Pricey homes and lots of 'em

Fewer sales mean more houses to choose from. Buyers have gained breathing room, if not a lot of great deals.
By: Darrell Satzman: LA Times
Guy and Karen Vidal are experiencing something new as they try to sell the small Craftsman house they own on Apex Avenue in Silver Lake.

Since listing it at $699,000 two months ago, they've reduced the price twice — first to $679,000 and then to $659,000 a couple of weeks later.

After buying, restoring and selling 20 distressed homes over the last five years in Silver Lake and Echo Park — and making at least a small profit on each one — the former entertainment industry workers feel the real estate market shifting beneath their feet.

"We specialize in restoring places to their original glory: old Craftsman, bungalows and Spanish houses," Karen Vidal said. "When you walk in the door, we make it look like it's 1925."

The problem for the Vidals is that after several years of frenzied bidding, buyers are also determined to turn back the clock.

Although most neighborhoods in Southern California saw home prices increase by double-digit percentages in the first quarter of this year compared to the first quarter of last year, some experts point to another key indicator — fewer sales — as evidence that the sellers' market of the last five years is coming to a close.

"This is a time when buyers have time to shop and compare and can make a thoughtful purchase," said Roni Telmosse, branch manager of Coldwell Banker Carlsbad in San Diego County. "It's not like a year ago, when buyers were walking around with a check in their pocket and writing offers on the hood of their car."

All told, there were 69,499 single-family homes sold in the first three months of the year in Los Angeles, Orange, Riverside, San Bernardino, Ventura and San Diego counties, according to DataQuick Information Systems — a decline of more than 8% from the same period a year earlier.

Riverside was the only county to show an uptick in sales activity — 6.6% — in the first quarter, while San Diego had 17% fewer sales; Ventura, 16%; Orange, 15%; Los Angeles, 10%; and San Bernardino, 3%, according to DataQuick.

Call it a correction, a flattening or a return to common sense, but as inventory creeps up and the number of sales diminishes, many believe the end of soaring prices in Southern California is nigh.

"Buyers don't have that panicked feeling: 'If I don't buy before the post goes up, I'll get into multiple offers and lose out,' " said Ron Tornell, manager of the Thousand Oaks office of Prudential California Real Estate.

In his area, Tornell said, there were roughly 900 houses and condominiums on the market at the beginning of May — up about 25% from last year but still well below the 20-year average of about 1,500 homes. During the depressed market in the mid- 1990s, there were about 2,500 homes for sale in the area, Tornell said.

"What we're seeing is a more balanced market," he added, "one that doesn't favor the seller or the buyer."

San Diego County had the lowest increase on a price-per-square-foot basis — 7.2% — of any of the six Southern California counties at the end of the first quarter of 2006, compared with the same quarter of 2005.

Although most buyers are focused on specific neighborhoods and follow median sales prices more closely than the price-per-square-foot measurement, real estate agents and industry analysts say the latter number offers the most reliable snapshot of how a market is performing over a wide area. By this same measure, San Bernardino County home prices were up the most, at 27.7%. Los Angeles County was up 23.1%.

Homes are also clearly lingering longer on the market. According to the California Assn. of Realtors, Southern California had a six-month supply of homes for sale in January, more than twice the number in January 2005. In February, the supply increased to more than seven months, again twice as much as a year earlier.

Even if interest rates stay relatively low, Southern California is entering a period of slower sales and flat prices that could last five years or more, believes Christopher Thornberg, senior economist for the UCLA Anderson Forecast. The forecast has been predicting a leveling off of prices for several years now; so far, it has not come to pass. But to Thornberg, the fact that fewer people can afford homes is an indication that prices will flatten. In Los Angeles County at the end of 2005, according to the California Assn. of Realtors, the percentage of households able to afford a median-priced home was just 12%, down from 17% at the end of 2004.

The sort of turnaround in the market predicted by Thornberg would make it easier for the Vidals to compete for the distressed properties they make their living restoring — but it leaves them in a bind with the Apex house, which they purchased in January for $525,000.

The people they bought it from acquired the house in October for $400,000 — turning a quick profit of $125,000 before agents' fees and taxes.

Guy Vidal says they spent more than $60,000 to restore the Craftsman to near its original 1911 condition, with such enhancements as copper plumbing and updated electrical wiring.

