Home values still through the roof

Andrew Edwards

The cost of buying a home in Newport-Mesa continued to get more

expensive in May. Real estate statistics released Thursday showed

median home prices went up in all but one local zip code.

The figures, compiled by La Jolla-based DataQuick Information

Services, showed that the median price for a home or condo in

Newport-Mesa ranged from a pricy low of $602,000 in south Costa Mesa

to $3.8 million on Balboa Island in May.

The statistics compared May 2005 prices to those in the same month

last year. The only part of Newport-Mesa where year-over-year prices

dipped was Corona del Mar, where median home and condo prices dropped

3.4% to $1.5 million.

Home prices continue to rise because of a low supply of available

homes, First Team Real Estate agent Lori Robnett said.

“There’s not a whole lot out there,” said, Robnett, who sells

houses in Costa Mesa. “I think the cheapest house out there is

$599,000.”

Though homeowners could expect to fetch a high asking price for

their house, people around Newport-Mesa may not be putting their

houses on the market because the high prices in the area make it hard

to use equity to move up to better digs, said real estate agent Kent

McNaughton, who sells homes in Newport Beach, Newport Coast and

Laguna Beach for First Team Real Estate.

“Why make the move?,” McNaughton asked.

Though home prices continued to climb in May, the rate of

appreciation has slowed, DataQuick reported. The company released

figures for Orange County as a whole Wednesday. Across the county,

the median price for a home or condo was $590,000. The new median

price was an 8.7% climb above May 2004 numbers. According to

DataQuick, May was the first time in more than three-and-a-half years

that Orange County’s year-over-year increase was in the single

digits.

In a statement, DataQuick president Marshall Prentice said no one

can tell if home prices will make a “soft landing” or begin to drop.

G. Christopher Davis, director of the real estate management program

at UC Irvine’s Paul Merage School of Business, believes Southern

California’s population pressures will bolster home prices.

“The simple economic formula of supply and demand will mean that

prices will continue to rise,” Davis said.

McNaughton does not worry about a real estate bubble, but believes

the market could undergo a correction in the next two to three years

if interest rates go up.

“The only danger that I see on the horizon for the real estate

market would be if interest rates rise dramatically or substantially

over the next few years,” he said,

McNaughton expects rates to go up some time in the next two to

three years. He said a home buyer using an adjustable rate mortgage

or interest-only loan to buy a house could be hit hard if rates go

up. People who take out interest-only loans only pay interest at the

beginning of the loan, before being required to pay back the

principal along with interest.

As of Thursday, the average rate for a one-year adjustable rate

mortgage was 4.25%, and the average five-year hybrid adjustable rate

mortgage rate was 5.1%, according to mortgage finance company Freddie

Mac. Average rates for both types of mortgage increased over the

previous week.

Freddie Mac also reported higher rates for 30-year and 5-year

fixed year mortgages Thursday. Average rates climbed 5.63% and 5.22%,

respectively.

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

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

@latimes.com.