Home Sales Bounce Back, Set Records

A sudden burst of home buying in late May led to stronger than expected monthly sales and higher prices throughout Orange and Los Angeles counties, as confident shoppers ignored early signs of economic slowing.

Monthly sales of new homes in Orange County were the highest in the 12 years of record-keeping by DataQuick Information Systems research firm in La Jolla, which released its report Monday. In Los Angeles County, sales were the strongest for any May in 11 years.

Home buyers who may have been reluctant in April and early last month made up for their hesitation in late May, pushing prices further beyond the reach of average wage-earners and exacerbating the lack of affordable housing.

Monthly Orange County sales numbered 4,660, jumping 9% over last year’s May. The typical home price charged ahead 11.2% to $268,000, marking the seventh time in the past 12 months that Orange County’s monthly home price has hit a new record, DataQuick reported. It was the 36th consecutive month of year-to-year price gains.

“It seems that higher mortgage rates aren’t slowing demand so much as creating a sense of urgency in buyers, who want to get in before the rates get even higher,” said housing analyst David Chapman at Haskell & White, a Newport Beach accounting firm.

In April, sales had fallen sharply from the previous year, leading real estate experts to speculate the market might be reaching a turning point after several years of high growth. Analysts said that a combination of inflated prices, low inventory of homes and higher mortgage rates restrained many buyers from purchasing.

The April pause extended into mid-May, as consumers deferred making a purchase out of their concern over stock market fluctuations and higher mortgage rates, said John Karevoll, the DataQuick analyst who prepared the report.

But apparently the market was only catching its breath, as sales snapped back in late May and another month of record results was posted. To avoid being priced out of a home, buyers “didn’t wait very long before getting back into the market,” Karevoll said.

“I think the impact that the turbulence had on personal finances was not as severe as some thought,” he said. “The market is still a bit stronger than we thought.”

Karevoll believes that Orange County’s economy can sustain double-digit price increases at least for several more months. He expects the overall median price, the point at which half the homes cost more and half cost less, could top $280,000 by year’s end.

But some analysts disagree, asserting that buyers are growing more cautious about paying premium prices.

Fewer buyers can afford to pay $350,000 for a house, causing some softening in the move-up market, said Robert Chapman, general manager for Prudential California Realty in Orange County.

“I think the strength of the market is probably a little overdone,” Chapman said.

Can Average Worker Afford Average Home?

Higher prices, including another monthly record in Orange County, are raising greater concerns that average workers are being priced out of homes. A federal report Monday found that housing costs are outstripping wage gains in areas of strong job growth nationwide, particularly Southern California, resulting in a growing shortage of affordable homes.

“Cities are enjoying the benefits of the longest and strongest economic expansion in our history, but many are still not full participants in the new prosperity that has swept across our nation,” Housing Secretary Andrew Cuomo said in a statement.

Continued job growth and a relative dearth of development in Los Angeles and Orange counties have been driving prices higher. The two counties, over the past 12 months, have created about 130,000 jobs, a pace that demands about 85,000 new homes, accountant David Chapman said.

But developers are on track to complete about 31,000 homes this year, he estimated. That “shortfall of housing,” he said, means the market is likely to prolong its boom, especially if high-technology jobs continue to provide large incomes.

Cuomo said a need for a larger amount of affordable housing nationwide was among the findings of the U.S. State of the Cities report that he released.

The monthly housing figures for Los Angeles reflect a “significant amount of growth” among sales of entry-level homes, Karevoll said. All housing sectors in Los Angeles, from entry-level homes to mansions, have recorded strong sales gains, he said, though more activity at the lower end of the market has helped curb overall rates of appreciation.

The number of homes sold in Los Angeles jumped 5.6% from last year’s May to 10,119, DataQuick reported. The median price rose a modest 2% to $194,000, according to the report.

A breakdown of the overall numbers in Orange County shows that new home prices jumped 19% to $388,000, existing homes surged 11.5% to $292,000 and existing condominiums increased more than 7% to $175,000.

Sales, in turn, rose in all sectors: Sales of new homes grew 25% to 432 units, existing condo sales increased 17% to 1,313 and existing home sales rose 4% to 2,915.

Using the median price for all homes sold in May, the typical mortgage payment, assuming a 30-year fixed loan with a 10% down payment, rose to a new high of $1,825. That exceeded the previous peak of $1,802 in April 1989, DataQuick said.

The monthly DataQuick study records home sales that closed during the month, reflecting agreements between home buyers and sellers over the previous 30 to 60 days. In May, the calendar contained two extra working days compared to a year earlier, helping to boost figures at month’s end, in particular.

Though sales and prices overall rose in May, the DataQuick report recorded some softer results in parts of the county, compared to a year earlier.

In Santa Ana, for instance, four out of six ZIP Codes showed a year-over-year decline in prices, ranging from 4% to 11%. Prices in Lake Forest dipped almost 8% and in part of Dana Point dropped 22.5%.

Karevoll said monthly declines in some areas have resulted from higher sales of lower-priced homes that has allowed sellers to buy more expensive, move-up homes. The figures aren’t reflecting a market in decline, he said.

Some brokers who cover the South County market said available homes in the $250,000 to $450,000 range are hard to find. Often, they sell within weeks of hitting the market, said Tim Kelly, an agent at First Team Real Estate in Irvine.

“I have buyers with checkbooks in hand,” he said, “but I don’t have anything to show them.”

* PRICE CHART: Home values by ZIP Codes. B4

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Up and Up

Sellers of all types of homes have reason to smile this year:

Median Price

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existing houses new homes condos Jan $267,250 376,000 164,500 Feb 269,000 333,500 164,000 March 279,000 367,000 169,000 April 286,750 382,000 174,000 May 292,000 388,000 175,000

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Source: DataQuick