Los Angeles' residential market took another tumble in May, as sales slowed and the county's median home price fell to its lowest level in three and a half years.
The median dropped to $435,000, with 2,556 new and existing homes sold, according to data provided to the Business Journal by Melville, N.Y.-based HomeData Corp. The price was down 26 percent from a year ago and 5 percent from April.
Sales were off an adjusted 12 percent from the prior month and an adjusted 44 percent from a year ago, bucking the usual gradual rise in sales leading into the peak summer selling season. (The Business Journal adjusts the percentage change in sales volume to reflect differences in the number of monthly selling days as compiled by HomeData.)
Economist Chris Thornberg of Beacon Economics said the data show that slower sales and lower prices have finally hit wealthy neighborhoods unlike May 2007 when continued strong sales of higher-priced properties drove up the county median to an all-time high of $585,000 even as middle- and working-class neighborhoods were hit by the credit crunch.
"Last year, the first cracks in the housing market showed up at the low end. Now fast-forward to this year: Sales have slowed across the board," said Thornberg, a former UCLA Anderson Forecast economist.
Countywide, 37 ZIP codes had a median home sale price of more than $1 million a year ago. That's now down to 29 neighborhoods. Even in million-dollar neighborhoods, the weakness was apparent.
In Calabasas' upscale suburban 91302 ZIP code, there were just six homes sold 58 percent fewer on an adjusted basis than a year ago when 18 sold with a median price of just $1.1 million, down 28 percent.
Thornberg, who was predicting in late 2005 that residential property in California was overvalued by as much as 45 percent, now says it wouldn't surprise him to see the L.A. County median approach $300,000 before prices balance out.
"While it's painful in the short run for people who thought we were home rich, it's a necessary thing because prices are simply too high. It ultimately will improve the ability for businesses to operate in Los Angeles because people can afford to live here," said Thornberg, noting the median income of county homeowners is just $74,000.
"There's no way you can justify a $585,000 house median in Los Angeles given the incomes here. To service the cost of homes like that would take two-thirds of that family's income."
Still, there was evidence in some of the wealthiest ZIP codes that although there might be fewer sales, the homes that did sell were high end and going to the richest buyers.
For example, in Beverly Hills' famed 90210 ZIP code, just six homes sold last month, a 63 percent adjusted drop from the prior year. But the median price soared 41 percent to $2.45 million.
However, the latest data show affordability is increasing across a wide swath of the county, even if fewer units were changing hands. There were just eight ZIP codes a year ago that had median prices at or below $400,000. Last month that number increased to 76.
The two homes that sold in Compton's 90222 ZIP a fraction of the number a year ago had a median price of just $362,000, an 11 percent drop. Downey's 90242 ZIP saw a 29 percent adjusted slide in sales to 12 properties, with a $396,000 median price that's 28 percent below a year ago.
The correction has been even sharper in the multifamily market, where the countywide median price for a condo fell 10 percent to $395,000, with a 57 percent adjusted drop in sales to 584 units.
However, some markets were doing better. Long Beach's 90802 ZIP had the largest number of condo sales at 28 and saw prices fall just 11 percent to $323,000. Sales were up 6 percent on an adjusted basis.
Michael Nourmand, president of Beverly Hills-based Nourmand & Associates Realtors, said the condo market in trendy urban neighborhoods, such as West Hollywood and Miracle Mile, are holding up well.
West Hollywood's 90069 ZIP code saw sales slide an adjusted 56 percent to 11 but that was still one of the highest volumes in the county; prices were down only 10 percent to $472,000.
Still, the Westside condos that are selling are those whose owners have been convinced to moderate their expectations, said Nourmand, whose brokers are hearing from investors looking for a bargain.
"As in single family, the high end is doing better than the low end of the market, but everyone is having to lower prices," he said.
Nourmand cited one Brentwood condo that had sold for $925,000 five years ago. The latest owner put it on the market and after dropping the asking price $100,000 received seven offers, selling it quickly.
In downtown, where condo conversions and new construction soared during the boom, developers are converting their for-sale properties to rentals to ride out the market downturn. Nourmand said the only development he saw selling well right now was the Ritz Carlton condo and hotel project, where demand is high because of its location at L.A. Live near Staples Center.
The 90015 ZIP that includes Staples saw a flat adjusted sales volume with nine units sold and the median off 16 percent to $445,000. In comparison, Central City West's 90017 ZIP saw condo sales plunge an adjusted 62 percent to four units, though the median price rose 24 percent to $552,000.
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