Owners Pay the Price : Home Values Decline--and There’s No End in Sight

Home prices continued dropping in most San Gabriel Valley cities this summer, and real estate and economic analysts say there’s no end in sight to the downward spiral.

Last year, home sales and prices dropped sharply in the San Gabriel Valley--as in the rest of Los Angeles County. Despite predictions by real estate agents that home sales would increase 5% or more this summer compared to last, they instead stagnated or dropped in most valley cities between May 1 and July 31.

Some realtors say low interest rates and bargain prices are tempting a growing number of prospective home buyers to shop around. But more shoppers doesn’t necessarily mean more buyers.

“I’m seeing a lot more action at open houses. . . . We have the buyers but they’re just not pulling the trigger,” said Ron Norrbom, president of the Hacienda/Rowland/Diamond Bar Board of Realtors.

Between May 1 and July 31, the number of homes sold in nearly all of the valley’s cities dropped--as little as 0.7% in Pasadena and as much as 45% in Sierra Madre--compared to the same period last year. Meanwhile, median sale prices fell--as much as 16% and as little as 1%--in all but five cities.

“It appears people don’t have enough confidence in their jobs or financial situation to make a commitment to buy a home,” said Rita Heieck, president of the East San Gabriel Valley Board of Realtors.

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The fears are real.

Just ask Michael Terrazino. He and his wife, who have a 2-year-old daughter, decided interest rates were just too low to pass up and bought their first home in June. For $155,000--the asking price was close to $190,000--they got a three-bedroom, 2 1/2-bath fixer-upper in West Covina.

“The owner was in a hurry to sell, but nobody thought he would go that low,” Terrazino said.

But after escrow closed, Terrazino, 31, lost his job as a graphic artist after his Irwindale employer was bought out by another company. Now the Terrazinos say they are struggling to make ends meet.

Some Valley realtors say as much as 70% of their business is with first-time buyers such as the Terrazinos. That helps explain why the homes most likely to sell are priced below $200,000.

First-time buyers have also helped keep San Gabriel Valley’s resale condominium market from sinking as low as that of detached homes. The number of condominium sales in about half the valley’s cities was up during the past three months this year compared to the same period in 1992. Increases were as high as 207% in Covina, where 46 units sold between May 1 and July 31.

Condominiums, which typically range in price between $120,000 and $200,000 in the valley, are selling relatively well in upscale and working-class communities alike.

For the past three months compared to the same period last year, Arcadia sales were up 118% with 37 units sold, Pomona was up 72% with 31 units sold, and Duarte was up 27% with 19 units sold.

And the news isn’t all bad in the resale housing market. A few communities over the past three months actually fared better in median sale price or the number of homes sold compared to the same period last year. In Walnut, for example, homes sales were down 15.1% but the median sale price was 5.8% higher, at $272,000. In Glendora, home sales were down 1.3% but the median sale price rose 8.1%.

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Real estate experts say interest rates will stay low for the foreseeable future and continue to give a boost to home sales. But the real estate market as a whole is not expected to improve until late next year.

“We don’t expect to see much of an increase in interest rates because the economy seems to be slowing down nationally and California hasn’t shown growth in three years,” said Adrian Sanchez, regional economist for First Interstate Bancorp in Los Angeles. “What rates are today they are likely to be in the first half of 1994.”

But he said that so long as the job market contracts, real estate values will continue to fall in lock-step. Sanchez does not expect home values to stabilize until the second half of next year.

Like the downward slide in San Gabriel Valley home prices, the decline in home sales reflects a countywide trend. In Los Angeles, for example, the number of homes sold between May 1 and July 31 this year compared to last is down 49%, while the median price of homes sold fell nearly 12%.

Sanchez offers this advice to anyone trying to sell a home: “If you don’t have to sell right now, your best bet is to take the home off the market and wait for a recovery.”

Today, some real estate agents say, home sellers are finally getting realistic about pricing their houses to sell. They are abandoning the idea that home prices will return to the levels of the late 1980s.

Meanwhile, buyers have become far more choosy and many expect to find the deal of a lifetime.

“Buyers have an impression that if you’re selling your house you must be desperate,” said Heieck, of the east valley realtors board. “Offers on homes are coming in very low. . . . People think they can steal the property.”

Says a Diamond Bar realtor: “You can write five offers a week and not one of them will go because a lot of buyers are just testing the waters. I just wrote a $175,000 offer on a $289,000 house in Hacienda Heights.”

It was rejected.

Sales statewide continue a three-year trend of sluggishness among homes priced above $200,000, analysts say. Sellers with homes priced above $300,000, and especially above $500,000, are swallowing deeper cuts in price. Properties priced at $300,000 or more are also staying on the market for a year or more before they are sold.

