Those ever-present market forces are slowing down the five-month-long home-buying binge. Escalating home prices of resale housing, coupled with gradually rising mortgage rates, which have been steadily increasing since July 8, may dampen the spirit of sales for the rest of the year.
Yet, in the new-home, move-up category, where some families are buying their third or fourth homes, you'd never know things were slowing down. Lotteries and sellouts are the order of the day, with prices scaled upward from $300,000 to well over the half-million-dollar mark. As reported last week by the California Assn. of Realtors in a sales summary, the price of an existing single-family California dwelling rose by 4.6% from May to June, even though sales were down 7.8% from those in May. But the hectic recent buying volume was 4.8% higher than the figure for June, 1987.
During June, 565,649 existing single-family homes were sold on a seasonally adjusted, annualized rate, compared with a 613,518-unit pace during May.
Statewide median prices for resale homes in June showed $211,038 for Orange County, up 4.1% from May; $209,687 for the San Francisco bay area, up 10.2%; the Los Angeles region recorded $182,364, up 4.8%; San Diego region, $147,605, up 3.8%, and the Riverside-San Bernardino area, $108,567, up 4.4%.
The increases over last June's median prices ranged much higher, up 12% in the Riverside-San Bernardino area; 17.6% in San Diego; 18.6% in Orange County; 21.1% in San Francisco and the highest, 22.7%, in Los Angeles.
"The June (1988) numbers suggest that the market may have reached its peak during the second quarter, and that we'll begin to see the number of home transactions move toward a somewhat lower level in the coming months. As this slowdown occurs, we expect to see far less drastic month-to-month increases in home prices," the CAR's chief economist, Joel Singer, said.
The condominium resale market provided a bright spot in the CAR's monthly report, showing an 11.9% increase in sales over May. Compared with a year ago, condominium sales were up 26.6%. The median price of a for-sale condo rose only 1.2% from May to June, to $122,903. But that figure was 13.3% higher than the price a year ago in June.
In many cases, would-be home buyers, discouraged by the rising prices for homes, opted for condominiums. The CAR's statewide inventory index in June, 1987, showed an 8-month supply; it fell to 6.6 months in May, and a 5.6-month supply last month.
In the new-home category, market forces haven't dampened or stalled the desire of move-up buyers, obviously. In the many hot spots, they'll tell you, "Sorry, we're sold out. And the price is going up on the next phase." That's easy-to-understand builder logic.
For instance, on July 23, A-M Homes' 30-unit third phase of Seadrift, four-bedroom homes in Laguna Niguel, sold out in a lottery. It was simple.
There were 70 eager and vying buyers in attendance. They quickly "won" the privilege of buying homes priced up to $470,000 within the Bear Brand planned community.
A spokesman for the firm said many buyers whose incomes allow them to buy high-end priced homes have bought and sold three or four homes in this "move up" market, benefiting from the hectic escalation taking place in the market.
Three fervent buyers, not to be left out, bought the three model homes at the project, and then temporarily leased them back to the builder until the sellout occurred.
The spokesman added that prices for the third phase were $50,000 higher than those in the initial phase, rationalizing that given the current status of spree-buying, prices for the first phase had been greatly undervalued.
Meanwhile, on the same day, at its 43-home Hillsboro project in the planned community of Three Springs in Westlake Village, A-M Homes sold out the first phase of 27 homes in a lottery attended by 75 anxious and prospective buyers. Prices for the four plans, ranging from 2,892 square feet to 3,817 square feet, were listed from $465,000 to $585,000.
These buyers didn't even have completed model houses to inspect. The models were in the drywall stage of construction--no finish trim, no elegant furnishings--the happy spokesman explained.
When the remaining 16 homes go on sale, you can bet they will have higher prices--whatever the traffic will bear.