Southland Home Price Rebound Fails to Appear
Red and white open-house flags flapped in the breeze outside the Rosoff home in North Hollywood and a “For Sale” sign read, “Completely Remodeled & Priced to Sell.”
Inside, Terry Rosoff walked across gleaming wood floors to show off her Euro-style kitchen and pointed to the back yard and two Jacuzzis. “It’s a great house,” said Rosoff, who has cut the price to less than $300,000, well below what she’d thought it was worth. “I wish I could find someone to buy it.
“The market is just dead.”
It was around this time last year that Southern California home prices began to show signs of a long-awaited rebound after a wrenching three-year slide. But as the real estate market heads into what should be its peak season, homeowners and agents alike face the dismal prospect that home prices still have not hit bottom.
From ranch-style houses in the valleys to coveted properties along the coast, prices of Southern California homes this year are running about 5% below 1994 levels. The latest drops put home prices back where they were in the summer of 1988, according to Dataquick Information Systems, a real estate research firm in La Jolla.
While many real estate experts think prices will bottom out sometime this year, most shellshocked homeowners are wary because prices have fallen for so long. Buyers still worry about how much their home may have fallen in value by the time escrow closes.
Even normally upbeat real estate agents turn bearish about prices when they have to compete with lenders eager to dump foreclosed houses at fire-sale prices. “No one can believe that it’s still coming down,” said Mission Viejo real estate agent Joan Wilson.
But, believe it or not, the market has continued to weaken, even as the state’s economy began to rebound in 1994. Now, with the economic recovery showing signs of sputtering, there are renewed worries that residential real estate values could tumble again--a development that would further shake confidence in the general economy.
The biggest fear of real estate agents and prospective home buyers is that interest rates could push upward in the months ahead and choke off mortgage lending. What optimism there is now, economists say, can be attributed mainly to recent sharp declines in long-term interest rates.
Meanwhile, the 1980s, when California home ownership offered a guarantee of easy riches, are virtually forgotten. Homeowners today are more likely to wonder how much--if any--equity they have left in their homes.
Most cocktail party gossip about real estate these days centers around a home as “a place to go where you are comfortable and protected,” said Ed Albers, president of the California Assn. of Realtors.
While the slide has extended statewide, residential real estate prices in Southern California have fallen the farthest, according to housing price data. In April, the median price of all homes in the region, including condominiums, stood at $161,000, a 5.3% drop from the same month in 1994, according to Dataquick.
Median prices in Southern California are now nearly 15% below the peak reached in June, 1991, while the median price of existing single-family homes has tumbled to $162,000, off more than 17% percent from the peak. Hardest hit has been Beverly Hills, where median house prices have fallen 42%, according to Dataquick.
During the depths of the recession in 1992 and 1993, typical home prices in Los Angeles County were falling about $1,800 a month, according to Nelson Pedroza, an economist and real estate specialist with the UCLA Business Forecasting Project. “No wonder people were not buying homes,” he said.
Rising mortgage rates through most of last year, foreclosure sales and the continued flow of middle-class Californians to other states all put downward pressure on prices. Prices have also been weighed down by regional problems. The Orange County bankruptcy, for example, has concerned many would-be buyers about the quality and price of government services if the county defaults on upcoming bond obligations.
In the San Fernando Valley, earthquake-damaged homes cast a pall over surrounding values. Sellers of existing homes in Riverside and San Bernardino counties must compete with new-home builders offering bargain prices and lucrative incentives.
These conditions have compounded the frustration and disappointment of home sellers across the region.
In November, real estate agent Andrew Awaida decided to put his own Glendale home up for sale at $249,000. After waiting for offers that never came, he reduced the price several times before accepting a $229,000 bid earlier this month.
“I don’t have any more confidence in the real estate market--and I’m a broker talking,” said Awaida.
In the Valley Village neighborhood of the San Fernando Valley, the improving economy and recent fall in rates on fixed-payment mortgages had convinced Walter Newman that it was a good time to sell his three-bedroom home. But the 42-year-old sound editor is having serious doubts only a month after putting his house on the market in March for $269,000.
