L.A.'s housing market, which has picked up a bit since its low point in February, enjoyed a bit of rally in June.
And those looking for a silver lining can focus on one area: condo sales.
While sales activity normally picks up going into the summer, June's increases exceeded the typical seasonal surge, especially in the condo market.
There were 1,254 condo units sold in June, up 115 percent from May. That was the largest number of condos sold in one month since July 2007, though sales were still off 4 percent year over year, according to data provided to the Business Journal by Melville, N.Y.-based HomeData Corp.
One reason for the surge: price. The median price of a condo that changed hands in Los Angeles County fell 12 percent year over year to $386,000.
Meanwhile, there were 3,332 new and existing homes sold in June, up 30 percent from May, but down 28 percent from year-ago levels. The median price fell to $429,000 its lowest level since October 2004.
"The prices are down far enough now that people who had been sitting on the sidelines are now jumping back in," said Delores Conway, director of the Casden Forecast at the USC Lusk Center for Real Estate.
In April home sales surged 15 percent and condo sales 9 percent compared to the prior month before falling off. But this time around experts cited several concrete factors that have converged to bring buyers back in the market, especially for condos.
- Record-high levels of properties in foreclosure have brought out bargain hunters;
- New condominium projects have been coming on line in places like Long Beach and Santa Clarita, with some at steeply discounted prices;
- With rents increasing at a steady clip, more condo buyers are purchasing with the intent to rent out their units;
- As gas prices near $5 a gallon, more people are looking at condos in urban settings closer to mass transit and employment centers; and
- The lower dollar has attracted more foreign buyers for high-end condos, especially those close to the coast.
All of this has given a boost for real estate agents handling condos.
"We're seeing more activity now with agents in our office, especially agents dealing with condo buyers," said Greg Bingham, Long Beach branch manager with Coldwell Banker Residential Brokerage.
In May, Bingham said that his office had 86 condo unit sales pending; that figure rose to 128 in June. "The bargain hunters have come out in force."
Indeed, the math has changed considerably for renters thinking about entering the condo market. Conway noted that monthly rents have increased about 50 percent in the last six or seven years to about $1,950 on average, while home and condo prices have fallen by double-digit percentages from their peaks.
"Housing and condo prices, especially condo prices, are now approaching the average monthly rent in L.A. County, when including the tax write-offs," she said.
One key reason condo prices have fallen: Many condo units have gone into foreclosure as first-time buyers eager to enter the real estate market got slammed by rising interest rates on adjustable rate mortgages and were unable to make payments.
Foreclosures also have the effect of driving down prices on surrounding units within complexes, drawing bargain hunters for those properties as well. This also holds true for single-family homes, where prices are now off 30 percent from their peak in mid-2007.
Indeed, the number of L.A. County ZIP codes with a median single-family home price under $400,000 shot up to 85 in June from just nine a year earlier.
"The market improvement always starts at the bottom, when properties become more affordable and people who had sat on the fence jump in. That's what we're starting to see now," said Bill Toth, broker-owner of Windermere/Bill Toth Associates in Burbank.
But it's not just bottom-fishers who are coming to the table. Condo properties near the water have also been attracting buyers. In Long Beach, for example, the 246-unit West Ocean condo project opened in February, with prices starting at around $500,000 and the most expensive units topping $1 million; units there have been selling "pretty briskly," Bingham said.
Some of this interest may be driven by a decision in late May by Fannie Mae to price so-called jumbo conforming loans of up to $730,000 at the same price of regular conforming loans under $417,000.
Interest also has come from foreign buyers, who have snapped up condo properties in Marina del Rey, according to Hannah Del Ponte, a Realtor with Coldwell Banker.
"The foreign buyers want their second or third home, without all the upkeep that a traditional home entails," Del Ponte said. "It's all being driven by the low dollar."
Del Ponte added that she is seeing more investment buyers coming into the condo market thanks to steadily increasing rents. The average asking rent increased 4 percent year over year in Los Angeles County in the first quarter to $1,949, according to market research firm RealFacts.
"Some investment buyers now realize they can rent out condos faster and are coming back into the market. This has really picked up in the last couple months," Del Ponte said.
A similar trend may be spreading to other parts of Los Angeles. Toth said that he received a call last week from a buyer who wanted to purchase and then rent out a property.
Rising gasoline prices also have prompted more people to consider condos located near employment centers or mass transit lines.
"Higher gas prices are spurring interest in infill condos in urban settings. If you're living in a place like Rancho Cucamonga and commuting to the Westside, you're seeing a huge increase in commuting costs," said Mike Nourmand, president of Beverly Hills-based Nourmand & Associates Realtors.
"We've seen an increase in inquiries from companies looking for places for their employees closer to work. Some companies are also talking about having employees come in only four days a week," he said.
In the greater Pasadena area, the Gold Line is attracting condo buyers to that market.
"We're still seeing the younger, hip urban kind of buyer in the market. But now we're also seeing people who are buying condos who want to be near the Gold Line, especially as gas nears $5 a gallon," said Dominic de Fazio, a broker associate with Coldwell Banker in San Marino.
With gas prices unlikely to come down substantially any time soon, real estate brokers and experts expect this trend to accelerate.
As for L.A. County's median home price, which has fallen nearly 30 percent in a year's time, Conway said there isn't a whole lot more room for prices to fall to return to the historical norm of being in line with monthly rents.
"The last time home prices corrected 20 percent or more in L.A. County was in the 1990s, and that took six years. This is happening very quickly," she said. "There's probably still a little ways to go in this correction before we turn the corner, but the cost of home ownership is now starting to approach the average rent."
However, Conway added there is one big wild card: the prospect of substantial job cuts.
"If the bottom falls out of the economy and we have significant job losses, then everything will come down: home prices, rents, everything. That could take quite a while to work through," she said.
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