Affordability still an issue

Andrew Edwards

The local housing market witnessed a scorching increase in home

prices last year, but the outlook for 2005 depends on whom you ask.

If Chapman University economist Esmael Adibi is correct, the

seller’s market is on the way out. Adibi, director of the

university’s Anderson Center for Economic Research, discussed his

predictions Wednesday at a lunch sponsored by the Newport Beach

Chamber of Commerce and the California Society of Certified Public

Accountants.

In Orange County, the median home price, not including condos, is

about $600,000, Adibi said. After taxes, homeownership would cost

about 48.8% of the median family income in the county. That number,

Adibi said, is higher than the same figure in 1989, when a downturn

in the housing market began. In 1989, local homeowners were spending

about 40.8% of their after-tax income on their house.

“Affordability became an issue,” Adibi said. He predicted that

countywide, home prices would drop 7.4% over 2005.

In 2004, more than 43,000 homes were sold across Orange County,

according to DataQuick, a La Jolla-based company that tracks property

values. The median value of single-family homes and condos in the

county climbed from about $405,000 to about $506,000 -- a 24.94%

appreciation rate.

In Costa Mesa, home and condo prices climbed more than 31.9% last

year to more than $573,000. Newport Beach home and condo prices

jumped 26.36% to more than $1,042,000.

Not all are convinced last year’s gains are over. Realtor Kent

McNaughton, of First Team Real Estate, who sells homes in Newport

Beach, Newport Coast and Laguna Beach, is not worried by Adibi’s

anticipation of a slowdown. He noted the Chapman Forecast erroneously

predicted the housing market would decline in 2004.

“I’m very optimistic about the market,” McNaughton said.

“There has been hardly any price erosion,” he continued, referring

to the communities in which he sells homes.

McNaughton said he and his colleagues are relying on a forecast

from Gary Watts, who owns Impact Real Estate in Mission Viejo.

Watts predicted Orange County homes would gain another 15% this

year. According to Watts’ analysis, affordability is not an issue for

people who buy homes in places like Newport Coast.

“This is an expensive area where the wealthy want to live,” Watts

wrote.

The California Assn. of Realtors is also expecting a 15% gain in

home prices, though Richard Kleinhanz, the group’s deputy chief

economist, said rising prices have caused a slowdown on the high-end

of the housing market.

Below the median home price, however, the association is

anticipating home sales will stay strong.

* ANDREW EDWARDS covers business and the environment. He can be

reached at (714) 966-4624 or by e-mail at andrew.edwards@latimes.com.