Editor’s Note:
This story appears in the Jan. 12 print edition.
The December 2008 median home price in Los Angeles County fell 32 percent compared with 2007, according to figures from HomeData Corp.
The average county home now costs $345,000, a level not seen since 2003. The average condo sells for $310,000, the same as in early 2004. Condo prices fell 28 percent compared with December 2007.
Brokers and experts agree that prices declined faster for less expensive homes during 2008, primarily because low-end foreclosed homes accounted for most of the transactions.
West De Young, owner of real estate agency Casa Caf & #233; in South Pasadena, said that in his territory and surrounding areas, where typical homes cost more than double the county average, prices declined only 10 percent last year. But volume took a dive.
“Relatively speaking our market has not been hit with price reductions, but it’s the number of transactions that is hurting us,” De Young said. “The only people selling are those who need to sell. What we’re missing are the move-up and move-down markets.”
Figures from HomeData, based in Hicksville, N.Y., show that the number of homes sold in L.A. County during 2008 totaled 41,881. That’s about half 2006’s tally and a 60 percent drop from 2005.
“The biggest issue that still exists is the excessive inventory,” said Gary Painter, director of research at the USC Lusk Center for Real Estate. “In Los Angeles County, the excess inventory is concentrated on the urban fringe, in areas like Lancaster.”
Middle-class family homes face obstacles on both ends of the transaction. The typical buyers “are the people who have been waiting for this market to drop, and now they’re taking advantage of lower interest rates,” said Bill Bowling, an agent with Prudential Malibu Realty.
Financially, many working Angelenos have difficulty qualifying for a home loan, even if they make good income, because the banks have tightened their standards and rarely allow so-called “stated income loans,” Bowling explained. Stated income loans are used for entrepreneurs, actors, musicians and consultants who don’t get a regular paycheck.
“Those loans are hard to get, so those people won’t be buying a home,” Bowling said.
Upscale buyers in Bowling’s territory of Malibu and Topanga often have cash. Also, he has seen a wave of wealthy Europeans buy second homes in Malibu by taking advantage of exchange rates.
For 2009, Painter expects the price declines to slow but not stop.
“The focus will shift from problems in the financial sector to weak employment,” he said. “It’s hard to see where a new demand for housing will come from. I wouldn’t expect to see rapid price declines, but I’m not expecting appreciation either.”
De Young believes low interest rates and a gradually emerging order in the banking sector will stimulate buying.
“First quarter 2009 promises historic low rates, maybe never seen again in our lifetime,” he said. “It makes for an encouraging time for people to get into the market.”
As for the real estate industry, the lack of transactions may occasion a reduction in the number of agents and brokers. But De Young, who serves as 2009 president for the Pasadena/Foothills Association of Realtors, said he will have to wait until March to know how many people in his area have decided to leave the business.
In Malibu, Bowling expects improvement next year in the luxury home market.
“I think the higher-end properties will always do well, as they did even in the hardest times of 2008,” he said. “Next year with the stimulus plan and new administration, it will give people hope to purchase their dream home.”
