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Realtors Say Home Price Rise to Slow

Real estate: Group says rate of increase in state may drop to 10% in 2003, down from 18% this year.

October 11, 2002|DARYL STRICKLAND | TIMES STAFF WRITER

California home prices will continue to rise next year, but at about half the rate of this year's torrid pace of 18%, the California Assn. of Realtors said Thursday.

The projected increase would push the median cost of a single-family home to a record $344,000 in 2003. That's a 10% increase in the price of what's expected to be this year's median home price of $313,000.

Citing a dearth of new construction and a crowd of investors drawn to real estate as the stock market falters, the Realtors group said the forecast suggested that housing prices are returning to a more normal rate of growth.

"It's leveling out," said Robert Bailey, president of the California Assn. of Realtors. "It's not an alarming number at all."

Still, the forecast was higher than some other analysts expected for next year.

"A price rise of that level, with very little inflation, is a high rate of increase and might not be sustainable," said Tom Lieser, a senior economist at UCLA's Anderson School.

With the Bay Area's economy still shaky, Southern California prices would have to rise even more than 10%, which Lieser said is unlikely, for the statewide average to be 10%.

Home sales, meanwhile, are expected to decline 3% next year from this year's record pace of 547,300, the Realtors group said. Bailey said the record gains in sales and prices cannot be maintained, leading to tempered expectations next year. But even with the drop, sales are projected to post the third-highest mark ever.

Interest rates still are helping to fuel home buying. In a separate report Thursday, secondary mortgage investor Freddie Mac said average 30-year rates edged down nationwide. Mortgage rates fell to 5.98% from 6.01% last week, the lowest level since the company began tracking weekly figures in 1971.

Falling interest rates have led to brisk activity in the housing market. Industry groups estimate sales of new homes will reach a new peak of 936,000 nationwide, while sales of previously owned homes probably will top an all-time high of 5.53 million and break last year's record.

Moreover, the low rates have created a record amount of home refinancings in California.

Despite historically low mortgage rates, rising home prices pushed more buyers out of the market during August.

The Realtors group reported Thursday that only 28% of Californians can afford to purchase a median-priced home, down 2 percentage points from a year ago.

The Realtors group also said only 30% of Los Angeles County residents were able to afford a median-priced home, down 4 percentage points from a year ago. In Orange County, the percentage declined to 23% from 27%.

The median home price statewide rose 18% in August from a year ago to $334,100, the group said.

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