For the first time in nearly a decade, a gauge of Orange County home prices went negative in August.
That could be just for starters, according to economists and real estate watchers.
The median price of an existing detached home in OC fell 2.5% in August from a year earlier, to $698,080, according to the most recent data from the California Association of Realtors.
Meanwhile, prices for all homes, including new houses and condominiums, have slowed to their slowest rate of appreciation in years.
Sales of homes already are well below the levels of a year ago.
“Locally, there’s going to be fewer sales until asking prices start to drop,” said Kerry Vandell, director of the Center for Real Estate at the University of California, Irvine.
Economists vary in their projections for home prices next year, with most seeing flat prices to a slight decline. A report last week from Economy.com, a unit of West Chester, Pa.-based Moody’s Corp., predicted the median sales price for an existing OC home could decline by 10% next year.
The county’s housing market retains long-term appeal for homebuilders. But a cooling could bring some near-term tweaks.
Projects in the works are likely to move forward, observers said, though possibly at a slower pace than originally planned.
Some developers considering condos amid stores or in industrial areas could turn their attention back to commercial uses.
One economist, Wells Fargo & Co.’s Scott Anderson, said he believes homebuilders have been slow to respond to the brewing slowdown.
“They are building as though it’s business as usual,” he said.
The slump in prices and sales could be most pronounced with more expensive homes.
So far, pricey homes at $800,000 and higher have seen the biggest dip in prices, according to real estate economist Walter Hahn, who does consulting work out of an office in Irvine.
Those homes are seeing drops in the 5% to 10% range when sold, he said.
“It’s a real price cut from last year,” Hahn said.
More affordable homes and condos,closer to the county’s median price of $633,000,continue to see strong sales and demand, Hahn said.
Those homes have helped keep the county’s median price relatively high, even though the rate of month-to-month increases has slowed down, he said.
Some signs of slipping demand for lower-priced homes are cropping up.
Last year, Irvine-based Sares-Regis Group paid a reported $96 million, or about $279,000 per unit, for the Innsbruck Resort Apartment Homes, a 344-apartment complex in Aliso Viejo.
Sares-Regis bought the apartments with an eye on converting them to condos.
About 10% of the converted homes, now known as Canyon Villas, are set to be auctioned off on Saturday.
Minimum bidding starts at $295,000, 38% below the homes’ last asking price, according to Sares-Regis officials.
Still, the Sares-Regis case isn’t as drastic as what’s been seen in other markets.
Near Union Station in Los Angeles, Irvine-based Standard Pacific Corp. recently backed out of a $34 million condo conversion project after slow sales. The homes are being turned back into apartments.
Down in San Diego, home prices have taken the biggest tumble of any California market, mostly due to the large number of condo projects that sprung up at once.
“I don’t think (the market) is going to take a dive here, like in San Diego. San Diego got grossly over-built. But Orange County is clearly seeing the effects of the nationwide (housing) slump,” Hahn said.
More homes could be put up for sale as homeowners with adjustable-rate mortgages try to unload their properties before they’re hit with significantly higher payments, Hahn said.
The area’s remaining speculative investors also could unload homes at lower prices, he said.
“The speculators haven’t worked their way out” yet, Hahn said.
