Southern California’s median home price stumbled last month and sales fell to near-record lows for an October — a weak performance with little promise for improvement as the traditionally slow season for housing begins.
The October median price for all houses and condominiums in October was $283,000, a slight increase of 1.1% from the same month one year earlier. That made for the weakest year-over-year increase since prices began their ascent last year, San Diego real estate research firm MDA DataQuick said Tuesday. Prices fell 4.2% compared with September as measured by the median price, which is the point at which half the homes sell for more and half for less.
Beverage distributor Jenia Kokotuha said he had struggled to sell a property in Malibu over the last 10 months and recently dropped the price $400,000 to $5.5 million. Kokotuha said he was able to rent the property over the summer to an “up and coming” Hollywood couple, but he had not seen much interest otherwise.
“The market in Malibu has definitely decreased due to the economic woes,” said Kokotuha, the 33-year-old chief executive of BevMarketing Group, which markets sparkling wine and other drinks. “Most of the interest has been from people who would like to lease it, with an option to buy.”
Kokotuha said he didn’t want to drop his price further and felt he could afford to wait out the market. His real estate agent, Brian Stevens, who works in Rodeo Realty’s Studio City office, said pricier listings such as the Malibu home were taking the longest to sell.
San Diego real estate agent Jim Klinge, who maintains the popular blog Bubbleinfo.com, said the key behind the sales slowdown last month was simple: Prices are just too high.
“Sellers are too optimistic on price. They think the market is better than it is, and they think they deserve more money,” Klinge said. “The buyers are smart. The Internet has leveled the playing field, and buyers are paying attention — they are checking the comps closer than ever, and they are not going to overpay for a house.”
Klinge credited those cautious, well-informed consumers as partially to blame for the October sales slowdown. Escrow closed on only 16,744 properties last month, down 24.3% from the same month last year, for the second-worst October since 1988, when DataQuick began its tracking. Sales of newly built homes posted their worst month on record.
Patrick Duffy, principal for research firm MetroIntelligence Real Estate Advisors, which closely tracks the market for new homes, said builders overestimated the demand for new homes and were likely to retrench in the months to come. The markets for both new homes and previously owned dwellings were driven by tax credits that expired earlier this year.
Those credits gave the market an artificial bump, pulling sales that would have occurred in the latter part of 2010 into the earlier part, Duffy said.
“We are continue to pay a price for the incentives,” he said. “You have to pay a price for those — we are having to pay it in the slowest time of year.”
The slowdown comes despite record-low and near-record-low interest rates since April. Home loan rates again hit new lows last week after the Federal Reserve introduced its controversial program to buy $600 billion in Treasury bonds.
Mortgage finance giant Freddie Mac said in its weekly report on rates last week that the lenders it surveyed were offering 30-year fixed-rate loans at an average of 4.17% with 0.8% in upfront fees, down from 4.24% the week before and lower than the survey’s previous record of 4.19% set Oct. 14.
Esmael Adibi, director of Chapman University’s Gary Anderson Center for Economic Research, said a housing recovery in Southern California would depend more on the ability to get the jobs engine churning again and less on low interest rates.
“We need to have household formation, and for that to happen we need job creation,” Adibi said. “It is not really interest rates that are drivers of home prices and purchases.”
It is not clear what effect, if any, the foreclosure freezes declared by some major lenders had on October’s sales figures. Bank of America is the only major lender that has declared a moratorium on foreclosures in California.
Foreclosures as a percentage of the resale market have dropped since hitting a peak of 56.7% in February 2009 but have fluctuated in recent months. Foreclosures made up 34.7% of the resale market in October, up from a revised 33.6% in September but down from 40.4% in October 2009.