Los Angeles home prices continued their downward slide in February while sales volume fell to its lowest level since the boom began to fade.
The countywide median price, which dropped below $500,000 in January, fell another 6 percent to $468,000 last month, according to data provided to the Business Journal by Melville, N.Y.-based HomeData Corp. That's down 15 percent from a year ago and 20 percent from May's market high of $585,000.
Only 2,046 homes were sold in February, 44 percent fewer than a year ago. With foreclosures starting to crowd the market, real estate professionals said more prospective buyers appeared to be waiting to see how far prices would drop. Also, buyers were finding it more challenging to get financing.
Realtor Connie De Groot at the Beverly Hills office of Coldwell Banker is seeing two trends. First, callers want to know if the seller is desperate before they look at a home. Second, potential buyers are looking for foreclosures, but then find that the properties have challenges.
"They're all, 'Get me a foreclosure,' until they see what kind of shape some of these homes are in," De Groot said.
The consensus among her colleagues is that it might take another six months for the market to stabilize.
"People can sell their homes to the right person for a good price now, but they have to commit to the process," she said. "It's put on a new coat of paint and have cookies baking in the oven time."
With few exceptions the downturn was widespread throughout the county. Sales volume in the moderately priced 90011 ZIP code in southeast Los Angeles dropped from 35 homes a year ago to only five, according to HomeData. Sales prices, however, held up fairly well, with the median dropping only 3 percent to $500,000.
Encino's 91436 ZIP saw only three sales, down from 21 in February 2007. The median price of the three was $1.4 million, up 19 percent from a year ago.
Homes prices in highly desirable communities generally withstood the downward pressure, though even homeowners in upscale neighborhoods were scaling down expectations from housing boom highs.
Sales volume so far this year remained steady and in some cases prices actually appreciated compared with a year ago in Brentwood, Beverly Hills, and the Hollywood Hills above the Sunset Strip, De Groot noted.
"Higher-end, picture-perfect homes are selling quickly, but with the cost of materials these days people aren't pulling the trigger on anything that might need some work," she said. "Last year people were excited about what they could do with a fixer-upper. Now they're scared to spend money."
In the 90275 ZIP of Rancho Palos Verdes, 12 homes sold last month, while 13 changed hands a year ago. But the median price rose 36 percent to $1.3 million.
That didn't stop Gaymond Lee, an independent real estate broker and investor, from playing safe by listing the price of his own five-bedroom hillside home at $1.9 million, compared with a $2.1 million appraised value of two years ago.
"I think the speed at which the market has unraveled has surprised many of us," Lee said.
He believes that the successful sellers in his area likely had also lowered their initial prices once the widening impact of last summer's credit crunch became clear. "You just have to be very creative whether you're selling or buying."
Difficulty in obtaining the jumbo loans, generally necessary to buy a home above the local median, has made it necessary for more buyers to scrape up a larger down payment or work out a deal with the seller.
Lee recently sold another Palos Verdes home he owns to buyers who were able to put down almost 50 percent of the sale price and thus only required a traditional conforming loan to close the deal. He's also doing more lease-option deals, where the prospective owner essentially rents the home with the ability to buy at a set price later.
"There are a lot of people who want to buy, but they just don't have the credit score or the down payment," Lee said. "In this market, I can buy a home at a good price, lock in a sales price to the new buyer that's still below where the appraisals would come in, and carry the property for a while as they make payments to me. Everyone's happy."
The market is more challenging in suburban communities that some of saw the fastest appreciation during the boom. Many properties had been purchased at inflated prices with adjustable rate mortgages and owners are now in default or going through foreclosure.
In Glendale, for example, sales volume dropped 50 percent in both the 91206 Rossmoyne and 91207 Verdugo Woodlands neighborhoods. But it was a different story on prices.
The median in Rossmoyne rose 44 percent, pushing that neighborhood just over the $1 million mark. But in Verdugo Woodlands, the median fell 23 percent from more than $1 million to only $825,000.
At online listing service RealtyTrac Inc., a Verdugo Woodlands home in preforeclosure with an estimated market value of just over $1 million was listed at the $320,000 balance remaining on the owner's loan.
California topped RealtyTrac's most recent foreclosure report with filings up 120 percent in January from a year earlier. The Irvine-based online service said there were 11,839 filings in Los Angeles County, up 135 percent vs. 12 months ago.
The rising wave of such properties around the country led Federal Reserve Chairman Ben Bernanke last week to urge lenders to help distressed owners by lowering the amount of their loans. It's a controversial proposal, since lenders tend to be more open to renegotiating an adjustable interest rate than reducing the actual principal on a mortgage.
"Chairman Bernanke was saying we need to shore up the leaks in the dam Rome is burning and we have to do something," said Stuart Gabriel, director of UCLA's Ziman Center for Real Estate. "People who got loans they could afford may be resentful, but it's really in everyone's own self-interest. Do you want foreclosure signs in your neighborhood driving down the value of your home?"
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