The number of sales in San Marino, Sierra Madre and Arcadia this summer are down substantially--20% to 45% compared to the same period last year.

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With the median sale price in Arcadia and South Pasadena hovering close to $300,000, some realtors say some people are able to buy into neighborhoods that once were out of their reach.

“The prices have come down and now we’re seeing a whole range of people looking for homes in areas that were never affordable to them,” said Barbara Patterson, a realtor who is president of the Arcadia Board of Realtors.

Most disappointed among today’s sellers, realtors say, are people who bought at the height of the market, between 1988 and 1990 and are now trying to sell their homes for something close to what they paid for them. It is not uncommon in such cases for serious sellers to drop their prices 15% or more. It is also not uncommon for a house that hits the market priced at $300,000 to be sold for $225,000--especially if the seller bought the home in the late 1980s or in 1990.

In the latter half of the ‘80s, San Gabriel Valley real estate prices soared and some speculators were buying and selling houses within a year or less to make a handsome profit. Those were the days when foreign investors, many of them Asian, were racing local buyers to put their money down on homes.

But the numbers of Asian buyers, particularly in west San Gabriel Valley cities, has receded substantially during the ‘90s, realtors say, though immigration continues to give a boost to an otherwise stagnant housing market.

Gone are the days when buyers had little time to shop around if they expected to get a good buy. Shoppers are now looking at 40 to 60 homes before deciding on one, realtors say.

“There’s so much inventory out there that buyers feel they have to see everything before they make a decision,” Heieck said.

Take Albert Lee, for example. He is a 35-year-old Monterey Park homeowner who plans to buy a house for his parents. That is, just as soon as he and his parents make up their minds on which house they want.

Lee has looked at about 60 houses over the past several months. Now he’s narrowed it down to three homes. He plans to spend between $200,000 and $220,000, he said, and is contemplating an offer on one home priced at $243,000.

“When I moved here in 1988 I only had time to look at three or four houses, otherwise the one I wanted would be gone,” he explained. “Now there is no hurry. There are plenty of houses to choose from. I think this is the time to buy. . . . How much lower can prices go?”

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Realtors say Lee’s attitude is typical among a growing number of shoppers.

But at the same time, some brokers say plenty of fears persist among potential home buyers: Will the Southland economy rebound next year, and will corporate downsizing taper off?

But most important, said Thomas O. Berge, a board member of the West San Gabriel Valley Assn. of Realtors and owner of an Alhambra-based real estate office, “We really just need some sign from the government that things are going to stabilize economically.

“People need something to hang their hat on.”

Sliding Sales

Single-family home resales for May through July, 1993, compared to same period in ’92. Median price applies to homes sold in that time frame.

City Number Change 1992 1993 Change Sold From Median Median From May-July Year Ago Price Price Year Ago Alhambra 296 -9.5% $184,000 $169,000 -8.2% Arcadia 132 -38.3% $363,000 $321,000 -11.6% Azusa 68 -9.3% $145,000 $139,000 -4.1% Baldwin Park 87 -28.7% $143,000 $138,000 -3.5% Claremont 85 -17.5% $236,000 $231,000 -2.1% Covina 154 2.0% $180,000 $160,000 -11.1% Diamond Bar 151 11% $241,000 $238,000 -1.2% *Duarte/Bradbury 63 12.5% $163,000 $168,000 3.1% El Monte 74 -2.6% $162,000 $154,000 -4.7% Glendora 147 -1.3% $186,000 $201,000 8.1% **La Puente 375 -26.6% $183,000 $181,000 -1.1% La Verne 73 -3.9% $183,000 $181,000 -1.3% Monrovia 75 2.7% $220,000 $185,000 -15.9% Monterey Park 88 18.9% $234,000 $225,000 -3.8% Pasadena 283 0.7% $288,000 $272,000 -5.6% Pomona 215 -0.5% $138,000 $139,000 0.7% Rosemead 78 -8.2% $180,000 $174,000 -3.3% San Dimas 79 -11.2% $216,000 $201,000 -6.9% San Gabriel 95 -26.9% $247,000 $227,000 -8.1% San Marino 47 -20.3% $649,000 $576,000 -11.2% Sierra Madre 27 -44.9% $299,000 $310,000 3.7% South El Monte 28 -26.3% $153,000 $148,000 -3.1% South Pasadena 50 16.3% $348,000 $298,000 -14.4% Temple City 77 -7.2% $227,000 $210,000 -7.5% Walnut 129 -15.1% $257,000 $272,000 5.8% West Covina 185 -20.9% $185,000 $181,000 -2.2%

* Duarte and Bradbury were lumped together because they share a ZIP code

** La Puente includes portions of nearby unincorporated communities, including Hacienda Heights

Source: Dataquick Information Systems/Southern California Real Estate Observer