L.A. Home Prices Soar in May
Home prices in Los Angeles County shot up to another record in May, but sales fell significantly from the same month a year earlier amid a rapidly diminishing supply of less-expensive homes.
The median sales price of new and existing homes in L.A. County jumped 21% on a year-over-year basis to $313,000 last month, according to a report released Friday by real estate research firm DataQuick Information Systems.
All categories of homes showed strong appreciation: Existing single-family houses rose 20% to $325,000, and new homes climbed 22% from a year earlier to $400,000. Condominiums, the most affordable option for home buyers, posted the largest gain, increasing 25% to $245,000.
Actual sales in the county, however, dropped almost 8% to 10,863 properties. Housing experts and brokers said the slowdown wasn’t a sign of weakening demand; rather, they blamed it on a persistent shortage of homes for sale and a storm of refinancings that is clogging up the system and delaying escrow closings. Home builders have ramped up construction in recent months, but new building has been constrained by a lack of developable land.
DataQuick said the biggest sales drop in May, about 28%, came in the segment of homes priced below $300,000. With fewer lower-priced properties on the market, sales tumbled in areas such as San Fernando, Covina and South-Central Los Angeles.
“Clearly there is a massive supply constraint in that segment, and unfortunately it’s the more affordable segment,” said G.U. Krueger, research director at Institutional Housing Partners, a real estate venture firm in Irvine. “Buyers are essentially skipping over that range and going straight to the next level.”
By contrast, sales of million-dollar homes in the county hit a record high of 478 in May. Monica Blythe, a Century 21 agent in Los Angeles, said she’s had no fewer than three homes listed in the $1-million range at any given time this year. Last year, she had none.
“Million-dollar homes are a dime a dozen these days,” Blythe said. “But what you get for that kind of money is a lot different too. Homes that never would have crossed that price level a year ago are being listed as premier properties today.”
Los Angeles County accounts for about half of the Southland’s home sales. May sales and price results for other counties will be released next week.
The region’s housing market has been a pillar of strength in an overall weak economy. State officials said Friday that the unemployment rate in L.A. County was 6.6% in May, down from 6.9% a year earlier but stubbornly unchanged during the last few months. Job cutbacks in manufacturing have persisted, and total nonfarm payrolls in the county were down 44,200 from May 2002, according to the state.
Michael Carney, real estate professor at Cal Poly Pomona, said record-low interest rates continued to push properties into “nosebleed territory.” The average rate on 30-year fixed-rate mortgages dropped this week to 5.21%. Still, he found it difficult to reconcile the sluggish labor market with the rapid appreciation in home values.
“The employment picture is flat-out not looking good,” said Carney, noting that jobs are what typically drive home prices. “People are just really overextended and overburdened with debt.... Interest rates are going to go up eventually, and it’s going to cause real problems for people.”
Other experts were less concerned. DataQuick analyst John Karevoll said that because interest rates were so low, the typical L.A. County home purchaser in May was making smaller mortgage payments than a comparable buyer in May 1989, when interest rates averaged 10.9%.
So far, he said, signs of homeowner stress aren’t visible. In May, there were 1,331 foreclosures in L.A. County, down from 1,698 in May 2002.
“You really need to have a relatively sizable job shock before you would see it show up in home prices,” Krueger said. “I suspect there is enough pent-up demand from past economic growth to keep the [housing] market pretty insulated.”
To that end, many agents expect a string of record-breaking numbers to stretch through the summer selling season. Alan Long, president of Los Angeles-based DBL Realtors, said more properties would come on the market as families with school-age children make their moves.
“Our biggest months are in the summer, and rates are just unbelievable,” he said.
