L.A. Business Journal: County home sales, median price drop in May

The median Los Angeles County SFR home price in May was $435,000, with 2,556 both new and existing SFR homes sold, according to a story by Deborah Crowe in June 9 edition of the Los Angeles Business Journal.

The median SFR home price peaked in spring and summer of 2007 at $585,000 and is now down to $435,000, now down -28% from that peak, -26% YOY, and -5% from April. Sales volume was down -44% YOY and -12% from April. Note: L.A. Business Journal tweaks the sales volume compiled by Home Data to reflect differences in the number of selling days in the month.

Economist Chris Thornberg notes that in May 2007, strong sales of high-end properties kept the median price up. "Last year, the first cracks in the housing market showed up at the low end." But slower sales and lower prices are now hitting the high-end areas too. "Sales have slowed across the board." Thornberg, who has been well ahead of most economists in predicting the California bust, now thinks the Los Angeles County median price could hit $300,000 before the situation levels off.

Note to falling Ginzu knife shoppers: If Thornberg is correct, that's down AN ADDITIONAL -31% from current price levels, and down -49% from the peak.

Thornberg goes on to say, "While it's painful in the short run for people who thought they were home rich, it's a necessary thing because prices are simply too high. It ultimately will improve the ability for businesses to operate in Los Angeles - because people can afford to live here." He states that the median income of county homeowners is $74,000. "There's no way you can justify the $585,000 house median in Los Angeles."

There's high end, and there is HIGH end. Even though sales have been slowing, mega-high-end properties still are commanding high prices.

In addition, some markets still seem to be holding up better than others. Sales in trendy areas like West Hollywood, Miracle Mile, and the Westside are doing relatively well. But there are caveats. According to Michael Nourmand, of Nourmand & Associates Realtors of Beverly Hills, the owners of Westside condos who have been convinced to lower their expectations are are the ones who have been selling their condos. "As in single family, the high end is doing better than the low end of the market, but everyone is having to lower their prices."

Developers of condo conversions and new construction in downtown Los Angeles are now converting their properties to rentals to "ride out" the downturn. Nourmand notes that only the Ritz Carlton condo and hotel project is under development, because is in a high demand area near the Staples Center.

-------------------------- SFR ----------------------------------
COMMUNITY          ZIP    May     %YOY        May    %YOY
                          Sales   Change      Price   Change
L.A County              2,556       -55%    $435,000  -26% 
El Segundo       90245      5       -50%    $850,000   +2%
Hermosa Beach    90254      7       -76%  $1,365,000   +9%  
Manhattan Beach  90266     15       -69%  $1,600,000   -6%  
Redondo Beach    90277     11       -59%    $910,000  -15%
Redondo Beach    90278      9       -71%    $740,000   -5%

------------------------ CONDO ----------------------------------
COMMUNITY          ZIP    May     %YOY       May       %YOY
                          Sales   Change    Price     Change
L.A. County                584     -65%    $395,000   -10%
El Segundo       90245       4       0%    $512,000    -7%
Hermosa Beach    90254       0     N/A         N/A     N/A
Manhattan Beach  90266       1     -80%    $700,000   -22% 
Redondo Beach    90277       9     -55%    $757,000    -2%
Redondo Beach    90278      14     -65%    $650,000    -5%

Keep in mind that for almost all the statistics listed below, price changes have occurred on lower volume when compared to last year, and in many cases may be on such low volume as to render the statistic meaningless.

The most expensive homes (SFRs) in May were in Santa Monica 90402 (-8% YOY); West Hollywood 90069 (+49% YOY); Beverly Hills 90210 (+41%); Malibu 90265 (-24% YOY); San Marino 91108 (+67%); Manhattan Beach 90266 (-6%); Brentwood 90049 (-15%); Pacific Palisades 90272 (-5%); Burbank 91501 (+102%); Hermosa Beach 90254 (+9%).

The most expensive condos were in Venice 90291 (+5%); Santa Monica 90403 (N/A - no condo sales in May 2007); Brentwood 90049 (+15%); Redondo Beach 90277 (-2%); Marina del Rey 90292 (-8%); South Robertson district 90035 (+12%); Torrance 90505 (+41%); Redondo Beach 90278 (-5%); Arcadia 91006 (+7%); and Rancho Park 90064 (-17%).

The areas with the greatest SFR price losses in May were in Torrance 90501 (-66%); West Adams 90018 (-60%); Willowbrook 90059 (-52%); Valley Village 91607 (-48%); Palmdale 93591 (-45%); Crenshaw district 90016 (-45%); Culver City 90230 (-45%); Panorama City 91402 (-45%); Lancaster 93534 (-44%) and 93535 (-44%).

The areas with the greatest condo price losses were in Pasadena 91107 (-52%); Canyon Country 91351 (-47%); Canoga Park 91304 (-46%); Panorama City 91402 (-42%); Van Nuys 91405 (-42%); North Hills 91343 (-42%); Winnetka 91306 (-39%); San Gabriel 91776 (-38%); Torrance 90503 (-36%); and Santa Monica 90405 (-36%).

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Maybe other local economists are too shell-shocked at the moment, but I find it rather telling that Chris Thornberg is the only economist extensively quoted for this May article. Thornberg has been much better than most local industry watchers in anticipating the magnitude and scope of this decline, but it has been my opinion that even he is a little optimistic. I don't think most economists' estimation of a decline here factors in the socioeconomic upheaval that is brewing. The upheaval will not be good and will eventually cause some *desirable* areas to be perceived as *undesirable*.

As for mega-high-end properties retaining their values, this sounds like tsumani victims weathering the disaster on very high ground. We don't know yet just how high this tsunami will reach.