The June median home price in Los Angeles County slipped back from its record high in May as sellers of mid-priced homes appear to have grown tired of waiting for a turnaround and are more willing to lower their asking prices.
The median price figure dipped in June to $575,000 from the prior month's $585,000, though that's still 3 percent higher than the $555,000 mark of June 2006, according to data supplied to the Business Journal from HomeData Corp., a Melville, N.Y.-based housing data firm. The drop in June put an end to three consecutive months of rising home prices.
Meanwhile, the number of new and existing homes sold has continued to plummet. In June, 4,614 homes sold, the second lowest total in three-and-a-half years and 34 percent below June 2006 levels. Only the short month of February saw fewer home sales.
The slowdown is beginning to hit mid-priced homes, priced at or slightly above the median, where sellers have been waiting in vain for months for a recovery in the market and are lowering asking prices.
"They had held out for about a year or so, but enough people have needed to sell and decided they could wait no longer, so they're lowering their prices," said Robert Kleinhenz, deputy chief economist with the California Association of Realtors.
The only reason the median price hasn't dropped further is because sales of multimillion-dollar homes have continued to be brisk. That has offset sluggish activity at the market's low end, where fallout from the collapse of the subprime loan sector has taken its toll.
"There's more inventory on the market now, especially in the under $500,000 range," said Delores Conway, director of the Casden Forecast at the USC Lusk Center for Real Estate. "Tougher lending standards are being applied and fewer people appear to be qualifying now."
Kleinhenz said the unsold inventory index in May hit 13.1 months, up from 12 months in April and six months in May of 2006. By comparison, at the height of the boom in 2004, inventories hit a low of 1.5 months.
The price cuts are being played out on the ground in the San Fernando Valley, especially in communities such as Burbank, which has seen home prices dip by about 4 percent in two of that city's three ZIP codes.
"We're seeing a lot of price reductions, especially in the last two or three weeks," said Bill Toth, who owns a Windermere Real Estate franchise in Burbank. "I've had 10 new listings compared with a dozen with price reductions."
The price reductions have so far been small in the 5 to 7 percent range by one account compared with fire sale prices at the bottom of the last real estate slowdown in 1993-94.
"I have a client who bought a home in Burbank more than two years ago for $650,000, put it on the market earlier this year for $819,000, dropped it to $799,000 and sold it last week for $785,000," Toth said. "This is typical of what's happened in the last month or so."
To some extent, the moderate price reductions are a return to the norm, where sellers tend to ask high prices and then are forced to come down as the market dictates and buyers bargain. But during the real estate boom, sellers were used to getting what they asked and more on the spot.
Among the hardest hit communities are in the Antelope Valley. In Palmdale and Lancaster, home sales have tumbled more than 50 percent from year-ago levels and home prices have dropped around 10 percent.
"With gas hitting $3.50 a gallon this spring, people just aren't buying homes when they know they'll put on nearly 150 miles commuting each day," Conway said.
Not all sellers in this range are lowering their prices. Many are opting instead to keep the asking price, but are now being forced to spend on sprucing up their places.
"You can't throw a house on the market now and expect to sell it as is," said Harvey Mark, a Realtor with Coldwell Banker Residential Brokerage in Long Beach, where home prices have declined or been flat in all but two of the city's 11 ZIP codes.
Mark's clients are now being forced to repaint, do carpentry repair work and fix up gardens before they can attract buyers. "You have to put $10,000 into it now just to sell at the same price," he said.
From the seller's perspective, that's tantamount to a $10,000 price drop, even if it doesn't reflect in the final selling price that's picked up by tracking companies like HomeData.
Sales of new and existing condominium units also fell in June to 1,307 units, down 19 percent from May and 29 percent from June 2006. The median price was unchanged in June from May at $440,000, though that's up 4 percent from June 2006.
"The condo market appears to have peaked out and softened about a year earlier than the detached home market," said Robert Kleinhenz, deputy chief economist with the California Association of Realtors. "Now, because condos are generally for entry level homebuyers, sales are being hit hard by the credit tightening we're seeing at the lower end."
It's quite a different story at the upper end of the market, with homes priced above $1 million. In this segment, buyers are flush with cash as L.A. has become a global destination for people with wealth looking to live in some of the few highly desirable locales in the county, like Bel Air, Beverly Hills or Malibu.
"The activity at the high end has never been better. There has been a tremendous influx of people with money coming into L.A. and there's a very limited supply of homes for people willing to spend $3 million or more," said Stephen Shapiro, a principal with Westside Estate Agency, which caters to this high-end market.
As an example of just how active the high-end market is, Betty Graham, president of the Los Angeles division of Coldwell Banker Residential Brokerage, said one of her agents had a home listed in Brentwood for $4.9 million. It sold in two days for $4.7 million.
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