BY GREGORY J. WILCOX, Staff Writer
LA Daily News
Article Last Updated:11/18/2006 10:01:33 PM PST

Over the summer, John Toole put his Woodland Hills home on the market for $1,695,000 and waited for a rush of prospective buyers.

And waited, and waited and waited.

So he offered a 15-day Hawaiian Islands cruise for two to the agent representing the buyer to stimulate some interest. And Toole waited some more.

He eventually slashed his asking price by $100,000. Nothing changed.

“It didn’t bring anybody around. Nothing. The market is absolutely dead,” Toole said. “I was amazed.”

He’s taking the house off the market when the listing contract expires next month.

Toole’s experience, sagging sales and scant year-over-year price appreciation offer proof that the boom market of the late 1990s and first half of this decade is over.

The number of “For Sale” signs across the San Fernando Valley soared earlier this year and many now feature “Price Reduced” banners. Monthly sales of houses and condominiums have been consistently about 20 percent below their 2005 levels, and prices are now increasing by the smallest amount in years.

Home sales counts have totaled fewer than 1,000 units every month since October 2005. And the year is expected to end that way for the first time since 1996.

And while the median home price - the point at which half the units cost more and half less - peaked at a record $625,000 this June, it has been bouncing around between the high $500,000 to low $600,000 range for 15 months.

At some point, possibly this month or next, many expect the median home price to fall below its year-ago level for the first time since March 1996.

One thing is certain: The last two market cycles are like none in recent Valley history. This boom has been longer and stronger than its bust.

The bust

The previous boom market peaked in 1988, when a then-record 15,263 houses changed owners, a 14.5 percent annual increase.

In 1988 the median price increased a record 32.1 percent to $195,708. The price record for that cycle came the following year when it twice hit $245,000. But 1989 also saw sales fall 16.4 percent.

The price slide began in 1990 when the median for the full year fell 2.4 percent. The full-year average median price then fell for seven consecutive years.

Starting in March 1992, the median price fell on an annual basis for 37 consecutive months. In November 1995, it dipped to $155,000, the low point in that down market, 36.7 percent below the old record high.

The boom

The sale upturn began in 1996 with a 7.6 percent annual increase. Sales then increased for three consecutive years, the biggest being a 14.7 percent gain in 1998.

Prices took off in 1997 when the full-year median increased 3.4 percent. Since then it has increased annually for 116 consecutive months.

Price gains far outstrip the loss of the early 1990s. From its low point in 1995, the median price skyrocketed 303.2 percent to a June 2006 record. It is up 293.5 percent through October.

From the prior boom market record, the median price is up 149 percent.

But October’s sales total of 771 houses is the lowest for that month since 1992.

So is this the 1990s all over again?

“It feels exactly the same,” said Realtor Raquel Magro of the Northridge office of Pinnacle Estate Properties Inc.

Magro has been selling Valley houses and condominiums for 24 years and has seen both bust and boom.

“In my opinion, prices are adjusting themselves to 2005. And what I’m seeing is that anything under $450,000 is selling, even with multiple offers. That seems to be the price for affordable housing in the starter market.”

She also saw another change last week. Magro specializes in foreclosed properties and last week a lender hired her to market a Burbank condominium priced at $519,000.

The owner who lost the condo paid $530,000 in September 2005 and it was being rented out at the time of the foreclosure, Magro said.

Buyers are still setting high asking prices and it usually takes three cuts to trigger a sale.

Some buyers who tried to time the price peak now are simply taking their properties off the market until things pick up again, Magro said.

To Jerry Carlisle, who has been inspecting properties for 20 years, the current climate has a sense of d j vu.

His business has been down by as much as 35 percent since the sales slide started.

“I’m concerned with it. I think it’s an indication of a down trend in the market that may be here for some time, but I have no way to predict that,” he said.

Part of it is the market and that there is more competition from other inspection firms now.

“A lot of it has to do with the time of year. When school starts again, you have fewer people selling their homes,” he said.

Carlisle has stepped up his marketing, going out and meeting Realtors, speaking at office meetings and sending out brochures.

But he is not turning bearish on the residential real estate market. Not just yet.

“I think that the real estate market in the Los Angeles area will be very good. The reason for that is the people that hire me, 25 percent are from the L.A. area and the others are from other parts of the world. So there is demand,” he said.

