Home sales and prices in Orange and Los Angeles counties grew vigorously last month, providing further evidence that the region's resilient housing market is cushioning the blows of a weakening economy.
Despite the energy crisis, burgeoning layoffs and malaise on Wall Street, median home prices shot up 10% in Orange County and 7% in Los Angeles County from January 2000, according to a report released Tuesday by DataQuick Information Systems Inc., a La Jolla research firm.
Sales were brisk, rising 5% in Orange County and 8% in Los Angeles County, as the market was buoyed by declining interest rates, strong equity gains and still-robust demand from a broad spectrum of buyers. The increase continues several months of year-to-year gains in homes sold, despite declining sales of new and existing homes nationally in recent months.
The Southland market could be boosted further: Federal Reserve Chairman Alan Greenspan told Congress on Tuesday that more interest-rate cuts may be needed to help a national economy facing significant "downside risks."
The sustained vitality of the Southern California housing market has surprised analysts, who now say housing could be a critical factor in staving off a possible recession in the region.
Strong home sales and appreciation will enhance consumer confidence, put more money in people's pockets and boost a range of industries, from mortgage bankers to glass manufacturers and furniture retailers.
"There may be a slowdown in the works, but right now we can't find it," said John Karevoll, the DataQuick analyst who compiled the report. "The numbers look strong."
Market Supported by Legitimate Factors
A decade ago, a housing market held together by a thin glue of speculative investing and overbuilding collapsed and helped push the region into a deep recession. But this time, economists see the reverse, saying that strong population growth, underbuilding and more gradual home appreciation bode well for sustaining a healthy housing market.
"Southern California remains shockingly upbeat given the plethora of bad economic events that have battered the state over the past several months," said Mark Zandi, chief economist at Economy.com in West Chester, Pa.
Zandi estimates that housing accounts for 15% of the nation's economy, and it usually makes up more in California because of higher real estate values.
A significant downturn in housing nationally has led to nearly every recession since World War II, Zandi said. "If housing is doing well, it's very hard to imagine the broader economy will fold," he said.
Other economists predict that slower growth and lower consumer confidence in Southern California will soften the housing market in the coming months. But the drop-off will be moderated by pent-up demand for housing, they said.
"While sales may not grow very much, they're not likely to drop off either," said Ted Gibson, an economist at the state Department of Finance.
The DataQuick report, for instance, cataloged 2,746 homes sold in Orange County last month, compared with 2,607 the previous January. In Los Angeles County, 6,614 homes were sold last month, the most for any January since 1990.
The median price of a home sold last month in Orange County was $276,000, which was $16,000 lower than December's record. In Los Angeles County, the median price--the point at which half the homes are sold for more and half for less--was $200,000, just $5,000 off its high in December, DataQuick said. Prices typically fall from December to January because fewer new homes are sold.
In some parts of Orange County, sellers are getting significantly higher prices. An Irvine home purchased for about $865,000 a year ago is on the market for more than $1 million and is attracting a steady stream of interest, said Patrick Knapp, an agent at ReMax Real Estate in Newport Beach.
"I don't see people holding back from purchasing out of fear of the economy," Knapp said. "My biggest dilemma is getting the inventory."
He said that he has only half his normal inventory of 25 homes and that other agents have the same problem. "Agents still get listings, but it's far and few between," he said.
Interest-Rate Cuts, Job Growth Spur Sales
Sales have been stimulated by a number of factors, according to analysts.
The Federal Reserve cut interest rates twice in January, leading to the lowest mortgage rates in two years. Job and population growth has remained high in the region, far outpacing new housing starts. And renters are looking to gain the tax advantages that come from purchasing homes.
Realtors said those factors also have helped keep buyers in the market well into this month.
Jennifer Rodriguez and her husband, Oscar, combed Long Beach, Lakewood and Cerritos for a home to buy. But the 23 homes they viewed in their price range were either too small, in rough neighborhoods or already sold.