Rise in Southland Home Prices Slows
Southern California home prices again hit new highs last month but did so at the slowest growth rate in more than three years, data released Monday showed.
Prices in each of the Southland’s six largest counties posted records, pushing the median price regionwide for all houses and condos to a record $465,000, according to DataQuick Information Systems, a La Jolla-based service that tracks property transactions. Orange County became the region’s first county to post a median price topping $600,000.
Still, the region’s 14.5% year-over-year rise in the median price was the smallest gain since March 2002. And San Diego County, once among the region’s hottest markets, continued to show signs of slowing dramatically.
“Prices are going up a slower pace -- but the fact is, they are still going up,” said John Karevoll, DataQuick’s chief analyst. June was the third consecutive month in which the median rose about 15% year over year. The median is the price at which half of all homes sold for more, half for less.
Analysts are closely watching for any signs of cooling in the Southern California housing market, generally regarded as one of the nation’s hottest. Industry officials contend that price surges are justified by tight supplies and strong buyer demand. More-pessimistic analysts contend that the region’s market is a bubble and that prices eventually will come down hard as they did in the early 1990s.
But Karevoll said prices were rising “at a steady, plodding, uniform pace,” which augured a “soft landing” scenario. In such a case, home price increases over the next six to 12 months would continue to appreciate at a “more normal” pace -- and could even slip into negative territory -- but won’t crash overnight, he said.
Indeed, the June median price rose just 2% from the month before -- the third straight period of such small month-over-month gains.
Sales too broke records in all counties but did so at a much slower pace. In June, 35,454 transactions were recorded, up 2% from a year ago and up 15% from May. That was the highest number of sales since August 1988, the year DataQuick began keeping track, but it broke the record just barely, Karevoll said.
A slowing rate of sales increases could suggest that price declines are coming, said Keitaro Matsuda, a senior economist for Union Bank of California. He said in a report this month that sales volumes tend to “correct,” or adjust downward, before home prices start to falter. “During most housing market slowdowns, nominal home prices are the last thing to fall,” he wrote.
Such a scenario could be unfolding in San Diego County, where sales declined 8.8% in June while median prices rose 6.3% to $493,000. That was the second consecutive month of price gains below 10% and the slowest rate of appreciation of all Southland counties.
San Bernardino and Riverside counties continued to show the biggest percentage price gains. In June, the median price in San Bernardino rose 30.9% to $322,000, and in Riverside it was up 23.2% to $393,000.
Sales in those counties also account for a bigger share of the region’s activity, a shift from the last housing boom cycle, when about 1 in 6 homes sold in Southern California was in the Inland Empire. Today, the ratio is 1 in 3, DataQuick said. In San Bernardino County, sales rose 9.5% while they gained 2.2% in Riverside County.
Because of affordability concerns, “a lot of the action has moved to the Inland Empire,” said G.U. Krueger, an economist for IHP Capital Partners, an Irvine-based advisor to the California Public Employees’ Retirement System. “The coastal areas are slowing down and the price increases are less dramatic.”
In Los Angeles County, the median price rose 14.7% to $475,000. Orange County’s median gained 11.7% to $603,000, while Ventura’s median rose 16.8% to $584,000.
Krueger and other economists are waiting to see whether an increase in mortgage rates will shrink buyer demand. That in turn could cause housing activity to reverse more acutely.
Meanwhile, most experts -- even those contending that the state’s housing markets are in a bubble -- concede that the massive job losses that led to California’s last housing downturn aren’t on the short-term horizon.
Still, most market watchers note that home prices in California and many other parts of the nation have far outpaced growth of personal income -- satisfying a key condition for a bubble.
“Our research shows that 60% of the country is currently in a housing bubble,” David Rosenberg, a Merrill Lynch economist, said Monday. “This covers the Northeast, the Pacific Coast and many pockets in between.”
Rene Mendez has noticed that prices aren’t rising as fast as they were a year ago. But the real estate agent and developer sees no shortage of eager buyers.
He recently bought a lot in the El Sereno neighborhood of Los Angeles, where he built three duplexes and a single-family home -- all of which were in escrow before the paint was dry.
“It’s not surprising,” Mendez said.
“I sold one of the houses for $399,000 two months ago when we started building, and I know if I waited I could have sold it for more.”
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Less appreciation
Median home price in June for new and resold homes overall and by county
*--* Area Median price (thousands) % change from year ago San Bernardino $322 +30.9 Riverside 393 +23.2 Ventura 584 +16.8 Los Angeles 475 +14.7 Orange 603 +11.7 San Diego 493 +6.3 S. California 465 +14.5
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Source: DataQuick Information Systems
