Southland Housing Sustains Solid Gains
Southern California’s housing boom continued to run on cruise control in November, with the median home price rising 15.4% above the year-earlier level, according to data released Thursday.
The statistics were more evidence that the area’s 5-year-old housing boom, though no longer white-hot, has settled into a more moderate pace. Although homes are staying on the market longer -- with some sellers of more expensive homes cutting asking prices -- there is enough pent-up demand to keep values from falling, analysts said.
“I don’t see any signs of weakening. The market just isn’t frenzied anymore,” said John Karevoll, chief analyst for DataQuick Information Systems, a La Jolla-based research firm that generated the price and sales data.
Even San Diego County, once the region’s hottest market, has stayed afloat. Its 6.4% year-over-year gain in median price was the region’s weakest, but the county has maintained percentage increases at mid-single-digit levels since May. Many analysts see the county as a test of whether the state housing market can achieve a “soft landing” instead of a free fall.
Strong buyer demand and anticipation of higher mortgage rates pushed the median price to a record $479,000 for the Southland, DataQuick said. That matched the 15.4% year-over-year rise in October, when the median price stood at $473,000.
Sales of new and previously owned homes totaled 27,637, down 3% from October but up 0.6% from a year earlier. A sales decline from October to November is normal for the season, DataQuick said.
Year-over-year increases in the median price have settled into a range of 14% to 17%. Although that is off the robust gains of at least 20% between January 2004 and February this year, many analysts had been expecting worse by now.
The question is how long the current pace of price increases can hold.
Several analysts say the market will slow to single-digit price percentage gains next year. But few are willing to forecast outright declines anytime soon -- a testament to the market’s resilience, defying doomsayers who contend that prices are in a bubble bound to burst.
The state and national economies would have to slow significantly with resultant job losses to generate price declines like those in the early 1980s and ‘90s, some analysts say. Another shock could come if foreign investors sharply cut back purchases of U.S. Treasury securities, which would drive up mortgage rates.
“We are vulnerable to an external shock ... but so far, nobody has identified that external event,” said John Husing of Economics and Politics Inc.
In 1982 the external shock was 20% interest rates, and in 1991 it was defense industry job losses triggered by the end of the Cold War, Husing said. Without a similar disruption today, he said, “we can get a soft landing.”
Chapman University economist Esmael Adibi, however, is forecasting price declines next year. He said higher mortgage rates, reduced home purchases by speculators as well as slower job and income growth would push average prices of existing homes 4% lower.
“Slower income growth is going to reduce demand,” he said.
For now, the Southland housing market is exhibiting a long-established pattern in which trends from coastal areas are taking 18 months to migrate to the Inland Empire, Husing said.
Thus, the near-20% price percentage gains seen in coastal counties in 2004 and early this year are now evident in San Bernardino and Riverside counties.
San Bernardino County posted the Southland’s largest year-over-year median price gain in November -- up 23.2% to $350,000, DataQuick said. The median is the price at which half the homes are sold for more and half for less.
The county’s sales were off 1.8% from a year earlier.
Riverside County was one of two counties in the region showing year-over-year gains in sales, which rose 18.6%, while its median price rose 17.1% to $405,000. Ventura County posted a sales gain of 12.1%, as its median price rose 20.7% to $612,000.
Orange County continued to boast the region’s highest median price at $616,000, a 13.9% gain on a 1.6% decline in sales. Los Angeles County’s median price rose 19.5% to $497,000 on a 3.6% decline in sales. San Diego’s rise put its median price at $518,000, but sales fell 9.5%.
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*--* Median % change price from Area (thousands) year ago San Bernardino $350 +23.2% Ventura 612 +20.7 Los Angeles 497 +19.5 Riverside 405 +17.1 Orange 616 +13.9 San Diego 518 +6.4 S. California 479 +15.4
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