Monday, March 10, 2008

L.A. Business Journal: Median Home Price Falls, Sales Slow in February

According to the story by Deborah Crowe in the March 10-16 edition of the L.A. Business Journal (I cannot link to it, unfortunately), the median home price in L.A. County dropped to $468,000 in February. I incorrectly surmised last month that this figure was SFRs and condos combined, but I believe it is just SFRs. For SFRs, this is -14.9% from February 2007, -6% from January 2008, and -20% from the May 2007 peak of $585,000. According to Home Data, the data provider, 2,046 homes were sold in L.A. County in February, -44.1% from February 2007.

The condo market is also getting whacked, though not as badly. The median condo price for L.A. County was $400,000 in February -6.1% from February 2007. Condo sales are -44.4% YOY.

And what are the industry observers in the trenches reporting? Connie de Groot, a realtor in Beverly Hills, tells us that buyers want to know how desperate sellers are. And the second trend she is observing is that buyers think they "want" foreclosures - until they see what shape those foreclosures are actually in. Her feeling is that sellers have to be very "committed" to the selling process. Her colleagues think stabilization is at least 6 months away.

Even in the highly desirable affluent areas, home sellers are downwardly adjusting their expectations from the boom highs - however sales volume in such areas has generally held up and even increased in some of those areas. De Groot notes that the "picture perfect" homes are selling quickly, but anything that's going to need work isn't moving. "Last year people were excited about a fixer-upper. Now they're scared to spend money."

Garamond Lee, a real estate broker in Rancho Palos Verdes who recently listed his own hillside home for less than its appraised value 2 years ago, notes, "I think the speed at which the market has unraveled has surprised many of us." He thinks the key to successful selling has been to lower initial asking prices once the impact of last summer's credit implosion clarified the situation. He also believes sellers and buyers have to be "creative", and cites one deal in which the buyer put nearly 50% down, thus needing only a traditional conforming loan, not a jumbo. Lee is also doing lease option arrangements, where potential buyers can rent the home with the option to buy it later at a certain price. He notes, "There are a lot of people who want to buy, but they just don't have the credit score or the down payment. In this market, I can buy a home at a good price, lock in a sales price to the new buyer that's still below where the appraisals would come in, and carry the property for a while as they make payments to me. Everyone's happy."

Stuart Gabriel at the Ziman Center for Real Estate at UCLA argues that it is in "everyone's own self-interest" to "shore up the leaks in the dam. Do you want foreclosure signs in your neighborhood driving down the value of your own home?"

-------------------------- SFR ----------------------------------
COMMUNITY          ZIP    Feb     %YOY        Feb    %YOY
                          Sales   Change      Price   Change
El Segundo       90245      5    +400.0%  $1,200,000  +23.7%
Hermosa Beach    90254      9    +125.0%  $1,255,000   -2.6%  
Manhattan Beach  90266      9     -52.6%  $1,575,000  -12.5%  
Redondo Beach    90277      4     -60.0%  $1,005,000  -10.9%
Redondo Beach    90278     10     -54.5%    $758,000   +2.7%

------------------------ CONDO ----------------------------------
COMMUNITY          ZIP    Feb     %YOY       Feb       %YOY
                          Sales   Change    Price     Change
El Segundo       90245     0       N/A         N/A      N/A (3 sales in 07, $630K)
Hermosa Beach    90254     1     -50.0%    $815,000   -11.6%
Manhattan Beach  90266     0       N/A  $      N/A      N/A (2 sales in 07, $746K) 
Redondo Beach    90277     3     -62.5%    $799,000   +11.3%
Redondo Beach    90278    10     -41.2%    $600,000   -18.9%

I will now list the zip codes with the most expensive homes and condos, and the zip codes showing the greatest price losses. However always keep in mind that these transactions occurred on very low sales volume, so these figures do not say anything about the unsold inventory sitting in these same areas. YOY comparisons may be comparing apples to oranges if comparable property sales are not matched.

The most expensive homes (SFRs) in February were in Laurel Canyon 90046 (+108.3% YOY), Pacific Palisades 90272 (+27.2%), Brentwood 90049 (-0.8%), West Hollywood 90069 (+52.6%), Manhattan Beach 90266 (-12.5%), Venice 90291 (+56.4%), Palos Verdes Estates 90274 (+11.7%), Rancho Palos Verdes 90275 (+35.6%), and La Canada 91011 (+9.2%).

The most expensive condos were in South Park 90015 (+21.5%), Santa Monica 90404 (-34.9%), Brentwood 90049 (+10.8%), Westwood 90024 (-2.6%), Playa Vista (YOY N/A, current median condo price $624K), Redondo Beach 90278 (-18.9%), West Los Angeles 90025 (-12.9%), Laurel Canyon 90046 (+43.0%), Koreatown 90005 (-2.4%), and West Hollywood 90069 (-3.5%).

The areas with the greatest home (SFR) price losses for February were Cerritos 90703 (-46.2%), Woodland Hills 91364 (-39.3%), Acton 93510 (-35.5%), Panorama City 91402 (-35.3%), Palmdale 93550 (-35.2%), Pacoima 91331 (-35.0%), Van Nuys 91405 (-33.8%), Woodland Hills 91367 (-33.6%), Agoura Hills 91301 (-32.2%), and Downey 90240 (-31.7%).

The areas with the greatest condo price losses for February were Westlake Vililage 91362 (-57.1%), Santa Monica 90404 (-34.9%), North Hollywood 91602 (-33.6%), Sylmar 91342 (-33.3%), Glendale 91202 (-33.1%), Monterey Park 91755 (-32.6%), Canoga Park 91304 (-31.0%), Arcadia 91006 (-31.0%), Newhall 91321 (-28.8%), and Hawthorne 90250 (-28.1%).

If you've been reading this blog for a while you'll know that I consider this kind of data practically useless for the average Joes and Jills trying to sell their homes and figure out if prices are going up or down. Each zip code is like a little straw poll. Taken together, they may have some weight, and the county figures overall have merit. But in so many cases, what was a hot sale last year may be avoided like the plague this year so we don't know from these numbers if we're truly comparing sales on the same types of properties.

It's hard to believe that the county SFR peak of $585,000 was less than one short year ago. Take away the credit cocaine, and this is what happens.

And while I admire some of the "creativity" spoken of in this article, I wonder if brokers are going to be able to continue to carry such deals should the market continue to spiral downward.

In the meantime, I still expect falling knife shoppers to come out of the woodwork this spring. It's part of the correction process.


Blogger bearmaster said...

By the way, when I do my monthly preliminary estimates, I lump 90277 and 90278 together, SFRs and condos together.

7:50 AM, March 10, 2008  
Blogger bearmaster said...

In light of UCLA's comments about self-interest, it seems to me there ought to be a commercial service where you can research the credit worthiness of a whole neighborhood, before you go through the process of buying a home. This could alert potential home buyers to the possibilities of massive foreclosures in the neighborhoods they are considering.

Among the things you'd find out are what type of financing each homeowner has on his home, how much each homeowner initially brought to the purchase in equity, and how much each homeowner has drawn down against the equity.

If there are any mortgage brokers out there tired of selling mortgage loans but otherwise feeling entrepreneurial, is this an idea worth pursuing?

9:13 AM, March 10, 2008  

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