Run-Up in Home Prices Showing Signs of Easing
Southern California home prices rose to new highs again last month, but the rate of appreciation remained at its slowest pace in more than three years, data released Wednesday showed.
Further, price gains in Orange and San Diego counties, which had been hottest the segments of the six-county Southland market, dipped below 10% for the first time in at least four years. But the Inland Empire continued to clock 20%-plus increases.
The latest numbers “are not ominous in any way,” said John Karevoll, chief analyst for DataQuick Information Systems, a La Jolla company that compiles the monthly housing statistics. “They just show a very stable market that is easing back from its peaks.”
The median price paid for a Southern California home rose 15.2% on a year-over-year basis to a record $456,000 in May, according to DataQuick. The pace of the increase equaled that of April, which was the lowest percentage gain since March 2002.
It is further indication that the region’s housing market, while still robust, is chilling out a bit, analysts said. The big price jumps of a year ago simply can’t be sustained, they said.
For example, in May 2004, the year-over-year rate of home-price appreciation soared 26.9% for the Southern California region. In Orange County alone, the median price rose a whopping 36%.
“How could you possibly sustain anything close to those numbers?” said Gary Watts, an Orange County real estate broker and local economist. “They were off the charts.”
Indeed, Orange County’s median price for all houses and condominiums edged up 8.7% last month to $590,000 -- the first time since October 2001 that the gain was in single digits. San Diego County saw its price gain decelerate to 7.5%, the slowest pace in five years.
In Los Angeles County, the median price gained 16.5% to $459,000. Ventura County’s median rose 15.7% to $569,000.
Similar price slowdowns are appearing elsewhere in the country. The Federal Reserve, in its monthly report on regional economic conditions released Wednesday, said conditions in residential real estate markets nationwide remained “quite positive overall, although some slowing in activity was noted in a few markets.”
Among the Fed banks citing some slowing, the San Francisco region, which includes Southern California, said home sales continued to be robust but were somewhat slower. The Richmond, Va., and New York districts said housing markets remained strong but had some easing in high-end real estate. The Minneapolis region said housing markets were mixed. The Cleveland, Dallas and St. Louis districts also reported signs of moderation.
By any measure, Southern California remains among the nation’s most expensive markets, with fewer than 17% of households estimated to be able to afford a home.
But industry experts downplayed talk of a local housing bubble, saying prices regionwide are being pushed higher not by speculators but by too many would-be buyers chasing too few properties. Home sales in May were nearly as strong as a year ago, when they set a record, DataQuick said. Last month, 30,886 new and resale homes changed hands in the region, down just 0.9% from a year ago.
National real estate trade groups also minimized the talk of a bubble and offered optimistic forecasts Wednesday. The National Assn. of Home Builders said its members were more confident this June than anytime this year, thanks to continuing low mortgage rates and robust demand for new homes. The group’s index rose one point to 71 in June, its highest level since a similar reading in December.
That builder optimism is based on the buying interests of households like the Lee family of Gardena. They have been hoping to buy a new home for some time, and have looked at more than 20 condominium or town house communities in recent weeks.
The Lees quickly put a deposit on a yet-to-be-constructed three-bedroom, trilevel town house in Torrance, priced close to $700,000 as soon as it became available last weekend.
“It’s kind of pricey but the area is nice and we wanted a newly built house,” said Andy Lee, 21, who, along with his parents and two siblings, will have to wait six months before the unit is ready.
Continued strong demand is expected to spark busy sales activity again this month, even as the supply of homes stays lean. According to broker-economist Watts, as of June 1 there were 1,500 fewer homes on the market in Orange County compared with the year before.
Elsewhere, inventories are just as tight. On the Westside of Los Angeles, there were 10% fewer listings between January and June 1 compared with the same period a year ago, according to the Combined L.A./Westside Multiple Listing Service.
“When there’s not a lot to choose from, activity will stay strong,” said Betty Graham, president of brokerage Coldwell Banker’s Greater Los Angeles division.
But while price increases in the coastal counties are losing a bit of steam, prices in the Inland Empire are still accelerating at a breakneck pace. In May, the median price rose 30.5% to $308,000 in San Bernardino County and 20.2% to $381,000 in Riverside County. Sales rose 8.5% in Riverside but slid 6.7% in San Bernardino.
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Slower appreciation
Median home price in May for new and resold homes overall and by county
*--* Median % change Price from Area (thousands) year ago San Bernardino $308 30.50% Riverside $381 20.20% Los Angeles $459 16.50% Ventura $569 15.70% Orange $590 8.70% San Diego $488 7.50% S. California $456 15.20%
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Source: DataQuick Information Systems