Even though the house is just a bit over 1,000 feet, the Vidals' agent, Lyn Bradford of Prudential California Jon Aaroe Division, believes it would have sold quickly a year ago.

"People are taking their time; there's a lot of fence-sitting going on," Bradford said. "There's no doubt the market feels flat."

"As soon as we bought it," Guy Vidal said, "the market changed."

Another recent buyer who has seen the market change is Matthew Zevin, an attorney who lives with his wife, Kimberly, and their two children in San Diego's Carmel Valley neighborhood.

The Zevins began looking for a larger house with a bigger yard and a pool in the same neighborhood last spring. At the time, prices were soaring and most listings in the area were being snapped up in a few weeks.

Sometime last fall, however, Zevin noticed a pronounced slowing. "It was drastic," he said. "There was suddenly a lot more inventory, and with more inventory, prices started dropping."

The Zevins paid $1.5 million in November for a 3,800-square-foot house. Coincidentally, they had bid $100,000 more for this same house in July. The sellers had rejected that offer, which was contingent on the sale of the Zevins' home.

"If we were buying it today," Zevin said, "we'd pay even less."

Some San Diego County communities actually registered a decline in prices in the first quarter of 2006, compared with the same period in 2005, a rarity in Southern California, where the six-county median was up nearly 18%. Among communities with 50 or more sales in the quarter, prices for East San Diego, ZIP Code 92105, were down 6.8% on a price-per-square-foot basis; El Cajon 92020 was down 4.6%; and Rancho Bernardo 92127 was down 2.7%.

By comparison, the lowest-performing ZIP Code in Los Angeles County was 91390 in Santa Clarita, which was still up 7.7% for the same period, according to DataQuick.

Among the best-performing neighborhoods in all of Southern California during the first quarter were Twentynine Palms 92277 in San Bernardino County, up 55.7%; August F. Haw 90061 in Los Angeles County, up 48.6%; and Coachella 92236 in Riverside County, up 40.3%.

Realtor Bob Deville is co-owner of Windemere Coachella Valley, which has a dozen real estate offices in Riverside County. His area, which includes Palm Springs and Rancho Mirage and is dominated by retirement and resort communities, is picking up after a slow stretch late last year and early this year, he said.

"Prices won't keep going up at the clip they had," Deville said, "but we still feel like we're going to have a good year."

Hector Castañeda, branch manager for Century 21 Real Estate in San Bernardino, said he thinks many parts of that city may be hitting their price ceiling. But, he added, a changing market is not necessarily bad.

"We're used to breaking records every year," Castañeda said. "So when you talk about a slowdown, it's all relative."


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Darrell Satzman is a Los Angeles-based freelance writer. Reach him at satzman@ earthlink.net.

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Leaders of the pack

Here are the places where home prices have risen the most, percentage-wise, in six Southern California counties, for the first quarter of 2006, compared with the first quarter of 2005.

Place and              ZIP Code Price change

Los Angeles County
LA/August F. Haw 90061       48.6%
LA/Watts             90002       43.6
LA/August F. Haw 90059       41.5
LA                      90011       40.4
El Monte              91732       40.0

Orange County
Anaheim Hills       92807        25.5
Anaheim              92805        25.0
Fullerton              92833        24.8
San Clemente       92672        24.0
Fullerton              92831        23.8

Riverside County
Coachella             92236        40.3
Hemet                 92344        29.9
Wildomar             92395        28.8
Norco                  92860        28.7
Riverside             92501        27.9

San Bernardino County
Twentynine Palms 92277        55.7
Barstow               92311        48.8
Joshua Tree         92252         43.6
San Bernardino     92411         38.9
San Bernardino     92410         37.3

San Diego County
Paradise Hills       92139         16.5
National City        91950         12.3
Fallbrook             92028         10.4
Escondido            92026         10.3
La Mesa              91941         10.3

Ventura County
Oxnard               93035          31.1
Ventura              93001          26.7
Camarillo            93010          19.4
Oxnard               93030          18.4
Simi Valley         93063          17.4

Note: Based on the median price per square foot for ZIP Codes with 50 or more sales for the quarter.

Source: DataQuick Information Systems