L.A. Business Journal: Housing Prices Fall Below Half-Million

According to the story by Daniel Miller in the February 11-17 edition of the L.A. Business Journal, the median home price in L.A. County dropped to $496,000, the first time it has been below $500,000 since May 2005. (I think this is SFRs and condos combined.) This is -9.7% from January 2007 and -3% from December 2007. The median home price hit a peak twice at $585,000 as recently as May 2007 and July 2007. According to Home Data, 3,379 homes were sold, a -38% YOY decline in sales volume.

Expert opinion is divided as to how deep the downturn will go and how long it will last. Mark Wollman at Hilton & Hyland sounds quite bearish when he says, "I think slowly but surely it is going to get worse...I think people are really going to start to understand what's happening this summer." Jerry Nickelsburg at the UCLA Anderson Business School is relatively optimistic, believing we'll see a bottom in mid-year, with the median -20% from the high. But prices are already -15% off the peak. He says it is "...significant that we went for a fair amount of time where the median price was not falling; it was rising in spite of the soft market...The market is finding its equilibrium."

The segment that appears to really be struggling is the midmarket - homes in the $500,000 - $1 million range. These are in the jumbo loan range. As things stand now, "I think it is going to struggle along for the time being...there are no indications the banks are going to loosen up" according to Mark Cohen of Cohen Financial Group in Beverly Hills. He was referring to the banks' current reluctance to make such big loans. Several believe that raising the conforming loan limit will be a "shot in the arm."

It is still a mixed bag in terms of what is happening in the most affluent areas. Manhattan Beach median price is up on a lower sales volume. Calabasas median is down on a slightly higher sales volume. Syd Leibovitch of Rodeo Realty sounds an optimistic note when he says "Prices have dropped so much that homes are a lot more affordable. I think we've hit the bottom...there are good deals." But Mark Wollman at Hilton & Hyland says he rejected three listings in December because the sellers had unrealistic expectations, and prior to December had rejected only one listing throughout his career. "I think a lot of people have not yet come to the realization that the market is slowing down and I also don't believe that a lot of homeowners understand that the lending instruments that were once available are no longer available. It's a very different ballgame now. If the buyer can't get financing, with all the great marketing in the world, the home is going to just sit."

The condo market is not getting whacked as badly as the SFR market. For January, the median price was $418,000, less than .5% from the median of January 2007, and down -3.2% from December. Sales volumes is down -18% YOY. Robert Kleinhenz, an economist for the California Association of Realtors, thinks condos have not been hit as hard because so many units are priced within the conforming loan limit of $417,000, thus making their purchase easier to finance. Condos in higher-end markets, though, have been getting hit.

-------------------------- SFR ----------------------------------
COMMUNITY          ZIP    Jan     %YOY        Jan    %YOY
                          Sales   Change      Price   Change
El Segundo       90245     10     +25.0%    $955,000  +20.9%
Hermosa Beach    90254     14      -6.7%  $1,110,000  -17.8%  
Manhattan Beach  90266     22     -24.1%  $1,730,000  +19.2%  
Redondo Beach    90277     13     +30.0%    $985,000   +6.6%
Redondo Beach    90278     11     -54.2%    $745,000  +14.6%

------------------------ CONDO ----------------------------------
COMMUNITY          ZIP    Jan     %YOY       Jan       %YOY
                          Sales   Change    Price     Change
El Segundo       90245     0      N/A        N/A        N/A
Hermosa Beach    90254     1      +0.0%    $969,000  +103.6%
Manhattan Beach  90266     3     -25.0%  $1,020,000   -10.4% 
Redondo Beach    90277     7     -50.0%    $770,000    +2.9%
Redondo Beach    90278    18     -21.7%    $690,000    +0.0%

The most expensive homes (I believe these are SFRs) in January were in Santa Monica 90402 (no change recorded YOY); Pacific Palisades 90272 (+72.3% YOY); Malibu 90265 (+36.1%); Beverly Hills 90210 (+16.8%); Beverly Hills 90211 (-37.9%); Bel-Air 90077 (+88.0%); Manhattan Beach 90266 (+19.2%); Brentwood 90049 (-8.5%); Venice 90291 (+54.6%); and Santa Monica 90405 (+25.4%).

The most expensive condos in January were in Santa Monica 90402 (no change recorded YOY); Torrance 90505 (+47.1%); Manhattan Beach 90266 (-10.4%); Rancho Park 90064 (+22.1%); Hollywood 90028 (+103.6%); Redondo Beach 90277 (+2.9%); Koreatown 90005 (+19.7%); Redondo Beach 90278 ( 0.0%); Marina del Rey 90292 (-21.6%); and Hollywood 90048 (-21.5%).

The areas with the greatest home price losses in January were Van Nuys 91405 (-32.6%); Harbor City 90710 (-32.1%); Palmdale 93550 (-32.1%); Lancaster 93534 (-31.1%); Palmdale 93552 (-29.8%); Long Beach 90804 (-29.3%); Sun Valley 91352 (-28.9%); Encino 91316 (-28.2%); Newhall 91321 (-27.9%); and Inglewood 90305 (-27.5%).

The areas with the greatest condo price losses in January were Long Beach 90805 (-56.0%); Civic Center 90012 (-43.7% - so much for those great downtown condos!); North Hills 91343 (-32.3%); Canoga Park 91304 (-32.1%); Canoga Park 91303 (-30.8%); North Hollywood 91602 (-30.6%); El Sereno 90032 (-30.3%); Sierra Madra 91024 (-29.8%); Van Nuys 91401 (-27.7%); and Agoura Hills 91301 (-27.5%).

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I wonder how long it's going to take for the L.A. Business Journal and the L.A. Times to wake up and realize that their publishing of these median statistics is meaningless to the average Joe or Jill trying to sell their homes. For many zip codes the sale numbers are too small to reach any valid conclusion about median price. Second, all I have to do is look at Redondo Beach in Zip Realty to see that asking prices (and therefore, sale prices) have COME DOWN. It used to be that if you sorted the entries by ascending price, you almost couldn't find anything below $600,000. Currently, there are nearly 6 pages of entries below $600,000. This speaks volumes more about what's going on than the sale statistics on a handful of homes.