Southland Home Prices and Sales Continue Gains in September; Median Cost Up 16.1%
Southern California home prices and sales once again defied the skeptics by notching strong gains in September, although rising mortgage rates and softness in a key market are stoking fears of a slowdown in the months to come.
The median price paid for a Southern California home was $475,000 last month, up 16.1% from a year earlier, DataQuick Information Systems, a La Jolla-based real estate research firm, reported Monday. Sales volume rose 6% year over year.
Orange County led the six-county region with a median price of $610,000, while San Bernardino County was the cheapest at $352,000.
However, closely watched San Diego County -- once the state’s hottest region -- posted just a slight gain in price and a decline in sales, the only one of the Southland’s six counties to see lower buying activity. Because it was the first major market in California to show double-digit price gains, San Diego is considered a possible harbinger of whether the state’s housing boom is losing steam.
Further increases in mortgage rates also could stymie the market, analysts say. Average national rates on 30-year fixed-rate mortgages last week rose above 6% for the first time since late March, although some experts say that rate must top 7% before causing serious problems for buyers and sellers.
Still, after year-over-year price gains of 20% or more during all of 2004, increases since April have held steady in the 14% to 17% range -- much better than many forecasters had expected five years into the boom.
“This market is surprising us,” DataQuick chief analyst John Karevoll said. Earlier this year, he expected price gains to fall to single-digit levels by year-end. Now he no longer thinks that will happen.
There isn’t even much sign of weakness yet when comparing prices on a month-over-month basis, Karevoll said. September’s median price was 0.2% lower than August’s, but August usually is one of the strongest months. When seasonally adjusted, September’s price actually rose 1.2% over August, he said.
Similarly, although September’s volume of 31,740 homes sold was down 7.4% from August, it was up 9.4% when seasonally adjusted, Karevoll said.
“Indicators of market distress are still largely absent,” DataQuick said, noting that foreclosure activity remained low.
Many industry experts expect a “soft landing” -- slower gains in prices and sales -- in the coming year, amid predictions of higher mortgage rates and a slowing economy.
But absent a sharp economic jolt that could result in significant job losses, prices are generally not expected to decline anytime soon -- much less collapse, as they did when the Southern California economy tanked in the early 1990s.
“You will not see depreciation in the price of homes ... without a major economic downturn or a serious recession,” said Ryan Ratcliff, an economist at UCLA Anderson Forecast, one of the first groups to label the nation’s and region’s housing boom as a bubble.
For now, strong demand and readily available financing are keeping the region’s market on a firm footing, DataQuick said.
Year-over-year increases in the median price ranged from 3.8% in San Diego County to 32.8% in San Bernardino County, DataQuick said. The median is the point at which half of all homes sell for more and half for less.
Price gains were stronger in more affordable markets, DataQuick said, which is normal for the tail end of a housing boom. Some sellers of higher-priced homes now need more time to reach deals and, in some cases, must drop their asking prices. Still, prices in expensive markets continued to rise.
Even the modest price rise in San Diego County, where sales volume fell 4.7%, wasn’t too alarming, Karevoll said. It was the county’s fifth straight month of single-digit gains, and the area’s ability to stabilize with increases in the low single digits bolsters the view that “the end of this cycle will be a soft landing” rather than a crash, he said.
“It takes much more pressure to push prices down than to push prices up,” he said, noting that sellers “just resist lower prices.”
“They would rather live in their home and wait out lower prices and sell later, rather than sell at a loss,” Karevoll said.
Prices also leveled off, but didn’t decline significantly, in the Bay Area after its dot-com implosion of 2000, he noted.
However, one danger is the high level of activity from buyers of second homes and investors buying strictly for profit, said Esmael Adibi, an economist at Chapman University in Orange.
If investors and second-home buyers sense that the market is peaking and try to sell en masse, “that’s going to cause prices to turn lower,” Adibi said.
And although mortgage rates remain well below what many analysts consider the danger point, interest rates have been marching upward for six weeks as inflation fears grip investors. The yield on the 10-year Treasury note -- a key indicator of the direction of mortgage rates -- closed at 4.5% on Monday, its highest level since late March.
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Still hot
Median price in September of new and resold homes overall and by county
*--* Median % chng. price from Area (Thousands) year ago San Bernardino $352 32.8% Los Angeles 494 21.4 Orange 610 14.4 Riverside 391 15.7 Ventura 604 11.9 San Diego 498 3.8 S. California 475 16.1
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Source: DataQuick Information Systems
