Sales of New Detached Homes Drop : Housing: In a two-tiered market, condominiums are moving faster in South County than they did last year, while high-priced homes compete for a dwindling number of buyers.

Are sales of new homes really slowing down in Orange County?

That depends, according to a new survey released Tuesday, which shows condominium sales are actually up this year over last. It is sales of detached houses--most of them very big and very expensive--that are in the doldrums this year.

Consider these figures from the Costa Mesa consulting firm Market Profiles: More than 3,600 condos and other types of attached housing had been sold through the first nine months of 1989 in the southern half of Orange County, where most new homes are built. That’s up 300 sales, or 9.1%, from last year’s 3,300.

Detached houses, though, are another story. Builders sold only 3,100 new houses in the area south of the Costa Mesa Freeway through the first nine months of the year, compared to 4,000 last year. That’s a 22.5% decline. Almost a third of the houses sold this year were priced at more than $450,000.

The market for used houses has also slowed, several other real estate surveys have recently indicated. And that means that people who once sold their existing homes and used the equity to buy a new house are no longer able to do so as easily. Yet land is so scarce and expensive in the county that many builders can’t turn a profit without charging astronomical prices for the houses they build.

Consequently, many buyers who might not have considered a condominium a few years ago now find it is all they can afford in Orange County, said Kelly McDermott of Market Profiles, accounting for the rise in condo sales.

All this has finally begun to affect housing prices.

Market Profiles reported Tuesday that the average price of a new home in the county fell for the first time in nearly a year during the summer.

For condominiums it was only a slight drop: The third-quarter price fell only 0.4% from the second quarter, a drop of $837 to an average of $193,089. For houses the drop was a little steeper: 1.7%, or $6,769, to $381,787.

And because of the slower sales, inventories of homes rose during the quarter by 350 units, or nearly one-third. That meant there were nearly 1,500 unsold units during the third quarter, most of them detached houses.

Market Profiles said this year should be considered more a period of market correction than the first sign of a drastic decline. Last year was an extraordinarily busy year for home sales, fueled by factors including buyer fears that slow-growth initiatives would choke off the supply of new housing.

Yet what’s less well known, said McDermott, is that 1987 was actually a stronger sales year than 1988 for new homes. Homes just sold at a steadier pace in 1987 compared to 1988, when buyers snapped up every house that came on the market almost within hours, and it “seemed as if the market was much hotter than it was,� said McDermott.

The figures: Through the third quarter of 1987, 8,300 units were sold, compared to 7,400 in 1988. This year it’s 6,700.

“So 1988 suffers in comparison with 1987, and 1989 suffers in comparison with both years,� said McDermott.

Last year, however, was a much better year for sales of detached houses. But the condo sales coming on strong this year are another sign that the market is going through a broad change, according to Market Profiles.

What’s ahead for the next year or so?

A little stronger sales than this year, said Market Profiles, for several reasons.

The huge price increases of last year--when the price of a house went up 26% between the end of 1987 and the end of 1988--should slow. And there will still be a lot of young, affluent couples with growing families in the market for big houses, McDermott said, who may be tempted to buy because prices won’t have risen as much.

In addition, builders will probably construct less expensive condos for first-time home buyers in response to a perceived demand for that type of housing. There are no condos inexpensive enough for the first-time buyer being built now, McDermott said.

“Builders are going to have to pay a lot more attention to quality and to the type of home the public wants,� said McDermott. “Last year you could (price) up anything and it would sell.

“Next year,� McDermott said, “the sales people are really going to have to sell those homes rather than just being available to take orders.�

SOUTH ORANGE COUNTY HOME SALES

Here are quarterly sales and average prices for new homes sold in southern Orange County from 1987 to the present:

Attached Detached Quarter Sales Avg. Price Sales Avg. Price 1st Quarter 1987 1,369 $130,198 1,831 $198,749 2nd Quarter 1,260 139,796 1,682 218,025 3rd Quarter 977 137,799 1,165 211,763 4th Quarter 916 138,921 1,219 230,777 1st Quarter 1988 1,287 153,170 1,364 262,215 2nd Quarter 1,217 162,150 1,272 297,163 3rd Quarter 840 181,657 1,402 329,214 4th Quarter 569 195,522 588 291,626 1st Quarter 1989 926 166,616 1,046 342,277 2nd Quarter 788 193,926 1,040 388,556 3rd Quarter 919 193,089 1,000 381,737

Source: Market Profiles