Market’s turn

Jim Link, executive vice president of the Van Nuys-based Southland Regional Association of Realtors, said the market has definitely made a turn.

But this slump likely won’t bring a twin whammy of falling sales and collapsing prices.

The last two market swings were not exactly normal, either.

“I would say that it is the longest sustained boom market since I’ve been here and I definitely think it lasted longer than anyone expected,” he said.

Industry officials and analysts had predicted as long ago as two years that sales would soften and prices would flatten.

But the market kept going until late last year.

“What we’re getting now is that correction,” Link said.

It seems to take more than a sales decline to tug down prices. When sales plunged in 1990 the median price eased down.

But that came after the Cold War ended and huge defense spending cuts wrought massive job losses in the aerospace sector, which was then a dominant component of the Los Angeles area economy.

Many of those jobs moved to other parts of the country and people followed them. Many of those who lost jobs also lost their homes, foreclosures spiked and the real estate market tanked.

The long boom that followed the early 1990s’ collapse began unwinding in 2004, when sales decreased an annual 4.3 percent. The median price though, increased 26.3 percent, the second-biggest on record in the association’s database dating back to 1988.

Last year, sales decreased 3.7 percent, but the median price gained 20.1 percent.

This year’s sales decline will be in the 20 percent range and the median price gain in single digits percentage wise.

L.A.’s economy

This down market will probably not end up like the 1990s for one reason: the economy.

It’s on much firmer footing now.

Daniel Blake, director of the San Fernando Valley Economic Research Center at California State University, Northridge, has noted that the local economy has a broader base and is expected to add jobs over the next several years.

Job growth can help mute downward price pressure from sagging sales. And the housing market sailed right through the recession in the early 2000s.

When this boom started no one guessed it would last this long. Prices have stayed in a fairly narrow range for more than a year and sales have been falling from their year-ago level for the past 12 months.

But while no one can say how long this slump will last, Blake seems certain about future Valley housing markets:

“I think they will cycle less violently,” he said.

$1 billion bond measure may spur massive projects
BY KERRY CAVANAUGH, Staff Writer
Article Last Updated:11/01/2006 01:16:17 AM PST

At the bottom of the Nov. 7 ballot is a $1 billion affordable-housing bond measure that could spur a massive, publicly funded building boom in Los Angeles over the next decade.

Measure H - the biggest bond in the city’s history - also touches on some of the controversial issues of development, density, homelessness and population growth.

Supporters argue that its passage would allow the city to coherently address those issues by concentrating denser, below-market housing near transit lines and moving transients from Skid Row into supportive housing complexes.

“Think about this, a billion-dollar investment in housing with a $6 billion economic impact. We’ll see the face of the city change before our very eyes. We’ll reconfigure what our city looks like,” Mayor Antonio Villaraigosa said last month at a housing summit to promote Measure H.

“It’s an incredible opportunity to remake Los Angeles.”

The measure would cost property owners roughly $15 per $100,000 of assessed value - about $53 for a $350,000 home, and $75 annually for a median-priced $500,000 home.

And that bothers Walter Moore, a real-estate broker and high school teacher who is among the most vocal opponents of Measure H.

“I don’t see why I have a duty - having worked hard and saved to buy a home - to work harder to pay for other people,” he said.

“It really boils down to what is your vision for the future of the city. Do we tax everyone who lives here to accommodate everyone who wants to live here?”

Too expensive

With the average monthly rent in Los Angeles at $1,500, low-income units are priced according to tenant income, with sample rents ranging from $400 for a two-bedroom apartment to $950 for a four-bedroom unit.

“At times, people don’t really remember there are security guards, food service workers, bank workers and a whole lot of people not served by our current housing situation. That’s why we’ve targeted this more to the less well-off, lower-income workers,” said G. Allan Kingston, president of nonprofit housing developer Century Housing and a co-chairman of the Homes for L.A. Families campaign committee.

Kingston and others say Los Angeles is suffering a housing crisis because not enough homes have been built over the past decade to meet population growth - and the homes that are available are too expensive for most Angelenos.

Housing need

Just 20 percent of Los Angeles residents can afford to buy today’s median-priced, $500,000 house.

