Home Sales Climb as Buyers Finally Step Up
By JOEL RUSSELL - 7/13/2009
Los Angeles Business Journal Staff

Thanks to pent-up demand and low prices, the number of homes sold in June skyrocketed in Los Angeles County.

The number of existing and new homes sold last month increased 25 percent from May and 44 percent versus June 2008 after adjusting for the difference in the number of selling days per month, based on figures provided by HomeData Corp. of Hicksville, N.Y. The 6,016 homes sold in June were the most in a month since December 2006.

The median price of the homes that sold crept higher by 5 percent compared with May. That’s the second straight month that prices have gone up. At $320,000, the county’s median home price is at the same level it was at the beginning of the year – but still 25 percent below where it was in June 2008 at $429,000.

Agents explain the numbers by pointing to two factors: demand and affordability.

“Pent-up demand and multiple offers for each home are driving the prices up a bit,” said Irene Reinsdorf, a broker with White House Properties in Woodland Hills. “I believe the market will continue upward and pending escrows indicate it will.”

Mark Troth, co-owner of Troth Realtors/GMAC Real Estate in Lancaster, said he was seeing the results of pent-up demand as well.

“It’s not unusual to see two or three offers on a home,” Troth said. “And some have 15 to 20 offers.”

According to HomeData, two of Lancaster’s three ZIP codes had triple-digit increases in sales volume during June. Troth reported that about half the buyers came from the Lancaster area and the other half were transplants from the San Fernando Valley or the Los Angeles Basin looking to take advantage of low prices.

Across the county, agents saw a cut-off price around $350,000. Below that number, the market has more buyers than sellers. But once prices get above that threshold, financing gets difficult and the number of buyers diminishes, resulting in a stagnant market.

“I tell my buyer clients that under $350,000 there’s no playing with price, we have to overbid at least $5,000, and we need some cash to cover closing costs,” said Hugo Castaneda, a Realtor with Century 21 Realty Masters in Montebello. “We’re never going to get it at listed price, especially if the house is in good condition, because right now there is a scarcity of homes.”

Casteneda added that these conditions prevail in Whittier, East Los Angeles and pockets of the San Gabriel Valley as far east as Pomona. The HomeData figures show four ZIP codes in Whittier had triple-digit gains in sales activity.

Both Troth and Castaneda said most of their sales involve bank foreclosures or “short sales,” where an owner sells the home below what’s owed on it to avoid foreclosure. A short sale requires bank approval.

“For the last year and a half, we’ve had a bifurcated market with the sales happening in the distressed segment,” said Leslie Appleton-Young, chief economist at the California Association of Realtors in Los Angeles. “The June numbers are consistent with that trend.”

Veronica Olofsson, owner of Olofsson & Associates Real Estate in the Miracle Mile neighborhood of Los Angeles, said June is normally a good month for home sales because people with children move during the summer. However, this June, the results were better than most because of transactions that started in the spring.

“Escrows that closed in June opened in April,” Olofsson explained. “It was a big month because of how slow the banks were to resolve offers on short sales and bank-owned properties. Those pent-up escrows finally came through.”

Agents consistently said most of the buyers are young professionals or young couples. Federal Housing Administration loans and an $8,000 federal tax credit for first-time home buyers have helped stimulate sales among those categories of buyers.

Also, some of the large banks had been observing a moratorium on foreclosures. That prevented the market from getting flooded with homes at lower prices.

But prices could fall again as the moratoriums end.

“A second wave of foreclosures is coming, but we don’t know how big,” Appleton-Young said. “As the recession has deepened, more prime borrowers have lost jobs and gotten in the risk category. It started in the subprime sector and now has spread to the marketplace as a whole.”

Olofsson forecasts an ebb and flow of home sales and prices.

“My intuition tells me that the market will go in little waves like this for a while,” she said. “We haven’t seen the end of it, but I’m hoping we’ve seen the worst of it.”

Condo sales were also strong in June. According to HomeData, the volume of sales for condos rose 37 percent in June compared with May after adjusting for the number of sales days per month. The median price for condos increased 4.7 percent for the month to $309,000.

Reinsdorf said the threshold for high demand for condos was at or below the $185,000 level.