Buyers Skip Condos, Aim Sights at Houses : Real estate: Low mortgage rates and single-family home prices leave a glut of condominiums on the market in the Valley.
In another time or place, Warren and Avah Ham might have bought a condominium or townhouse. Longtime renters in Reseda, the Hams don’t have a big income or big savings. And neither is particularly keen about yardwork or house repairs.
Yet last week the Hams, who have two small children, moved into a single-family house in Northridge, with three bedrooms and a yard surrounded by a white picket fence. The house was listed at $175,900 by the bank that foreclosed on the previous owner. The Hams bought it for $160,000 with a 30-year adjustable-rate loan with an initial interest rate of 4.8%.
“Why should we buy a condo when we can afford a house for the same price,” said Avah Ham, a music teacher.
Condos and townhouses have traditionally been first steps for young families wanting their own homes--and the tax break that comes with it. But the Valley’s weak housing market has been driving down prices. With the lowest interest rates in 20 years, many are skipping condos and buying single-family houses, leaving a glut of condos and forlorn sellers.
The number of condos sold in the Valley has been dropping since 1989 and this year the slide is even worse. From Jan. 1 through April 22, condo sales in the Valley totaled just 392 units--down 41% from the same period in 1992. Meanwhile, the average condo sale price is the lowest in four years, and there’s a 27-month inventory of condos on the market. (These figures include townhouses, which the San Fernando Valley Board of Realtors classifies as a type of condo.)
In many cases, it is also easier now to get financing for a single-family house than a condo, and potential buyers are increasingly expressing concerns about high homeowners association fees that condo and townhouse owners must pay to maintain their properties.
“It’s a real bummer,” grumbled Marlin Bladow, a retired contractor who listed his two-bedroom condo in Toluca Lake for $195,000 but sold it last month for $143,000 after more than five months on the market. “I’m glad to get rid of it,” said Bladow, who has moved to Palm Desert.
Overall, the Valley’s housing market remains sluggish. But it could be worse were it not for “a lot of shift from condominiums to single-family homes, especially from first-time buyers and low-income buyers,” said Jim Link, executive vice president at the San Fernando Valley Board of Realtors.
The sales difference between condos and houses in the Valley mirrors the activity in the state and the nation, and is largely a factor of price, analysts believe.
In the first quarter, the average price of a single-family house sold in the Valley fell 10%, to $258,800 from $285,000 in the same period in 1992. Meanwhile, the average price of a townhouse or condo dropped by 8% in the first quarter, to $145,700 from $157,000.
The median price of a single-family house sold in March was $203,000, compared with $220,000 a year earlier--meaning half the houses in March sold for more than $203,000 and half sold for less than that amount. Meanwhile, the median price of a condo was $144,000 in March, down from $154,000 a year earlier.
Bruce Mosk, a broker who specializes in condos for Fred Sands Realtors in the Valley, said he remembers when the market was quite different. “Back in the late ‘80s, I could hammer a sign into the ground and it wasn’t uncommon to have seven to 10 people bidding up the price,” he said.
At the peak of the market, in 1989, 23% of the condos and townhouses sold in the Valley closed escrow at or above list price, compared with less than 9% today. In 1989 it took agents like Mosk an average of just 83 days to sell a condo, compared with 141 days now. “Back then, it was like legalized stealing,” Mosk said.
These days, Mosk resorts to flying giant blimps and giving away Las Vegas trips to lure condo buyers. “With another desperate seller, I offered $25 to every broker who would come to see the condo. We got two people. That was six months ago, and it’s still for sale.”
Fortunately for Mosk, there’s a growing segment of elderly residents in the Valley who want the security and amenities that many condos offer, such as tennis courts and health facilities. Plus there are people who want to live in areas such as Encino and Tarzana, where single-family houses can be very pricey.
“There’s still a lot of money to be made in condos,” Mosk said. “You just have to know where to go and how to do it.”
