Median Home Price Falls Two Months in a Row

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The median price of a home in Los Angeles County fell for the second consecutive month in February, raising concern that the housing market’s nascent recovery has lost steam.

The price slipped to $327,000, a drop of $15,000 from January – putting prices right back where they were in summer 2008, according to data supplied to the Business Journal by HomeData of Hicksville, N.Y.

Median condo prices fell $10,000 to $295,000. It’s the first time condos have been priced under $300,000 since May.

“We usually expect quiet Januaries, it’s just the way our business operates – but February is beginning to be a trend, and that could be a concern,” said Betty Graham, president of Coldwell Banker Residential Brokerage in Los Angeles.

Prices are still higher than a year ago, when a median home sold for $310,000 and a condo sold for $289,000.

In some ways, the weak sales figures aren’t exactly a surprise.

They come on the heels of reports that the sales of new homes nationally in January plunged to a record low of 309,000 units, the lowest number in nearly 50 years. A separate report from the Mortgage Bankers Association showed that demand for home purchase loans had fallen to its lowest since 1997.

Economists say new homes sales have been hit hard by the wide availability of existing properties in states such as California, Nevada and Arizona, where defaults, foreclosures and short sales plague the markets.

“When we see a rebound, it’s minor at best,” said developer Paul Habibi, who also lectures at the UCLA Ziman Center for Real Estate. “When we see a decline, it’s minor at worst. This is indicative of bouncing along the bottom.”

Economists believe that the government’s decision to extend an $8,000 credit for first-time homebuyers – supposed to end in November – through April 30 is having little effect. The thinking is that the credit has largely been taken advantage of by those buyers who could, though there likely will be a rush of home sales in April as the deadline nears.

A bigger factor influencing the market is the weak economic recovery that has failed to generate jobs, as well as housing prices many think are still too high.

“If you sit back and look at it, the name of the game is still jobs,” Habibi said. “The government intervention we’re seeing is simply giving us a softer landing; ultimately we’re all going to get to the same bottom line. We are going to hit realistic pricing, regardless of what the government does.”

A wide swath of neighborhoods across Los Angeles County saw price drops when compared with a year ago, reflecting the soft market.

Among them were the San Gabriel Valley city of Baldwin Park, where prices fell 11 percent to $245,000; the city of San Fernando, where prices declined 9 percent; and the harbor community of San Pedro, where one ZIP code saw prices fall 22 percent to $322,000.

Communities experiencing rising prices included middle-class Glendale, where several ZIP codes saw median price gains that ranged from 14 percent to 70 percent. In the posh central L.A. community of Hancock Park, the median price rose 121 percent to $830,000. In La Habra, near the South Bay, the median price went up 51 percent to $498,000.

Though sales volume was off a few percent since January, it remained well above year-ago levels. Home sales were up 21 percent for homes and 48 percent for condos compared with February 2009. But even that good news was tempered.

“We were above our forecasts (for February) in escrows opened but in terms of closed escrows, we were below,” Graham said. “Perhaps they’re collapsing when it gets down to financing, I don’t know. Maybe people are getting skittish.”

Now, the question becomes how far will prices drop.

Habibi believes that home values are likely to fall perhaps 5 percent more with stability reached in 18 to 24 months. But there is widespread disagreement among economists. One of the housing market’s biggest bears disagrees.

“After the last two real estate bubbles it took five years for the market to get back onto a normal footing,” said Christopher Thornberg, principle analyst for Beacon Economics, a West L.A. consulting firm specializing in real estate. “This time around it was happening almost immediately, and that doesn’t make sense.”

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