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Friday, May 27, 2022

HOMES—Lenders Compete For Fast-Growing Mortgage Action

Southern California’s perceived immunity to an economic slowdown, particularly in the housing market, is showing some signs of vulnerability.

Yes, the broader housing market continues to jump halfway through 2001, home sales in Los Angeles County are up 17 percent over 2000 and prices keep climbing but it’s a trend that appears to be pushed along by lenders’ life support systems.

The engine driving regional home-buying continues to be the lower end, driven by low supply, declining interest rates and aggressive marketing by lenders.

It’s not without its dangers.

Robert Cohn, a vice president at First Capital Corp., a mortgage brokerage in Santa Monica, said lenders have become more aggressive in recent months and are offering favorable interest rates with little to no money down and, oftentimes, to people with less-than-stellar credit.

“(Lenders) are making it much easier for someone to get into a home than when I started 12 years ago,” Cohn said. “It doesn’t make any sense to me, but I’ve got a lot of clients who couldn’t buy homes two years ago.”

In addition to first-time homebuyers entering the market, Cohn said there are many people moving into larger, more expensive homes. Again, the banks are making the moves possible.

In some cases, lenders are offering equity lines of credit as low as 4.75 percent, allowing homeowners to borrow against their present home to finance a down payment on a move-up home.

The result of this propping up can be seen in the numbers: The July median home price in L.A. County hit $242,623, a 16.7 percent jump of the year before, according to DataQuick Information Systems.

Robert Kleinhenz, senior economist at the California Association of Realtors, said high-end homes go to people who capitalize on investments to make down payments, or buy homes with cash. With declines in the stock market, he said, much of that capital has evaporated, resulting in fewer buyers.

And while agents serving all ends of the spectrum have seen brisk activity, it often has come at the seller’s expense.

Prices are down 10 to 12 percent among the homes sold by Valerie Fitzgerald, an agent with Coldwell Banker on Westside sells. And with fewer homes in this range on the market, sales are off 25 percent from a year ago.

Homes priced above $1 million can linger on the market for months, she said.

It’s the one sector of the market that is not performing well ahead of normal pace.

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