Housing price cuts point to a shift in Southland market
The latest sign that buyers are gaining leverage in Southern California’s housing market: Price cuts are back.
The number of homes with reduced asking prices has risen sharply in recent months, a reversal from last year’s sellers’ market, when list prices seemed more like a floor than a ceiling.
In Orange County, the region’s priciest market, about one-third of sellers have been forced to cut prices, according to data from real estate firm Redfin. Across the Southland, prices have hit a plateau this summer, with sales volume slumping as buyers got pickier.
These trends have been building all year. But home sellers -- often the last to see market shifts -- are finally getting the message, said Paul Reid, a Redfin agent in Temecula.
“A lot of what we’ve seen over the last six or eight weeks is people lowering their prices to get buyers in the door,” Reid said.
The shift from a red-hot sellers’ market to something more balanced is reflected in price trends.
Every month for nearly two years, starting in mid-2012, the median home price in Southern California notched double-digit annual gains, according to housing data firm CoreLogic DataQuick. The growth peaked last June, with a 28% gain.
But the 9.1% year-over-year increase in August marked the third straight month of single-digit gains. In higher-priced parts of the region, gains are even slower; it was just 5.4% in Orange County.
Still, August’s median was $420,000, the highest point since the recession started in December 2007. That’s keeping many buyers on the sidelines, said Andrew LePage, an analyst with CoreLogic DataQuick.
“Prices are high enough to be a hurdle for a lot of buyers,” he said.
After two years of bidding wars and big price run-ups, some sellers have yet to come to terms with reality, said Steven Thomas, chief economist at Reports on Housing, which tracks the Southern California market.
“People have been putting a sign in the yard and expecting offers immediately. That’s not reality,” Thomas said. “In a normal market, you’ve got to put some work into selling it.”
David Silva, a veteran agent with Ricci Realty in Orange, has watched as the number of homes for sale in that Orange County town ballooned from about 100 in early 2013 to about 270 today.
With more competition on the market, some of his clients have had to cut prices to drive up interest. He’s heard stories from colleagues about would-be buyers walking away from contracts when they found a better house for less money.
“It comes down to affordability,” Silva said. “A lot of people are looking for a good deal. The lower-priced properties are going quickly. The mid-range inventory is taking longer.”
Silva said some of his clients are receptive to the idea of cutting prices to sell their homes. But some sellers -- those with less motivation to move now -- are pulling their homes off the market, said Steve Shrager, an agent with Coldwell Banker in Studio City.
Sellers who can’t get the price they want are choosing to rent their home, or try to sell again in another year.
“They feel the price can’t go anywhere but up,” Shrager said.
Buyers are choosier too, he notes. Though price growth has leveled off, many buyers still aren’t seeing bargains. And while the selection of homes has expanded, some aren’t finding any property they really want.
Some, he said, are choosing to stay put, or maybe try the market again next spring.
“I don’t want to use the word correction, but we’re in a bit of an adjustment period right now,” Shrager said.
Waiting for the spring selling season is fairly normal behavior for both buyers and sellers, Thomas said. But after a decade of boom, bust and boom again, many aren’t sure how to react to a normal market.
“People are not used to this,” he said. “That’s why you get some panic. Eventually these houses will sell. You just have to be patient.”
Patience and price cuts are paying off for Joseph David, an investor and rehabber who listed a blue three-bedroom Craftsman in Highland Park in late June at $624,990. When it went on the market, his agent got a lot of phone calls. Dozens of people showed up at open houses. But none of them pulled the trigger.
“We got a lot of response, but we didn’t get any offers,” David said. “There were a lot of looky-loos.”
Before long, he knocked a bit off his asking price. Then earlier this month, he cut it more sharply, to $549,000.
Interest picked up dramatically. His agent started to get a lot more phone calls, making David confident he’ll get that offer soon.
Twitter: @bytimlogan, @khouriandrew
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