New, Existing Home Market Heating Up

Since the mid-1970s, the California housing market has gotten red hot about every 10 years. And if the pace of home sales in December and January continues, the real estate market may be following the same cycle.

After a long and persistent slide in home sales and prices, the housing market is showing signs of heating up. The number of home sales is increasing, multiple offers are being reported in several areas around the state and home builders are buying up land in anticipation of a strong year.

Home sales in January were up 15.6% in the Los Angeles area compared to January last year, according to Dataquick Information Services Inc., La Jolla. San Francisco Bay Area sales climbed 16.6% from the same period in 1995.

Although the Bay Area housing market is stronger, even struggling Southern California is experiencing a surge.

“The multiple-offer phenomenon is popping up in established high-end neighborhoods like Malibu, Pasadena, La Jolla and Palos Verdes,” said Dataquick analyst John Karevoll. All of a sudden, “agents are complaining about too few listings, “ he said.

After a five-year hiatus, San Fernando Valley home builder Jack Shine is buying land for new building projects. He and many other builders in the state were dormant for the last several years, but Shine said that “the timing is right to build houses again as buyers get back into the market.”

According to Dataquick, in December 2,854 newly built homes were sold in Southern California, one of the highest sales counts for new homes since 1991.

Kaufman & Broad Home Corp., the state’s biggest home builder, reported that its Southern California home sales were up 18% in the first quarter of 1996, ending Feb. 29, compared to the same period last year. “Our traffic is at record highs,” said K&B; spokesperson Stacy MacLean. She estimates that 3,000 people visited their new home subdivisions in Southern California in the week of Feb. 18. The resale market is even stronger. “Our sales were up 36% in January from January last year,” said Gary Thomas, broker-owner RE/MAX South County, Mission Viejo, which includes eight offices along the Orange County coast. “We are seeing multiple offers and a phenomenal number of people coming into the market,” he said. Thomas doesn’t believe it is a momentary improvement; “I see sustained growth” in home sales.

According to Karevoll, the recovery began in the latter part of last year. Although total 1995 home sales were down from 1994 levels, fourth quarter sales were up 2.9% in Southern California and 5% in the Bay Area.

“The fourth quarter was very strong, and it is holding up,” said Sandra Perlatti, senior vice president of the McMillin Co., a San Diego-based home builder. On a weekend in mid-February, 1,500 people visited the firm’s 129-home subdivision in Chula Vista. “People aren’t just walking through the projects; they are real motivated,” Perlatti said.

Some analysts say that the improvement in the market is being driven by more affluent home buyers who are realizing gains from the stock market rally, particularly in the Silicon Valley, where technology stocks have been red hot.

“We had the best December and January that we have ever had,” said Rodger Ricard, president of Cornish & Carey Residential Real Estate in Palo Alto. As they did in the late 1970s and 1980s, buyers are lining up to buy houses, he said.

In the Silicon Valley, real estate agents are reporting as many as half a dozen backup offers on each house as buyers jockey for position to compete for a limited number of homes on the market. According to Dataquick, the two strongest markets in the Bay Area are San Mateo and Santa Clara.

Realty agents in other parts of the Bay Area, including Alameda, Contra Costa, Monterey and Santa Cruz counties, also report strong demand as the housing market comes back to life.

The low-end and the expensive homes are generating the most enthusiasm among home buyers.

“There’s no question that prestige homes started moving again,” Karevoll said. Statewide, homes priced at more than $750,000 are selling well, he said.

But the entry-level market is also strong, according to Dataquick. Homes priced between $90,000 and $120,000 are selling well as first-time buyers take advantage of lower interest rates. “They can afford to buy instead of rent an apartment,” Karevoll said.

A recovering California economy is also a factor as the strength of the computer industry in the north and growth in the entertainment industry in the south create new jobs and more confident home buyers.

Lower prices have also made homes so affordable that consumers can find value in the market.

So far, the improvement in sales activity hasn’t pushed up home prices. But if history holds true, that is the inevitable next step.