The run-up in housing prices has been so rapid, with L.A. prices roughly doubling over the last four years, that economists have been warning for months about the market being ripe for a correction.
That time could be at hand.
The October median price for an existing home in Los Angeles County fell to $520,000 from $528,000 the previous month, according to data provided to the Business Journal by HomeData Corp., a Mel-ville, N.Y. firm that tracks existing home sales nationwide.
It's not the first time that home prices have dipped on a sequential basis over the past 12 months, and October median home prices are still 21 percent higher than a year ago. But combined with data measuring sales volume, evidence is building that the local housing market might finally be running out of steam.
Last month, 8,435 homes were sold in the county, 166 fewer than September. It was the third straight month that sales fell, and the figure was the lowest monthly total since February (although October numbers were higher than for the like period a year earlier).
"The fall home-buying season typically is not the most robust, but in the context of our own data we are seeing a transition in the market," said Leslie Appleton-Young, chief economist with the California Association of Realtors, which is predicting a 2 percent drop in home sales next year.
The association points to a growing inventory of homes that are spending a longer time on the market, as fixed interest rates top 6 percent for the first time in years and the Federal Reserve appears poised to continue raising rates.
Meanwhile, the association's index of unsold inventory for L.A. County rose to 3.2 in September, up from 2.7 in August, with the median days on the market for an existing home rising slightly to 24.8 from 24. Still, inventories are extremely low by historical standards, and the 3.2 figure was lower than the 3.6 recorded in September 2004. (Figures for October, which are based on data from the association's multiple listings service, are not yet available.)
On the ground
Some real estate agents say they have been seeing similar indications of a slowing market around the region since at least mid-September, with sellers starting to contemplate whether they should lower their asking price.
"When we were in a more accelerated market, things were selling in 30 to 60 days, and now that's moving to more like 90 to 120 days, really a more normal market," said Carol Mineau, an agent at Santa Barbara's Pitts and Bachman Realtors, which is handling the sale of a one-bedroom home four blocks from the beach in Santa Monica. The owner just chopped $50,000 off his original $599,000 asking price after 30 days on the market.
Kirk Psenner, an agent with Sotheby's International Realty who sells homes in the Hollywood Hills and adjacent neighborhoods, can see the difference as well. He said that a two-bedroom hillside home in Silver Lake he's had listed at $699,000 for more than three weeks would have received multiple bids in July in its first week on the market. "It's starting to become a buyers market again," Psenner said. "There's no longer this panic-crazy buying."
While the monthly home data suggests that while the housing boom is running out of steam in certain neighborhoods the median price in Westwood was down 1 percent and Pacific Palisades was off 5 percent from a year ago other areas are continuing to see double-digit appreciation.
Rancho Palos Verdes, with the cheapest real estate on the pricey Palos Verdes Peninsula, saw prices rise 66 percent, while San Pedro was up 22 percent and Carson 19 percent.
"A lot of times these guys (sellers) still believe we're in a top rising market, but when they don't get any offers after 30 days they start lowering prices," said Dave Velazquez, a broker at HelpUSell Harbor Homes, which services San Pedro and nearby communities.
Housing experts were making similar observations at the Milken Institute's State of the State conference last week, concluding that California home prices would first flatten and then drop by 1 percent to 15 percent over the next two years. "Prices in California are overvalued by at least 10 percent," said economist Mark Zandi of Economy.com.
Angelo Mozilo, chairman and chief executive of Calabasas-based Countrywide Financial Corp., one of the largest mortgage lenders in the nation, said the reversal would actually benefit the housing industry.
"Too many people are being priced out of the market. We would like to see some leveling off so that people's income levels have a chance to catch up," Mozilo said.
The realtors' association most recent housing affordability study concluded that in Southern California, a family with a median household income of $52,580 would be $74,240 short of the income needed to qualify for a conventional loan to purchase a $541,110 house the association's median for the third quarter.
But panelists at the conference said underlying economic fundamentals, including rising incomes and steady job creation, are still too strong for a market collapse.
Delores Conway, director of the Casden Real Estate Economics Forecast at the USC Lusk Center for Real Estate, sees a soft landing for the market. "It's not at all going to be like the early 1990s," said Conway, who disagrees with economists at the UCLA Anderson Forecast, who have repeatedly warned of a housing bubble deflating by double digits in some areas.
Staff reporter Howard Fine contributed to this story.
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