Los Angeles County home values shed nearly six months worth of appreciation in January as the market continued a slide that shows no sign of ending soon.
The median price of an existing single-family home in L.A. County fell to $519,000 in January, a $6,000 decline from the month earlier and the lowest median price since July, according to HomeData Corp. a Melville, N.Y.-based company that tracks housing data.
While the January median price is 17 percent higher than it had been one year earlier, it’s also the narrowest year-over-year increase in L.A. County home values since May.
Real estate agents said the retreat in home sales and pricing is being sparked by everything from higher mortgage interest rates to buyers being more selective as the available stock rises.
“What’s backing up right now are the homes that would have been snapped up before for just having the right zip code,” said Michael J. Collins, general manager of the Manhattan Beach office of Shorewood Realtors. “Buyers are being more choosy, and a lot of times they can wait to see what comes out next week.”
Homes on high-traffic streets, those located on odd-shaped lots or that have unflattering additions are being passed over while nicer homes on quiet streets that are reasonably priced are still getting snapped up quickly. “Those are still getting multiple offers,” Collins said.
The January figures also point to a Los Angeles housing market that is steadily cooling off after nearly three years of red-hot appreciation that has more than doubled the value of many L.A. County homes.
While year-over-year appreciation levels continue to be well above normal historical rates of between 5 to 7 percent, January is the sixth straight month of declining or stagnant median home prices for L.A. County.
However, concerns that L.A.’s housing market could go into a free fall, leaving some homeowners owing more than their properties are worth, aren’t likely, according to Leslie Appleton-Young, the senior economist for the California Association of Realtors.
“We are definitely transitioning to a lower number of transactions and lower pricing,” she said. “We’re calling it a soft landing and we’ve been seeing evidence of it now for several months.”
Mixed bag
For several months, the year-over-year appreciation rates in other Southern California counties have slid to single-digit rates.
However, homes in L.A. County have continued to appreciate more rapidly because of a less volatile economy and a greater range of prices, Appleton-Young said.
“There’s a tremendous amount of diversity in terms of housing stock in L.A.,” she said. “The most rapidly appreciating areas tend to be those in the most affordable areas.”
That trend continued into January, where on average, homes in high-priced communities saw lower gains than homes in more moderately priced neighborhoods.
For example, even though more pricey homes in Calabasas’ 91302 ZIP code were sold in January than a year earlier, the median price fell 19 percent to $1.1 million. Meanwhile, in working-class San Pedro’s 90732 ZIP code, about the same number of homes sold in January as a year ago, yet the median price rose 53 percent to a not-so-blue-collar price of $708,000.
Still, there were several exceptions to the trend. For example, Santa Monica’s 90402 beat the odds. The tony ZIP code’s median price rose 60 percent to $2.2 million the second largest jump in L.A. County during January.
The highest priced homes in L.A. County during January belonged to Windsor Square’s 90020 ZIP code, where the median cost of a home reached $2.07 million. Beverly Hills’ 90210 followed with a median price of $2.04 million, which was trailed only slightly by Malibu’s 90265 with a median price of $2.02 million.
The most affordable communities in L.A. County during January were in the high desert communities of the Antelope Valley. Llano’s 93544 ZIP code fetched a median price of just $200,000. That’s followed by Palmdale’s 93591 where the median price is $268,000 and Lancaster’s 93534 where the median price is $290,000.
“In Southern California, the new supply of homes is pretty far away from the jobs,” Appleton-Young said. “Housing is tight, location is key and because of that we’ll start to see gentrification of neighborhoods closer to downtown, as one example.”
New trend
Still, L.A.’s housing market like those regionally and nationally faces some big tests in the upcoming year. Mortgage interest rates rose for the third consecutive month in January, putting housing further out of reach for most L.A. County families.
Only 12 percent of families in L.A. County had the income to qualify for a conventional mortgage to buy the median-priced home in December, the most recent month the figure is available, according to the Realtors association.
Similarly, as home appreciation continues to flatten, lenders are becoming more conservative about making hybrid loans such as interest-only mortgages that a majority of homebuyers have turned to in recent years.
Higher interest rates and more conservative lending could combine to put a crimp on L.A. County home sales. “We don’t think we’ll see a real sharp fall,” said Appleton-Young, “but this could be only the beginning of an extended trend.”
Mitch Ohlbaum, president of L.A.-based Legend Mortgage Corp, agreed, saying the shifts in the market will be subtle, but are having an impact on the market that could continue for the remainder of the quarter.
Ohlbaum said escrow agents are privately telling him that business is slowing, meaning a lower number of transactions could be looming over the next two months.
“We’re at the beginning of what appears to be a trend,” he said. “We’re seeing less purchase business and more people trying to refinance adjustable rate mortgages before they run out of time.”
Ohlbaum said his borrowers are in a completely different mindset than those borrowers from even six months ago. He said buyers on the market now are pushing prices down; not over-bidding.
“People now ask themselves how much under the asking they are going to bid. They no longer ask themselves how much over they’ll have to pay,” he said.
