After enjoying a bit of summer resurgence, Los Angeles County's housing market in August saw familiar trends: falling sales coupled with declining prices.
County housing sales in August declined 23 percent versus the same period a year ago, while prices fell 30 percent, according to data supplied to the Business Journal by Melville, N.Y.-based HomeData Corp.
It was a slightly accelerated decline in prices from July, when the cost of a home fell 28 percent from the same period a year ago. The county's median home sales price in August, $404,000, was its lowest since April 2004.
The condominium market, which showed signs of revitalization in June and July, appears to have cooled somewhat as buyers who snapped up deals had their appetite satiated. Sales in August increased by less than one-half percent from the same period last year after registering a 6.4 percent increase from July 2007 to July 2008.
The median price of a condo, meanwhile, fell to $380,000 17 percent off from the same period a year ago and 4 percent off from the prior month. In contrast, July condo prices actually climbed 2 percent over June, though they were substantially down from a year ago.
Experts said the overall numbers weren't surprising: While sales activity in June and July increased as buyers and investors swooped in to capitalize on low prices, the action mostly happened at the moderate and low end of the market. That kept median home prices soft.
"In general, you have such a rapid decline in prices and a huge increase in distressed sales, that you had a kind of bulge in buying," said Leslie Appleton Young, chief economist with the California Association of Realtors.
That's also likely what happened in the condo market, said Eric Sussman, a lecturer at the UCLA Anderson School of Management. There were 1,254 condo units sold in June, a 115 percent increase from May. In contrast, there were 1,171 units sold in August.
"It's like price paralysis basically," Sussman said. "People say, 'We'd like to buy a condo, but no we're just going to wait. Prices will fall further.' Then they realize that the bottom dropped as much as it was going to."
Indeed, if anything, the market stagnated a bit during August, with no big jumps in the number of Los Angeles-area ZIP codes with median home prices below the countywide average. In August, 103 ZIP codes had a median price below $400,000. That's up significantly from the same period a year before when there were only 15 such areas, but not a huge leap from last month, when there were 99.
Meanwhile, 25 ZIP codes had median home prices above $1 million, the same number as last month. In August 2007, there were 35 such ZIP codes.
To some degree, Realtors chalked up the decline in sales to the August doldrums as buyers lose interest heading into the fall. Sales also continued strong in some of the cheapest markets in the county, especially Lancaster and Palmdale.
Home sales in some of those areas more than doubled as median home prices dipped to as low as $120,000 in one Palmdale-area ZIP code.
"Anything around $100,000 they're snapping them up," said Carol Hansmann, a real estate agent with Antelope Property Management. "I have multiple offers. It's like a feeding frenzy."
Paying with cash
Agents also said people were increasingly paying with cash, furthering a trend that developed as investors poured into the market and buyers ran into trouble securing loans from banks with tightened credit requirements.
Hansmann said she has seen investors with $1 million cash come into the Antelope Valley and buy up 10 homes. The investors plan to rent them out until the market improves and then sell them when prices climb to $150,000.
And buyers aren't relying on cash in just the low-priced areas. Harvey Mark, an agent with Coldwell Banker Coastal Alliance in Long Beach, said three offers he entertained for a $525,000 home had down payments as high as 30 percent. It eventually sold to a buyer who put down more than $200,000.
"The market is all financing driven now," Mark said. "And it's tough to get a loan."
Paul Habibi, a professor at the UCLA Anderson School, said agents were seeing more cash in the market as banks corrected and in some cases overcorrected for the freewheeling credit market before the housing bubble popped.
"The pendulum of ignorance has swung in the other direction now," Habibi said. "Banks were originally far too liberal in their underwriting, and now they're far too conservative."
Over the past month, agents said they are starting to see the stricter loan requirements cripple deals before they can close them.
Mark Chappell, a broker associate with Keller Williams Realty in the Antelope Valley, said two buyers who originally qualified to put 5 percent down on their loans saw the rates jump while in escrow to as high as 20 percent.
"Those deals evaporated," Chappell said.
The broker said he's also had buyers fail to close on four other properties he had sold. And one property he has listed is on the market for the fourth time.
"The loan market is continuing to tighten up," Chappell said. "And that's causing us problems."
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