Home Price Gains Keep Shrinking
Los Angeles County’s home prices in July rose at their slowest pace in six years while San Diego County’s continued to fall, more evidence that the Southland’s real estate market is slumping, data released Friday show.
Buyers are not rushing into deals, with sales in Los Angeles County plunging 25% versus year-earlier volumes -- the eighth consecutive month of declines, according to La Jolla-based research firm DataQuick Information Systems.
The latest data are likely to intensify the debate over whether widespread predictions of a “soft landing” -- in which home prices level off and avoid sharp declines -- might be too optimistic. This week, lender Countrywide Financial Corp. and luxury home builder Toll Bros. Inc. said demand nationwide for mortgages and new homes fell more than expected this summer.
“The market isn’t exactly falling off a cliff but it is slowing more rapidly than we’ve seen in a long time,” DataQuick analyst Andrew LePage said.
Ever-slowing price appreciation, triggered largely by rising mortgage rates and shrinking affordability, is becoming more routine. The median price of all Los Angeles County houses and condominiums that closed escrow in July reached a record $520,000, up 6.6% from a year earlier but virtually flat compared with June’s median of $517,000.
The year-over-year gain was the lowest since a 3.7% rise in July 2000. During the peak of the real estate boom in 2004, prices typically rose more than 20% over year-earlier levels.
San Diego County, once one of the nation’s hottest markets, fared even worse. Its median price in July fell to $487,000 last month, down 1.8% compared with July 2005, while sales dropped nearly 30%, DataQuick said. The county, which first experienced the housing boom with double-digit price gains six years ago, became one of the first major markets in the nation to suffer a year-over-year decline when its median price fell in June.
Even the most bullish housing analysts and real estate agents now say other Southland counties could eventually post year-over-year price declines, just as they did in the market slump of the early 1990s. DataQuick will report price and sales data for other Southland counties next week.
“Everyone’s always said a ‘soft landing’ could include minor price declines,” LePage said.
Within Los Angeles County, there are at least a dozen ZIP Codes where prices have started to falter year over year, according to DataQuick. The biggest drop was in Torrance, where the median price of existing single-family houses fell 7.4% to $560,000 in the May 1-July 31 period, DataQuick said.
Also showing depreciation were Agoura Hills, where the median fell 4.1% to $820,000, and Manhattan Beach, where it dipped 3.3% to $1.45 million.
However, the declines are hardly widespread. Existing homes in the majority of Los Angeles County’s neighborhoods continued to gain value in the second quarter, close to half at double-digit rates, particularly in more affordable areas where home values are below the county median.
Nonetheless, a growing stockpile of homes for sale is putting pressure on sellers to cut their asking prices, giving buyers the upper hand in sales negotiations.
That’s becoming evident even in downtown Los Angeles, which has been one of the hottest local markets thanks to a boom in new condominiums and lofts.
“Downtown has gone into a state of paralysis because prices are starting to come down,” said Stephen May, a veteran real estate broker who specializes in the area. The dearth of demand and rising supply prompted May to advise one client seeking to sell her condo unit to list it at just $10,000 more than what she paid a year ago.
Today, there are seven condo units for sale for every one sold. Last year, the ratio was 1 to 1, May said. “It’s glut city,” he said.
According to the latest figures from DataQuick, home sales in both Los Angeles and San Diego counties dropped 21% from June to July -- the biggest monthly change since the summer of 2000.
Sales have been declining each month in San Diego for more than a year, and for the last eight months in Los Angeles. During the most recent real estate downturn in the 1990s, sales declines preceded price declines by more than a year.
Experts say the rise in mortgage rates over the last year has taken a toll.
“We are kidding ourselves that mortgage rates are not the problem,” John Burns, an Irvine building industry consultant, wrote in a note to clients this week. He pointed out that the monthly payment on a $300,000 loan is 15% higher today than in August 2005.
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All over the map
New and previously owned homes sold in July and their median price. Data for other Southland counties have not yet been compiled.
County: Los Angeles
Number of homes sold: 8,040
% change from ’05: -24.9%
Median price (thousands): $520
% change from ’05: +6.6%
County: San Diego
Number of homes sold: 3,370
% change from ’05: -29.3%
Median price (thousands): $487
% change from ’05: -1.8%
Three-month results, top and bottom 10 for L.A. County
May-through-July sales for previously owned homes in ZIP Codes with the highest year-over-year percentage increase or decrease in price. Only ZIP Codes with 50 or more transactions are included.
*--* % change Median % change Number of from price from Area ZIP Code homes sold year ago (thousands) year ago L.A. 90061 63 +1.6% $407 +31.3% L.A. 90003 135 -10.6 420 +31.3 Compton 90222 108 +13.7 385 +28.3 L.A. 90011 105 +9.4 410 +28.1 Compton 90220 144 +21.0 400 +26.8 L.A. 90037 60 +5.3 445 +26.2 L.A. 90063 51 -10.5 395 +25.8 L.A. 90018 54 -19.4 525 +25.0 L.A./View Park/ 90043 122 +1.7 550 +25.0 Windsor Hills L.A./Watts 90002 143 -0.7 385 +25.0 Woodland Hills 91364 120 -13.7 787 -0.1 Claremont 91711 108 -12.2 583 -0.4 West Hollywood 90046 64 -28.9 1,095 -0.5 Arcadia 91006 85 -19.8 714 -2.6 Glendale 91208 57 -9.5 815 -2.7 Manhattan Beach 90266 108 -19.4 1,450 -3.3 Agoura Hills 91301 65 -47.2 820 -4.1 Palos Verdes 90274 74 -32.1 1,400 -4.9 Pen. L.A./Rancho 90064 51 -34.6 895 -6.6 Park Torrance 90501 69 -5.5 560 -7.4
Source: DataQuick Information Systems
Los Angeles Times