Tax Credits, Shoppers Lift Home Prices

County median rises 4 percent in March after two-month slide.
By: Joel Russell: labusinessjournal.com
L.A. County’s median home price rose 4 percent in March after two months of declines.

The combination of federal tax credits and seasonal trends pushed up the median price of a Los Angeles County home 4 percent in March.

The median’s rise to $340,000 marks a turnaround after two successive months during which sales and prices slumped, nipping a nascent recovery begun in the second half of last year.

Many economists have attributed the strengthening of the housing market to the decision to extend until April 30 federal tax credits that had been scheduled to expire Nov. 30. The credits offer $8,000 to new home buyers and $6,500 to repeat buyers; they sparked a flurry of sales late last year.

“National housing sales have collapsed in the last three months after the stimulus package wore off,” said Christopher Thornberg, founding principal at Beacon Economics in Inglewood. “Now, again, you have these policies to restrict supply and stimulate demand in the market.”

In March, there were 4,849 homes sold in the county, an increase of 6.8 percent from February, after adjusting for the number of selling days per month as collected by HomeData, a Hicksville, N.Y., housing data firm. The median price is $13,000 higher than February, but lower than the December 2009 median of $348,000.

Geographically, sales activity in March was widespread, with ZIP codes in Lancaster, Compton, Pico Rivera, Bellflower and Granada Hills each showing more than 40 homes sold. Surprisingly, wealthy neighborhoods in Palos Verdes Estates, Calabasas and Beverly Hills also showed strong activity after years of dormancy.

“The traditional market weak spot – homes in the $1 million-$2.5 million range – has come back to life,” said Tom Dunlap, general manager at Prudential California Realty in Beverly Hills. “There is a lot of cash parked on the sidelines and the price is coming down now to where people who have been watchful are coming off the sidelines.”

Leslie Appleton-Young, chief economist at the California Association of Realtors in Los Angeles, sees the movement in luxury homes as the next phase in the recovery of the housing market, which started its collapse as subprime loans soured. The problems took longer to reach affluent home buyers, who had enough assets and income to wait out the market. But now even the owners in swanky neighborhoods need to sell and have dropped their asking prices significantly, especially as job losses have taken their toll on all wage groups.

“You’re seeing values at the high end,” Appleton-Young said. “Also, the spread of foreclosures starting a year ago has affected the high end. You’re seeing more nondiscretionary sellers now than earlier in the recession.”

David Jervis, a broker at Century 21 Jervis & Associates in Downey, said large homes in his market that previously fetched $2.5 million now sell in the $800,000-$1.1 million range.

“Typically, the people who sell are those who need to sell,” said Jervis, who specializes in selling bank-owned properties.

For homes selling for less than $550,000 that qualify for Federal Housing Administration-backed loans, “as soon as the property hits the market, we see a minimum of 10 offers and as many as 20,” he said. “People are overbidding each other up to 12 percent above asking price because there’s so little sellable inventory.”

Jervis believes the expiration of the federal tax credits shouldn’t slow demand for homes as long as banks don’t flood the market with their full list of foreclosure properties and other elements in the market remain stable, particularly liberal FHA loan terms.

In the L.A. condominium market, the number of units sold in March totaled 1,777, a gain of 2 percent compared with February after adjusting for the number of selling days each month. The median condo price in March was $300,000, a 1.7 percent rise compares with February.