L.A. County Home Prices Post Their Lowest Gain in Six Years
Southern California’s housing market continued to cool last month as Los Angeles County’s home prices rose at their lowest rate in six years while San Diego County’s price declines worsened, data released Wednesday showed.
The data were the latest indication that buyers are in no hurry to pay the high prices that attracted bidding wars in the last two years.
“It’s clear that a price correction is underway, but it’s a matter of magnitude,” said Andrew LePage, an analyst with La Jolla-based research firm DataQuick Information Systems, which provided the data. “We’re not sure at what point demand will respond and start to pick up again.”
Fewer buyers entered the market in August compared with a year earlier, eroding sales to levels not seen in a decade. In Los Angeles County, 9,193 homes were sold last month, the fewest since August 1997 and a 21% drop from year-earlier volumes, according to DataQuick. August was the county’s ninth straight month of plunging year-over-year sales rates.
Slow sales pulled down price growth in Los Angeles County, where the median price rose 4.7% year over year to $517,000 in August. That was the slowest rate of appreciation since the housing boom began six years ago and was below the county’s historical average growth rate of 7%, according to DataQuick.
In San Diego County, the situation was worse for sales and prices. Considered a bellwether because it was the first Southland housing market to heat up -- and now to cool down -- the region saw a 32% plunge in sales and a 2.2% decline in home prices compared with a year earlier. At $482,000, San Diego’s median price for all types of housing is now back to where it was in April 2005.
It was the third straight month that San Diego prices depreciated and the 26th consecutive month that sales dropped from year-earlier levels.
Data for other Southland counties will be released next week.
“We’re now experiencing a ‘payback’ in demand for homeownership, following the surge that pulled demand forward into the boom years,” David Seiders, chief economist for the National Assn. of Home Builders, testified before a Senate committee Wednesday.
The decelerating housing market may already be pushing up foreclosure rates. In the second quarter, the percentage of mortgages that started the foreclosure process rose to 0.43%, according to a quarterly survey released Wednesday by the Mortgage Bankers Assn. That was up from 0.39% in the second quarter of 2005.
In California, the percentage that started the process was 0.21%, up from 0.14% in the year-earlier period, according to the mortgage bankers group.
The real estate downturn “still has some distance to go, if only to work off excess supply in markets for both new and existing homes,” Seiders testified.
Seiders said he believed that the national downswing in home sales and housing production should bottom out about the middle of next year and would gradually recover to a more normal level by late 2008.
The local housing market is likely to follow the same trajectory, said Alan Gin, a University of San Diego professor and an associate at its Burnham-Moores Center for Real Estate.
“It will take a year or two to work itself out,” said Gin, who noted that in San Diego County, housing permits are down 43%, which means fewer homes will be built, easing supply levels.
But in the meantime, a swelling supply of homes for sale is weighing on the local housing market. Through the first week of September, it would take 5.7 months to sell all the existing homes on the market in L.A. County. That was up from 4.9 months two months ago, said Patrick Veling, president of Real Data Strategies, a Brea-based firm that tracks multiple-listing data.
Veling noted that at the nadir of the last housing cycle in the mid-1990s, inventory ballooned to a 19-month supply. He said a nine-month supply could begin to push prices significantly lower.
“But the market may turn the other way as quickly as it turned the wrong way,” he said. “There’s a huge amount of pent-up demand out there, and it’s growing bigger as more buyers are sitting on the sidelines.
“As soon as buyers realize that sellers may not be lowering their prices, we’ll see a radical absorption of inventory.”
That could already be in the works. Sales volume appeared to have picked up in Los Angeles and San Diego counties on a month-to-month basis, DataQuick said. From July 31 to Aug. 31, L.A. sales rose 14% and San Diego sales gained 8.7%.
The time of year may have had something to do with the results, DataQuick’s LePage said. Also, he said, some sellers may have aggressively reduced their asking prices to attract buyers last month.
“This could have been the last blast from buyers before the school year started,” LePage said. “But if next month’s numbers show a similar trend, then we may be in for a soft landing.”
*
