Price Cuts Unable to Spur Home Sales

Mike Collins has some advice for homeowners thinking of putting a “FOR SALE” sign on their front lawn--think twice.

“It is a wonderful buyer’s market, and we are encouraging everyone who doesn’t need to be on the market right now to pull off,” said Collins, a Hermosa Beach real estate broker and president of the South Bay Board of Realtors.

That would hardly have been Collins’ advice 30 months ago, when many properties sold soon after the sign had been driven into the ground and sometimes even before they made the realtors’ listing book.

“It was exciting, it was hectic, it was bedlam,” Collins recalled. “We could hardly get a listing to hang around a few days before we had an offer on it.”

Today, local agents say, the market is characterized by a crush of listings with some sellers sharply reducing their prices and still waiting months to unload their properties.

“Everybody has a house to sell,” said agent Susan McNeill, who is offering homes at the new Sea Bluff development in Rancho Palos Verdes, where prices have been reduced $100,000 to $150,000 to spur sales. The homes are now listed at $650,000 to $850,000.

At the same time, relationships between agents and sellers are being tested as the two sides square off over just how much a home should be listed for. Agents are now faced with the unpleasant task of telling clients that their homes may not fetch as much as the one down the street did six or seven months ago--even though the homes are clones.

“It’s tough because they think you are trying to rip them off,” said a veteran South Bay agent who did not want to be identified.

Generally, agents said lower-priced homes and very expensive homes, whose buyers aren’t as affected by ups and downs in the economy, are moving the most rapidly.

According to the California Assn. of Realtors, the median price of a home in California in August was $194,099, down 3.1% from a year ago. In Los Angeles County, the median price dropped 5%, to $212,170.

South Bay multiple listing figures show that there were 7,146 homes, including condominiums, on the market at the end of September, up from 5,196 during the same period last year. On the average, it took 109 days to sell a home, compared to 76 days during the same period last year, the figures show.

Even though agents say many sellers--even those living in the South Bay’s most pricey communities--are slashing prices and waiting longer for an offer, the local multiple listing numbers do not necessarily indicate that. On the average, home sellers were getting 94% of their list price through September, according to the data from the South Bay multiple listing service. For the same period last year, the figure was 96%.

Just where prices are headed is guesswork for agents and housing experts, many of whom peg their forecasts to the outcome of the Middle East and national budget crises and the direction of interest rates and inflation.

Barring major bad economic news, Kathleen Connell, chairwoman of the Center for Finance and Real Estate at UCLA’s Anderson Graduate School of Management, said she believes local real estate prices will probably remain flat in 1991, with perhaps a slight increase in the fourth quarter. Leslie Appleton-Young, vice president for research and economics for the state realtors association, predicted prices will remain steady the remainder of this year and next.

Some agents and housing experts say the present slowdown was predictable because home prices in recent years have escalated to a level where many people simply found it difficult or impossible to afford a home. In the South Bay beach cities, for example, a so-called starter home now sells in the neighborhood of $325,000, Redondo Beach real estate agent David Teague said.

“I think just pure affordability is a problem in our market,” he said. “. . . (The) first-time buyer segment is getting smaller and smaller.”

Others said they believe a lack of consumer confidence is also having an impact on the market. People wondering whether their jobs are secure or if they are going to receive a year-end bonus are reluctant to trade up to a more expensive home, they said.

“They are not going to commit themselves to buying a bigger home in a better community,” Connell said.

Connell said that she also believes that consumers are simply resisting high housing costs, figuring prices are too high for what they are getting. “People are beginning to show some skepticism about the cost of housing in California,” she said.

Connell predicted that the real estate market is returning to more normal times. Over a 10-year period, figures show the average time it takes to sell a home in California is 10 to 12 months, she said.

That’s probably small consolation to sellers who expected their homes to be on the market for several months at the most, only to find themselves having to endure long waits and price reductions. Redondo Beach broker Vince DeLuca said his office listed a home for $750,000 a year ago. Even though the owner has dropped the price more than $120,000, it is still on the market.

Even in the most desireable areas of the Palos Verdes Peninsula, the pattern of long listings and reduced prices is being repeated. William Michel, a retired aerospace worker who lives in Palos Verdes Estates, put his five-bedroom home on the market in January for $697,500. Even though he has lowered the price to $664,500, he still hasn’t had an offer.

Michel, who has purchased another home in Oceanside contingent on his own home selling, says he is in a quandary over whether he should reduce his price further.

“If I had a little crystal ball and could say very well what was going to happen, I might be interested in dropping (the price),” he said.

Sellers willing to list their homes at a realistic price have a much better chance of getting an offer, agents said.

“The bottom line as far as I am concerned is always the price,” said the agent who did not want to be identified. “The main problem I feel is people don’t want to concede prices have gone down.”

The agent said he refinanced his home last November; it was appraised at $390,000. “Right now I have run comparables and it looks like I would get $350,000,” he said.

The present market has produced its share of bargain hunters hoping to pick up a great deal, agents said. Nevertheless, the agents predict such buyers will be sorely disappointed if they are waiting for home prices to fall precipitously.

“If they are waiting for the bottom to fall out, they are waiting in the wrong neighborhood,” Collins said. “There just has never been any evidence of that in the South Bay.”