Prices Soar for Housing in Southland

By DARYL STRICKLAND

Jan. 22, 2002 12 AM PT

TIMES STAFF WRITER

Home prices streaked to record levels last month in Southern California, underscoring that the region’s robust housing market has been largely shielded from the national recession.

Boosted by larger gains of modest homes, median prices in Los Angeles County jumped 13.7% to an all-time high of $233,000 last month from a year earlier, according to a report released Monday by DataQuick Information Systems Inc. In Orange County, median prices climbed 14% to a new peak of $332,000 in December, the report showed.

Several analysts, surprised by the late-year showing, said such lofty gains as those in December are unlikely to be sustained throughout the year. They cited a combination of factors, including higher mortgage rates, less aggressive mortgage lending and slower job growth. Another effect is relatively weak stocks, especially of high-tech companies that have been a key source of down-payment funds for luxury homes.

“I think it will be a stronger economy and a solid housing market, but it won’t measure up to the strong conditions Southern California has enjoyed up to now,” said Mark Zandi, an analyst at Economy.com, a West Chester, Pa., forecasting group. He added that he expects price growth of between 5% to 7% next year in the region.

James Doti, an economist who is president of Chapman University in Orange, was far more cautious about the coming year. He told a large audience of builders last week in Orange County to expect a “significant drop in housing appreciation this year.”

He believes home values will rise by only 1% in Los Angeles County and by 3% in Orange County because far fewer jobs will be produced this year in those areas. Luxury home sales, which pull overall median prices higher because of their larger rates of appreciation, will be dented in particular, Doti said.

“The good news is that housing prices will continue to appreciate,” Doti said. “But the bad news is, at a lower rate.”

But prices have moved up sharply, in large part because the supply of housing in both counties remains near record-low levels, according to the California Assn. of Realtors. At the current selling pace, a 3.7-month supply exists in Los Angeles, down from 4.2 months last year. Orange County has a 2.5-month inventory, rising slightly from 2.1 months a year earlier. Moreover, the number of days that homes spend on the market for sale in the region also is near its lowest point at about 25.5 days in both counties, the realtors’ group said.

In part because of the tight market, some analysts expect only a slight dip in housing prices this year. John Karevoll, the DataQuick expert who compiled the monthly report, expects home prices to rise 7% to 9% if mortgage rates rise as he anticipates they will. “There’s no indication that there’s going to be any turnarounds in the trends,” he said.

The month of December capped a robust year for Southern California, as nearly every type of housing rose in both counties to a record- or near-high.

Consumers shopped for homes, drawn by mortgage rates that fell to a 30-year low in early November and still remain at historically low levels. Peter Gontang and his wife Lisa, for example, were among those who viewed the latest phase of homes at Ladera Ranch, a master-planned community in south Orange County. So far, about 2,000 homes, or one-quarter of the project, have sold since opening in late 1999, well ahead of projections.

“The rates are low right now and housing prices are going up consistently, even with the current economy,” said Gontang, 32, who is planning to start a family and seeks a larger home. “Who knows whether we’ll be able to afford in a year from now what we can purchase today.”

Overall, prices in Los Angeles County rose to a record $224,000, jumping 12.6% from a year earlier. The county recorded its highest percentage annual gain since 1989, DataQuick said.

In Orange County, annual prices also fared well by rising nearly 11.8% last year, finishing up the period at $303,000. It was the first time that a county in Southern California ended the year above the $300,000 barrier.

Annual sales in Los Angeles County, boosted largely by new homes, were 1.2% ahead of year-ago levels at 110,738. In Orange County, sales dipped 7% to 46,369 as higher prices and low inventory levels combined to drop overall figures, analysts said.

Despite the lingering recession, the nation’s real estate market is in strong condition. The National Assn. of Realtors, a Washington trade group, has projected U.S. sales of new and existing homes in 2001 to be at a record level. And the National Assn. of Homebuilders reported in January that an index of builders with a positive view of the market has risen to its highest level since November 2000 even though sales of luxury and prestige homes have slumped in recent months.

In Southern California, which has a large number of high-end homes, sales overall slid nearly 2% in Los Angeles, and by 6% in Orange County. DataQuick reported a flurry of activity during the last week in December as about 30% of the month’s transactions were closed, an amount comparable to previous years.

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By the Numbers

Median home prices climbed last year in Los Angeles and Orange counties, while sales were flat or decreased.

Prices

2000 2001

median median Percent

County price price change

Los Angeles $199,000 $224,000 +12.6%

Orange 271,000 303,000 +11.8

Sales

2000 2001 Percent

County sales sales change