Home prices continue to rise in early ’05

Andrew Edwards

Home prices around Newport-Mesa could continue to climb throughout

2005, local real estate agents say.

They are encouraged by sales activity over the first two months of

the year, but some are hesitant to predict that property values will

appreciate as much as last year.

“I don’t know if it’s going to be that good, but it’s going to be

good,” said Bill Cote of Corona del Mar’s Cote Real Estate Group.

During 2004, home and condo prices in Costa Mesa rose 31.9% to a

median of more than $573,000, while Newport Beach residences

increased by 26.36% to a median greater than $1,042,000, according to

DataQuick, a La Jolla based company that monitors property values.

Countywide, DataQuick recorded an appreciation of slightly less

than 25% last year. Cote said he expected home prices could grow

between 15% and 18% this year.

Through the end of January, DataQuick recorded further increases

in Newport-Mesa. Costa Mesa’s median home price went up to $583,000;

in Newport, that number climbed to $1,093,750. February figures were

not available.

Sales and listings figures supplied by Coldwell Banker of Orange

County, which included homes sold and placed on the market by other

agencies, suggest that the market continues to be active.

In Costa Mesa, 130 homes were sold during the first two months of

2004. Through Feb. 28 of this year, 99 homes have sold and 214 are in

escrow, including five that have price tags over $1 million.

During the first two months of last year, 178 Newport Beach homes

sold and 36 Newport Coast homes sold. This year, 145 Newport Beach

homes have been sold, and 31 sales have been completed in Newport

Coast.

“What I see doing it is, number one, a rebounding economy, number

two, a big demand from baby boomers who, as you know, have more

disposable income than any previous generation,” said Peter

Hernandez, president of Coldwell Banker of Orange County.

Realtors who were interviewed agreed with Cote that the local real

estate market shows signs of strength. Any differences of opinion

centered around whether prices would grow as much as in 2004.

One of the more moderate voices was Lori Robnett, a First Team

Real Estate agent who works in Costa Mesa.

“I don’t see a decline, I see a normal steady pace,” she said,

noting transactions have tended to include more negotiations this

year than last year.

On the other end of the spectrum, Patricia Moore, executive vice

president of the Newport Beach Assn. of Realtors, said 2005 “could be

a banner year.”

Moore cited mortgage rates that have hovered around 5% since 2004

as a continued incentive for buyers, and she said demand for local

homes exceeds current listings.

“That’ll mean multiple offers on the same listing and prices

higher than asking -- all the things that we’ve seen the past two

years,” Moore said.

Either way, real estate agents’ expectations are much different

from those set forth in the Chapman Forecast, which was presented to

the Newport Beach Chamber of Commerce in February. Discussing that

set of predictions, Chapman University professor Esmael Adibi told

the chamber that home prices would fall a little more than 7% across

the county.

Adibi said early signs appear to contradict his prediction, and he

admitted the Chapman Forecast did not anticipate last year’s

appreciations. But he stood by his earlier statements. He said he

expected rising adjustable mortgage rates would eventually give

buyers pause.

Average rates for five-year, hybrid, adjustable-rate mortgages

rose to 5.17%, mortgage investors Freddie Mac reported Thursday. That

number was up from 5.05% the week before. Average rates for 30-year

fixed-rate mortgages climbed from 5.69% to 5.79%.

However, realtors believe demand from buyers, especially wealthy

ones, wanting to live in Orange County trumps affordability matters.

“You don’t talk about affordability indexes in Orange County. We

got a bunch of rich guys here who don’t care about affordability,”

Cote said. “Poor guys don’t live here, I’m sorry.”

UC Irvine economist G. Christopher Davis also disagreed with the

Chapman Forecast. Davis argued that supply and demand, driven by

large numbers of people moving to the area, is the primary force

behind the home market rather than interest rates or similar factors.

“Population growth is fanning the fires of the continued good

housing market,” Davis said.