Still, the need for affordable housing is much greater than the 10,000 units the Measure H bond would provide, said Valley Village resident and apartment owner Victor Viereck.

“There’s so much more demand for what is there. You can’t overcome that by subsidizing things,” said Viereck, who sat on the city’s housing task force in the late 1990s.

“You’re taking from other people who need the money, from a lot of people who are struggling and there’s a relatively small percentage of people who would get the benefit.”

Plus, the city has lost more than nearly 12,000 affordable, rent-controlled units over the past five years as property owners demolished buildings to develop condominiums or converted rental apartments to condos.

Supporters acknowledge that government assistance will still be needed for low- and moderate-income residents despite the cooling real estate market and construction of more market-rate units.

“You cannot provide low-income housing without a subsidy. In a city like Los Angeles, which has very high land prices, you can’t even come close on a low and moderate income,” said Michael H. Schill, dean of the UCLA School of Law and an expert on housing policy.

But skeptics counter that Los Angeles, state and federal governments already fund Section 8 rental assistance, low-income housing subsidies and first-time homebuyer programs.

Plus, there are 626,000 rent-controlled units in the city.

“We’re doing plenty now to help, but if you’re hellbent on spending money on the poor, take the city’s tax revenues and spend some of that on Section 8,” said Moore, who signed the ballot argument against Prop. H along with anti-tax groups.

“Three quarters of the (bond) money goes to developers, the rest you’re taking money to pay for homes for yuppies.”

Developer view

Developers scoff at the idea they’ll make big bucks building low-income housing.

“All the tax-credit people and affordable-housing-credit people, their profits are regulated by the state and federal government,” said developer Jeff Lee, who builds condos and houses for low-income and market-rate buyers.

“This is not a get-rich-quick scheme by building affordable housing. Most of these people would be better off if they went to Palmdale and built $250,000 tract homes.”

And supporters note that Measure H also would require regular audits and an oversight committee appointed by the mayor and council president to advise the Housing Department on how to dole out dollars.

The measure also promises criminal penalties for misuse of the funds.

Bond supporters say the Housing Department has a good track record of managing the Affordable Housing Trust Fund, and every Los Angeles dollar has been matched by $4 to $5 in private, state and federal dollars.

“It’s one of the most successful government programs that we can look to in Los Angeles, and third parties, like the state, reinforce how well we’ve done,” said City Council President Eric Garcetti.

More importantly, Garcetti said, the trust fund created a transparent, point-based system to award funds, which took politics and influence out of the selection process.

“Quite frankly, if it had been the Housing Department with that money 10 years ago it would have been `Who do you know?’ It was very political,” Garcetti said.

“It’s a really clean process now.”

However, there hasn’t been a full, independent analysis of the trust fund in recent years. City Controller Laura Chick is auditing the trust fund, but her review will not be complete until later this year.

Spending history

Records show that since 2003 Los Angeles has spent $183 million in city and federal funds to help build and rehabilitate 4,679 rental units in 79 projects.

The trust fund generally has paid less than 20 percent of the total construction cost and most developers have received between $1 million and $6 million from the fund, depending on the size and cost of their building.

So far, most of the money has been spent in downtown, Central, East and South Los Angeles, in neighborhoods with lots of low-income residents and rundown rentals.

Roughly 12 percent of the funds have been spent on 12 projects in the San Fernando Valley, largely in the communities of North Hills, Pacoima, Van Nuys and Canoga Park.

In Van Nuys, L.A. Family Housing received $2 million from the Affordable Housing Trust Fund to build the 30-unit Cecil Younger Gardens apartment house on a vacant lot.

The nonprofit paired that with $2.3 million in tax credits, $1.4 million from the state housing bond, and other sources to cover the $7.2 million project.

The result is a clean, modern building with roomy apartments, a play area, and a child-care center.

Pilar Luna and her three children were crammed into a one-bedroom North Hollywood apartment before they were accepted into Saticoy Gardens.

Now they enjoy a brand-new unit with three bedrooms - enough room to play hide-and-seek in the apartment, 9-year-old Brandon Luna joked.

“When I saw the apartment for the first time, I cried,” Luna said recently. “We were uncomfortable and life was stressful before. This is good for my kids.”