Almost sold out
Ron Blum of Calabasas simply wants to buy a home in the $400,000 range. But after two years of tedious open houses and cutthroat bidding wars, he is wondering if he will ever find one.
“The first house we bid on, there were eight other bids and all were over the asking price,” said Blum, who has been house hunting with his wife, Devorah, in the Woodland Hills/West Hills area. “It’s frustrating because there just aren’t that many homes available.”
Blum and thousands of other would-be home buyers are caught in Southern California’s seemingly endless upward spiral of housing prices, in which the median cost of a detached, single-family home in December 2002 rose to almost $340,000, up more than 20% from $281,000 a year earlier. One reason for skyrocketing prices: Few homes are for sale.
In Los Angeles County, the inventory of unsold homes has reached “historic lows,” according to the California Assn. of Realtors, the lowest levels since the trade group began tracking them in 1982.
The inventory average indicates the number of months needed to sell all homes on the market at the current sales rate.
By this gauge, in December the county had a slim 2.1-month supply of homes on the market -- a steep drop from the 10-month average and dramatically lower than the all-time high of 27.9 months in February 1991. The low point was 1.9 months in April 2002.
Although year-end is traditionally a low-inventory period as homeowners focus on the holidays, December figures have declined steadily in recent years. December 2002’s 2.1-month supply is down from 2.9 months for the same month in 2001 and 3.4 months in December 2000.
The low inventory of homes for sale is widespread in Southern California. Riverside and San Bernardino counties, for example, had 2.3-month supplies in December, while Orange County reported a 2.5-month inventory. San Diego County was somewhat higher at 4.7 months.
The low-inventory trend extends nationwide too. The fourth-quarter 2002 inventory across the U.S. was at 4.7 months, which is well below the six-month level that is considered balanced between buyers and sellers, according to National Assn. of Realtors spokesman Walter Molony.
Why the low inventory? Certainly, economic conditions have made real estate an appealing investment. Mortgage rates are at 42-year lows, and the stock market continues to suffer from its post-Internet hangover and war jitters.
Furthermore, people continue to move to Southern California, but fewer new homes are being built, a factor that dramatically increases the buyer-to-seller ratio.
“Between births and migration, California is gaining about 600,000 people each year,” said Leslie Appleton-Young, chief economist for the California Assn. of Realtors. But the state adds only 150,000 new housing units each year, according to CAR statistics.
“It’s difficult to start construction due to site costs, zoning and development fees, and a lot of red tape, which makes California development the most expensive in the nation,” Molony said.
“In Southern California, about one new home is constructed for every four new jobs,” added National Assn. of Realtors economist Lawrence Yun. By comparison, the nationwide ratio is more balanced at 1 new home per every 1 1/2 new jobs.
Locally, the ratio of buyers to sellers is out of whack, according to area real estate agents. “We have many clients in our office with cash, and they’re willing to buy houses,” said Mohammad Talai, an agent for Gold Value California Realty in Los Angeles, “but it’s hard to find properties.”
From the seller’s perspective, said Coldwell Banker agent Martin Feinberg of Culver City, “a lot of people are nervous about putting their houses up for sale, because they fear they’ll be stuck without a place to live.”
Some prospective sellers change their minds after realizing they’ll become buyers in an inflated market. Sedie Eskandari, for instance, decided to rent her Agoura Hills home in January rather than sell it. She estimates her 1,419-square-foot house would sell for about $440,000 -- a nice profit for her -- but is worried about the availability of quality homes to buy.
“The price of my house is high, but when you look to buy, you get garbage for the same price,” said Eskandari, who decided instead to rent a $1,500-per-month apartment in Marina del Rey. At some point, perhaps when the market cools, she plans to buy another house. “But I will buy one in Los Angeles, which is closer to my work.”
Fewer homes on the market mean more bidding wars, as impatient buyers, fearing home values will continue to escalate, make offers at or above the asking price. Despite paying top dollar, winning bidders often feel relieved, particularly if they’ve lost previous battles.
Chris Vosse learned in November that procrastination is deadly in a tight seller’s market. Vosse decided to take a second look at a West Hollywood condominium before making an offer. He shouldn’t have waited.
“I saw it late Sunday and thought I’d go to the Tuesday showing,” he said. But when he got there Tuesday morning, the owners had already accepted an offer.
Vosse acted more aggressively next time. In February he made an offer on a condo the same day he saw it -- and bid $1,000 over the $399,000 asking price -- and was successful.
“It was getting discouraging, and a couple times I thought I should just try again later,” Vosse said, “but I kept at it, and I’m glad I did.”
While many house hunters are stymied, CAR economist Appleton-Young points out that some segments of the housing market, such as homes priced above $1 million, have plenty of inventory. In December 2002, for instance, Los Angeles County’s $1-million-plus supply was at 16.8 months.
“It’s amazing that there are more homes in the multimillion-dollar range than in the mid-$300s,” said house-hunter Blum, who is director of medical communications at Specialty Laboratories in Santa Monica. However, homes in the $1-million- plus range account for only 2.2% of home sales statewide.
Will inventory bounce back later this year? Supply always increases in the spring and summer, as families with children plan moves around school calendars. But current geopolitical turmoil could wreak havoc on the housing supply.
“There’s a lot of uncertainty created by our dealings with Iraq,” said CAR senior economist Robert Kleinhenz. “This has great potential to slow the market this year.”
One fact is certain: Home prices will continue to climb. Appleton-Young expects a 9.5% increase in 2003, which would be down from the blistering 19% rise in 2002. However, the number of sales will likely drop 5.5% over last year’s total, she said.
Jeff Bertolucci can be reached at jbert@aol.com.
