A sudden burst of home buying in late May led to stronger-than-expected monthly sales and higher prices throughout Los Angeles and Orange counties as confident shoppers ignored early signs of economic slowing.
Monthly sales of new homes in Los Angeles County were the strongest for any May in 11 years. In Orange County, sales were the highest for any May in the 12 years of record-keeping by DataQuick Information Systems, a La Jolla research firm that released its monthly report Monday.
Overall, the number of homes sold in Los Angeles jumped 5.6% from May of last year to 10,119, DataQuick reported. The typical home price rose a modest 2% to $194,000, according to the report.
In Orange County, monthly sales jumped 9% to 4,660. The median price--the point where half the homes sell for more and half for less--charged ahead 11.2% over May 1999 to $268,000, marking the seventh time in the last year that Orange County's monthly home price has hit a record, DataQuick reported.
"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 that 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 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 before sprinting ahead again, snapping back in late May to post another month of record results.
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."
Chapman agreed that "higher mortgage rates aren't slowing demand so much as creating a sense of urgency in buyers."
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.
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, Chapman said, a pace that demands about 85,000 new homes.
But developers are on track to complete only 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 among the findings of the U.S. State of the Cities report he released was a need for more affordable housing nationwide.
The monthly housing figures for Los Angeles reflect a "significant amount of growth" in 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.
Existing-home prices in Los Angeles rose 3% to $201,000. Condominium prices fell 2.6% to $150,000, while new homes grew by less than 1% to $277,000.
The number of existing homes sold in Los Angeles grew 10% to 7,614, driving the overall sales figures. New-home sales dropped 15% to 444, and sales of existing condominiums slid 4% to 2,061.
In Orange County, 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: For new homes, sales grew 25% to 432 units; for existing condos, sales increased 17% to 1,313; and sales of existing homes rose 4% to 2,915.
The monthly DataQuick study records home sales that closed during the month, reflecting agreements between home buyers and sellers over the previous 60 to 90 days. This May contained two more working days than May 1999, helping to boost figures at month's end, in particular.
Leo Nordine, a Redondo Beach broker, said he believes the market's pace will continue. He has noticed more activity among entry-level home buyers.
"I don't see any big glitches or upturns," Nordine said. "It seems like the rest of the year is going to be steady."