L.A. County Home Prices Cool Slightly

For the first time in 19 months, the year-over-year rate of housing appreciation in Los Angeles County has dropped below 20%, statistics released Wednesday showed.

The median price in the county in January rose 17% to $414,000, according to DataQuick Information Systems, a La Jolla real estate research firm.

It was the slimmest increase since June 2003, putting the county’s median price where it stood seven months ago, after hitting an all-time high in December at $418,000. The median is the point at which half of new and resold homes and condos sold for more, half for less.

The January numbers don’t necessarily suggest that prices have finally hit a plateau.

“We’re in for a slower rate of appreciation,” said John Karevoll, DataQuick’s chief analyst. He predicted the appreciation rate in L.A. County would be “closer to 10% than 20” by the end of the year.

“The big question is: Will there be a soft landing?” he said. “Right now, the soft-landing scenario is the most likely as we get appreciation rates back down to sustainable levels.”

The number of homes sold last month fell 5% to 7,633 from a year earlier. That was off the January peak reached in 1989, when 9,615 sales were recorded, but far above the January low of 4,524 in 1992.

Because January historically is among the least active months for buying and selling homes, the statistics may not signal any lasting trend, Karevoll said. DataQuick’s numbers include every recorded escrow closing for the period and reflect transactions that were opened 30 to 60 days before.

Persistently low mortgage rates, a limited supply of dwellings and steady demand are keeping Los Angeles’ housing market humming, albeit at a more measured tempo than last year. (Long-term interest rates sank even further Wednesday, when the benchmark 10-year Treasury note’s yield fell below 4% for the first time since late October.)

A year ago, L.A. was in the midst of a housing whirlwind. Few homes were available for sale, and demand was strong because mortgage rates were at 40-year lows. The activity became so frenzied that prospective buyers were bidding up prices on properties at a pace not seen since the late 1980s.

The flurry continued through the spring. By summer, homeowners wishing to cash out were rushing to plant “for sale” signs. The supply of homes ballooned, giving buyers not only more selection but more opportunity to negotiate the price.

By mid-summer, prices began to soften, a phenomenon that appeared to continue into the fall, said G.U. Krueger, an economist at real estate firm IHP Capital Partners. January’s data seem relatively weaker because they “reflect the deals made six weeks ago or longer -- at the tail end of that softening,” Krueger said.

Sensing that the froth was coming off, a growing number of homeowners retreated from the marketplace in recent months, shrinking the supply of for-sale homes.

The California Assn. of Realtors’ unsold inventory index for Los Angeles County, which measures how long it would take to sell all of the homes on the market at the current rate of sales, stood at 2.6 months in December, the latest month available. That was up from 1.1 months in December 2003 but down from August’s 6.1-month supply.

The change in inventory levels suggests that “there are more realistic sellers asking realistic prices, and buyers recognize that,” said Patrick Veling, president of market research firm Real Data Strategies. That phenomenon probably will keep the rate of price appreciation in the low teens by year’s end, he said.

But if inventories remain low, prices could go higher as demand picks up after winter ends.

“When you see a bull market such as this, it generally doesn’t stop and dip,” said Anthony Hsieh, president of LendingTree Inc., a division of IAC Corp. “If there is any momentum, it will go up again. But there’s no guarantee of that.”

“The next major test,” he said, “will be in the spring.”