Southland Home Prices Hit Record Highs
Home prices surged to another record high across a wide swath of the Southland in June as falling mortgage rates and a tight supply of housing continued to boost property values.
The median cost of a Los Angeles County home jumped 18% from a year ago to $269,000, marking the eighth consecutive month that the county set a record price, according to a report released Wednesday by DataQuick Information Systems Inc., a La Jolla-based firm that charts real estate trends.
In Orange County, the median price jumped 19% from a year ago to $359,000, reflecting the sharpest rate of increase for any month since May 1989, DataQuick said.
“It’s telling us the market is still rock-solid,” said John Karevoll, the analyst who compiled the data. “If you dig into the details of the numbers, not just the fact that a record median was set for Los Angeles and Orange counties, the sales counts and prices are strong in all categories. In other words, there are no categories of homes that are shaky.”
Despite that upbeat assessment, analysts warned that the current rate of growth in home values is unsustainable. A primary reason for the surge in values is that the pool of available homes is shrinking. That statewide trend is more pronounced in Orange and Los Angeles counties.
Prices will be high enough within the next few months to encourage a greater number of owners to put their homes up for sale, Karevoll predicted. If that happens, the annual rate of appreciation should edge down to about 12% to 15%. However, he said, the market should remain too robust for prices to decline.
Uncertainty over the national economy’s strength and corporate scandals on Wall Street could discourage prospective home buyers, said Leslie Appleton-Young, chief economist for the California Assn. of Realtors.
Moreover, Appleton-Young said, growth in employment in Los Angeles County and the rest of the state will show gradual improvement over the next few months and won’t add much fuel to the housing market.
The housing market remains a bright spot in the U.S. economy, with most measures of demand still at robust levels.
In a separate report Wednesday, the Mortgage Bankers Assn. of America said homeowners flooded lenders with refinance requests last week. Although the number of consumers who wanted loans to purchase homes slipped from the previous week, demand remains strong.
Also on Wednesday, the Commerce Department said U.S. housing starts in June declined nearly 4% from the previous month to an annual rate of 1.67 million units. The results, which analysts consider to be healthy, followed a spurt of almost 11% in May.
“There is no evidence the strength in housing is any way impeded,” Federal Reserve Chairman Alan Greenspan told Congress on Wednesday.
In the Southland, sliding mortgage rates in June drew buyers into the market. Sales rose more than 9% from a year earlier in Orange County, while falling more than 3% in Los Angeles County. But a year ago, Los Angeles County experienced the best June since the late 1980s, and analysts said last month’s decrease was the result of fewer homes available for sale, not a slowing market.
At the current pace of sales, the inventory of existing homes in Los Angeles would be depleted in less than two months, down from three months a year ago, according to the latest figures from the California Assn. of Realtors. Orange County has a two-month inventory, compared with a supply of more than 3 1/2 months at this time last year.
Tightening supplies and rising prices are raising barriers for first-time buyers in Los Angeles and Orange counties.
In June, the number of purchasers with down payments of 5% or less declined in both counties from a year earlier, suggesting that those buyers are being priced out of the market, Karevoll said.
