Forecast: Big demand, low vacancy drive rise
By Kerry Cavanaugh, Staff Writer
LA Daily News

Los Angeles-area rents, already among the nation’s highest, jumped by 7 percent in 2005, and a similar bump this year is expected to push the average monthly rent to more than $1,500, according to a University of Southern California forecast released today.

The run-up in rent is fueled by high demand for apartments and few vacancies. About 97 percent of the region’s apartments are currently occupied.

Additionally, an increasing number of apartments are being converted to condominiums, further reducing the number of rentals available.

“The supply of apartments now is really tight. Demand is still so strong and people have to find a place to live,” said Delores Conway, director of the Casden Real Estate Economic Forecast at USC’s Lusk Center for Real Estate.

She observed the hot market last summer when USC students were on the hunt for affordable rentals.

“All the students were arriving and they were having a hard time finding apartments because they would go there, and if they didn’t take (the unit) right away, it was gone.”

Apartment building owner and manager Christopher Spencer doesn’t need a study to tell him demand - and rents - are up. The real estate investor recently listed an Encino studio apartment for $995 and received 51 inquiries. The interest allows him to be “super picky” about his tenants. If someone shows up late for an appointment to view the unit or is not polite during the visit, he or she is disqualified. Bad credit or past eviction? Also disqualified. Sometimes, Spencer said, he’ll allow prospective renters to bid on a unit.

“A lot of times I’ll get a higher offer than I asked, if the unit is really clean or in a good location,” he said.

Units in high-demand neighborhoods, such as Encino, often go for more than the San Fernando Valley’s average rent of $1,355 per month - a 9 percent increase over the Valley’s 2004 average monthly rent. The average rent for Los Angeles County is $1,416 - 7 percent more than in 2004. San Francisco is the only California city with higher rents. That’s also a significant boost compared to 2003 and 2004, when the average rents only increased around 3.5 percent.

“It’s the condo conversions,” Conway explained, referring to the process of turning rental apartments into for-sale condominiums. With single-family homes so expensive, more buyers are looking at condos as a more affordable way to become a homeowner.

“We’ve seen so much activity in terms of condo conversion and that’s reduced the supply of apartments. It has tightened the market. It’s pushing up occupancy rates and increasing rents,” she said.

That troubles Larry Gross, executive director of the Coalition for Economic Survival, who counts 5,000 units in the Los Angeles area converted to condos in the last five years. He sees more low-income families forced to leave Los Angeles or move further from their jobs in order to afford a home.

“It has a ripple effect. If they build condos and take affordable housing off the market, then they need to make sure affordable housing is replaced,” he said.

There are more than 9,000 units under construction in the city of Los Angeles and neighboring Glendale, Burbank and Pasadena. But many of these new rentals are high-end and luxury buildings, Conway said.

Indeed, the average rent in Glendale, Pasadena and Burbank climbed 15 percent to $1,555, largely because of new, high-end buildings that opened to tenants last year.

ALEX VEIGA
Associated Press

LOS ANGELES - Home sales declined statewide in February and the rate of price increases slowed, a reflection of growing pressure on sellers to dial back prices to lure increasingly tentative buyers.

In all, 37,900 new and resale houses and condominiums were sold last month, a 9.3 percent decline from 41,800 in February 2005 and a drop of 1 percent from January’s sales, real estate research firm DataQuick Information Systems reported Thursday.

The state has seen annual home sales decline for five straight months. Last month’s sales were the lowest since 32,454 homes were sold in February 2001, the report said.

February is traditionally a slow month, and comparisons to last year could be misleading because it was such a strong year.

“It appears that today’s market is probably as close to what we would call normal as we’ve had in a long time,” said John Karevoll, a DataQuick analyst.

Still, the slowdown in sales also reflects the tussle between buyers and sellers as the housing market continues to level off from a five-year climb.

“What I’m seeing is both buyers and sellers digging their heels in, buyers saying ‘I’m not ready to buy’ and sellers going ‘I’m not going to lower the price,’” said David Kerr, a Realtor with Emeryville-based ZipRealty Inc.

“A lot of sellers are still pricing to the higher-end and their properties are still sitting there, and they’re not considering realistic offers,” said Kerr, whose territory includes Oakland and Berkeley.

The median home price in California last month hit $457,000, up 1.1 percent from January and up 12.3 percent from $407,000 in the same period a year ago. It marks the lowest annual increase since 10.7 percent in December 2001, DataQuick said.

Statewide home price increases peaked in June 2004 at 23.2 percent and that rate has gradually declined ever since.

DataQuick released figures Thursday for the nine-county region surrounding San Francisco Bay. Sales in the area were down 16.8 percent in February compared to the same month last year but up 3.4 percent from January, according to DataQuick.

The median price of a home in the region in February was $616,000, up 12.2 percent from $549,000 a year ago and up 1.5 percent compared to January.

