It Can Only Go Up From Here : The Antelope Valley’s Depressed Housing Market May Be Ripe for a Rebound

After a five-year fall from its dizzying heights of the late 1980s, the Antelope Valley’s housing market still holds an abundance of misery for property owners. But signs are emerging that the worst days may have passed or soon will.

Because home values have fallen nearly 30% on average since the market peaked in 1989 and 1990, thousands of families who bought in the high desert area then are stuck with houses that are worth less than their mortgages.

That has made moves difficult, even when prompted by job losses, transfers or divorces. Many owners couldn’t pay their mortgages. Some just walked away from properties. The result has been record numbers of foreclosures and abandoned homes, creating blight and further depressing the housing market.

“Forget the recession. It’s been a depression,” said Richard Cook, a real estate agent at Troth Realtors in Lancaster. To cope, Walt Troth, one of the owners, said his office has shifted to specializing in re-marketing foreclosed properties.

In an indication of how much the market has deteriorated, foreclosures in the Antelope Valley so far this year are outnumbering sales reported by local realtors. Total annual sales fell by more than half from 1989 to 1993. In addition to the loss in value for current homeowners, median sales prices for new houses have fallen by nearly 23% since 1989.

There may be some light on the horizon, however. Like elsewhere, Antelope Valley housing prices have stabilized this spring after a long decline. And local realtor boards reported their highest number of resales in more than three years this spring, although many were of foreclosed properties.

The collapse of the Antelope Valley market also has restored affordability--the factor that made housing in the area such a hot commodity in the late 1980s, when buyers who were priced out of other communities flocked to Lancaster and Palmdale. As a result, experts say, newcomers to the region can expect the best housing prices in years in a market that most predict will slowly rebound.

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That’s cold comfort for those who bought homes when the market was at its peak, however. While they may not lose any more value on their houses, they shouldn’t expect to recoup their severe declines anytime soon, experts said.

David Feller knows that story all too well. The 32-year-old communications company manager and his wife bought a new four-bedroom, two-bath home in the upscale Quartz Hill area for $210,000 in February, 1990, when the market was near its peak.

Payments were manageable at first, but then a growing family and financial problems necessitated lowering the payments or moving. Feller spent months trying to refinance his loan at a lower interest rate, but the lender refused, saying the $180,000 he owed far exceeded the then-current value of the house.

Today, Feller has a potential buyer willing to pay $130,000 for the house, 38% less than Feller’s purchase price. But the lender has yet to approve the sale. Such sales are called short pays, because the lender is not fully repaid. Some lenders permit them to avoid foreclosures, others do not.

In the meantime Feller waits, knowing regardless of what happens he probably has lost his home and $20,000 down payment. “We got screwed. This is our worst concern,” Feller said of the dramatic decline in local real estate values. Like other hard-hit residents, Feller said he sees no sign of a recovery coming despite the experts’ predictions.

His situation is not unique. His builder, Calabasas-based Griffin Homes, went bankrupt and was liquidated last August. A neighbor, despite getting a lower purchase price than Feller, went through foreclosure when the market collapsed. The family that bought Feller’s former home in Lancaster lost it. And a friend involved in a divorce may face the same prospect, Feller said.

Throughout the Antelope Valley, a 1,300-square-mile area of north Los Angeles County with nearly 300,000 residents, home resales this spring suffered a 28% loss in price for the same properties in 1990, according to TRW REDI Property Data, a company that tracks real estate. (A separate analysis by Dataquick Information Systems showed smaller median price declines, but did not necessarily compare the same properties.)

Median prices for new homes fell from $167,950 in late 1989 to $129,990 this spring, a smaller 23% drop, according to the Meyers Group, another tracking firm.

For most Antelope Valley residents who made 5% to 20% down payments on houses in the late 1980s, the declines have been more than enough to wipe out their equity and leave them “upside down” in their homes. That’s the real estate term for owing more than your property is worth.

If owners can stay put and continue to make payments, they suffer no direct loss and can wait for values to return, real estate experts said. But upside-down owners who need to move, sell or refinance face trouble, and that has led to the foreclosures.

Through the first five months of this year, the number of Antelope Valley foreclosures--1,297, most of them houses--exceeded the 1,122 home sales reported by the area’s three boards of realtors. Averaging 259 a month, the foreclosures are on a pace to exceed last year’s tally.

