Even as Los Angeles County's median home price continued to break records in May, the number of homes sold often a leading indicator of a looming market correction continued to drop.
The $550,000 countywide median price for existing homes in May was 16 percent higher than a year earlier and 1 percent higher than the previous month, according to data provided to the Business Journal by HomeData Corp., a Mellville, N.Y. company that tracks housing prices nationwide.
Even so, clouds are on the horizon.
There were 8,949 homes sold last month, 17 percent fewer than a year ago. And the 35,558 homes sold to date this year is off 15 percent from the first five months of 2005.
The drop in sales volume has contributed to an accumulating inventory of available homes which are staying on the market longer. The California Association of Realtors estimates that as of April, homes in L.A. County were staying on the market a median 35 days, compared to 25 days a year ago. There was 5.6 months of inventory in the overall Los Angeles market in April, compared to just two months' worth a year ago.
Six months worth of inventory is generally considered a balanced market for both buyers and sellers. A hot topic among real estate professionals at a statewide CAR meeting in Sacramento last week centered on the challenges of convincing sellers to lower their expectations.
"We've transitioned to a slower market," said Leslie Appleton-Young, the association's chief economist. "But you've got a situation where sellers are still tied to prices that would have been appropriate a year ago, when inventory was significantly lower."
May sales volume was up 25 percent from April as the market gears up for summer, typically the biggest sales months.
"Once we have the full second quarter numbers in, we'll have a better idea of how we're doing, going into the peak selling season," said Patrick Duffy, managing director of consulting for Costa-Mesa-based Hanley Wood Market Intelligence. "But we're coming off what historically were very high numbers, which were fueled by low interest rates. It was going to be hard to maintain that."
The drop off in sales is even being seen in the affordable Antelope Valley's Lancaster, whose three ZIP codes have accounted for 5 percent of the county's total sales volume. In May, sales were off 10 percent from a year ago, though the median price continued to appreciate by double digits, up 21 percent in the 93534 and 93535 ZIP codes and by 17 percent in the 93536 ZIP, which had the highest median price in that city at $380,000.
While the Antelope Valley has a growing job base, it also is an affordable haven for commuters. Peggy Mueller, president of the Santa Clarita Valley Division of the Southland Regional Association of Realtors, said months of record-high gasoline prices may be starting to take its toll.
"In the Santa Clarita Valley and the San Fernando Valley you have transit into the city, but if you live in the Antelope Valley, you've got to drive your car," Mueller said.
Rising interest rates also have contributed to the slowing market. "If you make $3,000 a month, you can still only afford maybe a $1,000 a month for your house, or you either have to buy less house, try to negotiate a lower price, or wait," Mueller said.
While the sales volume so far this year has been well off the record pace of the last several years, the region's still-robust economy is continuing to fuel demand for housing and prop up pricing, particularly at the highest and lowest ends of the market.
Often the county's priciest neighborhood in a given month, Santa Monica's 90402 ZIP code, north of Montana Avenue, saw its May median of $2.3 million from eight sales eclipsed by Windsor Square, where the median of five homes sold hit $3.2 million.
Among a record 14 communities recording median prices above $1.5 million were Beverly Hills' 90212 and 90210 ZIP codes at $2.08 million and $1.81 million, respectively; Malibu at $1.89 million; Brentwood at $1.84 million; Pacific Palisades at $1.77 million, Manhattan Beach at $1.76 million; Westwood at $1.65 million; and Calabasas at $1.64 million. Sales volume in all these areas was off year-ago levels.
Aside from the rural and suburban north end of the county, only a handful of communities remain where the median price is still below $400,000, including Compton, where the median ranges from 390,000 to $400,000 in its three ZIP codes; Watts at $390,000; and Willowbrook at $375,000. Sales volume in these areas in most cases was only slightly lower last month.
"The low end and the high end of the market are still doing okay, it's the great middle that's being most impacted," Duffy said. "It's more a consumer sentiment and affordability issue, than it is a market demand issue. There's still plenty of demand for housing the question is at what price."
What defines a middle market, of course, is always relative. For Jeff Hyland, president of Hilton & Hyland, whose territory includes the exclusive Westside communities of Beverly Hills, Bel Air, Brentwood and Malibu, it's the homes below $5 million that are struggling for attention. He noted that another brokerage sold a Beverly Hills home the same day it went on the market on June 2 for its $23.5 million asking price.
"We've had more homes above $10 million sell so far this year than ever on record," Hyland said. "There's so much demand and so little supply. There are all these big people who have made so much money, and this is where they want to be. And no one wants to sell because there's nowhere else to go here. Above a certain price, the market creates its own cyclone."
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