In a six-county area of Southern California, the number of homes sold last month also fell, DataQuick said earlier this week.

In all, 19,905 homes were sold during the month, a 7 percent drop from the same period a year ago and down nearly 1 percent from January.

The median home price in the region hit $480,000 last month, up 12.9 percent from February 2005 and up 2.3 percent from January, DataQuick said.

One factor behind the apparent disconnect between buyers and sellers involves the standard practice of using sales of comparable homes to set an asking price.

Such comparisons are typically made with homes sold within a six-month period. But in many cases, the prices that homes fetched a half-year ago don’t square with many buyers’ perceptions of where the market is headed.

“Sellers do not recognize what’s going on in terms of the market transitioning,” Kerr said. “They still think that because the house across the street sold for like $50,000 to $100,000 more than theirs, that theirs should be worth that, plus some. And what’s happening is, it’s not happening.”

Dale Hansen, a computer technician in Fairfield, listed his four-bedroom, two and a half-bath home for $665,000 in early January but took it off the market last month after only receiving offers well-below his asking price.

As a result, Hansen and his wife fell out of escrow on a condominium they were looking to buy after selling their home.

“We had a lot of traffic, a lot of interest,” said Hansen, 31. “A lot of people are coming in $20,000 to $25,000 right off less than what we’re asking for.”

The couple asked their real estate agent to hold firm on the price. They plan to relist the home next month.

“We went into this whole thing knowing it’s not the best time of year to sell, but we wanted to go ahead and give it a shot,” Hansen said. “We’ll cross our fingers and hope it goes well.”

Despite the market’s cooldown in recent months, some buyers say it’s still tough to find the right property in their price range.

Mathew Moses, an environmental engineer from Berkeley, has been searching for a home in the $500,000 to $600,000 range since December but hasn’t found anything to compel him to make an offer.

“The stuff that I’m looking at is way overpriced,” said Moses, 31.

Still, Moses says as long as interest rates don’t rise too high, he can wait for the right deal.

“I think it could be helpful if I don’t find anything ideal for me and wait another six months,” he said. “I’m willing to do that.”

By Gretchen Macchiarella
March 1, 2006

Steve States is the selling agent for a house in Camarillo that needs to sell by April 1.

To get the job done, the 17-year veteran threw in a little enticement: a 2006 BMW 325i.

For a list price of $754,777, you get the car and a four-bedroom, two-bath home in Mission Oaks. He said the $30,000-plus car generated a lot of interest in a crowded field, but the seller has not yet accepted an offer.

Little extras have not been very common for about five years as the hot real estate market put most of the negotiating power on the seller’s side, but a recent cooldown has put more homes on the market and increased the competition, States said.

“It has become a level playing field, maybe even in the buyer’s favor,” he said.

The California Association of Realtor’s report released Tuesday showed regions all over the state with slower sales and slower pace of appreciation than last year. Ventura County’s median sales price for an existing single-family home was $682,250 in January, up 6.9 percent from a year earlier.

Statewide, the median price was $551,300, up 13.8 percent from January 2005. Sales

dropped year-over-year by 24 percent, but the beginning of 2005 was unusually busy for a traditionally slow time.

The highest percentage price increase was in the high desert region, which gained 27.4 percent to a median of $321,400. Los Angeles County fell squarely in the middle of the statewide statistics with a median of $560,740, up 17.9 percent, with sales down 23 percent from January to January.

“The California real estate market is beginning to experience the soft landing that we expect to be the underlying dynamic driving the housing market his year,” CAR Chief Economist Leslie Appleton-Young said in a statement. “The number of homes for sale has risen to a six-month supply, which will translate into a slower rate of price appreciation than we experienced in 2005.”

There are still plenty of buyers for the right house in the right neighborhood, said Brian Watnick, broker at the real estate office of Goodwin & Thyne Properties in Ventura. Homes above the college in Ventura, for instance, are still a hot commodity.

Watnick said he been making sure to expand the reach of Ventura County houses for sale by putting them on Santa Barbara and Los Angeles’ multiple listing services. With the number of homes for sale these days, he said, it makes sense to try to bring in as many buyers as possible. “Sometimes you need a little creative marketing,” he said.

He is expecting a warm-up in the real estate market in the spring, when buying activity normally picks up.

States called the current market healthy, even if it is a slightly difficult transition for sellers accustomed to buyers lining up at the door. He said the enticements to get a house noticed might become more common during the year.

“When you have sellers that need to sell quickly ¿ they have to beat the competition and it is kind of a bitter pill for sellers now because we have been spoiled,” he said.

Ventura County’s median home price peaked at $694,690 in July, but has been edging back up toward $700,000. The University of California, Santa Barbara Economic Forecast Project expects the median price in Ventura County to reach $750,000 in 2006. Orange County, a market that typically tracks slightly ahead of Ventura County, was $699,060 in January.