Sales Reports Mask Decline in Valley House Prices : Resales: Lower mortgage interest rates are allowing home buyers to spend more. But the glutted market is also forcing some sellers to accept less.

Sales are down and the market is oversupplied. Any Economics 101 student can tell you that means prices should be falling as well.

But in the San Fernando Valley housing market, something strange seems to be going on.

For more than a year, the monthly reports from the San Fernando Valley Board of Realtors have shown that sales of single-family houses and condominiums have been declining. In August, for example, the board reported that sales plunged 25% from July, bringing the year-to-date total for 1991 down 8% from the same period in 1990.

Meanwhile, there’s a glut of properties on the market. In the August sales report, the realty board said the inventory of houses for sale had reached a record high. At the current sales pace, it would take a whopping 14.7 months to sell all the properties now listed.

Yet, seemingly in defiance of both gravity and logic, the average sales price continues to edge upward. So far this year, the average resale price of houses and condominiums is up about 2% over last year’s average.

What gives?

The problem, real estate experts say, is that the average price figures don’t give a true picture of what’s really happening with housing prices.

“It’s very deceptive,” said Roger Hance, president of R. R. Gable Inc., a Northridge real estate broker.

What’s deceptive about the average price is that the figure can easily be skewed upward by a few million-dollar sales--particularly when the pool of houses sold is small. Also, the price data reflect sales closings, which in the real estate world are already considered ancient history.

Despite the increase in the average sales price, real estate specialists say, housing prices have actually fallen about 10% to 15% over the past two years.

Here’s what’s happening: With the economy in a slump and the aerospace and manufacturing industries downsizing and moving operations out of state, home-buying activity has slowed. But those who are looking to buy can afford to spend a little bit more on a house than they could have a year or two ago because mortgage interest rates are now at their lowest levels in about 14 years.

With so many properties on the market, buyers can also afford to be picky. For the same money, they’re getting nicer, bigger houses in better neighborhoods than they would have gotten a few years ago.

But all that shows up in the price statistics is how much buyers paid on average. What doesn’t factor in, Hance said, is that “what you are buying for $260,000 today is much, much more house than it would have been two or three years ago.”

Or, put another way, houses that sell today would have sold for more money a year ago.

Which leads to another conundrum in today’s market. With sales in a slump and listings at record levels, why do people keep putting their houses on the block?

Sellers “just haven’t adapted to the changes” in the market, said Steve Owen, president of the local realty board and an agent at Century 21 in Mission Hills. “They still think there’s an abundance of people coming into California with suitcases full of money.”

Donna Beebe, manager of Fred Sands Realtors in Northridge, said there are two kinds of sellers in today’s market. The first type has to sell because of a job relocation, death, divorce--or because they’re financially overextended. In June, delinquencies on home mortgages in California rose to their highest level so far this year, Moody’s Investors Service recently reported.

Those sellers, Beebe said, will do whatever is necessary to find a buyer, including settling for a lower price than they might have hoped for initially.

The other sellers--those who make up the majority of today’s market, brokers say--put their houses up for sale thinking they’ll cash in on the equity they’ve accumulated on paper during the past few years, take advantage of the low interest rates currently available and move up to nicer houses or out of the area.

“The mentality is, ‘If I can get X for my property, yes, I’ll sell it,’ ” said Beebe.

But those homeowners’ visions of what their properties are worth today are often way out of whack because in the late 1980s, real estate values were appreciating wildly. Even though the market has slowed and property values have retrenched, many sellers are resistant to the notion that their houses are now worth less than just a year or two ago.

In this, however, sellers are not alone. “I think the brokers are as guilty as the sellers,” said Stan Weinscheink, manager of Coldwell Banker in Granada Hills.

Weinscheink and others say that the appreciation mentality among sellers is being fueled by real estate agents who are either inexperienced, unrealistic or so desperate for listings that they don’t tell sellers what prices their properties would realistically fetch.

Roger Ewing, director of Prudential California Realty in northern Los Angeles, Ventura and Santa Barbara counties, added that both sellers and agents were probably fooled last spring when the market blipped up during the few months following the end of the Persian Gulf War.

Now, he said, “We’re experiencing a dramatic new slowdown in the market.”

Some sellers have had to learn the lesson of today’s market the hard way.

Martin and Lori Saalberg bought their home in Woodland Hills in August, 1989, for $390,000. In April, they listed the house for sale at $369,000 and the first day got an offer for $340,000. But the Saalbergs decided to hold out.

Today, the Saalbergs’ home remains unsold, and is listed at $349,000.

Jerry Bolin, the Saalbergs’ agent at Fred Sands in Woodland Hills, said many sellers balk at lowering their asking prices because they think if their house was worth a certain amount a few years ago, they would be losing money if they sold it for less today.

But that “lost money” is on paper only, Bolin said. If a homeowner purchased his property before the boom of the late 1980s, chances are he’d still record a profit--albeit a smaller one--on the sale of that property.

The Saalbergs, however, are in a different bind, Bolin said. Because they bought their house a few years ago when prices were peaking, they’re now faced with taking a real loss on the sale of the house. The couple, who are moving to Orange County, are now worried they won’t have enough money to make a down payment on another house.

Tom and Heidi Wolfbauer of Chatsworth face another dilemma. The Wolfbauers, whose house has been for sale since July, have already purchased a bigger house about a mile away. They recently lowered the asking price on their four-bedroom house to $262,000 from $264,950, but so far they’ve received no offers.

“We feel a lot of pressure because right now we’re paying two house payments,” Heidi Wolfbauer said. But the Wolfbauers also can’t afford to lower the price much more because that would mean forgoing the remodeling work needed on their new house.

For homeowners who can afford to wait it out, they need only remember that the real estate market is cyclic. “Over the long haul, California investors have enjoyed great appreciation in their homes,” Beebe said.

But Prudential’s Ewing said the market will probably get worse before it gets better; he predicted prices will fall another 5% to 10% by the middle of next year. After that, he said, the resale market will probably bounce back quickly because financing for new housing construction has dried up and existing houses will be the only available properties.

“I can understand how home sellers are frustrated by this market,” Ewing said. “But 24 to 36 months from now, the people who lost some of their equity will recover it.”