January sales of previously owned homes in California slumped 16.1% and housing sales slipped nationally as well as higher interest rates took their toll on the economy, squeezing more prospective home buyers out of the market, realtor groups said Tuesday.
The California Assn. of Realtors said Tuesday that 396,020 existing, single-family homes were sold statewide in January, down from 471,910 homes sold in December. The drop reflects an increased caution among home buyers in the face of the Federal Reserve Board's substantial interest rate hike in mid-November, said Leslie Appleton-Young of the California Realtors.
For the Record
Los Angeles Times Thursday March 2, 1995 Home Edition Business Part D Page 2 Financial Desk 2 inches; 38 words Type of Material: Correction
Home sales--The annualized number of existing, single-family houses sold in the state during January was 396,020, down from 471,910 in December, according to the California Assn. of Realtors. These figures were not characterized as annualized in Wednesday's editions.
There was a strong upward trend in resale housing throughout much of 1994, but "by the Nov. 15 interest rate hike--the sixth increase of the year--the market had dampened," Appleton-Young said. "Part of it was the higher rates, but part of it was the \o7 expectation \f7 that the rates would continue to climb."
A key survey released Tuesday by the Conference Board underscored the point, indicating that higher interest rates have dampened consumer optimism about the state of the economy.
The business research group's overall consumer confidence index declined to 99 in February from 101.4 in January, signaling growing skepticism about the future. The index uses a 1985 base of 100.
Although a lull in the housing market is typical early in the year as consumers balance their finances after the Christmas rush, sales were also markedly lower than last January because consumers are waiting to re-evaluate the market, said Jack Kyser, chief economist with Los Angeles Economic Development Corp.
"Consumers are still nervous about trends in the economy and the interest rate," Kyser said. "It seems like the best time to buy has passed, so they are holding off to see what happens next before they act."
Though the falloff nationally was not as steep as in California, U.S. home sales slipped 4.5% during the same period to the lowest level in 21 months. Sales of existing single-family homes were 3.59 million at a seasonally adjusted rate, down from 3.76 million in December.
Sales had risen 1.9% in December, the first advance since March, but resumed their fall in January, with the Northeast posting the only regional gain.
"California is more sensitive to interest rate fluctuations because it has relatively higher home prices compared with that of the U.S. as a whole," said economist Chris Taylor of Wells Fargo Bank in San Francisco.
While the national median price of a previously owned home remained stable at about $108,000, the statewide median price of a home sold in January dropped 1% to $177,230 from a revised $179,060 in December. The median price is the midpoint, meaning half the homes sold cost more and half cost less.
Still, the state's improving economy is expected to bolster home sales in 1995, Appleton-Young said. And some believe mortgage rates, like other interest rates, have peaked.
Fixed mortgage interest rates averaged 9.15% during January, down from an average of 9.19% in December, according to the California realtors' group.
"As the national economy slows and inflation remains under control, fixed mortgage rates will likely decline even further, " Appleton-Young said. "This should bring many potential California home buyers into the market just in time for the spring home-buying season."
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Existing Home Sales
Seasonally adjusted annual rate, in millions of units:
Jan. 1995: 3.59
Source: National Assn. of Realtors