Upside in L.A. housing market

Condo sales downtown, where prices start in the mid-$300,000 range, are still relatively strong.
By Annette Haddad: latimes.com
Erica Helphand and Sawnia House are the types of buyers making downtown Los Angeles one of the region's strongest residential markets, for a simple reason: It's in their price range.

"If we could afford a Craftsman in Venice, hands down we would move there, but that's not an option," said Helphand, a 35-year-old professional events producer who lives with House in a rental in Culver City. They toured more than a dozen condo and loft projects last weekend and liked what they saw.

Even as most of Southern California is in the throes of a slowdown that has curtailed sales and tamped down price growth, downtown L.A. appears to be one of the few bright spots. And that helped Los Angeles County stay strong in February, with a median home price that was up 7.8% from February 2006, according to figures released Monday by DataQuick Information Systems, a La Jolla-based real estate research firm.

It was the biggest year-over-year percentage gain since July.

Sales of units in the seven ZIP Codes that comprise downtown nearly doubled from a year ago to 148 closed transactions in the three-month period that ended in February, according to DataQuick. These transactions don't take into account deposits made by would-be buyers staking claims on units still under construction. In the three months, more new units were available for sale compared with the year-earlier period but the number of deposits taken has been hard to pin down.

Still, the doubling in transactions is "pretty significant because it shows that demand exists," said Jim Perabo, a downtown broker. "The total number of units on the market for that period increased and sales didn't slow."

With some new units starting as low as the mid-$300,000s, downtown is attracting middle-class salaried workers like Helphand and House, as well as suburban homeowners rich with equity looking for a weekend getaway or a first home for their college-age children.

That wasn't necessarily the case just nine months ago. In mid-2006, downtown sales were declining as inventory of new and existing units inundated the market.

Since then, a combination of sales incentives, price reductions and a deliberate slowdown in the number of new units being released by developers has curtailed the downtown inventory problem and goosed demand.

More important, downtown's image as a livable place probably had its best year in decades. The Grand Avenue project — a major retail, housing and entertainment development that some hope will rival New York's Times Square — won city approval. The five-star Ritz-Carlton and four-star JW Marriott hotels announced plans to serve as Convention Center anchors at L.A. Live, another entertainment site in development. Meanwhile, a host of restaurants, bars and boutiques have sprung up to serve the budding residential population. The first downtown supermarket, set to open this summer, has generated nonstop buzz.

Not everyone is sold on downtown. Christina Yu and Christopher Camargo, renters in Long Beach, visited about a dozen condo and loft projects to learn firsthand what downtown has to offer and were not entirely impressed.

"It wasn't that long ago that the alleys were filled with derelicts and drug addicts," said Camargo, who was eating lunch Saturday at Royal Claytons, a new restaurant adjacent to a private gym that caters to two new loft-style complexes in the trendy Arts District that abuts the concrete channel of the Los Angeles River. But "if I'm going to pay $700,000 for a place, I think it should have a view of the ocean, not someone else's living room."

In general, Los Angeles County's housing market has shown slightly more resilience than other regions thanks to its status as the biggest county. In February, the county's median home price rose to $528,000, according to DataQuick.

At the same time, countywide home sales fell 11% to 6,300, the fewest transactions for a February since 1997, DataQuick said. The rate of decline picked up from January, when sales fell 6.9% from a year ago, but was an improvement over mid-2006, when sales were falling at a 25% year-over-year pace. L.A. County's median price — the point at which half of all homes sold for more, half for less — had been virtually flat since June, when the median was $520,000.

"We still see L.A. as a market in transition and it's important not to read too much into a modest price pop early in the year," said Andrew LePage, a DataQuick analyst.

January and February are typically the slowest months for real estate transactions. Analysts are more interested in seeing how well the next three months perform before drawing conclusions about the health of the Southland housing market.

The outlook nonetheless seems hazy. Tighter lending standards and slower appreciation will keep many would-be buyers on the sidelines, even if interest rates remain steady and the economy continues to produce jobs.

Downtown broker Perabo says he's busier than ever answering queries from potential homeowners. But he also is more worried because fewer first-time buyers will be able to qualify now.

"The days of 100% financing are over," he said, adding that about 20% to 30% of the first-time buyers he meets with would be unable to buy without improving their credit standing and coming up with a down payment.

Helphand and House have been saving for a house and are hoping to qualify this week for a conventional mortgage to help them buy a home in the mid-$400,000s. And after raising their bottom-line price slightly in order to increase their options, the couple has narrowed their home search to four places, in the Fashion District and the historic core near the Civic Center.

"We're ready to bite the bullet and purchase our first home," Helphand said. "But there's also a gut instinct about this being the right thing at the right time."

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Home sales

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Median price and number of homes sold in L.A. County

Sale prices Year-over-year
Feb. '06 Feb. '07 Change
Resale houses $524,000 $550,000 +5.0%
Resale condos $410,000 $432,000 +5.4%
New homes $433,500 $528,500 +21.9%
All combined $490,000 $528,000 +7.8%


Number of sales Year-over-year
Feb. '06 Feb. '07 Change
Resale houses $4,860 $4,392 -9.6%
Resale condos $1,215 $1,125 -7.4%
New homes $1,014 $783 -22.8%
All combined $7,089 $6,300 -11.1%