The median value of an existing Los Angeles County home sold in March rose $10,000 compared to a year ago, but some experts are casting doubt on whether the median reflects the true state of the market amid consistently falling sales.
The median price rose nearly 5 percent to $560,000, as volume fell 23 percent to 5,286 units sold, according to HomeData Corp., a Mellville, N.Y.-based company that tracks housing data nationwide.
The sharp drop in sales is similar to numbers posted every month since April 2006. What's more, the median has been in the $550,000 range plus or minus $10,000 for 11 months.
However, because Los Angeles has only a small stock of new homes, which have been declining sharply in sales price, it's difficult to get an idea of the depth of the problem. If those new home sales are a good indication, then a steep drop is in store. If they are an aberration, then things could land more softly.
Ryan Ratcliff, an economist at the University of California Los Angeles' Anderson Forecast, said that in today's economy, private sellers approach sales very differently from large builders who are far more willing to cut prices.
"An owner is not under any economic pressure to make a sale in a good economy," he said. "If they don't think they will get what their current house is worth they will stay a little longer so that is a market where volume plummets and prices are flat. A builder has Wall Street breathing down his neck and if he is going to sell he needs to cut prices to do it."
Los Angeles-based KB Home, the nation's fifth largest home builder, which is constructing homes in the county, has had to cut earning forecasts and its stock is now trading under $45 a share, about $20 off its peak of a year ago.
Even KB Chief Executive Jeff Mezger acknowledges that a turnaround is not in the cards for some time for builders, though he maintains it is coming. He said the homebuilder in the meantime may sell homes with fewer amenities and at cheaper prices.
"We will lower our price to the market and we may lower our spec levels," Mezger said. "I think it will be tough for a while before it gets better. But I think it gets better because of continued job growth."
Meanwhile, Ratcliff does not expect the existing homes sales data to change anytime soon, saying job growth makes it unlikely many sellers will feel forced to come down in price, despite a shrinking pool of qualified buyers as lenders tighten credit criteria in response to rising defaults in the subprime lending sector.
"If it takes out the bottom 10 percent there are still homebuyers," Mezger said.
Ratcliff said that a $10,000 gain in the county's median price is negligible because "in a normal environment" home prices go up. However, he expects at best a 5 percent price gain this year, and perhaps a flattening of prices.
"The resale market is like the junior high dance. Everyone is staring lovingly at each other at the dance but very few people meet in the middle to dance," Ratcliff said.
Ken Marker, director of new homes and estates for Coldwell Banker in Studio City, says that while prices have fluctuated in the past two years, his office's sales volume has stayed relatively consistent.
Marker specializes in selling new homes in the San Fernando Valley. Perhaps because of the shrinking number of subprime buyers, higher-end new homes are selling best, though not as well as a few years ago.
"I see a shortage in good new homes over the $2 million price range," Marker said. "The builders have no problem selling them but they aren't building as many as they were a few years ago."
Currently, Marker has about 50 listings for new homes and condos in the San Fernando Valley area. Still, in some areas, especially high-end enclaves, sales have slowed dramatically.
In the Beverly Hills 90210 ZIP code, sales were down 57 percent, but the six homes averaged $3.9 million in price, about double the prices of a year ago though hardly a representative sample. And in the Malibu 90265 ZIP code, sales were down 31 percent to 11 homes sold with the median price increasing 10 percent to $2.1 million.
The sales slowdown has also been seen in the time it would take to sell all the homes currently on the market. The California Association of Realtors reports that in February the figure was up to 10.2 months, from 10 months in January.
The figure was just 7.2 months in February 2006. Experts say a healthy market in equilibrium generally has about a seven-month supply of homes. Also, as of February, homes were sitting on the market an average of 81 days before they sold, compared to 42 days a year earlier.
It was a mixed bag for moderately-priced communities at or near the county median. For example, in the 90807 Long Beach ZIP code, sales were up 15 percent to 20 homes sold while the median price was down 13 percent to $554,000. And in the 91754 Monterey Park ZIP code, sales were up 75 percent to 21 homes sold with the median price up 5.8 percent to $563,000.
Parts of the San Fernando Valley experienced declining sales and increasing median prices. In the 91202 Glendale ZIP code, sales were down 14 percent to 12 homes sold with the median price up 2.4 percent to $818,000. Meanwhile, in the 91501 Burbank ZIP code, sales were down 31 percent to nine homes sold and the median price was up 5 percent to $840,000.
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