For the first time since the long national housing slide began, the median price of a house that sold in Los Angeles County was lower than the same month a year before, according to new figures on home sales in October. The number of homes that changed hands plunged as well.
The median price dropped to $525,000, a 3.7 percent fall from October 2006 when it was $545,000 and 9.5 percent off this September's $580,000, according to data provided to the Business Journal by Melville, N.Y.-based HomeData Corp.
Until last month, the cost of a median home had remained persistently high in the county even as the number of home sales fell by a third or more. The relative strength of the upper end of the housing market held up the price.
But with only 3,269 homes changing hands last month a 57 percent plummet from a year earlier the median price declined to a level not seen since February 2006. The largest previous home sales decline since the housing market lost its steam was in September, when sales were off 47 percent.
The decline is being attributed by real estate brokers and economists to the broadening effect of the credit crunch, which is now forcing owners of high-end homes to reduce prices. What's more, many don't expect the market to pick up until next year or even 2009.
"It is a very tenuous market and over the next few months I expect more price declines," said Mark Cohen, who heads the Beverly Hills-based mortgage bank and brokerage Cohen Financial Group. "I hope I'm wrong, but that's the way I'd bet. A couple of deals fell out of escrow today. It's no fun."
In past months, some of the biggest falls in sales and prices had been limited to lower- to mid-priced neighborhoods. But in October the decline in the county median reflected a broad drop in sales from the San Gabriel Valley to Malibu.
(The Los Angeles Times data service reported a median price decline throughout Southern California for September. However, the price for L.A. County did not show a decline.)
In upper-middle-class Agoura Hills, the 91301 ZIP code had a year-over-year price decline of 13 percent to $600,000. In the City of Commerce 90040 ZIP code, one of the county's most inexpensive, the median fell 14 percent to $389,000. Even in tony Malibu, the 90265 ZIP code saw a 31 percent price drop to $1.23 million.
Though the fall and winter are not peak home-buying seasons, experts said the price and volume declines are well beyond the normal range.
"What is going on now is you are going to see drops that far exceed what we expect seasonally," said Leslie Appleton-Young, chief economist for the California Association of Realtors.
Making a sale
Stan Richman, manager and vice president of the Beverly Hills north office of Coldwell Banker Residential Brokerage, has been witnessing the decline in housing prices at the upper end of the market. The office has listings from Hancock Park to Malibu.
In early November, Richman's office sold a home in the Beverly Hills area for $5.85 million, but that was only after reducing the asking price to $5.9 million from $6.5 million in late October. The home was first put on the market six weeks ago.
"When it was reduced we had multiple offers," Richman said. "If we can get a 10 or 15 percent reduction on the asking price, for a lot of homes there are buyers out there."
Richman said that nearly every day he speaks to sellers who aren't seeing interest from prospective buyers. In those cases, he often advises a reduction in asking price. "We want something to tell the marketplace that we have a real seller."
Still, sales have slowed so much that it would take nearly 19 months to deplete the supply at the current rate of sales, according to the state Association of Realtors. That figure is far higher than the 7.8-month supply of a year ago. A six-month supply is generally considered to be a market in equilibrium.
The 19-month supply also tops the 15-month figure common during the height of the last big residential downturn in 1993, according to Appleton-Young.
A big reason why sales have slowed continues to be a lack of readily available credit as mortgage lenders keep a tight rein on financing after the collapse of the subprime lending market earlier this year.
Bill Toth, owner of a Windermere Real Estate franchise in Burbank, recounted the recent sale by his office of a home in the flatlands Magnolia Park neighborhood of Burbank.
In August, the three-bedroom, two-bathroom home fell out of escrow at $782,000 after two months. The prospective buyers, a couple, were forced to breach the contract because the buyer of their old home in North Hollywood couldn't get a loan to make that purchase.
The Magnolia Park home was put back on the market at a reduced price and recently went into escrow again, this time at $702,500 for a 10 percent price decrease. "The market just stopped is what it did," said Toth, who estimates the home would have sold for $820,000 a year ago.
The 91505 Burbank ZIP code, which includes Magnolia Park, saw an overall 4.7 percent fall in its median price to $589,000. Sales volume was down 46 percent with only 15 homes sold.
With the housing bust hitting different parts of the country at different times and with varying levels of severity, the biggest question locally is: How far does the Los Angeles County market have to go before it bottoms out?
Ryan Ratcliff, an economist at the University of California, Los Angeles' Anderson Forecast, said that the correction for the county market could mirror San Diego County's, which was once even hotter than L.A.'s.
Price declines began in San Diego County at the beginning of 2006 and didn't level out until this year.
"What I expect to see in L.A. home prices for at least the next two years is sideways movement, a month up and month down," Ratcliff said. "It's hard in the current market to see any sort of price appreciation, but I don't think L.A. has the fundamentals to see the same sort of declines other parts of the state have seen."
Cohen said he wouldn't be surprised if the median price dropped another 5 percent to 10 percent because of "inventory buildup and credit getting tougher to obtain for people." But he added that the market could surge in January.
"Once all of this nonsense is out of the way after the first of the year and there is some traction in the market you will see a decent recovery," he said.
Toth said his office, which has Burbank, Toluca Lake and North Hollywood listings, actually had a pretty good month in October, but his agents had to work harder to make sales. Toth's 42 agents sold 16 homes last month. That compares favorably with the "seven or eight homes" his office sold in some of the summer months when mortgage lenders first put the breaks on loans.
"Our office has an excellent attitude. You just have to do three times the work," Toth said. "Houses relist, there are two or three price reductions. Sellers that have a real motivation to sell will sell."
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