Housing market cooling
By Gregory J. Wilcox, Staff Writer
LA Daily News

California’s housing market continued leaking steam in December as sales plunged an annual 17.6 percent and price increases continued moderating, a trade group said Wednesday.

It’s the third report this month showing that last year ended weaker than 2004’s strong finish.

A market matching December’s pace for all of 2005 would feature 531,910 sales of previously owned single-family homes, said the California Association of Realtors. A year earlier the annualized pace totaled 645,860 sales.

That market ended up setting the sales record, and 2005 will come close to matching it when the final numbers are tallied, said Leslie Appleton-Young, the association’s vice president and chief economist.

“I wouldn’t call December’s sales strong. I would call them moderate; I would call it a good market. I anticipate a soft landing,” she said.

Sales in the Los Angeles County market fell an annual 15.8 percent, the association said.

Rising interest rates and higher housing and energy costs rattled consumers last month.

For example, as the year wound down, mortgage rates spiked above 6 percent for the first time since the middle of 2004, and the adjustable rate rose above 5 percent for three consecutive months.

Association President Vince Malta said the malaise could carry over into this month.

For example, earlier this month the Southland Regional Association of Realtors reported that December’s sales of single-family homes fell an annual 22.4 percent, and DataQuick Information Systems said sales of new and previously owned homes and condominiums sank 13 percent.

The last quarter does seem to be sending a signal.

“I think this is probably an indication of the expected cooling of the market,” said industry analyst Nima Nattagh.

Price gains are still strong, though.

During December, the median price of a California house increased an annual 15.6 percent, to $548,430, and was just under November’s medium of $548,680. In Los Angeles County, the median price increased 19.3 percent, to $552,760.

That’s still healthy appreciation but some sections of the state have seen rates narrow sharply. For example, during December, the median price in San Diego County increased 4.6 percent, to $603,680, and in Ventura County it increased 10.3 percent, to $675,680.

Sales in Ventura fell an annual 15.5 percent.

In the High Desert, which includes the Antelope Valley, the median price increased 31 percent, to $320,490, and sales increased 7.6 percent. That’s the most affordable region in the state and one of two to show a year-over-year sales increase.

Appleton-Young said this adds up to a more balanced market, which is good news for buyers. But housing affordability is reaching historical lows in many areas.

That’s not likely to improve.

“I think affordability is going to be very strained this year. I don’t see price declines (but) rates are rising,” Appleton-Young said.

More signs of cooling
By Gregory J. Wilcox, Staff Writer
LA Daily News

Residential real estate in California may be overvalued by as much as 26 percent but the anticipated market correction won’t bring a sharp price decline, according to a research report released on Tuesday.

It’s more evidence that a cooling rather than a meltdown is in store for the state’s hot residential real estate market.

The analysis, from Orange-based Advanced Data Mining & Research Inc., concludes homes are overvalued by as much as 16 percent in Southern California and by as much as 27 percent in the Bay Area.

And at about 28 percent, the Inland Empire ranks as one of the most overvalued areas in the state. The research firm, which specializes in property valuation methods and analysis, says that this is not surprising because prices in Riverside and San Bernardino counties have been increasing by about 16 percent a year since 2000.

Nima Nattagh, a principal at ADMARI, said that an overvalued market does not necessarily foreshadow trouble.

“We’re not saying that the values are going to come down or that a major correction of the market is in the offing,” he said.

And Nattagh said it is hard to apply the term “bubble” to the rapid price appreciation of the past several years.

That’s because a house is not an easily tradable commodity and that tends to ensure that any price decline will be gradual. And Nattagh believes that at this time next year prices will be higher than they are now. He just doesn’t know by how much but expects the increase to outpace the rate of inflation.

And he notes that prices in California did fall in the early part of the 1990s and many of the same market conditions are in place. The big difference now is that the state, especially Southern California, is not facing huge job losses and the overall economy is much more diversified.

Robert Kleinhenz, deputy chief economist at the California Association of Realtors, said that there has been concern for several years that the housing market is overvalued.

“We’ve heard for four years that there is a bubble and it’s going to burst. Now some of those bubblists are saying it’s not going to burst, it’s just going to deflate.”

Late last month the Los Angeles-based association said that both sales and price records would fall when the 2005 numbers are tallied.

And while sales are predicted to retreat from this year’s record level they won’t fall far while resale housing prices should rise about 10 percent, Kleinhenz said.