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Median Price of O.C. Homes Takes a Dip

Real estate: Some analysts expect housing demand to remain strong despite last week's sudden jump in mortgage rates.

October 13, 1998|DARYL STRICKLAND | TIMES STAFF WRITER

Orange County's surging housing market showed signs of cooling off last month, according to a report on home prices and sales released Monday.

The median price of a home in the county fell to $227,000 in September, down $3,000 from the previous month. The prices were still 9.7% above prices a year ago, but it was the first time in almost a year that home prices haven't shot up in double digits, according to Acxiom/DataQuick Information Services, which compiled the survey.

A sudden leap in mortgage rates last week could cloud the market, but some analysts said they expect housing demand to remain strong. They point out that mortgage rates remain at relatively low levels, despite a half-percentage point gain late last week that offset most of the declines in rates over the last two months.

"The change we've seen in the last week isn't enough to change the factors that are affecting home sales," said Earl Peattie, president of Mortgage News Co. of Morro Bay, who has compiled a weekly report on mortgage rates in Southern California for more than 12 years.

He added that rates remain at some of the lowest levels in 20 years, and that he believes those who will be affected most by the sudden spike in rates are people with marginal credit.

In the past couple of years, partly because of income growth, looser credit and lower mortgage rates in general, the housing market has not been as sensitive to changes as in the past, Peattie said.

Although the increase in mortgage rates will knock some buyers out of the market, "the bigger effect on home sales is the state of the economy, rather than this blip in mortgage interest rates," said economist Walter Hahn.

Bruce Lehman, executive vice president of Catellus Residential Group, said it's too soon to say what the impact will be. But "if rates don't go up any further, we wouldn't anticipate any profound impact."

At Santa Ana-based Norwest Mortgage Inc., a large lender in the new-home market, the effect of last week's rate increase has been nil, said Dan Hanson, senior vice president. "The difference of a half-percentage point will not be a big deterrent," he said.

Indeed, the sudden increase could cause people who have been on the sidelines to jump into the market, realizing that rates are as low as they are likely to get.

"Once rates bounce up a bit, people realize rates have hit bottom and have gone as low as they can," said Bill Plattos, general manager, First Team Realty in Costa Mesa. "It may cost a few more bucks, but rates are still lower than 7%. I'm real comfortable in saying this will increase volume rather than slow it down."

Although home sales tend to sag in September as the pool of buyers thins out as their children head off to school, the past month ranked as the busiest September since at least 1990. It marked the 16th consecutive month that prices showed a year-over-year increase.

A total of 4,331 homes sold in September, up 9.6% from the same month last year. Existing houses and condos both continued to enjoy double-digit growth during the month, but new-home sales dropped 37% as developers, hampered by a shortage of ready-to-build lots, have been unable to satisfy demand.

One key reason that prices remain so far ahead of year-ago levels is that appreciation has spread throughout the market. Although high-end homes led the housing revival, even starter homes have gained in value rapidly over the past 12 months. As a result, median prices per square foot in September were almost 14% over year-ago levels, Acxiom/Dataquick said. Plattos acknowledged that the volume of transactions in September dipped about 5% from August levels at his First Team office in Costa Mesa.

"If the country has a slowdown next year, Orange County won't participate at the same rate," he said. "Houses will still keep selling."

(BEGIN TEXT OF INFOBOX / INFOGRAPHIC)

Orange County Home Sales

September home sales increased 9.6% from a year ago to 4,331, but that was short of the August tally of 4,710 sales. Similarly, the September median price of $227,000 was up from a year ago, but down from the August level of $230,000. Sales, median prices of new and resale homes and condominiums, by ZIP code:

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