No Recovery in Sight for Valley Housing Dip : Real estate: Average home prices have dropped back to 1988 levels. Foreclosures and desperate sellers have made this year’s decline particularly steep.

The Valley’s housing market looks bad. What’s worrisome is that things are even worse than they look, and it may be a long, tough wait before any big recovery.

Despite an uptick of sales in recent months, analysts say a majority of the activity is from first-time buyers, many of whom are buying foreclosed houses at fire-sale prices. But the core trade-up market is barely alive. This even though mortgage rates are at their lowest in 20 years and housing prices have sunk to levels of 1988, and that doesn’t take into account inflation.

The average resale price of an existing single-family house sold in the Valley has been dropping since 1990, when it peaked at $296,700. Through Sept. 23 this year, the average price of a house sold in the Valley was $254,800--down 10% for all of last year, according to the San Fernando Valley Assn. of Realtors. The price drop has been dramatic this year thanks to a rush of foreclosed properties and desperate sellers.

Judging by another yardstick, the price drop has been even more severe. In the first three weeks of September, house buyers in the Valley paid a median price of $189,800, down 11% from a year earlier, and down 21% from $240,000 in May, 1991. The median price is the point at which the half the houses sold cost more and half cost less.

One problem is the boom in foreclosures: they are up tenfold in the Valley since 1990. And there is no sign that foreclosures are slowing down. Through July, lenders foreclosed on 2,168 properties in the Valley, the same as all of last year, according to TRW REDI Property Data in Riverside. About 85% of the foreclosures are houses and condos.

Officially about 12,600 existing houses and condominiums are for sale in the Valley. At this year’s current sales rate, it would take 15 months to move those properties. But those inventory figures are only part of the story because they don’t include many foreclosed properties.

Dale Fay, owner of Century 21 Oak Tree Realty in Valley Village, says about 65% of her agents’ sales are now foreclosures. “That’s what the buyers are asking for,” she said.

The glut of foreclosed properties drives down prices, which makes it tough for owners like Eugene Wong, who wants to sell.

Wong, 39, hopes to move his family into a bigger house in the Valley. But the electrician can’t because he must first sell his North Hollywood house, and no one has come close to his asking price of $250,000. Wong bought the four-bedroom house in 1988 for $219,000.

After one year of fruitless open houses, Wong recently took his house off the market. Wong says the only offers he got were “insulting.” Other “looky-loos just trampled on the new carpet,” he added bitterly.

Barbara Deloney, a Hollywood renter who has been house-shopping in the Valley for the last year, seems to speak for many potential buyers. “At first I was rushing and trying to grab whatever I could,” she said. But she hasn’t bought yet. Why? “I saw prices come down . . . I think it’s going to be a buyer’s market for another year.”

Appraiser Wayne Scott doesn’t see a turnaround in Valley housing prices until 1996. In more expensive areas such as the southwest Valley, “it might not be until the year 2000,” Scott said, because foreclosures keep watering down prices. Scott is owner of American Real Estate Appraisal in Canoga Park.

Jim Link, executive vice president of the Valley realty group, says the Valley housing market is near the bottom. But he conceded it’s not clear whether prices have actually bottomed out.

The strongest part of the market has been in the lower and medium-priced properties, he said. “If we see the middle and upper part get stronger, that would indicate the whole market is coming back.” For now, he said, “We’re in for at least another year of this.”

But when will a housing recovery come?

Cities like Boston, Denver and Houston all went through housing slumps in the 1980s, and they lasted at least six years. It took that long to turn around the job market, clear supplies of foreclosed properties and rebuild confidence among buyers and sellers.

Houston’s housing prices climbed in double digits annually, until the late 1970s when the energy industry began faltering. Houston, whose economy was centered on the oil and gas business, then saw its real estate market hit bottom in late 1982. Brokers say it stayed there until early 1986.

“We had entire subdivisions abandoned because they were foreclosed,” recalled Lynn Zarr, who has operated Zarr & Co., a real estate brokerage, in Houston for nearly 20 years. Zarr said reducing the supply of foreclosed properties took two to three years. “You’ve got to get them off the market because then it puts the market more on an even keel,” he said.

Zarr said when foreclosed properties were finally gone, the trade-up market picked up, which in turn spurred construction of new homes--another sign of a recovery. Still, in Houston the median price of a house or condo sold peaked in 1983 at $80,260--and only this year did prices come back to that level, which adjusted for inflation is way below the price of a decade ago.

