Home Prices Retreat in Orange County : Increased Sales of Less-Expensive Houses Bring Down Average Cost 0.8% in May

Orange County home prices dropped slightly in May, according to TRW Real Estate Market Information, which said the drop was actually evidence that the housing market became a little stronger during the month.

The average price of a home in May was $236,375, down 0.8% from April’s $238,353. Despite the drop, the May average was still 23.3% higher than a year ago, when the price was $191,691.

(TRW counts both new and used condominiums and houses in its monthly survey of land transactions.)

There were more buyers in the market in May, said John Karevoll of TRW. Earlier this year, rising interest rates forced less-affluent buyers out of the market, and less expensive houses weren’t selling too well.

As a result, the average price of the homes sold in the county rose each month, even though sales weren’t as strong as last year. With only expensive homes selling, the average price rose each month.

Now, said Karevoll, with interest rates going down again, less expensive houses are selling and the average price is declining slightly.

“People who were kicked out of the market because of rising mortgage rates are coming back, and that’s why the average price declined in May,” he said.

Still, TRW said, the market is a lot slower than this time last year, when home sales took off and stayed hot through much of the rest of 1988. Part of the reason is that prices have climbed so high that far fewer residents can afford a home in the county.

While home sales rose 5.7% from April to May, from 3,693 to 3,903, sales were way down from last May’s 5,610 homes sold. That was a whopping 30.4% drop, said TRW.

“Orange County is definitely a little softer,” said Karevoll. “A lot of Orange County buyers are being bumped out to Riverside County by the high prices.”

Riverside County home sales through May, for example, jumped 34.7% compared to last year. In Orange County, they slumped 20.3%, said Karevoll.