Real Estate’s Reality Check : As Inflated Home Prices Bottom Out, Buyers, Sellers Take Stock

Software engineer Chris Farrar put his three-bedroom Hawthorne home up for sale three weeks ago, but even at $84,000 less than he bought it for five years ago, he’s not sure he’ll find a buyer.

Personnel administrator Penny Polston closed escrow on her Torrance home March 11, but it sold for less than what she owed on her mortgage. She got relief, however: She worked out a deal with her lender to forgive part of her debt.

Business manager Kathleen McNamara once thought the $600,000-plus luxury homes in Torrance’s Pacific Colony were well out of her reach. But at an auction in January, she bought one of the gated community’s homes at almost half off, and moved in last month.

How’s the local housing market? It depends on if you are a buyer or a seller.

Throughout the South Bay, dreams have been fulfilled or fortunes have been busted. For buyers, there are bargains to be had, as many experts predict that prices are at or near rock-bottom.

But for the unfortunate seller, success is just staying afloat. And many of these sellers, especially those forced to move because they lost their job or are being relocated, often leave the South Bay with maxed-out credit cards, a hefty tax bill and a feeling of disillusionment.

“Most of the younger, first-time buyers (from the late 1980s) are kind of beat up emotionally,” said Torrance tax attorney Tim Moore, who gives seminars to those who face selling their home at a loss. “They saved up for years to buy their home, then lost (the equity).”

At the same time, home prices continued to fall. According to Dataquick, the average median price of a previously owned home in the South Bay dropped 7.3% to $237,400 in the fourth quarter of 1993, from $256,200 in the same period a year earlier. Values have fallen almost 20% since the fourth quarter of 1990, according to Dataquick Information Systems, which analyzes government records of completed transactions.

“There are so many properties upside down right now,” said Donna Shultze, a broker at Century 21 Union Realty in Torrance. The bright side is that families who before couldn’t own a home are “now realizing the American dream. But some of those dreams are at the expense of the seller.”

Sellers who stand to lose the most are those who bought when home prices were at their peak in the late 1980s and early 1990s, or those who added to their mortgages by taking out home equity loans, said Torrance real estate broker Robbie Mills.

Farrar, the Hawthorne homeowner, bought his home to gain equity after years of renting. He liked the quiet location on 140th Street and the layout of the house. It was built in the post-World-War-II-boom era of the late 1940s and featured hardwood floors. Paint and stucco work have masked similarities to the other tract houses on the street.

“I was told that it was the type of house to own to see an appreciation of property values,” said the 38-year-old Farrar, who is single.

As his employer, NCR Corp. El Segundo, began cutting back its staff a year ago, he considered selling. But he was in for a surprise.

“I knew property values had gone down,” he said. “I just hadn’t realized they had sunk that much.”

Still, when his firm offered him a separation package in December, he grabbed the chance, fearing that his options would only worsen as the company further cut staff. And recently, he found a job at Tandem Computer Corp. in Cupertino, which led to him putting his house on the market. He bought it for $273,000. It is listed for sale at $189,000.

“Buy at the peak, sell at the trough,” he joked.

In Cupertino, he plans to rent for a while until he can save enough for another down payment.

“It will take me a while to recover, but I don’t think it’s diminished my interest in owning a plot of land, owning a piece of America, as they say.”

Other homeowners are not as optimistic. Their houses, from ocean-view mansions on the peninsula to tract homes in Torrance, are worth thousands of dollars less than their mortgage debt.

“We have extremes of income in the South Bay, but it doesn’t matter,” Mills said. “I have seen people devastated by this. Their business went under, they got a divorce, their overtime got cut or they lost their job.”

Community correspondent Samantha Dunn contributed to this story.