The median price of a home in Los Angeles County bounced back in July matching a record $585,000 even as the widening mortgage crisis makes it harder to close sales at the lower and middle ends of the market.
The median rose $10,000, a 6 percent increase over last July and hitting the record set in May. That came after the median had fallen an equivalent $10,000 in June, according to data supplied to the Business Journal from HomeData Corp., a Melville, N.Y. housing data firm.
Sales volume also picked up slightly in line with the usual summer home-buying season. HomeData counted 5,458 sales, an 18 percent jump from June, though down 11 percent from a year ago. In addition, the median price for a condo rose to an all-time high of $450,000, with sales volume up both from June and a year ago.
Once again, housing experts attributed the rise in prices to a relatively greater number of more expensive homes and condos selling, even as less expensive units failed to move.
"The market has become bifurcated," said Delores Conway, director of the Casden Forecast at the USC Lusk Center for Real Estate. "People at the low end are having trouble qualifying for loans. At the high end, well, they just have the money to buy what they want."
However, even in more expensive markets the rapidly widening credit crisis was threatening future home sales; interest rates rose in August on jumbo loans over $500,000 even for borrowers with the best credit.
Two sub-markets in July illustrated the bifurcated market: Santa Monica, where the median in each of its five ZIP codes exceeds $2 million, and Palmdale, where one ZIP code had the county's lowest median at $245,000.
Volume in Santa Monica was off 43 percent from a year ago with just 20 sales, but at least three of the neighborhoods showed strong gains. And prices themselves appreciated, with the median gaining at least 16 percent.
Conversely, in the five ZIP codes of Palmdale, where existing homeowners are competing with homebuilders willing to slash prices, both the volume and the median plummeted. Sales volume was down by 50 percent in the Mojave Desert community to 227 units, with median prices off in all but one ZIP code by 7 percent to 12 percent.
Similar trends were seen in pricey Beverly Hills and affordable West Adams in South L.A., but trends in areas with mid-priced homes were mixed. In Chatsworth, sales rose 18 percent but the median dropped 11 percent to $615,000. In the 9008 ZIP code of the Los Angeles community of Baldwin Hills, the median rose 12 percent to $795,000 as volume dropped 32 percent. But in Baldwin Hills' more affluent 90056 ZIP code the median dropped below the $1 million mark on unchanged volume.
And some desirable seashore and hillside communities continued to defy trends. Hermosa Beach's sale volume more than doubled with the median price rising more than 21 percent to $1.4 million. In West Hollywood, sales volume rose 48 percent, with the median rising 29 percent in two of its three ZIP codes. In the 90069 ZIP code, the median hit $1.4 million.
Sales of multimillion-dollar homes have continued to be brisk, propping up the median as the declines of the sub-prime and Alt-A loan sectors the latter featuring borrowers with credit below prime but better than sub-prime have made it harder for moderate income families to find and even retain their financing.
However, Conway noted that the jumbo rate on a variable rate loan over $500,000 jumped earlier this month from a high of 6 percent to at least 8 percent at some lenders. That will impact many potential buyers in this market.
"You just don't see an increase like that in a week," she said. "It reflects all the uncertainty out there about whether the sub-prime situation will turn into a contagion spreading to the rest of the market."
Los Angeles-based housing market expert Patrick Duffy of Metro Intelligence said the jumbo loan phenomenon is a side effect of Wall Street's current skittishness about investing in mortgage-backed securities. "Jumbos are going to be hard to come by because they're now harder to sell on the secondary market," he said.
Steven Thomas, president of one of ReMax Real Estate Services largest Southern California regions, said lenders are increasingly inflexible on loan terms. If escrow fails to close by deadline, even for administrative reasons, lenders are unwilling to extend the interest rate lock on a mortgage.
That's forcing many buyers to re-qualify under a different program generally at a higher rate often leading deals to fall out of escrow. "It's definite adding anxiety for the borrower, and sellers too," he said.
Thomas also noted that sellers of lower- and mid-price homes are competing with a growing number of foreclosed, bank-owned properties. According to multiple listing service data, 50 percent of all bank-owned homes are currently listed under $500,000, and 95 percent are under $750,000.
Despite rising foreclosures, Thomas expects inventories will start to decline as sellers who can afford to wait get frustrated and simply pull their homes off the market.
"I think it will take until the first quarter of 2008 for that bank-owned and similar inventory to work itself out of the market," he said. "We have this strong economy in the background, but it's this mortgage market that everyone is concerned about. It's a big giant 'what if' for both buyers and sellers."
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