Certainly, Mosk faces less competition. Because of the soft housing market, real estate brokers have not been renewing their licenses. The Valley realty board currently lists 6,948 brokers, that’s down almost 1,000 from December.
Many brokers also don’t sell condos or townhouses because they’re harder to market and the commissions are smaller. And others who normally do are accepting fewer condo listings these days because of the tough market.
“I tell them, ‘I don’t want to waste your time or mine,’ ” said Sam Lee, a broker at Pinnacle Estate Properties in Northridge.
As a result, analysts said they believe there are many more condos for sale in the Valley than are actually listed by the realty board. In March active listings of condos totaled 2,702--up slightly from December but actually down 4% from March, 1992.
Manuel Mantell, a retired family doctor, would like to sell his two-bedroom condo in Northridge and move to a small house. But Mantell hasn’t put his condo on the market because he doesn’t believe anybody would buy it.
Mantell said he and other tenants of the 165-unit complex learned about six months ago that their condos were infested with termites. That’s when the complex’s homeowners association raised Mantell’s monthly assessment fees from $225 to $324.
“Who’s going to buy when you’ve got a fee like that,” said Mantell, 84. “We’re stuck.”
While Mantell’s case is unusual, homeowners association fees often run $200 a month or more, and that turns off some potential buyers from buying condos. Many other condo owners are stuck because property values have sunk, and they owe more on their mortgage than they can get from a buyer--what realtors call being “upside down.”
“I can’t refinance many condos because they’ve dropped in value,” said Art McCollum, owner of Omega Mortgage Co. in Chatsworth. McCollum said it’s also harder for condo buyers to get financing, whereas lenders now offer specials that allow a first-time home buyer to put as little as a 3% down payment on a new single-family house.
Also detracting from existing condo sales is competition from new condo and townhouse projects, many of which were built in recent years because it was easier to obtain permits to build them than single-family houses. Yet new condos and townhouses in the Valley are faring just as badly, plummeting 63% in the first quarter of this year, to just 98 units, according to the Meyers Group in Encino.
Joe Priske, of Priske Development in Ventura, in July completed Terrace Courts, a 30-unit condo complex in Van Nuys.
Priske had hoped to sell the two-bedroom units for as much as $200,000 each.
But facing pressure from the Bank of A. Levy, his lender, Priske recently slashed prices by an average $20,000 a unit. So far, Priske has sold 20 units.
“It’ll lose money,” he said. “If I had a chance to do it again, I would say no.”
Karen Solomon, owner of a unit at Dupont Gardens in Chatsworth, doesn’t regret having bought a townhouse four years ago. Still, she and her husband, Steve, now have a second child, and would like to sell their property to buy a single-family house.
“We want a yard for the kids,” said Karen Solomon, a 36-year-old homemaker.
So on a weekend last month, the Solomons had their first open house. But nobody came.
“It’s really a nice complex,” she said, adding that her two-level unit has a view of the mountains.
But staring at the swimming pool that is at the center of the gated complex, Solomon seemed resigned that it may be a long wait before her family can move, and only after they take a loss.
The Solomons bought their townhouse for $179,000. But they listed it at $162,000.
“I’m willing to drop” the price, she said eagerly.
Valley Condominium Market
NUMBER OF AVERAGE INVENTORY OF YEAR CONDOS SOLD SALES PRICE CONDOS FOR SALE 1993* 392 $142,100 2,715 1992 2,199 152,212 2,563 1991 2,646 153,208 2,566 1990 3,313 151,983 2,225 1989 4,571 144,500 1,691
AVERAGE NUMBER PERCENT OF CONDO OF DAYS TO SALES AT SELL A CONDO** ASKING PRICE March, 1993 135 8.7% March, 1992 141 8.1% March, 1991 129 6.9% March, 1990 110 13.1% March, 1989 85 23.0%
* through April 22 ** also includes single-family houses Source: Valley Board of Realtors
