Home Prices Jump 17% in Southland

Southern California’s hot housing market reheated in August as prices rose at a faster pace for the second month in a row after slowing earlier this year, according to data released Tuesday.

The median home price in the six-county region rose 17% to $476,000 last month compared with the year-earlier period, after year-over-year increases of 16.7% in July and 15% in June, according to DataQuick Information Systems, a La Jolla-based real estate research firm. The volume of transactions also regained steam after tapering off in recent months.

The faster appreciation and higher sales volume suggested that the anticipated deceleration of the housing market might take longer to develop.

“We thought we were in for more of an appreciation-rate slowdown,” said John Karevoll, DataQuick’s chief analyst. “We’d been expecting the rate to get down close to 10%, so this is surprising.”

Analysts still expect the market to lose traction because the region cannot sustain aboveaverage price increases that topped 20% in both 2003 and 2004.

The question is whether the slowdown might simply result in a gradual leveling off of prices -- or something more ominous. Pessimistic analysts suggest that the region’s housing market is in a bubble, and prices may eventually decline sharply as they did in the early 1990s.

But brisk demand, persistently low mortgage rates and creative financing have kept housing in high gear, analysts said. Also, home buyers might be accelerating purchases, possibly anticipating higher prices and mortgage rates ahead.

“Home buyers look and think ‘It’s now or never,’ ” said Esmael Adibi, an economist at Chapman University in Orange.

However, there are palpable signs of slowing in certain areas.

San Diego County, where California’s housing boom was launched five years ago, is showing signs of fatigue. Last month, the median price rose 2% from year-earlier levels to $493,000, the lowest rate of all Southland counties. Sales declined for the 13th straight month.

What’s more, San Diego County home prices have been virtually flat since December, according to DataQuick, which compiles statistics based on all closed property transactions in a given month.

San Diego is seen as a bellwether for whether there is a housing bubble here and in other markets. If San Diego crashes, analysts suggest, so might other hot housing markets.

“It’s been apparent that San Diego was pushing the statistics,” Karevoll said. “So now the big question is whether that rate of appreciation edges up to the 3% to 5% range and stays there, or could there be some downturn.”

It’s not likely that San Diego would see much of a price decline, he added, “but it is possible.”

Elsewhere around Southern California, home-price appreciation on a month-to-month basis has simmered down somewhat, gaining 3% or less each month since January. But experts say that because the supply of homes for sale remains far lower than the number of prospective buyers, home values will continue to edge up.

“Prices have stabilized a bit,” said Ron Ario, director of the Central/Southern California region for real estate brokerage Keller Williams Realty Inc. “But the bottom line is: People buy houses when they’re working. Unemployment is contained right now and rates are low. Those factors make for strong demand.”

And those factors also made for new records in the Southland. Last month, the median price for existing houses cleared the half-million-dollar mark for the first time when it hit $501,000. Likewise, the median price for resale condominiums surpassed $400,000 for the first time. The median is the point at which half of all homes sell for more and half for less.

What’s more, the 34,292 transactions in August -- up 10% from a year earlier and up 10% from July -- made it the seventh strongest month in nearly 20 years and the third-best August since 1988.

In August 2004, there was a sharp drop in sales in Orange County, in contrast to last month, when sales surged 26% compared with a year earlier. The median home price climbed 14% to $617,000.

Los Angeles County, the region’s largest market, saw the median home price rise 21.4% to $494,000 as sales gained 9%.

San Bernardino County once again led the region in price growth, jumping 32% to a median price of $344,000 as sales rose 5%. It was just four months ago that the median price there topped $300,000 for the first time. With among the lowest prices in the six-county region, buyers unable to purchase elsewhere have turned to the San Bernardino market in droves.

Riverside County’s red-hot growth continued to cool off, rising 16% to a median of $388,000, with sales gaining 15%. Ventura County’s median rose 15% to $592,000 as sales climbed 32%.

“It remains a sellers market,” Ario said. “One reason is because inventory is staying low. Homes ... get snapped up quickly.”

Further driving demand is the widespread availability of easy financing, coupled with low interest rates. Lenders no longer require buyers to fork over much of a down payment and have eased underwriting standards to allow even those with badly blemished credit to qualify.

Another sign that the region’s housing market remains energized is the low level of foreclosures. Data released Tuesday by RealtyTrac Inc. of Irvine showed a 15% decline in foreclosures in California in the first and second quarters. With home prices still on the rise, owners who are unable to make mortgage payments can still sell at profit.

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Still hot

Median price in August of new and resold homes overall and by county

*--* Median % change price from Area (thousands) year ago San Bernardino $344 +31.8% Los Angeles 494 +21.4 Riverside 388 +16.2 Ventura 592 +15.2 Orange 617 +13.6 San Diego 493 +2.1 S. California 476 +17.0

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Source: DataQuick Information Systems