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Housing Market 'Still Going Up'

Sales* Despite rumors that it has peaked, California's bullish streak is continuing.

September 01, 2002|DIANE WEDNER | TIMES STAFF WRITER

Dispelling rapidly spreading rumors that the current real estate boom is about to end, a study released Wednesday points to a continuing bull housing market in most of Southern California.

Even as some of the higher-priced areas of Orange, Ventura and Los Angeles counties are taking a temporary breather from rapidly rising home prices, most of Los Angeles, and particularly the Inland Empire, continues to see a rise in home prices, said the study's author, Christopher Cagan, director of research and analytics at First American Real Estate Solutions, a nationwide provider of real estate information.

"I think the party's going on for a while," Cagan said. "The market has not peaked."

Amid continuing double-digit home price increases and sharp spikes in home sales, questions have arisen about whether California real estate is experiencing a "bubble" that is about to burst.

Cagan pointed to several indicators that belie that assumption.

First, the average yearly price appreciation for detached, single-family homes over the last 16 years is up in all five Southland counties. And prices, while exceeding pre-recession prices in some areas, have not yet reached the levels of the late 1980s in many areas, leaving room for even higher prices.

Furthermore, although the number of those who can afford a median-priced home has dropped in the last year into the 20% to 30% range, that figure is nowhere near the affordability levels of about 13% to 18% of the late '80s, a benchmark for a housing recession, Cagan said.

Other bull-market predictors include the current low mortgage-interest rates, stronger housing demand than supply, the quick pace of sales once a home hits the market, and the slow pace of new-home construction.

Signs of a declining market would include falling prices, increased foreclosures and forced government bailouts, none of which is occurring.

"The housing market can take a breather right now, especially in Orange County, where there's been such a bull market for so long," Cagan said. "The overall market is still going up, and will for a while."

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