SoCal home sales and prices: June 2007

Home sales plunged in Southern California last month, making it the worst June in 14 years and reflecting an increasingly soft housing market — especially in outlying areas such as the Inland Empire and Antelope Valley.

Overall, values are continuing to hold their own — with the median price of a Southland home rising to $502,000, up 2.4% from a year ago. But prices fell in two-thirds of the region's ZIP Codes, reflecting greater weakness in lower-cost housing markets. Riverside County posted a 6% decline in values.

Experts say prices are likely to remain weak in most areas until buyers start clamoring for homes again.

"Without any recovery in the sales volume, we won't recover as far as pricing is concerned," said G.U. Krueger, an economist and real estate consultant who thinks the housing market will start to regain strength by 2009.

Figures released Tuesday show that the number of Southland home sales plunged 36% in June from the same month last year, marking 21 straight months of year-over-year sales declines. San Bernardino County posted the worst numbers, with sales diving 50%.

Real estate experts attributed the drop to several factors, including tighter lending standards and a drop in speculative buying by house "flippers."

But they also note that sales were hitting records earlier this decade, and that is now helping to amplify the decline.

"There's a huge drop in sales volume, but that drop-off has more to do with how high the numbers were a few years ago," said John Karevoll of DataQuick Information Systems, a La Jolla-based research firm that compiles monthly real estate statistics. "Just how much of the demand cycle was pre-met with the activity two years ago, we're not sure."

Regina Nadeau didn't need the latest sales figures to tell her that the market is slow — she's been trying to sell her Lake Forest condo for the last eight months.

"I pray every day and have a sense of peace, otherwise I would be stressing out," she said.

Nadeau has cut her asking price twice since January, and is now seeking $318,000 for her one-bedroom place. But she says she's reluctant to take it down any lower: "I don't want to sell too cheaply."

Karevoll believes that the psychology of any housing market comes down to "gotta" vs. "wanna."

People who cannot make their mortgage payments or find that their homes are worth less than their loans fall into the "gotta" camp, and are helping to account for a rising tide of defaults and foreclosures.

But these homeowners constitute less than 10% of the total market, Karevoll said. The vast majority of homes for sale in the six-county Southland are owned by the "wannas" — people who have discretion over whether they have to sell and at what price.

Indeed, in Los Angeles County alone, 3,000 sellers took their homes off the market from May to June, or about 7% of all sellers, according to real estate brokerage ZipRealty Inc.

Many sellers are simply holding out, refusing to give up any perceived equity gain by reducing their asking price, Karevoll said.

That is the big reason why Southern California prices regionwide haven't tumbled precipitously — the people who "gotta" sell, at any price, remain a minority.

Still, the health of the market varies widely.

Take San Bernardino. The city in the heart of the Inland Empire benefited greatly as home prices in neighboring counties exploded in the early part of the decade.

Builders saw opportunity to construct houses by the tens of thousands on relatively inexpensive land, and eager first-time home buyers — many with little or no down payments and sub-par credit scores — were willing to trade long commutes for an affordable abode.

The result of absorbing this spillover was an upsurge in sales and prices in the last two years, just as the boom elsewhere was waning.

But now San Bernardino is reeling from the same post-boom effects — but to a greater degree. In June, sales in the city fell by 57% and the median price dropped 16% to $246,000 from $290,000 a year earlier.

Ditto for Lancaster in the Antelope Valley, which like San Bernardino also attracted large numbers of first-time home buyers seeking affordable prices. There, sales plunged 62% in June and the median price declined 13% to $279,500 from $320,250, according to DataQuick.

"Whenever you have a market that is receding, as Southern California is right now, it will recede more in the spillover markets," Karevoll said. "In the core areas, people will be much less affected than where there was a lot of building and risky lending."

While price appreciation was down or flat in most of Southern California, Los Angeles County posted a 4.8% increase in its median price, to $545,000.

L.A.'s numbers were helped in part by rising values in affluent areas such as Beverly Hills, La Canada Flintridge and Studio City — where buyers typically aren't fazed by tighter lending standards or higher interest rates.

Even so, sales in Los Angeles County fell 32.5%.

Orange County, the region's priciest county, saw its median edge up 0.4% to $645,000 — a new record — while sales declined 31.6%.

San Diego County, where prices have been slipping for the last year, experienced a 1.9% drop in its median price to $495,000. Yet despite the year-over-year decline, its median is now back to where it was in August. Sales there fell 22.6%.

Ventura County's median price dropped 7% to $582,000 and sales declined 27.8%. Because the county is the region's smallest market, where fewer than 1,000 homes are sold a month, it tends to experience bigger price swings.

In the hard-hit Inland Empire, Riverside County's sales plummeted 50.1% and the median price fell 5.9% to $400,000, while San Bernardino County's sales tumbled 47.2%, with the median price flat at $365,000.

The data include all homes sold, including condominiums and newly built housing.

A cooling market, with hot spots

Southland home sales have fallen to their lowest level in 14 years, but despite the slumping market some communities are still seeing values rise sharply. To check changes in your ZIP Code, go to latimes.com/homesdata.

The 10 areas with the largest percentage price increases and the 10 with the largest decreases in June

[please see microfilm for full chart and map information]

Arcadia: +39%

Beaumont: -19.3%

Calabasas: -21.9%

Camarillo: -22.3%

Chatsworth: +16.5%

Huntington Beach: +16.4%

La Canada Flintridge: +21.7%

La Habra: +16.1%

La Quinta: +17.3%

Lake Arrowhead: +38.3%

Manhattan Beach: -18%

Murrieta: -16.9%

Newport Beach: +24.4%

Palm Desert: -24.2%

Studio City: +25.4%

Sun City: -17.6%

Twentynine Palms: -20.4%

Valley Village: -19%

Ventura: +60.2%

Vista: -19.1%

Five largest sales decreases

Five largest sales increases

Five largest price decreases

Five largest price increases

Only ZIP Codes with 20 or more existing homes sales in June of 2006 and 2007 were counted.

Source: DataQuick Information Systems

See our updated article on Lake Arrowhead's luxury market update for real, local market statistics. Lake Arrowhead is considered a "hot spot" for a reason! Come up and see! Jason and Holly Galligan