Los Angeles Housing Market Holds its Ground
What to believe?
Last week came news that the number of U.S. homes entering foreclosure is rising, and with it, more experts are predicting a meltdown of the bad credit home loan lending market.
But that stares in the face of median home prices in Southern California still climbing the first two months of 2007, compared with 2006. In L.A. County, the median rose 8.2 percent in the two-month period, to $525,000.
Yes, fewer houses were sold. But the number remains above the mid-’90s slump.
Conventional wisdom late last year was that a downturn would stretch across the board by now — and most segments have seen appreciation declines and sales drop-offs — but the high-priced market, usually the first to head south, is still steady.
The low- and mid-ranges, which offer more affordable California mortgage financing to prospective buyers, are also performing satisfactorily.
Experts are not sure why the L.A. market is doing better than expected. One explanation is that sellers have been pricing homes more realistically, and prospective Los Angeles mortgage applicants understand that they aren’t giving away their homes in a fire sale, said
As a result, the sales dropoff has slowed, giving everyone a breather.
“The year 2006 was a steep learning curve for buyers and sellers, but we didn’t plunge into the abyss,” said Leslie Appleton-Young, chief economist for the California Association of Realtors. “Buyers who were on the sideline in 2006 are back in.”
In the six counties comprising the Southern California housing market, the median price of a home — the point at which half the homes sell for more and half for less — was $489,500 in January and February combined, up 5.5 percent from the same period a year ago.
San Diego County reported the steepest decline: 5.9 percent, to $475,000.
“Prices are still cooking,” said John Karevoll of DataQuick.
They hit a record for L.A. County in February, rising to $528,000, up 7.8 percent from a year ago. Orange County’s median price, however, dipped 0.4 percent, to $620,000, as California mortgage loan demand subsided.
Sales continued to fall the first two months of 2007, but at a less torrid pace than in mid-2006. Sales in the Southland’s six counties fell 18 percent from a year ago.
The Inland Empire posted the steepest decline, at 33.1 percent.
Some housing experts believe the market may be nearing the bottom. This spring and the next six months will be “very informative,” said Delores Conway, director of the Casden Real Estate Economics Forecast at USC.
“Much depends on how much the supply of existing homes go up, which could push prices down,” Conway said. “If there are sufficient buyers out there, though, that won’t happen.”
All of this is small comfort to the borrowers with bad credit who jumped at the chance for easy money and signed up for mortgages much larger than they could handle. They figured their homes would appreciate and D-day (due day) wouldn’t come.
It did.
The big question swirling now is how big an effect the bad credit mortgage lending industry’s meltdown will have on home buying and Wall Street investors.
First-time buyers, especially, will have difficulty pulling together the 20 percent down payment required for a conventional mortgage, experts say.
Among California’s 806,022 sub-prime home loans, nearly 11 percent were delinquent, compared with 13 percent nationally.
To put this into perspective, a small percentage of homeowners who are late with their payments end up in foreclosure. The majority refinance or sell.
Not all experts are worried.
“The fact is, a vast majority of those who buy a house do it with straightforward mortgages,” Karevoll said. “Sub-prime lending is a sub-category of a sub-category. There is a ton of mortgage money out there.”
The bottom line is that no one can predict exactly which way the market will go this spring, which has traditionally been the top season for buying and selling.
SOURCE: Los Angeles Times