“It’s really a very hard time to sell a house,” he said during a recent yard sale to clear out family belongings in preparation for an elusive offer. “People are scared of the economy--but the main thing is that people want to get out of L.A.” Newman wants to join those people and move to Valencia--if he can sell.
Congress is mulling legislation to allow taxpayers to deduct losses on home sales, but that proposal comes too late for members of the Sieres family.
They put their Rancho Santa Margarita home in Orange County on the market in January for $189,000--$14,000 less than they paid for it three years earlier. Four months later, they sold the home, but ended up losing $20,000 on the sale.
“We loved living in California,” said Rebecca Sieres, who moved with her family to suburban Chicago after her husband took another job. “I just think if you are going to have a boom, you are going to have a bust. Unfortunately, we were there for the bust.”
Although prices have slid across all types of homes, the more expensive, move-up homes have taken the hardest hit. Agent Roland Wilhelm at Jim Dickson Realtors in Pasadena estimates that 85% of his clients who sell move out of the area, shrinking the pool of buyers for pricier real estate.
“There is no significant sign that our prices are moving in an upward direction,” he said.
Many sellers have been plagued by the large number of lender-foreclosed homes that drag down neighborhood values. During March, nearly one-third of the homes sold in Riverside and Corona were foreclosures, said Jeff Holloway, a Century 21 real estate agent. Foreclosure sales “set the [standard] for the rest of the market,” he said.
Agents themselves have adapted their sales strategies to the slumbering market. Wilson, the Mission Viejo agent who works for Prudential California, knocks on doors in apartment and condominium complexes in search of entry-level home buyers.
“When people are not moving up, you have to dig further for the people that are moving or that want to buy,” she said.
Despite a bleak winter, the decline in fixed mortgage rates this year and the approaching peak summer selling season have many real estate experts hoping for prices to turn up. Realtor Fred Sands says prices will probably rise, certainly for low-end homes far from neighborhoods glutted with foreclosure properties.
“We felt last year that prices would stabilize and that by the end of 1995 we would see higher prices,” he said. “I still think we will.”
State realtor association President Albers anticipates that the statewide median price will rise 1.5% this year over 1994 levels, thanks primarily to lower interest rates. “We fully expect the market to start upward,” he said.
But other experts remain unconvinced.
“Most people would look for some sign of a turn in the market,” said Tom Lieser, associate director of the UCLA Business Forecasting Project. “I think there might be some areas where that might be true. But on average, it’s not.”
In fact, Wells Fargo, which had forecast that prices would rise this year, has revised its prediction and expects the statewide median to fall 2% to 3% from 1994 levels. “In order for prices to stabilize and come up, we need to see more strength in the overall economy and stronger demand in the housing market than what we’ve seen the first quarter,” said Wells Fargo economist Chris Taylor.
While economists and real estate agents debate their price predictions, many potential home buyers are remaining on the sidelines, bargaining unmercifully and waiting for the market to hit bottom.
In the Hollywood Riviera section of Torrance, for example, Linda and Dave Nolte recently walked through yet another open house as part of a two-year quest for the perfect home. Falling prices had finally put an ocean-view home within the couple’s grasp, and Linda Nolte had the impression the market might turn up this summer.
So were they ready to make a deal on the $495,000 open house--already reduced $20,000--with the impressive view of the Pacific? Not unless the owner came down nearly $100,000, said Linda Nolte.
“This area,” she said, “still seems a little bit high.”
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Falling Prices
Most of the five-county Los Angeles area has suffered through four years of falling single-family home prices.
MEDIAN SINGLE-FAMILY HOME PRICE BY COUNTY
Year Los Angeles Orange Riverside San Bernardino Ventura 1990 $201,000 $228,000 $130,000 $126,000 $227,000 1991 201,000 228,000 131,000 129,000 218,000 1992 195,000 223,000 130,000 129,000 212,000 1993 182,000 215,000 130,000 128,000 204,000 1994 174,000 208,000 126,000 124,000 195,000
Source: Dataquick Information Systems
