Home prices in Los Angeles County declined 31 percent in November compared with the previous year.
But the decline was 1.4 percent from October, the smallest month-to-month drop since summer.
The median price of homes that sold in November was $360,000, based on information from HomeData Corp. in Hicksville, N.Y. The number of homes sold in November was 3,974, down 3.4 percent from October and up 48 percent from November 2007.
Residential brokers and agents report that most sales are foreclosed properties or "short sales," where the property owner sells the home and gives the money to the lender at a loss with the goal of avoiding foreclosure.
Justin Mulhearn, an agent with Prudential California Realty in Long Beach, said that after resisting short sales during the early phases of the downturn, lenders now have systems in place to evaluate and process such transactions.
"The banks are a lot more receptive to short sales now," Mulhearn said. "If you go into the Multiple Listings Service, half of the properties that come up say 'Preapproved Short Sale.'"
While such deals get a distressed loan off the bank's books, the banks incur a loss on the loan. As a result, bankers conduct due diligence before agreeing to a short sale, said Bob Taylor, whose namesake Bob Taylor Properties Inc. sells property in Glendale and Eagle Rock. The bank's goal is to minimize the loss.
"It's a tough negotiation," Taylor said. "They won't do it if the owner can make the payments."
Delores Conway, director of the Casden Forecast at the USC Lusk Center for Real Estate, said most home sales are taking place in the lower-price tier of the market for two reasons: Most of the buyers are investors looking for bargains, and lenders are playing tight with money.
Since the market downturn began, "jumbo" mortgages loans for more than $417,000 have become much more difficult to get, so there are more deals for smaller amounts.
"The higher-end market is simply not moving because lenders have tightened their criteria," Conway said.
As for the buyers, most are individual investors. Conway knows one who hopes to buy 1,000 homes across Southern California. "The goal is to hold them five to 10 years and achieve appreciation," she said.
Investors who buy in the lower-price ranges can rent the homes and nearly break even on the mortgage payment. Mulhearn said investors couldn't do that before this recession because mortgage payments on a typical home were too high compared with market rents.
"I used to work with flippers, people who would buy and resell homes," said Taylor. "Now they buy homes and rent them out. They put down 30 to 40 percent."
A lot of the homes that investors are buying need repairs before going to the rental market, said Carole Parker, a broker with Re/Max Olson & Associates in Northridge. They're putting money into the property with the expectation they'll get it back in the long term.
"The buyers are hoping prices will go up, but it's all a guess when this market will turn," she added. "Right now the prices are where they were in 2003."
Prices held steady in the condominium market during November, with an average of $340,000. The number of transactions declined slightly to 1,375, a 1.9 percent drop compared with the previous month, according to HomeData. The volume was up by 86 percent year over year.
A closer look at the data for 2004 to 2007 reveals that a typical condo maintained a cost of about 79 percent of the price of a stand-alone home. But that changed in the last year, as home prices declined much faster than condo prices.
The average condo now costs 94 percent of the price of a house. Since November 2007, condo prices have declined 18 percent; home prices have plunged 31 percent.
Taylor said a typical condo today costs as much as a home when the association fee is added. Condo buyers have to pay the fee in addition to their monthly mortgage.
While the cost is similar between homes and condos, the profile of buyers is completely different.
"The pure speculative investors are going for the single-family home," said Mulhearn, while condos "are better for buyers who want to buy a home and live in it."
Condo fees pay to maintain the exterior of a complex, landscaping, gated security and amenities such a pool and picnic areas. The HOAs give condo buyers the assurance that the property has received at least basic maintenance.
In contrast, "foreclosed properties are pretty well trashed," said Taylor. "If the owners are going to lose it, they stop taking care of it. And if they put a lot of money into the home, then they strip it out before leaving."
Several brokers confirmed that condo buyers are generally professional singles, couples or single-parent families. They range in age from newly marrieds to empty nesters, with mature couples a growing segment of the market that has moved into certain geographic regions of the county, such as downtown Los Angeles.
Another noteworthy aspect of the current market is the demand for rentals sometimes among people who've lost their property.
"When we get new rental properties, we rent them in two days," said Taylor, whose company manages about 350 apartment projects. "People are walking away from their homes and need a place to live. If foreclosure is the only mark on their credit report, I'll rent to them."
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