Total Antelope Valley foreclosures increased tenfold from 250 in 1989 to 2,799 last year, according to TRW REDI Property Data. Those made up nearly 12% of the countywide tally of 23,863 foreclosures for 1993, even though the valley only has about 3% of the county’s population.

As a result, neighborhoods across the valley are dotted with abandoned homes, marked by unwatered landscaping that has turned a parched brown. Some homes have been vandalized and left open. Others are illegally rented to unsuspecting tenants by con artists, local realtors said.

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In one east Palmdale neighborhood, a vacant 4-year-old house has been decaying for nearly two years while a foreclosure process goes on. Vandals smashed doors and windows, stripped the house of fixtures, spray-painted graffiti on walls and hauled a decrepit sofa bed into the house.

All of this is a dramatic change from the mid-to-late 1980s, when builders in the Antelope Valley couldn’t put up houses fast enough to meet buyer demand. The heady times began to fade in late 1989, when big price hikes made homes less affordable, the nationwide recession hit, the move-up market died and a housing glut ensued.

Antelope Valley housing sales peaked in 1989, when 10,368 units were sold. Compare that to the 4,850 units sold last year, according to TRW REDI Property Data. The number of new home tracts on the market dropped from 161 in late 1990 to 102 this spring. And builders have spent most of the past several years slowly unloading their inventory of unsold houses.

Now, inventories are down, prices are at pre-1988 levels and surviving builders are cautious. Real estate experts said those factors and others make the Antelope Valley market ripe for a rebound. But they warn that unloading the glut of foreclosed houses may delay that for some months.

John Karevoll, a financial editor at Dataquick Information Systems, said he expects areas such as the San Fernando and Santa Clarita valleys, closer to urban centers, to recover more quickly. He called the Antelope Valley a “spillover” market for those who can’t afford to live closer to Los Angeles.

There are some encouraging signs, however. Resale purchases in the Antelope Valley from March to May totaled about 750 houses, the best quarter in more than three years. Median resale prices reported by local realtor boards also held steady from February through May at $103,500 after a long decline.

In fact, total Antelope Valley resales in 1993 surpassed new home sales there for the first time in some years, records show. New home sales in the region totaled 583 from March through May, down 7% from the same period in 1993 and down 22% for the same period in 1992, the Meyers Group reported.

Not everyone has lost out, meanwhile. Neri Garcia, 37, recalled looking at new Palmdale houses that he couldn’t afford in the late 1980s. So Garcia, his wife and three children, who lived in rented property in Los Angeles, waited until December.

Then the moving company driver returned to his favorite east Palmdale tract and bought the same model he had wanted from the original owner for $112,000, about $48,000 less than its original price. Garcia said he likes his quiet cul-de-sac, believes his family is safer and thinks the local schools are better.

Among home builders, the state’s largest, Kaufman & Broad Home Corp., has won the same leading rank in the Antelope Valley in recent years by more than doubling its local market share to 25%. As smaller developers failed, the well-capitalized giant has been buying up their graded lots at deep discounts.

Jeffrey Mezger, president of the company’s Antelope Valley division, said his operation sold a record 614 houses in the past fiscal year. Mezger said he expects to exceed that number this year, in part with the company’s trademark focus on catering to entry-level buyers.

Analyst Bob Bray of the Meyers Group said the entry market represents the high desert’s future. “This remains the only outlet of affordable new housing in L. A. County. And that bodes well for the Antelope Valley. It’s still tough to get a new house for $130,000 anywhere else.”

Antelope Valley Housing Slump

A spectacular run-up in the Antelope Valley real estate market through the mid-to-late 1980s has been followed by an equally dramatic decline during the past five years. Most experts say the market now has hit bottom or is close to it, and is poised for a slow recovery despite continuing foreclosures.

MEDIAN HOUSE RESALE PRICE

(For Antelope Valley homes) 1989: $121,500 1990: $125,000 1991: $122,000 1992: $120,500 1993: $118,000 1994: $115,000 * May 1994, year-to-date

Source: Dataquick Information Systems

FORECLOSURES

(About 15% are estimated to be non-single family homes)

YEAR ANTELOPE L.A. A.V. % OF VALLEY COUNTY COUNTY 1989 250 2,607 9.6% 1990 195 2,385 8.2% 1991 670 6,517 10.3% 1992 1,573 13,334 11.8% 1993 2,799 23,863 11.7% YTD May 1994 1,297 11,217 11.6%

Source: TRW REDI Property Data.