The Southern California median sales price slipped for the first time this year after holding steady for the first three months of 2009, DataQuick reported today.
The median price paid for a Southland home was $247,000, down 1.2 percent from $250,000 in March, and well below the $385,000 median seen a year earlier.
The median is now at its lowest point since February 2002, and 51.1 percent below the $505,000 peak seen in the spring and summer of 2007.
However, most of today’s home sales involve discounted foreclosures, while very few high-end homes are selling, so the median’s decline has been exaggerated.
“In many markets we’ve seen signs you’d expect to see not long before prices would normally stabilize: robust investor and first-time-buyer activity, 10-plus months of year-over-year sales gains, and less price erosion, if any,” said John Walsh, MDA DataQuick president, in a release.
“The problem is that we still face two big threats to price stability: layoffs, which can cause foreclosures across the home price spectrum, and possibly a new round of foreclosures triggered by defaults on ‘option ARM’ and ‘stated income’ loans used in mid-to high-end markets.
A total of 20,514 new and resale houses and condo were sold last month in six Southland counties, up 5.2 percent from March and 31.4 percent from a year ago.
Foreclosure sales accounted for 53.6 percent of resales, the seventh consecutive month in which post-foreclosure properties made up more than half of resale activity.
Meanwhile, builders sold the lowest number of newly constructed homes last month for an April since at least 1988.
Sales were at or near record highs for an April in hard-hit inland communities like Palmdale, Lancaster, and Victorville, while high-end coastal communities’ sales remained at or near record lows.
Last month, jumbo loan financing accounted for just 10.9 percent of sales, while FHA loans financed a near-record 39.1 percent of home purchases.
The Southern California median sales price slipped for the first time this year after holding steady for the first three months of 2009, DataQuick reported today.
The median price paid for a Southland home was $247,000, down 1.2 percent from $250,000 in March, and well below the $385,000 median seen a year earlier.
The median is now at its lowest point since February 2002, and 51.1 percent below the $505,000 peak seen in the spring and summer of 2007.
However, most of today’s home sales involve discounted foreclosures, while very few high-end homes are selling, so the median’s decline has been exaggerated.
“In many markets we’ve seen signs you’d expect to see not long before prices would normally stabilize: robust investor and first-time-buyer activity, 10-plus months of year-over-year sales gains, and less price erosion, if any,” said John Walsh, MDA DataQuick president, in a release.
“The problem is that we still face two big threats to price stability: layoffs, which can cause foreclosures across the home price spectrum, and possibly a new round of foreclosures triggered by defaults on ‘option ARM’ and ‘stated income’ loans used in mid-to high-end markets.
A total of 20,514 new and resale houses and condo were sold last month in six Southland counties, up 5.2 percent from March and 31.4 percent from a year ago.
Foreclosure sales accounted for 53.6 percent of resales, the seventh consecutive month in which post-foreclosure properties made up more than half of resale activity.
Meanwhile, builders sold the lowest number of newly constructed homes last month for an April since at least 1988.
Sales were at or near record highs for an April in hard-hit inland communities like Palmdale, Lancaster, and Victorville, while high-end coastal communities’ sales remained at or near record lows.
Last month, jumbo loan financing accounted for just 10.9 percent of sales, while FHA loans financed a near-record 39.1 percent of home purchases.
Some hard-hit neighborhoods in Southern California have seen home prices fall below 1989 levels, according to an article in the LA Times.
In 14 Southland Zip Codes, mostly desert communities on the outskirts of Los Angeles, median prices have fallen below levels recorded in April 1989, according to statistics from DataQuick.
They include cities like Lancaster, Palmdale, Hemet, Barstow, Desert Hot Springs, Victorville, Santa Ana and Oxnard.
In some parts of Palmdale, home prices are off 44.2 percent compared to 1989, and some spots in nearby Lancaster are down more than 35 percent.
Of course, the Southland median is actually much higher, clocking in at $247,000 in April, near the 2002 level.
But the median isn’t really a reflection of overall home prices, as most of the homes selling these days are at the lower end of the pricing spectrum, in foreclosure-ridden hotspots in the six-county area.
These areas also happen to be home to countless new housing developments, many of which are still being built despite being filled mostly with foreclosures and very few homeowners.
That’s the problem with areas on the fringe, where land is plentiful and obtaining building permits is relatively easy; who’s to say a builder doesn’t come in and attempt to build another 1,000 new homes next to yours?
Home prices closer to Los Angeles remain much higher than they appear, as a lack of space keeps supply in check, and new building permits aren’t so easy to acquire.
Of course, much of the unprecedented appreciation of the last few years has been wiped out, but things aren’t as bad as the median price implies.
Four days a week, Leticia Ortega de Ceballos sleeps in her car so she can pay for a house more than 100 miles away.
Her workweek begins with the Sunday night shift at Loews Hollywood Hotel, where she cleans the hallways and lobby. When she finishes, exhausted, there’s just an hour until she starts her second job cleaning hotel rooms at the Hilton in Glendale.
