Buyers play wait and see

PHILIP SWIGER, 56, has lived in Kentucky, North Carolina and Texas. But none of those markets prepared the furniture designer for the home prices he encountered when he moved to Huntington Beach last month.

“As much as you read and hear about it, it was still a total shock to see what prices were like and what you get for your money compared to other places,” he said.

Swiger, who sold his Louisville, Ky., home for $500,000 and rented a Huntington Beach town home for $3,000 a month, said he plans to hold off and buy this winter.

“I’m going to roll the dice a bit,” he said, “and see if prices come down in the next six months.”

He isn’t rolling alone. Sobered up from frenzied exuberance over last year’s housing gains by this year’s declining sales, price reductions and increased housing inventory, a growing segment of Southland buyers are waiting on the sidelines for a significant downshift in prices.

Bob Taylor, owner of Bob Taylor Properties Inc. in Highland Park, noticed the change in buyers in May.

“Unless they can get a good offer accepted, about 75% to 80% of my clients are saying they want to wait up to one year for 10% to 15% price adjustments,” Taylor said.

And they appear to have a reason to wait. DataQuick Information Systems reported that the Southern California median price slipped from $493,000 in June to $492,000 in July. The number of sales dropped to 24,669 in July, down about 27% from 33,561 in July 2005.

With an estimated one-third of Southland properties currently “wildly overpriced,” according to John Karevoll, chief analyst at DataQuick, a La Jolla-based real estate research firm, patience could be a home shopper’s best virtue.

“If you’re a buyer, there’s no hurry at all,” said Edward Leamer, director of the UCLA Anderson Forecast, which provides quarterly economic projections. “Prices are going to be a little weaker a year from now, and there’ll be more listings and more choices.”

How much weaker remains to be seen, but Leamer anticipates an annual 2% to 3% drop in home prices for three to five years.

Although market indicators may justify a wait-and-see attitude, experts and consumers say timing the market can be tricky.

In 2001, when Aileen Jones, 49, sold her four-bedroom home for $865,000 -- after paying $650,000 for it in 1991 -- she rented a West Hills house and started looking for another investment.

In February 2003, she found a 6,600-square-foot, five-bedroom home in foreclosure on half an acre in Woodland Hills for less than $1 million. Jones, a housewife, spent $400,000 renovating the property and estimated that today, based on comparable prices and recent area sales, the home is worth about $2.1 million.

“Had I not rented and gone into another house, I would never have gotten this one,” she said. “But because the market was so high, I was really persistent about looking.”

Victor Migenes, 45, owner of 2nd Street Cigars & Gallery in Los Angeles, has bought and sold investment properties numerous times in the last 20 years. This market, however, feels different to him, he said.

“I think the prices are overblown,” he said. “And as the market softens, some buyers are going to be unhappy with their purchases unless the home is the type of home that you want to hold on to.”

Fearful of getting stuck on the high end of a softening market, Migenes, now a Los Feliz renter, sold the Mount Washington home he’d purchased for $260,000 in 1999 for $440,000 in 2002 and started looking for another investment in Bel-Air, Beverly Hills, Brentwood, Encino, Redondo Beach, Santa Monica and other locations where properties traditionally hold value.

In February 2005, he bought a Bel-Air-area tear-down for $525,000 and gutted the home.

The house is slated to be finished next year, and based on current home prices, Migenes said he believes the 3,000-square-foot, tri-level rebuild will appraise for about $2.2 million.

“I got a decent deal. If I had held on to the Mount Washington home about six months longer, I would have gotten maybe another $100,000. But you can’t look back,” Migenes said. “It’s a gamble.”

Not every gambler gets lucky. Believing a rapid decline in prices would diminish the equity accrued on the Tarzana home she bought for $166,000 in 1999, Inbar Cohen, 35, sold the property for nearly $400,000 in August 2003. She then rented a house in Encino for $2,000 a month and started looking for her dream home.

“At that time, $600,000 would buy you a mansion” south of Ventura Boulevard, Cohen said. “And we thought we would be able to buy a $600,000 home and put all our equity into it.”

Three years later, that dream is on hold. “We were hoping that prices would drop. Now, $600,000 will buy you a fixer-upper in my neighborhood,” said Cohen, a hearing officer for the L.A. city attorney. “I’ve waited this long. I can wait another year.”

Glen and Holly Avendano planned to use equity from the November 2002 sale of their one-bedroom Fullerton condo for a down payment on a home.

Feeling no immediate pressure to buy, Glen Avendano, 32, who works for the federal government, and Holly, 31, an insurance rater, rented a three-bedroom Anaheim home, banked their equity and watched the window of opportunity slam shut.

“Holly and I got stuck,” Glen Avendano said. “We had sold our condo, and housing prices were too high for us to buy.”

The story is familiar to Realtor Taylor. In 2002, six of his 64 clients opted to sell and then rent while trying to time the market, thinking it had peaked. Today, all but one are still renting, he said.

Southlanders who are waiting for the market to hit rock bottom, should ask themselves: “When is that going to happen?” said Dixie Long, an agent with First Team Real Estate Inc. in Huntington Beach.

“And as soon as it happens, don’t you think that everyone is going to start jumping on the bandwagon? So if the timing is right, and you’ve seen a home you like that has gone down in price, why not get in the ballpark?” she asked.

While some buyers are pinching pennies, analyst Karevoll said, there are also many sellers stuck in a get-rich-quick fantasy.

“This market is starting to normalize,” Karevoll said. “But you’ve got all kinds of people trying to gain the peak of the market by putting properties on the market at fantasy prices.”

Then there are renters such as Poway resident Schahrzad Berkland and supporters of www.boycotthousing.com, a Bay Area site that has managed since May to get more than 2,000 visitors to sign a petition agreeing not to buy Bay Area homes for three months to one year.

Berkland, 44, who made about $300,000 on the sale of her San Diego home in January and regularly tracks sales and inventory in her area, said she believes the fallout from exotic home loans and real estate speculators will mirror the dot-com crash that followed the tech-stock mania of the late 1990s and left many investors dazed.

“Then, just like now, a lot of people got caught in the frenzy,” said Berkland, a business consultant. “I didn’t buy tech stocks either. I believe we are headed for a crash.”

But housing is not bought and sold as easily as tech stocks, Karevoll said. “People who are rolling the dice, and not getting into real estate for the right reasons, are putting themselves at risk,” he said.

“If you’re planning on living in the property for three to five years or more, you can make a good investment today,” he said. “It won’t be as good as if you bought three years ago, but it will be better than if you wait until interest rates go up.”

L.A. freelance writer Michelle Hofmann is at michellehofmann @earthlink.net.