Southland Home Prices Up for 2nd Month

Southern California home prices posted a 4.3% increase in July, a research firm reported Friday, further evidence that the area may finally be sustaining large enough price hikes to significantly stimulate the regional economy and spur many more buyers and sellers into the market.

The increases in July and June--when the median also rose 4.3%--are the largest year-to-year gains reported in six years, according to figures released by Acxiom/DataQuick Information Systems, a real estate research firm.

Such sustained rises, while still modest compared to the double-digit increases of the late 1980s, nonetheless are a huge psychological boost to the many homeowners whose equity evaporated during a long and painful slump. They also may bolster confidence among potential buyers who may have been reluctant to invest in California real estate during an era of plunging property values. At the worst of the real estate bust, home values in some neighborhoods had fallen as much as 50%.

The rise in prices “has a tremendous psychological impact on homeowners and buyers, and it makes everybody feel good about the money they have spent,” said G.U. Krueger, deputy chief economist for the California Assn. of Realtors, the state’s largest trade group of real estate agents and brokers.

The housing comeback--which reflects the region’s accelerating job growth and greater consumer confidence--also could mean that the real estate industry will finally contribute again to the state’s budding economic recovery. The home construction business, dormant during much of the 1990s, is beginning to show signs of increased activity and hiring.

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Home prices rose across the six-county Southern California region compared to the same month last year, with the median price for all residential properties sold in July hitting $169,000, according to Acxiom/DataQuick.

The pace of sales remained unusually strong in July, as the total number of residential sales--which includes single-family homes as well as condominiums--jumped 18% from last year’s level, to 22,389, Acxiom/DataQuick reported.

The increase in home prices last month ranged from a high of 4.7% in Ventura County--where the median rose to $202,000, the highest in the region--to 0.6% in San Diego County, where the median stood at $199,000.

In Los Angeles County, Southern California’s largest real estate market, the July median price rose 4.2% from the same month last year to $172,000. The Orange County median price increased 3.1% in July to $199,000.

“The jump in sales activity was somewhat stronger than we anticipated, and the supply of homes on the market is dwindling. This sets the stage for continued price increases,” said Mike Ela, DataQuick president.

Last month, sales in Orange County reached a seven-year high, rising 29.8% from the previous July, to 3,871.

Southland home values had been expected to rise only slightly or remain flat this year. But the regional market performed stronger than expected, forcing some housing experts to revise their forecasts.

Home values in Los Angeles County had not been expected to increase this year, according to a previous forecast by the California Assn. of Realtors. But now the group expects the average home price in the county to increase 2% this year and even more in 1998, said Krueger, the association economist.

Statewide, the average home price should rise 3% this year instead of 2% as originally forecast, according to Krueger.

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The current levels of price appreciation should go a long way to cut the number of homes that fall into foreclosure and lead to a substantial drop in the ranks of homeowners whose mortgage amount exceeded their home value--at one point estimated at more than 300,000 statewide. That condition, known as negative equity, has depressed home sales in many areas and prohibited homeowners from borrowing against their properties.

While prices remain depressed in many neighborhoods, real estate agents in most areas have reported a surge in sales activity this year and at least stable if not rising home prices. In some prime neighborhoods, such as the Westside of Los Angeles, competition is keen among home buyers, and sellers have been able to extract higher-than-expected prices, according to agents.

In the San Fernando Valley, Woodland Hills real estate broker Tom Carnahan said he has noticed that home sellers are more likely than in the past to reject offers 5% or more below their asking price. Carnahan also said his firm is working with more home sellers who want to trade up into more expensive homes in the area.

In the past, the vast majority of Carnahan’s sellers simply moved out of Southern California, depressing demand and home prices.

“The main thing is that people are staying in town, and that’s stimulating the whole market in different price ranges,” he said.