L.A. County home sales plunged about 47 percent in September to their lowest level in at least four years as the full effect of this summer's credit crunch began to hit the local market.
Yet through it all, the median price of a home in L.A. County continued to rise, up 5 percent in September to $580,000, just shy of the all-time high of $585,000. That increase reflects the continued brisk sales of high-end homes, even as sales of average and lower-priced homes plummeted.
There were 3,237 new and existing homes sold in September in L.A. County, down 46.6 percent from Sept. 2006 and down 21 percent from August, according to data collected by Melville, N.Y.-based HomeData Corp. for the Business Journal.
That's a steeper drop than the revised 38 percent decrease recorded between August 2006 and 2007 (see box) and indicates the full force of the mortgage lending crunch that hit in mid-August. It's also the lowest level of homes sold in a single month since HomeData began collecting data for the Business Journal in January 2004.
"Given the recent pace of sales and the credit crunch we experienced, we expected that closed escrow sales in September and October will be among the weakest in quite some time and that's exactly what happening," said Robert Kleinhenz, deputy chief economist with the California Association of Realtors.
The sales drops were widespread, with double digit drops in at least three-fourths of all L.A. County ZIP codes. Scores of other ZIP codes had drops exceeding 50 percent, especially in the East San Gabriel Valley, the Antelope Valley, South Los Angeles and communities to the south and east of downtown L.A. And three ZIP codes in Long Beach, Santa Fe Springs and West Covina either approached or exceeded 90 percent drops.
"These numbers are in line with what we're experiencing," said Jim Rood, a broker for Century 21 U.S. Realty in Covina.
Condominium sales, while down, have not been hit quite as hard. Condo sales in L.A. County were off 30 percent in September from a year ago and only 12 percent from August. One major reason: many condos are still within the range of "conforming loans," below the $417,000 threshold set by the Federal Housing Administration.
But most single-family detached homes sold in L.A. County require so-called "jumbo loans" of more than $417,000. For a brief period in August, interest rates on jumbo loans soared past 8 percent. That combined with dramatically tightened lending standards nearly brought the market to a standstill.
That disruption started to be felt in August. But it was expected to intensify in September and October as prospective homebuyers have been forced to drop out of the market or voluntarily backed off as they expected prices to drop.
"Buyers are still waiting: they think the bottom might fall out. Sellers don't want to come down on their prices. It's a real standoff right now," said Matthew Barnes, a Realtor representing the Hollywood Hills area for Austin, Texas-based Keller Williams Realty.
Some sellers are waiting four or six months before deciding whether to take their properties off the market or "chase the market down" by lowering their asking prices, Barnes said.
The pain has been most acute at the lower end of the market, with so-called "starter" homes. "Starter buyers simply can't qualify for loans right now," Rood said.
That has put even more pressure on many sellers, who, because of upside-down mortgages or other financial pressures, have not been able to wait out the market to get the price they wanted. A year ago, in the East San Gabriel Valley, starter homes were in the high $400,000 range; now they are going for the high $300,000s, Rood said.
Two other factors have contributed to the price drops: a rising number of foreclosures and, in outlying communities such as Lancaster and Palmdale, fire-sale prices offered by homebuilders for homes in new housing developments.
But it's an altogether different story at the higher-end of the market, where sales of multi-million dollar homes have been brisk all year and only experienced the slightest of hiccups in August.
"There's huge demand and there just aren't that many homes out there. I have 10 buyers right now that want to spend $20 million or more and I've got no houses that they are interested in right now," said Stephen Shapiro, chairman of Westside Estate Agency, whose Beverly Hills and Malibu offices specialize in the sale of homes $2 million and up.
Indeed, in Beverly Hills, 12 properties sold in September, up from nine a year earlier. Shapiro said demand has increased even further in recent weeks as the value of the dollar has dropped, bringing in an influx of well-heeled foreign investors.
Other upscale areas, such as San Marino, also fared comparatively better. Gary Fleishman, manager of the San Marino office of Coldwell Banker, said home sales are down but nowhere near the level seen elsewhere in the county.
He's also noticed that in recent weeks, there has even been some pent-up demand for homes from buyers who found themselves temporarily stymied by the August credit crisis, but who have since lined up financing.
"I'm seeing multiple offers on properties. Maybe not the 20 or 30 that would have been made a year ago, but I'm still seeing six, eight or even 10 offers," Fleishman said.
Furthermore, the broker said he expects some improvement in home sales in November and December because new home loan products are coming onto the market. "It will make it easier for some people to get loans, especially those who are qualified."
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