After shedding several months' worth of appreciation in January, the median home price in Los Angeles County in February bounced back to December's level.

However, the number of homes sold in February fell off sharply from a year ago, portending a likely downturn in prices.

"We'll be in a rocky road now for the next year or two," said Jeff Lazerson, president of Laguna Niguel-based Portfolio Mortgage Corp., which shops lenders for prospective homebuyers in a five-county area that includes Los Angeles. "God help anyone who bought zero-percent down in the last 12 months, unless they don't need to sell for a while."

The median price for an existing home in the county rose to $525,000 about 20 percent higher than a year ago and $6,000 more than January's $519,000 median price, according to data provided to the Business Journal by HomeData Corp.

HomeData, a Mellville, N.Y. firm that tracks county recorder's office data nationwide, counted just 5,309 homes sold last month in the county, down 20 percent from the same month last year. Long Beach and the San Fernando and San Gabriel valleys were among the areas where the drop-off was most acute.

In Long Beach, sales volume was down 26 percent from a year ago. But the year-over-year median price in all but two of the city's 11 zip codes was up more than 19 percent.

Both economists and industry veterans say the disparity between sales volume and price is likely to show up several more times this year as the region eases off several years of red hot appreciation.

On one end, higher mortgage interest rates, tighter financing requirements and an increasing number of homes remaining longer on the market are encouraging buyers to be more selective and cost-conscious, while also reducing the pool of qualified buyers. The California Association of Realtors' most recent Unsold Inventory Index which measures the time it would take to sell all of the houses on the market jumped to 6.2 months in January, compared to 2.8 months a year earlier. The median number of days a home is staying on the market increased from 38 to 42.

Working against any slump in prices this year is the continued demand for homes by the region's still-growing population, coupled with stubbornness by sellers unwilling to accept the boom may be over.

"Prices lag volume. There's no mystery here," said Chris Thornberg, a UCLA Anderson Forecast senior economist who has been predicting a deflation in the region's real estate market for more than a year. "Usually when volume starts collapsing, then six to nine months later you have prices slowing down. If there's anything people are willing to fool themselves about, it's the price of their home."

Stepping back
Also contributing to lower sales volume has been decreasing enthusiasm among investors, who during the height of the boom were able to flip properties for a profit quickly with just modest renovation.

"Investors have been buying for the last five years or so on appreciation, not cash flow," Lazerson notes. "Now that the appreciation is going away, there's no appetite for most investors to buy into a non-appreciating asset that likely will have negative cash flow."

Paul Krause is a Redondo Beach real estate investor who specializes in buying houses that have been on the market for more than 90 days and have fallen in asking price. He said he's seen increasing interest from sellers but many are still unwilling to lower their price expectations.

"I'm swamped with leads from people who want to sell, but 75 to 80 percent of them are still hopeful," Krause said. "I looked at a property the other day owned by a couple now living out of state and that house has been the market 321 days, but is still priced $30,000 over the market. Now that's tenacity."

Thomas Gabor, an agent with Coldwell Banker Studio City, said he makes his life a lot easier by not representing properties he considers overpriced, a philosophy that's working to his favor in the current market. Gabor considers three of his listings for three- to five- bedroom homes, priced around $1.5 million in the Studio City's tony Donas neighborhood, among the most realistically priced properties in the city. Studio City's February median price was $890,000.

"But even these homes aren't flying off the market, so that's got to tell you something," he said. "But they'll sell quicker than some others out there."

The highest median home price in the county, according to HomeData, was in Malibu. The median price on nine homes sold there in January jumped 135 percent to $2.77 million from a year ago, when 18 sold. The median price for four homes sold in Bel Air was $2.7 million also half the number that sold a year ago.

In communities where prices were closest to the county median, Canyon Country's 91351 ZIP code hit $522,000, a nearly 15 percent increase, but on 39 percent fewer sales than a year ago. In three Covina ZIP codes, the median ranged from $455,000 to $530,000, representing more than 15 percent appreciation, but sales volume was down 33 to 50 percent.

The most affordable communities in L.A. County continue to be in the Antelope Valley, where the February median in Lancaster's 93535 ZIP code hit $310,000, up 25 percent from a year ago. Home sales there were down 14 percent last month to 108 units. Prices in Los Angeles urban neighborhoods were slightly higher, with 19 homes in Compton's 90222 ZIP code selling for a median of $356,000, with appreciation up 28 percent but volume down 50 percent.

There were several exceptions to the trend. South L.A.'s 90061 ZIP code saw its median rise by 32 percent to $395,000, on sales volume that was 29 percent higher than a year ago. And in Beverly Hills' upscale 90210 ZIP code, where the median price hit $1.9 million, sales volume was up 40 percent, with appreciation hitting more modest 9.8 percent.

Patrick Duffy of Hanley Wood Market Intelligence cautions against making too many generalizations about where the Los Angeles County housing market is heading. That's because it's comprised of so many distinctive submarkets, he said.

"You've got places like West Hollywood that came to the party early and may be starting to slow earlier than markets like Compton," said Duffy, managing director of consulting for the Costa Mesa-based housing industry specialist.

For example: February sales volume in three West Hollywood ZIP codes was down 46 percent from a year ago, according to HomeData, compared to a 25 percent slowdown throughout Compton.

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