The San Fernando Valley, now in its third year of housing downturn, isn’t likely to pull out of its doldrums soon.

The biggest reason: Los Angeles County’s employment isn’t expected to grow until at least 1995. Through August, the county has lost about 50,000 jobs this year, most of them in the high-paying manufacturing sector, according to state labor figures. Jack Kyser, economist with the Economic Development Corp., predicts the county will lose an additional 20,000 jobs next year.

The state’s crucial aerospace/defense industry, which has lost an estimated 330,000 jobs since 1986, is likely to see another 125,000 jobs vanish over the next four years, according to the California Commission on State Finance.

While the Valley’s job base is more diverse than Denver’s or Houston’s, it’s still home to many aerospace workers. But Hughes Aircraft Co.’s missile-design plant in Canoga Park is transferring 1,900 jobs to Arizona. Litton Industries will eliminate 700 jobs in Woodland Hills by 1995. And Rocketdyne’s space station employment in Canoga Park is being cut by 200 more jobs, and that project’s future is in doubt.

Though defense firms and their suppliers in the Valley are now trying to convert to commercial work, experts say any payoff from those efforts are several years away. And there are no major public works projects like the new airport and baseball stadium that helped Denver pull out of its housing slump.

Moreover, in the Valley non-aerospace firms such as Transamerica Insurance of Woodland Hills continue to flee Southern California’s inhospitable business climate. Transamerica is shifting 1,000 jobs to Texas next spring. “There’s still economic pain that hasn’t worked its way in the (housing) system yet,” said Brian Cromwell, an economist at the Federal Reserve Bank of San Francisco.

Making things worse, residents are leaving the Valley because of the rising crime rate and deteriorating schools. Demographers say the Valley’s net population continues to rise because of new births, immigration and migration from the inner city. But many of these newcomers are unlikely to buy houses for quite a while, economist Kyser said, because they lack the money or established credit.

One bit of good news is that is that new-home sales have fared better in recent months, but only because builders have slashed prices here, said Joseph Yeyna, a research analyst with the Meyers Group in Encino.

In his third-quarter report, the number of new houses sold in the Valley jumped 26% in the latest quarter, compared to the April-June period, Yeyna said. However, that came at a price: The median sale price of a new detached single-family house in the Valley was $309,900--down 28% from the second quarter, he said.

“Countywide depreciation of home values has dropped buyer confidence levels to an all-time low,” Yeyna said.

The one boom market remains foreclosed homes. Home Savings, Great Western and other lenders have moved aggressively to unload foreclosed properties to clean up their books. They send weekly reports of properties and offer brokers a full 6% commission if they sell them.

“I’m concentrating on the foreclosures, auctions and short payoffs,” said Neil Cooper, a broker in the Valley since 1979. Short payoffs are when house owners, usually struggling with mortgage payments, strike a deal with their lender to walk away from their houses when they owe more than their properties are worth.

Yet it isn’t easy finding a good foreclosure house: Many are in poor shape, often thrashed by occupants before they are kicked out. But the payoff can be huge. Just ask James and Sherri Bauserman.

Longtime renters, the Bausermans plan to close escrow later this month on their first home--an 1,800-square-foot, two-story, three-bedroom house in Canoga Park. In mid-1989, the former owners of the house paid $235,000--according to property records. The price to the Bausermans: $164,500.

The Bausermans got in with just a 3% down payment, the rest financed through a 30-year mortgage at a fixed rate of 7%. Just about the only things the Bausermans didn’t get with their new house were an oven and bathroom vanities, which the former occupants took with them. “The house is great, we’re real happy,” says Sherri Bauserman.

For every happy story, though, there are probably several sad ones.

Just two years ago, Annie Vetoyanis, had her custom-built Toluca Lake home appraised at $420,000. A year ago, Vetoyanis said her husband lost his job as a musician, and since then they have struggled to meet their $3,000 mortgage payments.

In June, Vetoyanis put her house up for sale, listing it at $525,000. Now the price is down to $385,000--$35,000 less than what Vetoyanis owes on her loan. Vetoyanis says she now faces foreclosure.

Near tears, Vetoyanis said: “It’s a sickness, and we’re all suffering.”