Home sales in Los Angeles County plummeted last month to their lowest level since the real estate market began tanking, but the price slide halted at least temporarily as cautious sellers waited for a turnaround.
Only 2,680 homes were sold in November, around half the number of a year ago and 18 percent fewer than in October, according to data provided to the Business Journal by Melville, N.Y.-based HomeData Corp.
The median price, however, remained at $525,000, down 4.5 percent from a year ago but unchanged since October the first month that the median price fell on a year-over-year basis since the housing market slowed.
"I think you've got a lot of people who are stubborn and waiting for the market to return. They're not willing to sell until they get the price they want," said Patrick Duffy, an L.A.-based real estate industry analyst who recently launched his own firm, MetroIntelligence.
The drop in volume is stark. Not only was November's volume about half that of a year ago, but it represents only little more than a quarter of November 2005 sales when 9,675 homes changed hands. At that time the median price also was $525,000 indicating that despite the will of sellers the median sales price is likely on its way down.
However, analysts and real estates agents are in disagreement about how far the median price may fall as sales decline. The drop largely has been the result of the credit crunch that began this past summer when rising defaults caused the failures of subprime mortgage companies and spooked the entire industry.
Syd Leibovitch, president of Rodeo Realty, a Beverly Hills-based real estate brokerage, said he wouldn't be surprised to see prices drop more, but only for the next three months.
"But then I'm an optimist, because I see the market leveling off by February; that's when things usually start picking up after the holidays," said Leibovitch. "You've already got some people thinking that it's already hit bottom. You're going to see more sales in December than in November, which is pretty unusual."
However, economist Chris Thornberg, who as an economist with the UCLA Anderson Forecast had been warning about a housing bubble years before prices peaked, believes the market still hasn't corrected itself enough.
He said there's been too much focus on upcoming resets in subprime mortgage as low teaser rates are replaced by higher permanent rates when the real problem is that homeowners at all ends of the market can't afford their mortgages.
At the peak of the last home price bubble in the late 1980s, a median income homeowner in the region earned about 20 percent less than they needed to in order to comfortably afford a median-priced home. At today's prices, a median income homeowner is stretched even thinner, earning 40 percent less.
"2008 is going to be worse than 2007 because prices are still way too high relative to income," said Thornberg, now the L.A.-based partner at Beacon Economics. "Forget all the nonsense about 'Not at this price point. Not in this neighborhood.' You've got a wave of foreclosures that's causing a meltdown in the Inland Empire and that's eventually going to start to spill over here."
Even so, certain sub-markets in the county are clearly doing better than others.
Higher priced homes in Beverly Hills' iconic 90210 ZIP code were certainly getting more attention. The median price for the three homes that sold in November hit $3.6 million, up 82 percent from the two homes that sold in the same month a year ago. In Glendale's 91208 ZIP code, sales dived from 15 a year ago to only four, but those sales had a median price of $914,000, up 20 percent.
Real estate agent Mike Collins, whose Shorewood Realtors focuses on the South Bay's desirable beach communities, said sales are being propped up by buyers with ready cash. "We're seeing a greater percentage of sales from the people who can just write a check for more than a million dollars," he said.
For example, the nine homes in Hermosa Beach's 90254 ZIP code that sold in November had a median price of $1.35 million, up 26 percent from a year ago.
But in the 90006 ZIP code of Laurel Canyon, sales volume declined 29 percent to 17 sales, with the median falling below the $1 million mark to $820,000, a 26 percent drop. The La Canada Flintridge ZIP code of 91011 also fell below $1 million median, with sales volume off 65 percent and the median falling 26 percent to $950,000.
One damper on asking prices is the increasing number of foreclosed homes that banks are now putting back on the market often at a large discount to their last selling price. Notices of default in the third quarter in California were up 166 percent to 72,571 from the same period a year ago, and were at the highest level since 1996, according to DataQuick Information Systems in La Jolla.
Bruce Gold, a Prudential California specialist in selling so-called real estate-owned homes those owned by lenders that took them back in foreclosures said he's spending around three quarters of his time these days valuing and marketing such properties rather than dealing with conventional listings.
Gold has one property listed in Lake Encino for $1.25 million that 14 months ago sold for $1.825 million.
"There's got to be something fundamentally wrong when a property goes into foreclosure less than a year after the loan was made," said Gold. "The loan underwriting process really suffered in the last few years."
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