Sales of homes down 34% in region
Build them and the buyers will come. That’s how developer Shone Wang has been selling homes in Southern California for the last 15 years.
But this spring, Wang hit a snag: no takers for a cluster of luxury homes he built in Rancho Cucamonga.
“The first day my homes went on sale I decided I had to do something else,” Wang said.
His solution is an auction, set for Saturday, at which bidders have to agree to pay at least $700,000 for homes originally priced at $1.2 million.
It’s no secret that fewer buyers are snapping up homes these days, and statistics released Wednesday bear that out. In May, home sales in six Southland counties plunged to a 12-year low, declining 34% from a year ago, real estate tracker DataQuick Information Systems reported.
Even as sales continued to drop, home prices held steady, however. For the third straight month, the Southland’s median home price came in at $505,000. That’s up 4.9% from May 2006, DataQuick said.
Still, the drop-off in sales, which has been particularly acute in lower-priced neighborhoods, has started to weigh down prices throughout the region, DataQuick said.
May’s data show that sales of homes priced below $800,000 plummeted 38%, while sales of homes priced at or above that amount saw little to no change from May 2006.
What’s more, if homes sold at $800,000 or more are excluded, prices overall would be down 2% from year-earlier levels, DataQuick said.
“The absence of those low-end sales is keeping the median from being tugged down,” said John Karevoll, DataQuick’s chief analyst.
Karevoll, who has been crunching real estate data for nearly 20 years, believes Southern California home prices have yet to hit bottom. One year from now, he said, values will probably be about 4% lower on average.
“That’s the most likely scenario,” Karevoll said.
He added, however, that “all bets are off” if interest rates rise another percentage point or more. The nationwide average for a 30-year fixed-rate mortgage rose to 6.61% last week, its highest level in almost a year.
Economists point to rising rates and tougher lending standards as the biggest blows to demand, especially among first-time buyers.
Those buyers have helped power sales in the Inland Empire, with its ample supply of new, moderately priced housing. Now the area is watching values dip and sales crater.
In Riverside County, the median price declined 3.3% year over year to $406,000, as sales dropped 45.4%. In neighboring San Bernardino County, the median was $361,750, or only 0.5% higher than a year ago, as sales slid 46.5%.
The median is the price at which half the homes sell for more and half for less.
The area is also experiencing the highest number of loan defaults in Southern California, but foreclosed properties have not been a drag on home values in most communities, DataQuick said.
But that is expected to change as more lender-owned homes are put up for sale and at below-market rates, experts say.
Robert Harris bristles when he hears talk of a housing slump. The Simi Valley real estate broker likes to remind people that 2004, 2005 and 2006 were three of the best years for real estate sales.
“Yes, we’re off of our highs -- but they were the highest in history,” Harris said.
He acknowledges that his business in east Ventura County is slower these days as potential buyers wait for signs that the market is stabilizing. Last month, the median price in Ventura County fell 1.6% to $590,000 as sales dropped 25% from a year earlier.
“The market will find its legs again, and people will build their confidence again,” he said.
For his part, developer Wang would rather give wannabe homeowners a nudge than wait for them to respond at their own pace.
That’s why he is resurrecting a sales method he hasn’t used since the early 1990s: the auction. He hopes that by setting the minimum bid 40% below his original $1.2-million asking price, buyers will elbow one another for the chance to buy one of his houses.
Over the weekend, Wang was heartened to see about 80 people attend a one-time pre-auction session to learn how to bid on his homes.
“There are people sitting on the sidelines, but the market’s not dead,” he said.
In May, the strongest segment of the region’s housing market remained Los Angeles County, where the median rose 6.8% to a record $550,000, even as sales fell 31% from a year earlier, DataQuick reported. The state’s biggest county accounts for about a third of Southland residential sales.
In Orange County, the priciest local market, the median of $635,000 was about the same as the year earlier. Sales there declined 29%.
San Diego County, where home prices started depreciating nearly a year ago, saw its median price edge 1.6% lower to $492,000. Sales fell 24.4%.
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Begin text of infobox
May sales
Median price and number of new and previously owned homes sold
*--* Median % change % change price from Number of from County (thousands) year ago homes sold year ago Los Angeles $550 +6.8% 7,426 -30.7% San Bernardino 362 +0.5 2,220 -46.5 Orange 635 +0.1 2,675 -28.9 Riverside 406 -3.3 3,307 -45.4 San Diego 492 -1.6 3,385 -24.4 Ventura 590 -1.6 861 -24.8 Total 505 +4.9 19,874 -34.4
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Source: DataQuick Information Systems
