Home Price Rise of 18.6% Ends Streak
Southern California home prices in March failed to rise more than 20% for the first time in a year, data released Thursday showed, more evidence that the region’s sizzling housing market is cooling down a notch.
The 18.6% gain over prices a year earlier ended a 14-month streak of 20%-plus increases and was the smallest rise since June 2003, according to DataQuick Information Systems, a La Jolla-based firm that tracks property transactions.
Price gains in one of the region’s hottest markets, San Diego, showed more modest increases, while sales fell. Regionwide, total sales were virtually unchanged from the year-earlier level.
Nonetheless, housing experts said the latest numbers indicated that the real estate market was still healthy, countering some contentions that the sector is a bubble waiting to burst.
The hefty price jumps of last year -- which peaked with a 26.9% gain in May -- are simply unsustainable, they said.
“What we have is more of the same, just not quite as frenetic,” said Patrick Veling, an industry consultant and president of RealData Strategies in Brea.
Today’s market “is still very good,” said David Cook, owner-founder of DC Corp. of West Covina, a small family-run home builder. “Prices aren’t rising as they had been but they are certainly not retreating.”
The median price in March hit a record $439,000 for all houses and condominiums sold in the six-county region. The number of sales was near a record, with 32,674 property transactions closed, 43 short of the year-earlier results, which were the strongest March sales on record, DataQuick said.
Analysts attributed the market’s health to continued strong demand from buyers -- driven by relatively low mortgage rates -- and a tightening of the supply of homes for sale.
The average rate on a 30-year, fixed-rate mortgage fell as of Thursday to a one-month low of 5.91%, according to mortgage financer Freddie Mac.
The number of homes on the market today in Los Angeles and Orange counties is only half the level of six months ago, when sellers rushed to list their properties amid fears that prices had already peaked, Veling said. He estimated that the stock of homes for sale equals a 7 1/2 -week supply versus about a 16-week supply last fall.
“We’re seeing market conditions that are approaching what we saw last spring,” Veling said. Then, there was about a five-week supply of homes for sale. The tight inventory touched off a buying and selling frenzy that helped make 2004 one of the strongest years for the region’s real estate market.
Today’s tight inventory has led to a return of the phenomenon of multiple offers being made for properties in some neighborhoods.
Steve Sisson, for instance, saw 44 offers come in within nine days of listing his North Hills home. The 1,200-square-foot dwelling is now in escrow at about $20,000 over his $435,000 asking price.
“I was very surprised,” Sisson said.
Developer Cook also is benefiting from high buyer interest. In less than 20 days, he sold 28 of the 35 two-story single-family homes his firm is building in West Covina, at prices ranging from $499,900 to $599,900.
However, Cook said, the pace of sales is slower than a year ago, when it took only a few hours to sell all 16 homes his company offered at one of its developments in South El Monte.
No one is anticipating a return to the hyperactivity of a year ago, when the Southland’s median price rose nearly 6% between February and March 2004. Last month, the median rose 3.3% from the previous month.
According to DataQuick, four of Southern California’s six counties saw median prices reach new records in March, while sales were flat or up slightly. The median price is the point at which half of all homes sell for more, half for less.
Leading the pack was San Bernardino County, where strong job and population growth helped trigger a 34.8% year-over-year gain in the median price to $298,000 while sales rose 3.7%. In neighboring Riverside County, the median rose 26.3% to $379,000 while sales were flat.
Orange County, long the most expensive local market, saw its median climb 16.5% to $565,000, while Los Angeles County’s median increased 17.3% to $440,000. Ventura County saw the median price rise 16.1% to $535,000.
Yet in San Diego County, sales fell 5.5% and the median price was up just 12.5% on a year-over-year basis. Since last summer, San Diego’s prices have flattened out and the number of homes for sale has nearly doubled. San Diego is being closely watched as an indicator of what might happen when the region’s housing market cools more dramatically.
“It’s not the frenzy anymore,” said Noah Gamer, a real estate agent in San Diego. According to data supplied by local multiple-listing services, he said, there are more than 11,500 properties for sale in the San Diego area as of Thursday, up from about 5,500 a year ago.
“Buyers are taking longer to select their properties,” Gamer said. With more homes on the market, prospective buyers “have time to be patient,” he added. Slower buyer activity puts downward pressure on prices and sales.
Yet, if the tempering of San Diego’s market conditions is an indication of what’s to come for the rest of the region, Southern California’s housing market is probably headed for a soft landing.
“If that’s the way it’s going to play out, we can live with that,” said John Karevoll, DataQuick’s chief analyst. “It won’t be the sky-is-falling scenario that many think will occur.”
