Class Action May Have Taken Down Home Sales

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Is L.A.’s white-hot housing market headed for burnout? After home prices flattened this summer, the numbers rolled back last month.

The median sale price in September for a Los Angeles County home was $510,000, a 3 percent drop compared with the previous month, according to data from Seattle real estate research firm Redfin. The median price had held steady at $525,000 in July and August. (See the list of local home prices, Page 55.)

With plenty of upscale apartment complexes under construction, any prolonged dip in home prices could put pressure on rents, which would create real problems for those projects’ backers – not to mention the house flippers who have returned to Southern California in full force.

But buyers shouldn’t get excited about any return to affordability, industry insiders cautioned. Fundamentals remain strong, and the main reason for the recent dip might be nothing more than a reflection of the start of the school year. A minor price drop is typical at this time of year, as families no longer rush to buy homes before school begins.

“The real pressure on homes happens before school starts,” said Steve Goddard, broker-manager for Re/Max Beach Cities Realty in Manhattan Beach. “Once everybody is in a school area, then they’re not charging as much to get kids in school.”

Goddard added that he believes prices would likely pick up in January after the holidays, although he said the pace would vary from neighborhood to neighborhood depending on inventory.

That’s just what happened last year: After a stable summer, the county’s median price dropped in September and kept shrinking until February, when prices picked up momentum once more. The median price peaked in June at $550,000 before tumbling to $525,000 in July.

Even with September’s slight dip, $510,000 represents a 6 percent increase over the previous year, signaling a healthy market with room for growth, said Paul Habibi, a finance and real estate lecturer at UCLA.

Habibi expects prices will remain high and stable, citing the impact of a relatively limited housing supply and that some banks have eased up on their lending standards. New York’s JPMorgan Chase Inc., for example, recently lowered its credit score and down payment requirements for “jumbo” loans, which are mortgages in excess of $625,500 in the county.

“We’re in a good place,” he said. “We’re fairly valued … relative to where we were 10 years ago.”

Troy Martin, an analyst at Redfin, said that despite the slowdown, Los Angeles looks to be doing better than other major cities that have gone through their typical end-of-summer slump.

In September, 4,611 homes sold in the county, a 4 percent drop compared with the previous month. At the same time, nationwide sales dipped about twice that rate.

There doesn’t seem to be too much concern about a supply glut, however. Sellers listed 13,282 homes in the county last month, 2 percent more than the previous month but 69 percent less than the previous year.

Martin doesn’t expect supply to pick up until spring.

“Most of the listings come between March and July (from) people who decide they want to sell have made repairs and upgrades to their home,” he said. “In the fall, fewer people are listing, more of the inventory is old and the inventory that sells tends to be lower priced.”

The spring saw a flurry of activity as buyers worried the Federal Reserve would finally hike interest rates after years of inaction, and they wanted to lock in historically cheap mortgages. But after the stock market took a dip, the Fed decided last month to hold off on raising rates, which reduced some of that urgency.

Even if the Fed does raise rates at some point in the next few months, which most financial observers expect, Habibi can’t see them moving enough to change the calculus for most buyers. A quarter-percent hike in the Federal Funds rate, which is likely to be the first increase, should still result in relatively cheap mortgages for the foreseeable future.

“We’re looking at a low rate environment for a few years to come,” he said. “That’s going to enable housing prices to continue their ascent.”

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