Buyers Continue to Wait Out Southern California Housing Market

The waiting game. Buyers and sellers are familiar with the concept, sitting from the sidelines, afraid to gamble on a slow Southern California housing market.

Prospective buyers worried about falling prices are staying away, which is the real reason that there’s been a big drop in sales activity, said Bill Watkins, director of the UC Santa Barbara Economic Forecast Project.

In a year-by-year comparison, home sales in May slid by double-digit percentages, extending a cooling off period that began in late 2005, according to the Ventura County Star.

But Deborah Poole, a Realtor with Troop Real Estate in Oxnard, says now is actually a terrific time to buy. She describes the Ventura County housing market as realistic and priced fairly, while California mortgage rates are still at historically low levels.

• Ventura County’s median sales price for an existing single-family home was $699,480 in May, the fourth-highest mark since January 1990.
• The next highest medians were posted last year in June, July and August, when the record of $710,906 was set.
• The county median increased 1.1 percent from $691,710 in April and 1.6 percent from $688,440 in May 2006.

It doesn’t mean that prices are rising across the board in the county, CAR Vice President Leslie Appleton-Young said.

“Prices have plateaued in Southern California,” Appleton-Young said. “Home prices are reflecting a change in the composition of what’s selling.”

The decline in sales is driven by tighter loan standards and negative news about foreclosures and bad credit home loans, she said, adding that the lower end of the market has suffered the most from problems in subprime mortgages, with sales falling off and prices weakening.

The market’s strongest segment has been at the top.

Experts expect the median to linger around $700,000 for about a year, as the California mortgage loan market settles, with the sales volume either declining or stabilizing.

“Prices are holding firm, which reflects the lack of necessity for most sellers to sell their house,” Watkins said.

“They’re just going to wait it out.”

Ventura County sales climbed 6.9 percent in May from April, but fell 25.3 percent from the same month last year.

“We’re hopeful that sales volume picks up toward the fall,” Watkins said.

Ventura County had a 2.4-month supply of unsold inventory in May, compared with 38.4 days a year ago.

“That’s among the lowest in Southern California,” Appleton-Young said.

San Diego’s unsold inventory was 9.2 months, while California’s was 10.7 months. Unsold inventory indicates the number of months needed to deplete the supply of homes on the market at the current sales rate.

Poole suggested that the best time to buy is now until the end of the year, before an anticipated fall in mortgage rates next year drives prices up and swings the market back in favor of sellers.

Some lenders and mortgage brokers expect interest rates to drop sharply around March because next year is an election year, Poole said.

Watkins disagrees.

“I don’t think that this Fed would cut interest rates to sway an election,” he said. “I think there’s still concern with inflation and unemployment, and so at least in the next six months, it’s more likely the Fed will increase rates than decrease rates.”

Poole predicts a gradual increase in activity for the rest of the year, a pattern that echoes the first half of 2007.

“It’s not the mad California housing market frenzy you had a few years ago, where buyers had to make a decision in two hours, and sometimes there were 20 counteroffers,” she said. “It was crazy.”

Homes priced correctly are still flying off the market in a few weeks, she said. The transactions she’s handled have averaged 90 days, she said.

The Ventura County homes sold in May were on the market for a median 51.7 days, up from 44.5 days a year ago, CAR reported.

In California, the median price of an existing home was $591,180 in May, a 4.8 percent increase from $563,860 a year ago, CAR reported. The state’s median price decreased 1.1 percent compared with $597,640 in April.

Statewide escrow sales totaled 366,370 in May, statewide, at a seasonally adjusted annualized rate, down 25 percent from 488,260 sales over the same period a year ago, according to CAR.

The statewide sales figure represents what the total number of homes sold during 2007 would be if sales maintained a May pace throughout the year.

Nationally, sales of existing homes fell for the third straight month in May, and are now at their lowest in four years as the median sales price declined for a record 10th consecutive month.

Sales fell by 0.3 percent in May to a seasonally adjusted annual rate of 5.99 million units, the National Association of Realtors reported. Sales now stand at 10.3 percent below where they were a year ago.

The median price of an existing home sold last month fell to $223,700, down 2.1 percent from a year ago.

SOURCE: Ventura County Star