Home Sales at Scorching Pace
Home sales surged last month across much of the Southland, lifting prices for almost every type of housing and putting the market on a scorching pace through the early part of the year that is ahead of last year’s robust levels.
Sales of existing homes, condominiums and new homes jumped in Los Angeles County by 21% to 7,898, marking the best February since the previous boom in 1989. The median price for all types of homes, or the point at which half sell for more, half for less, was a record $237,000, up 15% from a year earlier, according to DataQuick Information Systems Inc.
Orange County also recorded double-digit gains in sales, which grew by 29% from a year earlier to 3,497, the highest mark reached in a February since the La Jolla firm began keeping figures in 1988. Led by condos, prices also rose across the board, with the median up nearly 11% to $317,000.
“The market is on fire. I don’t know how else to say it,” said Leslie Appleton-Young, chief economist for the California Assn. of Realtors. Such strength is reflected in almost all major metropolitan areas statewide, she said. With prices rising sharply, interest rates creeping higher and inventories stretched thin, a “sense of urgency” exists among buyers to make a purchase before housing eludes their financial grasp, she said.
Even though the February activity surprised analysts by its strength, the monthly results showed once again how resilient real estate has been, buffering the region from a sluggish economy.
Analysts now are saying that home values in Orange County have grown at a slightly higher pace than average incomes on a historical basis, causing some to believe the market, after 56 consecutive months of year-over-year gains, is overheating.
The strength of the market in Orange County is reminiscent of the late-1980s price bubble, some analysts say. That was followed by a sharp drop in home values when the economy crumbled in the early-1990s. It took several years for homeowners to regain lost equity, and some walked away from homes that were worth less than the mortgage.
“We’re in a mini-bubble,” said Irvine real estate consultant John Burns. If the market continues to grow by double digits for more than a year, he said, the county “will get to a point where home prices are no longer sustainable.” He added, “We are starting to enter that period.”
But John Karevoll, the DataQuick analyst who compiled the February report, disagreed. Orange County buyers would gravitate toward adjustable-rate mortgages if their finances were stretched, he said, but the percentage of buyers using such mortgages has not passed 25%, a fairly small share. The number of people entering the first stage of foreclosure remains low and monthly mortgage payments for a median home still are within range for many buyers, Karevoll said.
“None of these indicators show any imminent change in the market,” Karevoll said. “The market is rock solid. The only issue is supply.”
With a dearth of new construction, prices are expected to rise in the region unless mortgage rates shoot to 8% or more from the current 7% range, analysts said.
But the February rate of increase in sales isn’t expected to last all year. In Los Angeles, resales rose by more than 17% in February, and in Orange County they also were up sharply.
If sales in December, January and February are combined, DataQuick said, the two counties saw an increase of more than 11%, or about 3,600, from the same period a year earlier--a slower but still strong pace that Karevoll believes can be sustained this year.
Still, the surging market is causing some buyers to alter their plans. Beth Gilmartin and her husband, Dan, moved to suburban Denver three years ago from Valencia. They hoped to move back this summer and to purchase a home in the same area for a few thousand dollars more than the approximately $248,000 they received when they sold their last one. But now, after searching the market, the family believes they will have to spend more than $300,000 for a single-family home.
“We were shocked to hear how much housing has gone up,” Beth Gilmartin said. “It’s discouraging because there’s not much for sale in our price range.”
Neal Weichel, an agent at Remax in Valencia, said he’s advising clients to offer full prices on resale homes in the Santa Clarita Valley. The number of potential buyers far outnumbers homes available for sale in his area, he said, prompting stiff competition.
When a condo priced at $175,000 hit the market last week, he said, the unit elicited two offers at $195,000 and one that ultimately was accepted by the sellers at $200,000. He expects to see such premiums for resales until more new homes hit the market later this year.
“It’s the strongest seller’s market I’ve ever seen,” Weichel said. “To be a buyer under $350,000 is very tough.”
Even the market for high-end homes is starting to pick up, said Steven High, president of Strada Properties in Newport Beach. He said buyers are showing “renewed interest” in the market since late last year, when the market paused.
“Many buyers who were on the sidelines have jumped back into the market because they’re not seeing a reduction in prices,” he said, “and right now our market doesn’t show any sign of stopping or slowing.”
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As Sales Increased, So Did Prices
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