Then she has six hours to shower, eat and sleep before she starts all over again. Loews, Hilton, shower, eat, sleep. The 56-year-old sees the house in California City and the family within it on weekends.
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Gladis Ávila, 39, can spend more than two hours in traffic commuting to her job at the W Hollywood Hotel from her new house in Victorville, a 90-mile drive away. Some nights she gets home just as her youngest children are getting ready for bed.
“At the end of the day, when I’m heading home,” Ávila said, “I wonder if it’s worth it.”
The women, both hotel workers, grapple with all the difficulties of the housing market in California today, the high prices that push first-time buyers increasingly far from work, the scarcity of anything they can actually afford.
Housing concerns have been at the forefront of contract negotiations for hotel workers. Thousands of workers recently went on a three-day strike, demanding higher pay and better benefits. It was the first wave of walkouts anticipated this summer after contracts expired.
But Ortega de Ceballos and Ávila are looking for more than just shelter.
Sure, they want a home to live in now. But they also want to one day give their children the financial footing they themselves never had. The key is more than just hard work and a savings account with a laughably low interest rate. The key is a house, the kind of investment that can grow over time.
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Investing in a house is their way of building the kind of generational wealth that has long been out of reach for Black and brown families in the United States. The typical white family in the 21st century has five times the wealth of the typical Latino family and eight times the wealth of the typical Black family, according to the 2019 Survey of Consumer Finance.
And while homeownership represents an important component of wealth, there is a significant divide in who is able to achieve it. In California, in 2021, the Latino homeownership rate stood at 45.6%, compared to 64.5% for white families. The Black homeownership rate stood at 35.5%, according to census data analyzed by the Public Policy Institute of California.
The typical route to owning a home is to rent first and eventually save enough for a down payment. But with rising rents and wages that aren’t commensurate, that dream has become increasingly out of reach.
“Traditionally, owning a home has been the way that most families accumulate wealth,” said Marisol Cuellar Mejia, a research fellow at the Public Policy Institute of California. “That has happened for many years, and that was in some ways a manifestation of the American dream.”
Ortega de Ceballos, who emigrated from Mexico in the 1980s, started working two jobs, in part so she could help her sister back home study at a university. The two were orphans. Ortega de Ceballos wanted her sister to follow her dream.
She started a family while living in North Hollywood, but as it grew she moved to Sun Valley to find a larger place. Then she moved even farther away, to Lancaster, where she rented a house for a decade and raised her three children. That’s when she started sleeping in her car to save time and money on gas.
Ortega de Ceballos has juggled both jobs for more than 20 years. At the Hilton, rooms can go for more than $200 a night. At Loews, they go for around $300. Ortega de Ceballos earns $22 an hour.
It wasn’t until four years ago that she was able to finally accomplish her dream of buying her own home. The only catch — this time the house was even farther north, in California City, about 105 miles from her jobs in Hollywood and Glendale. Although it has a population of around 15,000, to Ortega de Ceballos it’s a “pueblito,” a small town. The typical home price is less than $300,000, compared to nearly a million in L.A.
She shares the three-bedroom home with her husband, who is disabled, and her youngest son, who is 29 and studying nursing. The home, severely damaged when the couple bought it, has now been renovated. When Ortega de Ceballos is home, she tends to her trees in a garden out back.
Owning her own home helped Ortega de Ceballos secure a better future for herself in addition to her children. She knows whatever retirement income she receives won’t be enough to pay rent in L.A.
“When I retire, I’m not going to be worried about all of these costs. I’m not going to be worried that I’m going to have to rent and I’ll be without money to eat or anything to live,” Ortega de Ceballos said.
The trade-off to accomplish her dreams has been brutal. The grueling, almost three-hour commute back home would be impossible, so she doesn’t return from Sunday until Friday. She sleeps in her red Kia more often than she does in her own house. She’s endured heat waves and at times feels as if she’s homeless.
Sometimes she goes out to eat, but often she relies on food she can get from the hotel, where she also showers. She drinks hotel coffee morning and night to keep her going.
On Fridays, her husband drives to Lancaster and then takes the train to his wife so he can to drive her home and prevent her from falling asleep at the wheel.
“It’s cost me a lot of sweat and tears,” Ortega de Ceballos said, her voice choked with tears. “Everything requires sacrifice. I’ve had to make sacrifices to get to where I am.”
“The most important thing is that my kids feel secure that they’ll have something one day,” she added. “For their future.”
Ortega de Ceballos has thought about finding work closer to home, but it’d be much less pay. It’s a cruel irony, where the income is better in L.A. — just not enough to live there without throwing the bulk of her paychecks at the rent.
That fact has become a major focus as the hotel workers’ union Unite Here Local 11 tries to negotiate new contracts for its members. Thousands of workers at hotels across Southern California walked off the job over the busy Fourth of July weekend.
In a Unite Here Local 11 survey, 53% of workers said they had either moved in the past five years or will move in the near future because of housing costs. Hotel workers reported commuting hours from Apple Valley, Palmdale, California City and Victorville.
