Home Prices Soar 23.7% in Los Angeles County
Different month, same story: The Los Angeles County housing market is hot and prices are at new highs.
In December, the median home price hit $345,000. That was 23.7% more than the median of $279,000 a year earlier, DataQuick Information Systems, a La Jolla real estate data provider, reported Tuesday.
Year-over-year increases have exceeded 20% every month since July. And prices probably will continue to shoot up at that pace into the spring before “easing back to the mid-teens” by April or May, said DataQuick analyst John Karevoll. “We don’t envision a decrease in prices in 2004,” he said, “but we do envision a lower rate of appreciation.”
The county’s median sales price for all of 2003 was a record $319,000, up 21.8% from 2002. That surpassed the largest jump recorded by DataQuick, an 18.2% increase from 1988 to 1989, when the median reached $188,000.
December sales remained brisk, rising 8.3% from a year ago, with 11,059 new and used homes and condos trading hands. It was the busiest December since 1988.
And for the year as a whole, sales kept pace with the county’s last prolonged real estate boom. The 2003 tally of 125,907 was up almost 4% from 2002, making last year the busiest year since 1989, when 134,021 homes were sold.
Such demand emboldens builders like Jeff Lee, who plans to construct about 300 dwellings this year in Los Angeles markets including downtown, Playa Vista, Woodland Hills, Boyle Heights, Venice and Hollywood Hills.
“We see more of the same this year, as far as sales and the pace of sales,” Lee said. “There is just no supply.”
The City of Los Angeles issued permits for 9,000 housing units last year and expected to authorize about the same number this year, he said, which would fall far short of creating enough housing to meet demand.
Facing an acute shortage of land suitable for development in Los Angeles, so-called infill developers such as the Lee Group will continue to turn underutilized and undervalued properties, such as former industrial buildings and failed strip malls, into housing, Lee said.
His Los Angeles company converted a former warehouse near Staples Center into 91 condominiums last year. Eighty-five of the units at Flower Street Lofts, where prices range from $350,000 to $1.1 million, have been sold, Lee said. Now he is converting an 80-year-old office building nearby to upscale lofts.
“We believe that interest rates are going to remain low,” Lee said. “We don’t see anything to stop that housing market.”
Economist Raphael Bostic doesn’t expect the sales boom to slacken anytime soon either -- though he sees the potential for the market to go “off of a cliff” in two or three years.
Bostic, who is director of the Casden Real Estate Economics Forecast at USC’s Lusk Center, said prices may rise to a point where Los Angeles becomes undesirable for employers because their workers are unable to buy a home.
Such business operators might chose to move or decline to locate here.
“It’s hard to know what point is the ‘cliff’ point,” said Bostic, who notes that Southern California has advantages such as temperate weather that help it compete for businesses.
But if many managers decide to bail out at the same time, demand could drop to practically zero and prices would soon fall, he said.
Back in the trenches, Long Beach real estate agent Joe DiTore of ReMax Real Estate Specialists is planning for “another very strong year” based on the level of activity he’s already seen.
Results of 2004 for may not surpass 2003, he said, but they will come close.
“The market is creating its own energy,” he said, as the low supply of homes, coupled with the threat of further mortgage rate increases, drives anxious would-be buyers to bid up prices.
“It’s a very stressful market,” he said, with buyers often finding themselves bidding against rivals for homes they want. It’s common for buyers to lose out on a house or two, he added, before they get aggressive enough to complete a purchase.
Some sellers, on the other hand, are getting carried away, pricing their homes at 10% to 20% above the local market average and finding that they can’t close a sale because buyers won’t bite or because appraisers for buyers’ lenders won’t agree that the houses are worth such large loans.
“That pattern has increased in the past year,” DiTore said. He recommends that sellers look for the highest comparable sales prices in their neighborhood and add 3% to 5% to come up with their asking price, as long as the house is in good condition. A 5% increase on a $400,000 house would give the seller an additional $20,000.
Buyers and lenders are not being shocked by those kinds of increases, he said. “The market is not going to crash.”
