REALTORS® Guardedly Optimistic That The House Market is Stabilizing as January Home Sales Hit Record Low

Home buyers are awakening to the opportunities available in today’s housing market even as some sellers cling to unrealistic price expectations, a stalemate that pushed sales of existing single-family homes during January - historically one of the slowest months of the year - to the lowest level on record, the Southland Regional Association of Realtors^® reported.

A total of 323 single-family homes closed escrow during January throughout the San Fernando Valley, down 43.2 percent from a year ago and 17.2 percent below the December tally. It was the fifth consecutive month that sales were in the 300s. Only one other time since the Association started keeping separate sales statistics in 1984 has the monthly sales total been in the 300s - February of 1991 as the state and nation plunged into recession.

Condominium sales were down 50.2 percent from a year ago to 105 closed escrows - the lowest in years, but not the record low of 80 sales which came in February 1993.

"We expected sales to be down, given the deluge of negative news from lenders and the impasse between buyers' over-eager desires and sellers' false expectations," said Mary Funk, president of the Association. ‘We are now guardedly optimistic that the worst is past, the market is beginning to stabilize and that sales will pick up as the traditional Spring home-buying season gets underway."

Pending escrows, a measure of future resale activity, supported that positive perspective. Open escrows were down 38.2 percent from a year ago, but increased 38.1 percent from the December tally, a potentially significant increase after months of generally double-digit declines.

Funk and Jim Link, the Association's chief executive officer, said Realtors are reporting a gradual decline in the number of sellers who list their home for sale at yesterday's prices.

"Now is not the time for sellers to be dabbling in the market, holding out for a unattainable asking price when eager buyers fully understand the new realities," Link said. "It's better to take the property off the market and wait until it turns around again.

"On the other hand, buyers need to realize that prices are not nose-diving," Link said, "especially in a stable, mature economy like the San Fernando Valley where there is a finite supply of homes for sale, little space for new construction, and relatively few properties coming on the market through the foreclosure process."

Some buyers incorrectly believe that if a home is being sold as a result of foreclosure it means the property will be dramatically discounted.

"Lenders may price a foreclosure aggressively so that it competes with other listings," Funk said, "yet there are few, if any, listings at fire sale prices."

The January median price of $500,000 was down 18.4 percent from a year ago, the first time since the early 1990s that the price posted a double-digit decline and the lowest median price since the record high of $655,000 was set in June of 2007.

Even as sales were starting to slow down, prices had been rising until August of last year and posted modest single-digit drops in the last three months of 2007.

The condominium median price of $368,000 was down 3.2 percent from a year ago and posted an 11.5 percent increase on a month-to-month basis. The record high of $415,000 came in February 2006.

Today is clearly a buyers' market, but a disconnect exists between the public's perception of the inventory and the actual number of homes listed for sale.

‘The inventory is large enough to offer buyers a wide selection," Link said, "but not so large that it drives resale prices down dramatically."

A total of 6,928 active listings were reported at the end of January, up 33.1 percent from a year ago and up 22.2 percent from December.

At the current pace of sales, the 6,928 active listings represents a 16.2-month supply- an indicator of a buyers' market since a balanced market is in the 5- to 6-month range - but still no where near the record high 23.0-month inventory of February 1993 or the record high 14,976 active listings of July 1992.

"It's difficult to know if the various assistance efforts mounted by the federal government will arrive soon enough or yield a significant local impact while tighter rules on home loans limit the number of buyers able to afford a home," Link said, "but we believe the opportunities now outweigh the risks and market is beginning to level off.

"It is still a buyers' market he said, "but some time soon we expect to see a balance emerge between buyers and sellers."