Southern California Housing Market “Settling Down”

The Southern California housing market may be “back to normal” or “depressed,” depending on what you read, but one thing is for certain - it’s not what it used to be, according to The Signal.

“I’ve been in real estate for 20 years, and seen changes in the market,” said Margo Sherwood, a real estate agent with Kellar Williams VIP Properties, adding that the market has been stagnating locally.

In March, there were 5,500 single-family homes sold in Los Angeles County, with 261 sold in the Santa Clarita Valley, according to DataQuick.

Jack Kyser, chief economist for the Los Angeles Economic Development Corp., said that the market is shifting to a very strange dynamic, especially with people who were trying to “flip” properties, or buy and resell quickly, and those who were paired with mortgages or homes that were wrong for them.

“A lot of people are quite nervous,” he said.

Linda Slocum, a Realtor with Vintage/Sotheby’s International Real Estate, said that the market during the three years - which helped funnel California mortgage prices out of control - previous to the crash was abnormal.

“It was a frantic three years, and then it went back to normal,” she said, adding that the market was relatively stable and, with more homes coming onto the market at this time of year, was traditional.

Kyser disagrees, saying that while there was a dramatic increase in the Southern California housing market close to a frenzy, it went too far on the other side of the spectrum.

“It’s like you were out on a binge, you’re waking up the next morning and you have a very bad hangover,” he said.

During those years, there was a major shift, especially in property value.

Sherwood said that prices for homes double every 10 years. However, over the past several years, they went up faster than before, with California home prices still remaining high during the fall.

“We have an unusual market,” she said.

The problem with the current market is that the supply is up - without the demand for the homes, and without as many buyers, many of whom are unable to afford housing due to the tightening of conditions by lenders.

This is partially due to the foreclosure crisis, which was exacerbated by concerns with subprime, or bad credit home loans.

In addition to the subprime loan market, Slocum said there are concerns for when people qualify for a mortgage refinance on their homes or take out another loan and don’t use it for their homes, but for “play money.”

“It’s not all people who got into bad loans,” she said of foreclosures, although she added that Los Angeles County’s biggest concern regarding widespread defaults and foreclosures is in Palmdale.

In addition, home builder confidence hasn’t been strong.

“They are selling, but they aren’t selling at the rate they were,” Slocum said.

Building has not stopped in the Santa Clarita Valley, with developments such as West Creek, West Hills and River Village still continuing.

Kyser said there is a shortage of available property in the Los Angeles housing market, and developers are going to have to offer incentives.

However, Kyser said there is hope: Except for the real estate market, the economy has been performing well, which means that it could help the housing market in the future.

“There is slow growth in the economy but no regression,” he said.

Although not much activity is expected in 2008 or 2009, 2010 might be the year that things bounce back.

Slocum said she receives calls at her office, saying that people don’t want to buy a home because “the market’s going to crash.”

“If you look at our economists, they’re not seeing anything drastic,” she said.

SOURCE: The Signal