Though the housing market is displaying some signs of health, economists say they could be misleading.
Home prices in Los Angeles County edged up in October, while sales volume continued a slow downward drift after sizzling through the summer. The increasing prices represented the continuation of a trend that started in May after a slide of almost two years.
The median price of a home was $340,000, up $5,000 from the month before, according to data supplied to the Business Journal by HomeData of Hicksville, N.Y. Adjusting for the difference in the number of selling days per month, sales volume dipped slightly – about 1.2 percent – representing the second monthly decline in a row.
Experts viewed the rising prices as further evidence that the real estate market has stabilized, at least temporarily. But some cautioned that it may be falsely propped up by government stimulus programs that eventually will end.
“About 15 percent of the mortgages in California are not performing right now,” said Christopher Thornberg, principle analyst and founder of Beacon Economics, a West L.A. consulting firm specializing in real estate. “Eventually the properties that those mortgages represent will come on the market, and when they do all hell will break loose.”
According to Thornberg, the rising prices and sales volumes are indicative of an “artificial stability” in the housing market driven by, among other things, a logjam in the foreclosure process created by a state moratorium on foreclosures, the increasing reluctance of banks to move forward on foreclosures and the federal push for loan modification programs that allow homeowners to avoid foreclosure.
Additional factors, he said, include a temporary first-time buyer’s tax credit as well as “ridiculously low” mortgage interest rates created by the federal government’s massive purchase of bad loans.
“What I’m trying to point out is that the real estate market is not healthy,” Thornberg said. “This is a false bottom that will only get worse.”
The most dramatic change in the monthly data was in Palos Verdes Estates, where sales volume increased by 533 percent. Other notable spikes were seen in Maywood, Signal Hill, parts of Culver City and the Exposition Park area of Los Angeles.
Some experts attributed it to activity at both the high and low ends.
“We’re seeing an increase in low-end buyers benefiting from the one-time credit,” said Robert Foster, executive vice president and regional manager of Coldwell Banker Residential Brokerage in Los Angeles.
At the other end of the spectrum, he said, high-end buyers were still getting deals on what they previously couldn’t afford.
Los Angeles County’s most notable median price hikes occurred in South Park, up 213 percent, and Topanga, an increase of 138 percent.
Not all analysts were equally pessimistic regarding the future.
Paul Habibi, a professor of real estate at UCLA’s Anderson School of Management, agreed with Thornberg’s analysis that the real estate data is skewed by government policies that are helping prop up the market.
“Ultimately it’s a waiting game,” he said regarding the housing market’s future. “Largely it depends on employment. The job market is the greatest lever we have on whether this housing crisis will subside.”
Habibi sees little evidence that the government’s help will soon end.
“So far they’ve shown us every reason to believe that they’re going to intervene to put a floor on the housing market,” he said. “While we’re seeing an uptick in prices, it’s still very fragile.”
One bright spot in the statistics for October was a modest increase in the sale of condominiums, up 14.7 percent from the same month last year.
“Anything with entry level pricing is receiving lots of action,” Foster said.
Overall, home prices were 6.8 percent below last October’s median price of $365,000, though sales were up by 6.6 percent.
Foster predicted that the numbers will improve.
“I believe we’re going to continue seeing moderate growth,” he said. “We’re seeing buyers come back who’ve been sitting on the sidelines.”