By Kevin Felt
Staff Writer
Monday, July 26, 2004 - Los Angeles County's median price for an existing single-family home hit a record $445,140 last month, up 31.6 percent from a year earlier, the California Association of Realtors reported Monday.
June's median price eclipsed the county's previous record of $434,760, which was set in May. As jarring as those numbers are, the statistics did not surprise Raphael Bostic, director of the Casden Real Estate Economics Forecast at the USC Lusk Center for Real Estate.
"The market has been hot for quite a while, and for the most part it has been a story of too many people chasing too few houses,' he said.
CAR also reported sales volume decreased slightly for the second month in a row, dipping 1.3 percent compared with June 2003.
California's median home price the point at which half the homes cost more, and half less also set a record in June, rising 25.3 percent in the last year to $469,170. Home resale activity increased 10.8 percent.
With prices continually rising, fewer and fewer families can afford to buy a home. And that is the scariest part of Southern California's housing equation, according to Tom Adams, co- owner of Century 21 Adams & Barnes in Monrovia.
"Housing affordability has fallen to 18 percent in L.A. County,' Adams said. "That means that 82 percent of (households) can't afford a median-priced home. People no longer have the opportunity to own a piece of the community they live in ... and that's not good.'
But buyers are still lining up, despite the whopping prices hikes.
"The number of new homes going into escrow through our office was up 250 percent in July over a year ago,' Adams said. "It's unprecedented. I'm baffled by it.'
Robert Kleinhenz, chief deputy economist for CAR, expects to see tight market conditions continue, even though homes aren't selling quite as quickly as they were in previous months.
"I wouldn't be surprised if the volume of sales stays level or drops off a bit in July,' he said. "I also wouldn't be surprised if we continue to see price increases in the 25-percent-to-30-percent range in July and August for L.A. County. It's not as intense now, but it's still very tight.'
Though he thinks the market is slowing, Bostic is optimistic it won't decline.
"I don't think we're going to start seeing prices fall,' he said.
But he also does not expect that annual price increases of more than 20 percent which the county has seen all year long will continue much longer.
Rather, he expects the market to stabilize with smaller annual price bumps of 8 percent to 10 percent.
"The Southern California economy is performing pretty well,' said Bostic. "As long as that continues, we will see continued demand for housing.'
But if price hikes continue at current levels for much longer, Bostic said it could potentially hurt the area's economy as a whole.
"We're certainly not there now, but at some point there is the thought that housing prices could become a competitive disadvantage and could inhibit the region's ability to compete for jobs,' he said.
Among cities with at least 30 sales completed in June, San Marino ranked ninth in the state with a median home price of $1,078,000, according to La Jolla-based DataQuick Information Systems, which includes all types of homes including condominiums in its data.
Alhambra and Diamond Bar posted median price increases that were among the county's highest compared with June 2003. Alhambra's median jumped 43.5 percent to $377,500 and Diamond Bar's median rose 41.5 percent to $467,000.
Colton's 78.6-percent increase to $250,000 was the state's largest year-to-year gain.
Kevin Felt can be reached at (626) 962-8811, Ext. 2703, or by e-mail at kevin.felt@sgvn.com.