The median price of homes that sold in Los Angeles County in January dipped below $500,000 the first time in more than two and a half years that the price was below that threshold.
January's median price $496,000 was 9.7 percent less than the same month last year, according to data provided to the Business Journal by HomeData Corp. of Melville, N.Y. It also was 3 percent lower than the previous month's median.
What's more, the number of homes sold declined. A total of 3,379 homes changed hands in January, 38 percent fewer than January 2007. It was less than half the number that sold two Januarys ago in the county.
The downturn has been widely attributed to the subprime housing meltdown, which first rocked the local market last summer, causing banks to tighten their lending criteria, freezing many potential buyers out of the marketplace. And as variable-rate loans have adjusted up, homeowners have defaulted on payments and foreclosed properties have popped up.
The big questions now, of course, are how far down will the market slide and how long will it take. Although a few believe the market will turn around soon, several local experts said they're braced for more bad news in the coming months.
"I think slowly but surely it is going to get worse," said Mark Wollman, a residential broker for Hilton & Hyland, a Beverly Hills brokerage. "I think people are really going to start to understand what's happening this summer."
Jerry Nickelsburg, an economist with the widely referenced UCLA Anderson Forecast, believes the bottom may be hit as early as midyear, when the median could decline 20 percent from its high. Prices are now off 15 percent from their high.
"What is significant is that we went for a fair amount of time where the median price was not falling; it was rising in spite of the soft market. Owner-occupied housing takes a longer time to respond to a soft market because people base their expectations on what they've seen houses sell for," he said. "Now we are seeing home prices come down. The market is finding its equilibrium."
The last time the median price was below the half-million-dollar level in L.A. County was in May 2005, when it was $475,000. The following month it was $501,000 the first of 31 consecutive months in which the price was greater than $500,000.
The median price peaked at $585,000 in May and again in July. In October, the price sunk to $525,000 and it was the first year-to-year sales decline in the current downturn.
The portion of the market that has been most impacted in recent months is the midrange, where homes sell for prices between $500,000 and $1 million. That's because those prices are in the range of jumbo loans, which are greater than $417,000. Lenders have become cautious about making those kinds of loans because they are difficult to sell.
In the 90241 Downey ZIP code, the median price was down 23 percent to $495,000 and sales volume declined 32 percent to 19 homes sold. In the 90026 Echo Park neighborhood, the median was off 14 percent to $564,000 and volume was down 54 percent to 16 homes sold. In the Burbank 91505 ZIP code, the median price dropped 16 percent to $540,000 and sales volume was down 28 percent to 18 homes sold.
"I think it is going to struggle along for the time being," said Mark Cohen, who heads Beverly Hills-based mortgage bank and brokerage Cohen Financial Group. "You don't have the banks that are being aggressive in lending. There is a big credit crunch right now and there are no indications the banks are going to loosen up."
Legislation being discussed in Congress could raise the conforming loan limit from $417,000 to $625,000 or more. Several agree that such a move would be a shot in the arm, at least for Los Angeles County and other high-priced areas.
"That would help in markets like we have in Southern California because our properties are a lot more expensive," said Delores Conway, director of the Casden Real Estate Economics Forecast at the USC Lusk Center for Real Estate.
However, in L.A.'s most expensive markets, where homes sell for millions of dollars, the slowdown has hit unevenly, given how the wealthiest buyers often have top credit and tend to have more cash on hand and better access to financing.
In Manhattan Beach, the median price rose 19 percent to $1.73 million, though volume was down 24 percent to 22 homes sold. In Calabasas, the median price was down 21 percent to $1.02 million, but sales volume was up by 5 percent to 23 homes sold.
Syd Leibovitch, president of Rodeo Realty Inc., a local real estate brokerage, said sales were up 40 percent in January compared with November and December.
"Prices have dropped so much that homes are a lot more affordable. I think we've hit the bottom," Leibovitch said. "I think that there are good deals."
However, Wollman, who has been a broker for nine years and works in Bel Air, Brentwood and Beverly Hills, said that since December he has passed on three listings because sellers had unrealistic expectations. Prior to December, he had only rejected one listing in his career.
Wollman was expected last week to meet with a Beverly Hills-area homeowner who wants to sell a house for $2.4 million. Wollman said he would tell the seller who purchased the home two and a half years ago with an interest-only loan and now wants out that the asking price would have to be lowered by $400,000 to make a sale possible.
"I think a lot of people have not yet come to the realization that the market is slowing down and I also don't believe that a lot of homeowners understand that the lending instruments that were once available are no longer available," Wollman said. "It is a very different ballgame now. If the buyer can't get financing, with all the great marketing in the world, the home is just going to sit."
By comparison, the condominium market is not suffering as much as the single-family home market. Prices and sales volume are down to be sure, but by less significant margins.
The median price for a sold condo in January was $418,000, down less than one half of 1 percent from a year earlier and down 3.2 percent from December's $432,000 price. There were 992 condos sold during the month, 18 percent off January 2007.
Robert Kleinhenz, deputy chief economist with the California Association of Realtors, said the condo market has not been hit as hard because many units are priced below the conforming loan limit. That makes it easier to finance their purchase.
"What I have seen over the past few months is that whatever price adjustments have been taking place have been smaller (with condos)," he said.
However, higher-end condo markets like Brentwood or West Hollywood have been hurt. In West Hollywood's 90048 ZIP code, the median price for a condo dropped 22 percent to $642,000, though volume held steady at six condos sold. In Brentwood, the median price dropped 16 percent to $550,000, while volume was down 70 percent to three condos sold.
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