seeking Homes

Carol Gagne was determined to stick with her routine this weekend. And for the 52-year-old legal secretary, that meant house hunting.

Wearing a blue-and-white sweater emblazoned with a U.S. flag around her waist, Gagne scoured homes in Long Beach with her agent as she has done on weekends for the last two months. The terrorist attacks Tuesday didn’t change the fact that she is a renter with dreams of owning.

“I have to continue on with my life and put something in the economy” she said Saturday. “What happened won’t make me give up.”

Gagne was hardly alone. Although there seemed to be fewer open houses and smaller turnouts in general, buyers with offers in mind still toured homes over the weekend, a reassuring sign that the region’s housing market may withstand the shocks from last week’s horrific events.

Throngs of people, for instance, turned out Saturday to stroll through Northpark Square in Irvine, a 900-unit subdivision of attached and detached homes with prices ranging from just under $300,000 to more than $600,000.

In interviews with more than three dozen brokers, consumers and analysts in recent days, many expressed concerns about consumer confidence and the increased likelihood of a recession. Even so, most remained cautiously optimistic that Southern California’s housing market, which has been a linchpin of the economy, stands a reasonably good chance of staying on track, at least in the short term.

With the exception of luxury homes, the Southland’s housing market is coming off an exceptional summer. When August figures are released later this week, they are expected to show the highest monthly sales in Los Angeles County since 1989, following a 20% surge in July. Prices throughout the region have been at record levels all year.

Few brokers and industry executives see the market collapsing as it did after the 1990-91 Gulf War, which played a significant role in the nation’s last recession. Compared with a decade ago, Southern California’s economy is more diversified and its housing market more balanced, without the widespread speculation from buyers and overbuilding by developers that preceded the housing bust in the early ‘90s.

Lower Interest Rates Are Luring Buyers

Analysts agree that the economic fundamentals are much stronger than a decade ago. Unemployment remains relatively low, and interest rates are near record lows, with many analysts expecting further cuts from the Fed that could bring further reductions in mortgage rates.

Indeed, interest rates seemed to be on the minds of many prospective buyers over the weekend, real estate agents and mortgage brokers said.

“Interest rates are our friend right now,” said electrician Jack Quinn. He and his wife, Anne, who have rented an apartment for five years, were checking out a three-bedroom home in Mission Viejo with an asking price of $320,000.

The Quinns said they felt “a little guilty” shopping for a new home so soon after the terrorist attacks, but also a sense of urgency--the Lake Forest couple is expecting their first child around Thanksgiving.

Wearing matching shirts with the American flag, the Quinns said they’d put the Mission Viejo house on their “A list,” even though it was slightly out of their original price range.

Interest rates “keep coming down, and now after the terrorist incident, they’re going to keep falling,” Jack Quinn predicted. “We can afford a little more house now.”

Even in the immediate aftermath of the attacks on the Pentagon and World Trade Center, some Southland brokers said business had hardly slowed.

“I’m almost embarrassed to say that it’s almost like nothing has happened,” said Neal Weichel, an agent at Remax in Valencia. On Tuesday, Weichel hung the U.S. flag at his home, then headed to the office expecting a grim day.

But within a couple of hours, clients were on the phone asking him to complete deals. That day, Weichel placed two homes in escrow. A day later, he fielded three offers for sellers he represents. “So far,” he said, “I haven’t seen any direct effects at all.”

To be sure, some consumers may have been anxious to close deals amid heightened uncertainty. Even though the nation’s worst terrorist attacks left Southern Californians shocked, deals were done because of the dire need for housing.

“I’ve got three closings due this week, and people are still going through with the purchase,” Dave Macleod, an agent at Century 21 in Huntington Beach, said. He said two buyers canceled appointments to view homes, too shaken by the catastrophic events. But they also told him they would reschedule for this week.

In Lake Forest, potential home buyer James Slater was among those who had decided to hold off making an offer on a house for at least another week. The 38-year-old roofer said he’d been looking for several months, since he got married and his wife decided she didn’t like townhome living.

“If I’m going to buy, I want it to be someplace where we’re going to stay for a while,” said Slater, leaving an open house near Rimgate Park in Lake Forest. “I want to watch interest rates, and I want to get an idea how the economy’s doing after all of this. I need to know how far my money’s going to go, especially if we fall into a recession.”

Terrorism Having Little Influence on Deals

Even before Tuesday’s attacks, there were some growing concerns about the Southland’s housing market. Sales of million-dollar homes have fallen by 20% this year after soaring to record levels last year. Although those homes constitute just 2% of the region’s overall market, some analysts worried that a slump in luxury sales might spread to the rest of the market, as it did a decade ago.

The top quarter of Los Angeles County’s market--homes priced at about $380,000 or more--has seen a bit of a slowdown too. From 1997 through the end of last year, values had risen at an average rate of 10% annually. But since January, appreciation rates have slowed to about half that pace, according to an analysis for The Times by DataQuick Information Systems Inc. of La Jolla.

Still, the rest of the market--particularly the low end--has picked up considerable steam this year. In July, median home prices climbed to record highs, moving up 17% in Los Angeles County and gaining 15% to $303,000 in Orange County. Many homes in Bell, Compton, Paramount, Lancaster and other working-class communities across the region have been appreciating at rates well ahead of the average 5% clip that those homes had been enjoying in recent years.

A surge in buying, fed by rising population growth even as the rate of job creation has slowed considerably, has diminished the number of available homes, especially those priced at $300,000 or less. In Los Angeles County, inventory has dropped to just three months, a record low, according to the California Assn. of Realtors. In Orange County, there was little more than a two-month supply, the second-lowest level on record. A nine-month inventory is considered normal.

Little relief can be found in the new-home market, with the number of potential buyers far exceeding home construction throughout Southern California. In fact, Orange, Los Angeles and San Diego counties, as well as the Inland Empire, have some of the largest gaps in the nation between housing demand and new construction, according to a new study by the Meyers Group, a real estate research firm in Irvine.

Of course, that could change if the economy lapses into a recession.

At Prudential California Realty in Rancho Santa Margarita, some 40 agents had about 60 home sales since Tuesday. But agent Cory Munden said consumer confidence will determine how the real estate market will fare after the attacks.

“I see business as usual in the short run,” said Munden, noting that entry-level housing remains strong, at least in south Orange County. “But we were already on the cusp of a minor slowdown in the market before [Tuesday’s attacks], so only time will tell.”

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Times staff writer Bonnie Harris contributed to this report.