December Delivers Higher Home, Condo Prices

Sales volume drops, stoking concern over strength of rebound.
By: DAVID HALDANE: Los Angeles Business Journal Online
Home prices in Los Angeles County bounced back in December, the first month since the housing bust that the median price for both homes and condos was higher than the year before.

The median price of a home was $348,000, up from $339,000 in November and $345,000 the year before, according to data supplied to the Business Journal by HomeData of Hicksville, N.Y. The median price of condos was $315,000, up from $305,000 in November and $310,000 in December 2008.

But there are signs that the road to recovery may be a rocky one.

The number of homes sold dropped by about 7 percent from November, but it was 30 percent higher than November 2008.

Analysts viewed the rising prices as further evidence that the real estate market is rebounding, though some characterized the upswing as a temporary respite before it once again recedes.

Last week, analysts were alarmed when the National Association of Realtors reported that the number of pending home sales across the United States dropped 16 percent from October to November. L.A.’s November sales volume dipped by 1.6 percent.

The market had softened until President Obama extended a tax credit through April 30.

“What we’re seeing today is not due to fundamentals but to government intervention in the economy,” said Christopher Thornberg, principle analyst for Beacon Economics, a West L.A. consulting firm specializing in real estate.

Thornberg said the tax credit and other government policies aimed at encouraging low mortgage rates, including financing from the Federal Housing Administration, were propping up the market. In addition, he added, the rate of foreclosures has been artificially slowed by federal pressure on banks to allow upside-down homeowners to modify their loans.

How it all turns out, Thornburg said, will become more apparent over the next several months.

“We have a big excess supply of units that have to be burned off when foreclosures start going on the market,” he said. “If that wipes out demand, it will push prices down.”

Nonetheless, Thornberg said that the historic lows of mortgage interest rates are an advantage for buyers.

That point of view is shared by many in the real estate business.

“I’m feeling very optimistic,” Betty Graham, president of Coldwell Banker Residential Brokerage in Los Angeles, said of December’s price hike. “I think it shows that we’re moving in the right direction.”
Graham said her company is doing brisk business, especially at the market’s upper end. And while obtaining financing is still difficult, many customers are tapping other sources – such as stock holdings – to pay for homes.

“They’re tired of waiting,” she said. “The buyers out there really want to steal something; but bottom fishers looking for desperate sellers may find disappointment in this market because there isn’t a deep need to sell.”

In other words, she said, when homeowners put their houses on the market they can usually hold out for their price.

One place that is occurring, Graham said, is in Malibu, where – after weak sales for the last two years – an agent recently sold three homes priced at more than $6 million each.

HomeData figures show that seven homes in Malibu were sold in December at a median price of $1.2 million.

Another area where sales were booming was Beverly Hills, Graham said.

“One of my top agents had her best fourth quarter in 30 years,” she said. “And she’s been selling real estate in Beverly Hills the whole time.”

HomeData reported that 15 homes were sold in Beverly Hills’ 90210 ZIP code in December at a median price of $1.9 million.

“This was better than most Decembers,” Graham said. “I go out to these offices and can almost touch the feeling of optimism.”

But she quickly noted that it’s not overly exuberant optimism.

“The recovery is going to be a little anemic,” she acknowledged. “Any hope of it being something else is naïve.”

A case in point, she said, is the San Fernando Valley, where sales have been flat for several months.

“I can’t really say why,” she said, “but I believe that their time will come.”
Twenty-one homes were sold in each of Woodland Hills’ two ZIP codes in December at a median price of $660,000 in 91364 and $559,000 in 91367.