Southern California home buyers continue to turn their backs on an expensive market with few houses for sale.
Home prices fell 3.8% in January compared with December, though the median price remained up sharply compared with January of last year, research firm DataQuick reported Wednesday. The price decline, coupled with falling sales, revealed a market that has lost momentum after an explosive price run-up in the first half of 2013.
"Buyers are not overpaying," said Broker Derek Oie, owner of Century 21 the Oie Group in the Inland Empire. "They know the market has changed."
January's median home price, $380,000, is the lowest since May. The year-over-year gain — prices rose 18.4% since January 2013 — is the smallest increase since November 2012.
In the six-county Southland, 14,471 new and resale condos and houses changed hands last month, a three-year low for a January, signaling that high prices and tight inventory have handcuffed buyers. Sales were 9.9% below January 2013 levels and have now fallen year-over-year for four consecutive months.
"The pause is related to a deterioration in affordability," said Stuart Gabriel, director of UCLA's Ziman Center for Real Estate. "The urgency to buy has essentially evaporated."
The price decline from December isn't unusual; the market typically slows in the winter months. But this year's decline was slightly sharper than normal, DataQuick said. Investors usually play a larger role in the marketplace this time of year as families pull back. That can drop the median price because investors often seek lower-priced homes.
The median price is the point at which half of homes sell for less and half for more.
Absentee buyers — mostly investors and some second-home purchasers — bought a slightly higher share of homes last month: 27.5%, compared with 27.2% in December.
Prices soared early last year as investors and families rushed to buy homes they viewed as bargains. But the demand pushed prices up quickly, forcing many buyers out of the market.
In last year's fourth quarter, only 32% of California's potential home buyers could reasonably afford a median-priced home, the California Assn. of Realtors said Wednesday. That was unchanged from the previous quarter, but down from 48% in the fourth quarter of 2012.
The spring home-buying season should provide clearer insight into the direction of demand and prices.
DataQuick President John Walsh said two big questions hang over the market: Will sellers list more homes to cash in on recent price appreciation? And if inventory does expand, how much pent-up demand is left?
"Unfortunately, we'll probably have to wait until spring for the answers," Walsh said in a statement.
Some agents, especially those in wealthier neighborhoods, say they've already noticed a shift.
"The moment the clock hit January, it was like a starting gun went off," South Bay real estate agent David Keller said. "We are all busy."
Sales in the lower end of the market continued to decline in January, while sales in more affluent neighborhoods rose. The number of homes that sold for $800,000 or more jumped 36.7% compared with a year earlier.
But overall sales fell, as lower-priced neighborhoods remain stymied by low inventory and weak income growth. Even though prices have risen considerably in these areas, many homeowners saw big drops in their home's value during the housing crash. So listings remain limited because many homeowners still owe more on their mortgages than their homes are worth.
Real estate agent Leo Nordine said he's seen the disparity across his coverage area of South Los Angeles and the South Bay, with far more demand in upper-class neighborhoods.
"Everywhere else is really weak," he said.