Home Prices Continue to Soar in L.A. County
Los Angeles County home prices posted their biggest increase in at least 15 years in June as the median surged 32.3% to a record $414,000, according to data released Monday.
June marked the first time that the county’s median price -- the point at which half the homes sold for more, half for less -- topped $400,000 and was the 12th consecutive month that prices rose at least 20% year over year.
The steep run-up in prices, over the last two years in particular, has prompted concern that the region’s housing market, a major engine of the economy, may be caught up in a speculative bubble. But so far, some key warning signs have yet to reach what experts consider to be dangerous levels, even as prices continue to rise at a sizzling pace.
“There is still no indication in these numbers that the market is turning,” said John Karevoll, an analyst at DataQuick Information Systems, a La Jolla firm that compiles the monthly housing data.
A lack of inventory that helped fuel this year’s steep increases appeared to be easing. June was the fourth consecutive month that more than 10,000 sales were recorded, with 11,673 new and resale homes and condominiums closing escrow. More transactions were posted in the month than in any June since 1989, DataQuick said.
Karevoll and other housing experts said additional data in the coming months would provide a clearer picture of the market’s durability.
Sales that were completed in June initially went into escrow in March, April and May, when there were fewer homes on the market. As the school year has ended, and more owners are putting their homes on the market hoping to sell at record prices, inventory levels are rising.
Whether that will be enough to slow or halt the historic pace of price increases remains to be seen. If records continue to be set throughout the summer, it may mean that there still are many more buyers than sellers and that the market’s chances of overheating may grow.
“It’s scary because what comes up must come down,” said Anthony Hsieh, founder and chief executive of mortgage lender Homeloancenter.com. “Does it go down a lot or level off? The unknown is: At what level is it going to settle down to in the next year or two?”
If sales continue to climb and prices level off, it may mean that the market is cooling some, and that the chances for continued but moderate price increases may grow, Karevoll said.
Mark and Shannon Rothman are among those pondering a sale. They’re thinking about putting their west Van Nuys home on the market and relocating to a bigger house in Porter Ranch.
They estimate that their three-bedroom home on Wish Avenue has doubled in value since they paid $255,000 for it three years ago. On Sunday, their theory was confirmed after they visited an open house two blocks away. There, they toured a similar-sized home that was listed at $522,000.
“I think we can get a lot more for our house,” Shannon Rothman said.
That kind of seller’s mentality was prevalent at the peak of the market in the last cycle.
So far, two key indicators of an overheated market have been rising steadily, but not to levels that experts consider dangerous:
* Adjustable-rate mortgages (which offer lower initial interest rates and therefore lower monthly payments) accounted for 66.7% of purchases in June, up from 59.8% in April. That increase tracks a corresponding rise in mortgage rates over the same period.
* Flipping -- the practice of quickly reselling homes for a big profit -- was up 35% in May from a year ago, accounting for 3.1% of all sales in Southern California in the month, according to DataQuick. The record high is 3.5%, set in early 1989, about a year before prices peaked in the last cycle.
In June, the median price of all types of housing in the county rose at least 30% from June 2003. The resale median jumped 31.1%, to $427,500; the median new-home price climbed 39.8%, to $515,000; the median resale condo price surged 34%, to $335,000.
In the near term, the amount of inventory will be key. And it’s growing.
Betty Graham, president and chief operating officer of Coldwell Banker Residential Brokerage in Los Angeles, said one telling sign was the heft of the Caravan Express, a weekly brokers’ publication promoting new listings on the Westside.
On May 4, the catalog was 196 pages. On June 28, it had grown to 240.
“It’s a real break for buyers to have a little more choice,” Graham said.
Unlike earlier this year, when anxious consumers snapped up new listings and often paid above the asking price, a larger inventory means that it’s taking longer for many homes to sell.
“We’re seeing more houses being reduced, in some cases twice, before it hits a magic number,” said Alan Long, founder of DBL Realtors, which sells homes in Los Angeles, Pasadena and Palm Springs. “And then the offers come flying in.”
To be sure, demand in Los Angeles County and elsewhere in Southern California remains high. Propelling buyers into the market are mortgage rates that are near 40-year lows. Rates on 30-year fixed-rate mortgages declined to 6% last week, after hitting 6.37% just before the Federal Reserve moved to raise its key short-term rate on June 29.
The low rates have served as a “tremendous blinking light,” beckoning buyers to take on mortgages, or homeowners into refinancing, said Leslie Appleton-Young, an economist with the California Assn. of Realtors. “They’re afraid if they don’t act now, if they wait it will be harder.”
Mortgage lender Hsieh doesn’t see rates affecting the local market as much as supply and demand. If the supply of homes grows, buyers will become more picky; if there’s a shortage, then the market will stay strong.
“Certainly, we are at some sort of crossroads right now,” he said. “Within the next 30 to 60 days, this tug of war between buyers and sellers will determine where the market goes for the rest of the year.”