In contract negotiations, the union has proposed creating a hospitality workforce housing fund, in addition to better wages, healthcare benefits, pensions and safer workloads. The hope is that an additional tax on hotel bills could go toward the construction of workforce housing for hospitality workers, said Kurt Petersen, co-president of Unite Here Local 11.
“I think every working person in Los Angeles is struggling to afford to live in Los Angeles,” Petersen said. “Our position is that those who work in the region’s most important and prosperous industry — tourism — need to have the ability to live in Los Angeles.”
On the Fourth of July, around 30 people, including housekeepers and cooks, picketed outside of the W Hollywood Hotel, where rooms go for more than $300 a night. They twirled noisemakers, banged on pots and pans and used megaphones to amplify their chants. At times, onlookers threw eggs at them.
Ávila was among those picketing. She usually commutes from Victorville to Hollywood from Sunday to Thursday. She has been a housekeeper at the W for 11 years, but she hasn’t worked at the hotel for the last few months as she helps organize her colleagues in her capacity as a union steward.
When Ávila first arrived in L.A. in 2009, she squeezed into a studio apartment with her parents, sister and her young son. After she started her own family, she rented a one-bedroom in Hollywood for $1,700. She, her husband, Armando Guzmán, and their three kids shared the room, splitting up among bunk beds.
A year and a half ago, she and Guzmán found a five-bedroom house in Victorville where her children — ages 17, 9 and 7 — could each have their own room. They pay $2,000 a month toward something of their own.
The two-story house has a pool, where the family spends weekends. She has space for exercise equipment, which saves her money on a gym. Although her oldest son had been reluctant to leave L.A., she said, he was happy to have a room of his own.
To stay awake on drives that can sometimes last three hours, Ávila keeps candy and gum in her car. She rolls down the windows and calls other hotel workers throughout the commute.
Guzmán, a construction worker in L.A., will sometimes stay the night with his mother or sister on days where the sun has beaten down and left him too drained to drive home.
Ávila thinks about how much she struggled in life and how she wants to ensure a better future for her children.
“I know that one day, when I’m not here,” Ávila said, “my children can have this home and know, ‘my mother made a sacrifice for us.’”
While your neighbor’s home loan may be none of your business, how they choose to finance their property can affect your home’s value.
A new Home Value Forecast Update from Teck Valuation Services revealed that areas where homeowners took out high loan-to-value (LTV) loans experienced larger home price declines.
Zero Down Palmdale
For example, in Palmdale, California, a city about 60 miles (by car) north of Los Angeles, the average LTV was approximately 94% from 2000 to 2012. And since home prices peaked there around 2006, they’ve fallen by more than 60%.
Put simply, in areas where homeowners took out high LTV loans, there was much less incentive to stick around once home prices began to fall.
Additionally, homeowners may have had difficulty keeping up with payments, as many of the high-LTV loans carried expensive second mortgages with interest rates in the double-digits.
This led to a downward spiral as more and more homeowners missed payments and/or walked away, with little or no home equity to keep them invested.
Established Arcadia
Conversely, in areas where LTVs were lower, home price declines tended to be much more muted, as was the case with Arcadia, CA, which is closer to the urban center of Los Angeles.
There, the average LTV was below 70% for the same period, and home prices only experienced a “very shallow decline” in 2008-2009 before bouncing back to all-time highs.
As you can see, the spread between mortgage amount and average sold price was a lot wider in Arcadia, and seemed to have peaked in the first quarter of 2013.
In other words, the chances of these homeowners walking away were pretty slim, even if home prices declined by a sizable amount. At worst, they could still sell if they couldn’t keep up with payments anymore.
Where Are the Good Homeowners?
While it’s not necessarily easy to tell where homeowners take out higher-risk mortgages, there are some clues.
Many of the newly-built neighborhoods offered up by the big publicly traded home builders tend to tout all types of creative financing to get prospective homeowners in the door.
So if you’re getting a great deal on financing with very little or nothing down and all kinds of tax breaks, your neighbor probably is too.
And if the entire neighborhood is relying on that type of financing, a sudden reversal in home prices could wreak havoc on everyone involved.
However, if you purchase a home in an established neighborhood with mostly older residents that appear to have lived there for a long time, chances are the LTVs are a lot lower, assuming they didn’t go nuts cashing out over the years.
Unfortunately, these neighborhoods tend to be in desirable parts of town, which are often priced much higher than surrounding areas.
Clearly there’s no guarantee to what your neighbors might do when it comes to financing, but finding a home in an older and more affluent neighborhood could provide a buffer if the economy tanks again and home prices get hit.
Sure, the potential upside might be more limited in an area that’s already established, but do you really want to gamble on a home purchase?
Hereâs a novel idea. If youâre having trouble paying the mortgage, and you canât get any assistance from your lender/servicer, you donât need to give up your home. You just canât live in the main house anymore. Thatâs what one guy did out in Palmdale, California, although he wasnât actually struggling to pay his bills.… Read More »If You Canât Pay the Mortgage, Live in Your Awesome Garage
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Whether you’ve lived in Palmdale for a while or recently moved there, check out 9 must-try restaurants in Palmdale. Find out where the locals eat.
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