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Owners Pay the Price : Home Values Decline--and There's No End in Sight

August 22, 1993|ANDREW LePAGE | SPECIAL TO THE TIMES

THE REGION — Home prices continued dropping in most San Gabriel Valley cities this summer, and real estate and economic analysts say there's no end in sight to the downward spiral.

Last year, home sales and prices dropped sharply in the San Gabriel Valley--as in the rest of Los Angeles County. Despite predictions by real estate agents that home sales would increase 5% or more this summer compared to last, they instead stagnated or dropped in most valley cities between May 1 and July 31.

Some realtors say low interest rates and bargain prices are tempting a growing number of prospective home buyers to shop around. But more shoppers doesn't necessarily mean more buyers.

"I'm seeing a lot more action at open houses. . . . We have the buyers but they're just not pulling the trigger," said Ron Norrbom, president of the Hacienda/Rowland/Diamond Bar Board of Realtors.

Between May 1 and July 31, the number of homes sold in nearly all of the valley's cities dropped--as little as 0.7% in Pasadena and as much as 45% in Sierra Madre--compared to the same period last year. Meanwhile, median sale prices fell--as much as 16% and as little as 1%--in all but five cities.

"It appears people don't have enough confidence in their jobs or financial situation to make a commitment to buy a home," said Rita Heieck, president of the East San Gabriel Valley Board of Realtors.

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The fears are real.

Just ask Michael Terrazino. He and his wife, who have a 2-year-old daughter, decided interest rates were just too low to pass up and bought their first home in June. For $155,000--the asking price was close to $190,000--they got a three-bedroom, 2 1/2-bath fixer-upper in West Covina.

"The owner was in a hurry to sell, but nobody thought he would go that low," Terrazino said.

But after escrow closed, Terrazino, 31, lost his job as a graphic artist after his Irwindale employer was bought out by another company. Now the Terrazinos say they are struggling to make ends meet.

Some Valley realtors say as much as 70% of their business is with first-time buyers such as the Terrazinos. That helps explain why the homes most likely to sell are priced below $200,000.

First-time buyers have also helped keep San Gabriel Valley's resale condominium market from sinking as low as that of detached homes. The number of condominium sales in about half the valley's cities was up during the past three months this year compared to the same period in 1992. Increases were as high as 207% in Covina, where 46 units sold between May 1 and July 31.

Condominiums, which typically range in price between $120,000 and $200,000 in the valley, are selling relatively well in upscale and working-class communities alike.

For the past three months compared to the same period last year, Arcadia sales were up 118% with 37 units sold, Pomona was up 72% with 31 units sold, and Duarte was up 27% with 19 units sold.

And the news isn't all bad in the resale housing market. A few communities over the past three months actually fared better in median sale price or the number of homes sold compared to the same period last year. In Walnut, for example, homes sales were down 15.1% but the median sale price was 5.8% higher, at $272,000. In Glendora, home sales were down 1.3% but the median sale price rose 8.1%.

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Real estate experts say interest rates will stay low for the foreseeable future and continue to give a boost to home sales. But the real estate market as a whole is not expected to improve until late next year.

"We don't expect to see much of an increase in interest rates because the economy seems to be slowing down nationally and California hasn't shown growth in three years," said Adrian Sanchez, regional economist for First Interstate Bancorp in Los Angeles. "What rates are today they are likely to be in the first half of 1994."

But he said that so long as the job market contracts, real estate values will continue to fall in lock-step. Sanchez does not expect home values to stabilize until the second half of next year.

Like the downward slide in San Gabriel Valley home prices, the decline in home sales reflects a countywide trend. In Los Angeles, for example, the number of homes sold between May 1 and July 31 this year compared to last is down 49%, while the median price of homes sold fell nearly 12%.

Sanchez offers this advice to anyone trying to sell a home: "If you don't have to sell right now, your best bet is to take the home off the market and wait for a recovery."

Today, some real estate agents say, home sellers are finally getting realistic about pricing their houses to sell. They are abandoning the idea that home prices will return to the levels of the late 1980s.

Meanwhile, buyers have become far more choosy and many expect to find the deal of a lifetime.

"Buyers have an impression that if you're selling your house you must be desperate," said Heieck, of the east valley realtors board. "Offers on homes are coming in very low. . . . People think they can steal the property."

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