Southland’s Housing Market Frenzy Cooling
From Palos Verdes to Pasadena, Southern California’s once red-hot real estate market has cooled off in many communities, where brokers are advising sellers to roll back prices and buyers are shopping more carefully amid a growing number of “For Sale” signs.
A combination of forces has conspired to put the brakes on the skyrocketing prices and the bidding battles that awaited many buyers earlier this year. Wall Street’s summer nose dive and the prospect of slower economic growth undermined the confidence of many home buyers just as sellers were eagerly jacking up prices. The result has been a more modest--but still healthy--pace in home sales and prices.
“I think [buyers] are looking for a better deal because they see more inventory on the market and because there is a sense of uncertainty that wasn’t there six months ago,” said Victor Kaminoff, who sells homes in the Hollywood Hills and surrounding areas for Coldwell Banker.
Despite the slowdown, 1998 should prove to be a record year for real estate, with the statewide median sales price for an existing house projected to rise 10% from last year to $205,140, according to the California Assn. of Realtors.
Southern California’s growing population and inventory of jobs should continue to drive up demand for homes, say real estate observers. Mortgage rates--despite some volatility in early October--remain under 7% for most conventional home loans and are forecast to continue slipping to historic lows. In addition, Wall Street has swiftly recouped most of the losses it suffered in August, easing anxiety among many consumers and potential home buyers.
Many choice homes can still sell at alarming speed. In October, for example, a postmodern house listed for $2.2 million in the Hollywood Hills sold within a week to a buyer on the first showing, Kaminoff said. In many inland areas, such as western Riverside and San Bernardino counties, sales and price appreciation have actually grown stronger as buyers take advantage of affordable new housing.
Jeanette Young, an agent with Century 21 King Realtors in Chino, has sold more than 60 homes since the end of June. “The market is pretty darned good,” she said.
But most economists and brokers do not expect a return of the super-heated conditions that triggered huge price hikes in such places as south Orange County and the Westside of Los Angeles. The strong job growth that helped fuel demand for housing is expected to weaken in response to a slowdown in the national economy and Asia’s continued economic problems. The California economy next year is anticipated to grow only half as fast as it did this year.
As a result, the statewide median sales price is forecast to grow 4% in 1999--a respectable amount but less than half of this year’s price gain.
“We still see a healthy real estate market going forward barring any major shocks to our economy,” said Esmail Adibi, director of the Center for Economic Research at Chapman University. “Housing appreciation will continue to be with us for 1999 but not as strong as it was in 1998.”
O.C. Property Values ‘on Hold’
Housing observers said the powerful surge in real estate activity--in part triggered by years of pent-up demand and owners who were finally able to trade up to more expensive properties--could not continue indefinitely.
In Orange County, for example, monthly home sales during most of 1998 jumped 25% or more on a year-over-year basis, according to Acxiom/DataQuick Information Systems Inc. In the posh, gated community of Coto De Caza, it was not uncommon for homes to sell for $100,000 more than 1997 levels, according to brokers.
But in September, the year-over-year gain in Orange County slowed to 10% and sales actually fell in October--the first such decline in nearly 1 1/2 years. After watching prices rise month-to-month earlier in the year, property values are now “on hold” but still above last year’s levels, said broker Bill Plattos.
“It’s actually gotten normal and a little bit more balanced,” said Plattos, vice president and general manager for First Team Real Estate Corp., a 15-office brokerage in Orange County. “It’s going to give the first-time buyer a chance now that prices are not going up by 15% [a year].”
Many house hunters now find themselves with more time to shop around instead of fearing that the home of their dreams will be swept away in a tide of ever-spiraling multiple offers.
Peter and Linda Tan spent last spring walking through Sunday open houses in Mar Vista and other Westside neighborhoods where the atmosphere was tense as buyers huddled with agents in corners to decide if they should write an offer on the spot.
“It was crazy,” said Linda Tan, 30, an architect. “You would call the agents and they would tell you there were already three offers on the house.”
“It’s much more sane now,” said Peter Tan, 34, a philosophy graduate student, as he and his wife recently strolled through a Spanish Colonial style house on the market for $289,000. “We are not under pressure.”
With increasing frequency, many brokers and their agents have had to nudge sellers into cutting prices and to forget the days of spring, when many homeowners set their asking price $5,000 or more above what the house next door just sold for.
Sellers Fear Having Missed Market’s Top
But now, Scott Gibson, head of the Los Angeles and South Bay operations of Coldwell Banker, advises his agents to avoid setting prices above the peaks reached last spring or risk having the house languish on the market.
“The market got overpriced, especially in the high end,” said Gibson. “Buyers today are still sensitive to changes or potential changes in the economic environment and they are not willing to overpay.”
After growing accustomed to spring’s feverish sales pace, some homeowners fear that the current lull in sales and price means they have missed the top of the market--a fear many agents and economists say is unfounded.
“ ‘Have I missed it?’ is what we hear constantly,” said Marsha Salsido, a Coldwell Banker agent who sells homes in Palos Verdes and the South Bay. “Sellers are nervous and think they have to lower their price” when a house does not sell in 24 hours.
Agents said demand has not wavered for entry-level homes, particularly in inland communities where price increases started later and are more modest than those reported in coastal areas. Dax and Wendy Hayden have been looking for a home in La Verne--a suburban community in eastern Los Angeles County--priced in the high $100,000 range. But apparently so have a lot of other buyers: All of the Haydens’ three offers have been topped by rival bidders. Their fourth offer, however, was accepted and they are now in escrow to buy a three-bedroom home for $176,000.
“What I would hate to see happen is for prices to get out of my range,” said Dax Hayden, 28, a construction estimator. “A friend bought a house in Murrietta for $113,000. It’s now going for $130,000.”
Despite troubling economic signs on the horizon, buyers such as the Haydens said they are confident about their personal financial outlook and the real estate market. Wall Street’s plunge never made Ammar Kharouf, a newly minted attorney, and Guy Diconte, an actor, think twice about shopping for a home on the Westside of Los Angeles.
“It’s not going to prevent me from doing it,” said Kharouf, 28, of uncertain economic times. “I want the tax deduction . . . and I’m not concerned about the [real estate] market plummeting.”
The market’s plateau has certainly not discouraged Braemar Group--an Agoura Hills-based home builder--from proceeding with its plans. After nearly selling out all of its existing projects, Braemar Group is going ahead and building new homes in Tarzana priced in the $900,000 range, said Avi Brosh, executive vice president.
“People just froze,” Brosh said, describing home buyers’ reaction to Wall Street’s tumble in August. “But once the Dow Jones settled . . . there seemed to be life reborn. Buyers as a whole saw that the economy was doing well and their personal finances were OK.”
