August cold to home sellers
Home prices fell in most Southern California neighborhoods and the number of sales tumbled to a 15-year low for August -- driven down by tougher lending standards, mounting foreclosures and skittish buyers.
Sales for the month plunged 36% from a year earlier. What’s more, 71% of the Southland’s ZIP Codes showed price declines, according to figures released Wednesday by DataQuick Information Systems. The survey excluded areas with 14 or fewer sales.
“Prices are falling everywhere,” said Christopher Thornberg, a former UCLA business professor who is now a principal at Los Angeles-based Beacon Economics.
In recent years, the housing market had been propped up by the widespread use of home loans with low introductory teaser rates -- allowing prices to outpace income growth, he said. But with those easy-credit loans all but gone, values are coming back into balance.
“People just don’t have the income to support these prices except with crazy mortgages -- and now the mortgage money is going away, and people are walking away from their homes,” Thornberg said.
Nearly 9% of the homes sold last month were foreclosure properties, DataQuick reported, up from 2.2% a year earlier.
Most communities are seeing price declines, and the downtrend is strongest in outlying suburban areas such as in Riverside County, where affordable homes attracted droves of first-time buyers -- many of whom could not qualify for traditional fixed-rated mortgages.
Today, many of these same buyers who counted on rising home values can’t refinance their loans and can’t make the escalating payments on their adjustable-rate mortgages, forcing them into foreclosure and putting yet more properties on the market.
“Virtually every community in Riverside County has massive inventory levels, which almost certainly will require price corrections in order to be absorbed,” Riverside County-based appraiser Michael Mathis said.
Riverside County posted the worst showing of the six Southland counties in the DataQuick report, with the median home price there falling 6.1% and sales volume down 46.4% compared with August 2006.
Surprisingly, the median price of a home in Southern California rose last month to $500,000 -- up 2.7% over August 2006. In Los Angeles County, the median price rose 5.8% to $550,000, although sales sank 34.4%.
Analysts said increases in the median price -- the point at which half the homes sell for less and half for more -- were driven mainly by rising prices and healthier sales in affluent areas such as Bel-Air and on Orange County’s so-called Gold Coast, where newfangled mortgages didn’t play as big a role during the boom.
“The areas in decline are seeing sales slow more than the areas that are not in decline,” said John Karevoll, DataQuick’s chief analyst.
The housing slump is part of a national downturn in home sales, and many analysts believe that prices could continue to slip through next year. That has many would-be buyers sitting on the sidelines, further cooling sales activity.
“Real estate is so unsettled right now that a lot of buyers are just looking to see what’s there,” said Matthew Crowder, a Corona homeowner who has been trying to sell his house for the last three months. He’s had plenty of looky-loos but no viable offers.
“Nobody is getting that aggressive,” he added.
One group of sellers hoping to shake home shoppers out of their wait-and-see attitude is the region’s home builders, who have been among the hardest hit by the real estate doldrums.
After booking record profit and sales this decade, builders are struggling to unload their inventories and are working mightily to entice buyers with incentives including free trips and plasma TVs. Some are offering outright price discounts.
“Buyer apathy in this market has really deflated all the builders’ business plans, so the only thing they can do is to do everything,” said Steve Johnson, regional analyst for industry consulting firm MetroStudy.
Dennis Hsii is counting on builder desperation to help him buy his first home. This weekend, the Los Angeles technology consultant hopes to renegotiate his contract to buy a $700,000 town home in Playa Vista that has been under construction for the last year.
That’s because the town home’s builder, Irvine-based Standard Pacific Corp., is hosting the equivalent of a car dealership “blowout” sale at Hsii’s community and 48 others starting Friday. The company’s goal: sell 200 homes in 10 days by offering mortgage loans with rates of less than 6%, along with other carrots.
On Wednesday, the company sent Hsii an e-mail promising a refrigerator, a washer and dryer, window blinds and a 42-inch flat-screen TV “at no additional cost” if he went ahead with his purchase. Hsii is looking for a cash discount instead.
“My goal,” Hsii said, “is to get the lowest price possible.”
So far, however, such incentives have not been enough to turn the sales slump around, Johnson said.
“Buyers are hearing more and more about foreclosures and declining values, and frankly they are terrified even with these ‘great values’ being offered and are afraid to be purchasing when prices may still go down,” he said.
Most economists and other industry watchers expect Southland prices to continue to ratchet down, especially if the supply of unsold homes grows. In August, the inventory of existing homes edged higher in all counties, according to real estate brokerage ZipRealty Inc.
In Orange County, there are so many homes for sale that it would take 14 months to sell them all at the current sales pace, said Steve Thomas, president of brokerage Re/Max Real Estate Services. And more than half are owned by people “who really don’t have to sell,” he said, serving to distort market conditions.
“They are clogging up our market right now,” he said. “This is the time that if you really don’t have to sell, don’t. Even if you’d like to sell, don’t.”
As in Los Angeles, the median home price in Orange County edged up -- by nearly 2% to $642,250. But once again, the rise was more the result of gains at the upper end of the market, masking troubles in less-affluent areas. Appraiser Mathis said that in parts of the Inland Empire it could take as long as three years to sell off all the homes currently on the market, a glut that is likely to further erode prices.
“Outlying markets have been showing significant weakness for over one year now, and this direction is now clearly being followed by the remaining Inland Empire markets,” he said.
“Equally ominous is the fact that most recent analysis suggests that the decline is accelerating.”
Many analysts believe that the housing market will remain troubled as long as the mortgage industry is in turmoil.
This summer, rising defaults on sub-prime mortgages to borrowers with shaky credit triggered a meltdown in global credit markets. That dried up capital for loans -- especially for so-called jumbo mortgages of more than $417,000 that are widely used to purchase homes in Southern California’s pricier neighborhoods.
In early August, 43.4% of all Southland home purchases involved jumbo financing, DataQuick found. But in the second half of the month, the percentage dropped to 39.7%.
Now, mortgage brokers say some creditworthy home buyers are struggling to complete their purchases because lenders can’t easily package the loans and sell them to investors.
“We thought there would be an immediate drop-off in sales because escrows were being held up,” DataQuick’s Karevoll said. “We’ll certainly be watching the September numbers very closely.”
The DataQuick survey includes all homes sold in the six counties, including condominiums and newly constructed dwellings.
--
--
On latimes.com
Check your ZIP
To see how home sales and prices in your ZIP Code have changed since August 2006, go to latimes.com/housingmarket.
