April home sales in Southern California hit three-year low for the month
It is shaping up to be a silent spring for the housing industry.
Warmer days and the need for many families to make a move during the summer school recess have long made spring the peak season for buying homes. But lingering economic uncertainties and the expiration of federal tax incentives — which juiced up sales last year — have turned the market soft.
April home sales in Southern California were down 9.2% from a year earlier. The figure, the lowest for April in three years, was 25.4% below the month’s average since record-keeping began in 1988, DataQuick of San Diego reported Thursday.
The median price paid for a home in the region fell 1.8% from a year earlier to $280,000.
“The market is just kind of putzing along,” said David Emerson, a Lakewood agent with Prudential California Realty. “This should be the hottest time of the year in terms of deals going into escrow, but — especially once you consider where interest rates are — it is still a struggling market.”
The poor showing continued last month despite the influx of cash-rich investors who are snapping up cheap properties to rent, flip or hold. And sales in the Southland of newly built homes, which are facing fierce competition from foreclosures, turned in their second-worst performance for an April on record.
In the boom years, buyers rushed to make deals before prices pushed higher. Today, buyers are taking their time.
Robert and Charli Kugler of Carson have been scoping out homes for six to eight months, but say they won’t put money down until they find the one that’s just right for them.
“We don’t want to rush into something that we are going to regret,” Robert Kugler said.
With an eye on finding bargains, they are steering clear of packed open houses and instead are checking out short sales and other so-called distressed properties. They have a set maximum price they are willing to pay and do not intend to get into any bidding wars.
“We have a realistic maximum price, and there is no negotiating past our maximum price,” Robert Kugler said. “We do have a no-nonsense approach.”
For the California real estate industry, that kind of hesitation is translating into smaller commissions, fewer appraisals and less work for people such as Phyllis C. Yanagihara, an escrow officer in Glendale and president of the Los Angeles Escrow Assn.
Yanagihara said business across the board is slow, although prices and sales have picked up enough in some neighborhoods that current homeowners are selling.
“We have to work harder to develop business, that is for sure,” she said. But “there are a lot of young people buying homes and young people that haven’t started their families yet, and I think that is very encouraging.”
Builders are trying to attract buyers by touting the green credentials of new homes, as well as offering incentives such as interest rate buy-downs — in which builders help buyers secure a rate lower than the going rate by paying extra cash up front to lenders — and providing cash to go toward buyers’ closing costs. KB Home handed out free boxes of See’s chocolates over Mother’s Day weekend to people touring model homes.
New-home sales are suffering the most because builders have to compete with a large and steady supply of foreclosures, many of which were built very recently. Few analysts expect builders in the region to post a strong showing this year.
“It’s not going to be pretty,” said Russ Valone, chief executive of San Diego-based MarketPointe Realty Advisors, which tracks new housing.
Shares of Westwood-based KB Home, for example, are down 16.8% on the year, while the Dow Jones industrial average is up 9.7%.
The pricier segments of the resale market also remain weak, with the “move-up” buyer all but disappearing since the crash. The decline in home prices has left many homeowners unable to sell, and the uncertainty in the job market is discouraging others from taking on the risk of a new purchase.
“I don’t see any move-up market happening,” Gerd-Ulf Krueger, principal economist with HousingEcon.com, said. “Typically, the move-up buyer moves because there is equity. Specifically there is some kind of housing market pattern where you start out with the first-time buyer and that triggers moderate home price appreciation, and then after a while confidence comes back.”
“That process has basically gummed up.”
Despite the lackluster pattern so far, local real estate professionals have experienced an uptick in hiring. The region’s real estate sector — which includes agents, property managers and appraisers — employed 51,300 people in Los Angeles County in March, up 0.8% from March 2010, according to the state’s Employment Development Department.
That was still down 7.6% from the same month in 2007, when regional home prices were striding toward their peak.
There are some incentives for buyers to step into the market right now, namely the affordability of homes and low interest rates.
Buying a home has become a better deal than renting in several markets, including the Inland Empire, Phoenix, Houston and Chicago, according to real estate research firm Green Street Advisors Inc. of Newport Beach, which measures affordability by comparing the cost of a mortgage payment after taxes with the cost of an area’s average asking rent.
Although renting still remains the most affordable option in Southern California’s coastal markets — Los Angeles, Orange and San Diego counties — the home price declines from the peak years have been enough to tempt potential buyers such as the Kuglers, who sense a moment of opportunity.
Robert, a 28-year-old aspiring actor and comedian, and Charli, 26, an accountant, came to Los Angeles from Lincoln, Neb., last spring so that the former Marine and Iraq war veteran could pursue his dreams in the entertainment industry.
Robert’s biggest work has been a commercial promoting the benefits available through the Department of Veteran Affairs, a spot in which he marches through a battlefield and into a civilian classroom, looking directly into the camera and imploring his fellow veterans to explore their options, including the kind of no-money-down VA home loan that the Kuglers hope to use to buy their home.
The couple pays $1,650 in rent for an apartment in Carson. They want to buy a home priced no more than $320,000 and have a monthly mortgage payment of no more than $2,100.
“It is kind of exciting to think we could snag a place,” Robert Kugler said. “It would be a little more permanent, like we are not just floating around.”
After showing some interest in one Burbank condominium, Robert Kugler returned to the complex and began knocking on doors. He learned that the homeowners association was not making many of the repairs that the people living there, mostly renters, wanted to get done. So the couple scratched that one off the list.
The terrain of their evening and weekend hunts is in the Southland’s market of short sales and foreclosed homes, empty spaces with no hosts that exude all the hushed charm of crime scenes. Their agent John Venti, whom Redfin pays per appointment and not by commission, is not rushing them either.
“You probably don’t hate it,” Venti told the Kuglers on a recent weekend afternoon as he stood in the front doorway of a spare and tiny two-bedroom Burbank condominium. “But it’s probably not the one for you.”
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