Average L.A. County Home Still Worth 14% Less Than in 1990

Despite leading the nation in rising values last quarter, the average home in Los Angeles County is still worth about 14% less than at the beginning of the decade--negative equity that analysts predict could take a year or more to wipe out, a real estate research firm reported Wednesday.

The negative equity shows that Los Angeles County has yet to fully recover from the deep recession of the early 1990s when home values plunged as much as 30% from their peak in the late 1980s, according to Nima Nattagh, director of research for First American Real Estate Solutions, which compiled the report.

Consequently, a typical Los Angeles homeowner who bought in 1990 is likely to be in a negative equity situation by 13.8%.

“It’s probably going to take at least another year or year and a half for the typical homeowner in Los Angeles to realize the equity they lost,” Nattagh said.

Fueling Nattagh’s optimism that the situation will correct itself are rising home values in Los Angeles County, which outranked all other metropolitan areas in the U.S. during the first quarter of 1999 with a 14.9% year-over-year gain--more than double the nationwide average of 7.2%.

The Los Angeles economy has benefited from a booming high-tech sector and entertainment industry along with solid employment and income growth. Added to that, Nattagh said, is an imbalance in the supply and demand of homes.

“There’s not a good supply of housing in more desirable neighborhoods which has translated into a rapid appreciation of home values,” Nattagh said.

Orange County ranked second in the nationwide report with a 14.5% increase during the first quarter, and San Diego followed with a 12.7% jump. Homes in both counties are worth more than they were in 1990, unlike the situation in Los Angeles County.

A modest increase of 7.2% for the Riverside-San Bernardino area, which ranked 15th nationally, signaled that Southern California’s housing market recovery, which began three years ago among the coastal communities, has spread into the inland areas, Nattagh said. Despite the improvement, homes in the two-county area are worth 20.4% less than they were in 1990.

Nattagh said he believes Southern California will continue to see a healthy rate of growth as long as interest rates remain low and the economy sound.

His only concern is that the pace will moderate in southern Orange County, San Diego County and the Westside of Los Angeles--all areas where the rate of growth has priced out entry-level buyers.

While homes continued to appreciate in Northern California during the first quarter, they did so at a slower rate than a year ago. San Francisco, for example, posted a 10% gain--a year ago that figure was 19.8%.

“It’s a clear sign that the hectic pace of appreciation we’ve see in Northern California for the last couple of years is not sustainable,” Nattagh said. “I think price increases will definitely moderate this year.”

Nattagh’s report measures the appreciation of homes that sold at least twice since the first quarter of 1990 and tracks the rate of gain rather than reports the median price for each market.

The report included 315,871 repeat sales in Los Angeles County, 131,425 in Orange County, 107,705 in San Diego County and 172,806 in the Riverside-San Bernardino area.

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Change in Home Values

Home prices are surging throughout the Southland, but Los Angeles, Riverside and San Bernardino counties have yet to see home values* return to 1990 levels.

Los Angeles County:

% chg. from first-quarter 1998 to first-quarter 1999: 14.9%

% chg. from first-quarter 1990 to first-quarter 1999: -13.8%

Orange Country

% chg. from first-quarter 1998 to first-quarter 1999: 14.5%

% chg. from first-quarter 1990 to first-quarter 1999: 2.9%

San Diego

% chg. from first-quarter 1998 to first-quarter 1999: 12.7%

% chg. from first-quarter 1990 to first-quarter 1999: 9.0%

Riverside-San Bernardino

% chg. from first-quarter 1998 to first-quarter 1999: 7.2%

% chg. from first-quarter 1990 to first-quarter 1999: -20.4%

U.S. average

% chg. from first-quarter 1998 to first-quarter 1999: 7.2%

% chg. from first-quarter 1990 to first-quarter 1999: 19.9%

* This report measures the appreciation of homes that have sold at least twice since the first quarter of 1990 and tracks the rate of gain rather than reporting the median price for each market.

Source: First American RES