California’s Housing Rebound Sputters : Real estate: After a four-month spurt in sales, the turnaround has surprised the industry.
While the housing market nationwide is enjoying a five-month recovery, California’s rebound has apparently ground to a halt.
The Construction Industry Research Board in Burbank this month lowered its 1991 forecast for total new-home construction in California to 125,000 units from 130,000 units as home sales have fallen.
Official statewide figures on home sales aren’t yet available for July. But several big markets posted lower sales last month and continue to perform sluggishly in August, even though average, 30-year fixed mortgage rates in California declined to a five-year low last week--9.174%.
Dataquick, a San Diego-based information services firm, said existing home sales in July fell 17% in Riverside, 11.4% in Sacramento and 20% in Kern County. The number of Los Angeles homes and condominiums sold in July declined 8% to 361 units from 391 in June, according to the Los Angeles Board of Realtors.
The Los Angeles figures do not include the San Fernando Valley, Beverly Hills, West Hollywood, Santa Monica, Venice, Culver City or Marina del Rey. But last month, the California Assn. of Realtors reported that home sales throughout the state fell 7.2% in June. The decline came amid widespread price cutting that pushed down the median price of an existing single-family home in California 1.5% to $204,090.
Realtors, developers and lenders from San Francisco to San Diego say they are surprised by the markets’ sudden about-face after four consecutive months of sales increases. The sales slowdown came as a rude awakening, given the state’s improved employment statistics, low interest rates and strong home sales elsewhere in the nation.
But others point to clear signs of weakness--notably California’s persistently sluggish economy, fading consumer optimism and declining home sales in once-red-hot markets such as Sacramento--as possible contributors to the slump.
One top executive of a major thrift also notes that tougher pricing by developers and lean backlogs of built homes contributed to the slowdown. He notes that, immediately after the Gulf War, builders cut prices sharply to attract buyers but then soon began to ratchet prices up again. At the same time, many builders have scaled back the number of homes they are willing to construct that have not already been presold.
“People are asking, what happened to the buying euphoria that occurred right after the (Gulf) war?” said Sanford R. Goodkin, a partner at the San Diego real estate consulting firm Goodkin, Kahn & Associates. “Well, the euphoria is gone. There’s all kinds of confusion and anxiety in the market now that probably won’t sort itself out until sometime past October.”
“I think a lot of people are concerned about their jobs and taking on more debt,” said Mark Paolucci, director of marketing for Arvida Co., which is developing the planned housing community of Coto De Caza near Mission Viejo in Orange County. “The entry-level stuff continues to sell well, but I’ve never seen it this bad--with sales dropping down in the middle of the summer.”
Wall Street analysts recently reduced their earnings estimates for California’s largest single-family home builder, Kaufman & Broad, after home sales tumbled in both June and July. The company confirmed that sales have fallen but provided no figures. However, Steve J. Dobi, an analyst for Smith Barney, estimates that for the seven-week period ended July 20, the company’s home sales totaled 310, compared to 395 for the same period a year ago.
Another indicator of just how badly sales have slumped in California in the wake of the buyers’ market is the relative glut of new homes featured in the Realtor’s Multiple Listing Service (MLS). One-third of the San Diego County homes listed in the service are new homes, “which is unusual,” said Bill Opie, president of the 5,500-member Dan Diego Board of Realtors. “Usually the new housing guys sell their own . . ., but in a tough market they turn to us.”
California’s housing woes come as many Americans had begun to rejoice about a rejuvenated housing market. The market screeched to a near-standstill last winter. Then, just as suddenly, it staged an explosive upturn, the end of the Gulf War and single-digit mortgage rates sparking a five-month-long recovery that in June drove nationwide sales of existing homes up 1.4%. Most analysts continue to forecast a recovery in housing, but California’s slump has stirred concern about how strong that recovery will be.
In addition to concerns about consumer confidence and the poor economy, some experts cite the credit crunch as a factor in dampening home sales. Banks and thrifts have ended the “easy qualifier” loans of 18 months ago, where borrowers could get a mortgage with as little as 5% down and little or no documentation of income. Most institutions now require 20% down and more extensive income documentation. Though falling home prices and lower interest rates have offset some of the impact of the tougher lending standards, borrowers aren’t beating a path to lenders’ doors.
“Refinances are up, but (home) purchase demand is fairly sluggish,” said Bill Houtz, a sales manager at the Orange office of Norwest Mortgage, which was the nation’s largest originator of mortgages in the first half of the year. Houtz said demand was strong as recently as early June, but since then “the market has really slowed down.”
The nation’s largest publicly owned mortgage banker, Pasadena-based Countrywide Credit Industries Inc., said its July mortgage originations grew 128% over the same period a year ago. But the growth came mostly in robust markets in the Northwest, Texas and Florida--not California.
“California is what I would call a ‘stable market’ for us,” said Jerry Baker, Countrywide’s managing director, production and support divisions. Baker said his company has managed to thrive in California only because it has acquired significant market share from less active lenders.
To try to stir reluctant home buyers from the sidelines, developers and real estate agents are having to resort to ever more aggressive marketing tactics.
Neil Schwartz of R. R. Gable Inc. in Woodland Hills, for example, has been “cold calling” and making door-to-door visits in order to drum up new business. Kaufman & Broad has opened a “Home Store” sales office in an Antelope Valley shopping mall to reach more potential home buyers, and Coto De Caza developer Arvida Co. is offering a chance to win a new BMW to visitors who simply tour its development.
“In this market, you have to change the way you work,” added Pat Rollie, a real estate agent at Bliss Keeler. “You’ve got to have skill in pricing a home, spend more money on advertising and marketing and do a lot of hand holding” with anxious sellers and finicky buyers.
Zandra Perry is among the growing number of hard-nosed home buyers who are making it tough for existing homeowners to quickly cash in to trade up to bigger homes.
The pharmaceutical sales representative decided that she was tired of renting and wanted to buy a home with her brother but didn’t want to spend any more than $200,000. After hearing reports of the buyer’s market, she began house hunting this past spring.
She recently paid $130,000 for a two-bedroom condominium in a 12-unit Baldwin Hills complex where most condos had sold for $150,000. She even talked the sellers--an elderly couple who was selling in order to move to a retirement home--into providing $13,000 in financing to close the deal.
“It was relatively painless,” said Perry. “I didn’t realize how much of a buyer’s market it was.”
“I think sellers have become a lot more realistic,” said Ricki Weinberger, an agent for Jim Dickson Realty in Pasadena. “I’m seeing asking prices much lower than they were even four months ago.”
Times staff writers Patrice Apodaca, Greg Johnson and Chris Woodyard contributed to this article.
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