Home Prices Surge in February

By Annette Haddad

March 16, 2005 12 AM PT

Times Staff Writer

Southern California’s housing market continued its seemingly relentless march into the record books in February, as prices hit all-time highs in four of the region’s six counties.

The median price of a Southland home rose 21.1% to $425,000 last month from a year ago, DataQuick Information Systems, a La Jolla firm that compiles monthly property transactions, reported Tuesday.

Sales of houses and condominiums dipped 7% to 21,394, but it was still the fourth-best February in 17 years.

“There’s still plenty of gas left in the tank,” said John Karevoll, DataQuick’s chief analyst.

February marked the 13th consecutive month that the region’s median price -- the point at which half of all sales were for more, and half for less -- rose at least 20% year-over-year, DataQuick said.

Buttressing last month’s lofty gains was the Inland Empire. San Bernardino County posted a 41% jump in its median home price, which now stands at a record $292,000. Riverside County’s median rose 30.5% to $372,000, also a record.

The inland run-up is not surprising to economists and other experts who have observed the market through previous housing cycles. Initially, the most-desirable neighborhoods experience frothy gains. Next, the middle tier of the market sees prices escalate.

As that segment becomes less affordable, lower-cost locales “suddenly start to pop,” said Christopher Cagan, an economist with giant title insurer First American Corp. in Santa Ana. “And when it comes, it comes like a really hard whip crack.”

That’s what happening in San Bernardino County, said Freddie Spellacy, a local real estate broker/agent. “You get a listing and it’s sold in just about the same day. There are a lot of good folks coming into the area who are not able to afford what they would like in these other places. But they are finding it here.”

The Inland Empire is catching up with the rest of the Southern California market in terms of price appreciation and sales, Karevoll said. The two-county area now accounts for a third of all Southland home sales.

Orange County, long the most expensive local market, saw its median climb 16.8% to $555,000, while Los Angeles County’s median increased 20.5% to $424,000. Both were records. In Ventura County, prices didn’t hit a new high, but rose 18.4% to a median $521,000.

The market’s inexorable rise has many experts predicting an eventual slowdown in price ascension. Indeed, in the coastal counties of Los Angeles, Orange, San Diego and Ventura, price increases have dropped to 21% or below, compared with a year ago.

And although sales were up nearly 2% year-over-year in San Bernardino County, they were down everywhere else.

(In Los Angeles County, sales dipped 8.6% to 7,056; in Orange County sales fell 11% to 2,890; in Ventura, sales slid 3.9% to 882; and in Riverside County, sales edged down 2.7% to 4,084.)

A big reason: very strong year-ago numbers, when February sales in the Southland set a record at 23,004. Also affecting the number of transactions is the skimpy supply of homes for sale.

Inventories today are higher than they were a year ago but are “still a lot less than is normally on the market this time of year,” said Michael Davin, executive vice president of CataList Homes Inc., a Hermosa Beach-based brokerage that touts its low-commission service.

He believes the region’s high prices, particularly in the coastal counties, are “sucking the oxygen out of the market.”

Potential sellers “are paranoid because if they sell and can’t find any place to move they will be out on the street,” Davin said.

There lies the paradox of today’s market, Karevoll said. With fewer homes for sale, buyers again are finding themselves having to engage in bidding wars to acquire a property. That’s one reason prices are being pushed higher.

The problem is particularly acute in San Diego County, which has the lowest rate of affordability -- outside of the resort towns in the Palm Springs area -- in the six-county region. Only 11% of the county’s residents can afford a median-priced home using conventional financing and a 20% down payment, according to the California Assn. of Realtors’ calculations.

San Diego County may be approaching a “crunch point” at which buyers’ inability to buy a home will cause a swifter deceleration in prices, Karevoll said.

But that hasn’t happened yet. In February, the median rose 16.3%, to $472,000, as sales fell 12.4% to 3,442.

“San Diego should have hit the wall about a year ago,” Karevoll said, “but since then prices have still gone up another 16%.”

That has Karevoll and others scratching their heads over how to interpret the trends.

“There is some uncharted territory we’re in right now,” he said. “And we would love to have had a chart.”

(BEGIN TEXT OF INFOBOX)

Still climbing

Median price for new and resold homes in Los Angeles County

Other counties

County: San Bernardino

Feb. 05 median price (000s): $292

% change from Feb. 04: +41.1%

County: Riverside