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What Median Buys

June 09, 2002|DIANE WEDNER | TIMES STAFF WRITER

Estelle Clay learned just how competitive the current housing market can be when she put her three-bedroom Bellflower condo on the market early this spring and eight offers above the asking price quickly rolled in.

Nonetheless, the elementary school administrator, pre-approved for a home loan and armed with a 15% down payment, still was stunned to find herself on the losing end of three successive bidding wars for a newly constructed home in a development nearby. She landed a house there on the fourth try, but only after offering to pay far more than the $268,000 asking price.

Clay, like many frustrated home buyers today, wasn't competing for an entry-level home, nor was she vying for a million-dollar mansion. She simply sought a home priced at what is now the median for Southern California, a challenge that grows harder every day.

Low mortgage interest rates and ever-shrinking inventory have pushed the median price of homes in Southern California up 15.7% over last year to a record $258,000, according to DataQuick Information Systems. The median price is the amount at which half the homes sold for more and half sold for less.

The year-over-year increase was the strongest since June 1989, when prices reached $174,000, up 16% from the previous year.

Further fueling interest in home buying, the average rate for a 30-year fixed mortgage with one point in Southern California was 6.48% last week compared to 7.02% a year ago, said Earl Peattie of National Financial News Services.

But the low rates aren't enough to offset the high price of houses, so frustrated buyers find themselves scrambling to purchase homes they can afford. Sellers, meanwhile, are turning down perfectly good offers because they can't find move-up homes in their price range.

"It's an exuberant market," said John Karevoll, a DataQuick analyst. "But we're scraping the bottom of the barrel for inventory."

So what can you get for $258,000? That depends on where you look in Southern California, where homes in that range run from cramped to considerable, according to DataQuick research.

In Orange County's Huntington Beach, for example, an 872-square-foot one-bedroom home sold in April for the Southern California median price, while in Riverside County's Temecula, a four-bedroom home with 2,200 square feet went for the same price.

In Arcadia, a two-bedroom home in 866 square feet was purchased in April for $258,000, while in Paramount, a four-bedroom 2,055-square-foot home was bought for the same price, according to DataQuick.

"It blows your mind when you see what homes cost," said Candice Peck, 26, a San Clemente first-time buyer.

Peck and her 27-year-old husband, Darren, both teachers, recently found a 1,077-square-foot two-bedroom condo in the Orange County beach community for just below Southern California's median home price. The couple initially was worried about finding an affordable home after an 800-square-foot two-bedroom unit where they formerly rented sold for about $500,000.

Had they looked in the Riverside County community of La Sierra, they might have quickly found the four-bedroom 2,700-square-foot house that Teer One Properties agent Rita Gutteriez just sold for $255,000. But the Pecks held out for their cozy condo, even though it took much longer to find it.

"We lucked out with our place," Candice Peck said. "We thought we'd have to move to the desert."

The Pecks' agent agreed.

"I shake my head in disbelief," said Debbie Ferrari, the Pecks' Prudential California Realty agent, about the hoops buyers must jump through to clinch a deal. "Sellers won't consider contingency buyers anymore. Recently I've seen buyers with all cash get turned down in multiple-bidding situations."

To improve their prospects, move-up buyers should sell their homes before looking for new ones, said Suzanne Gracie, an agent at Prudential California Realty in Torrance.

Gracie's clients, Kate and Bruce Halling, recently attempted to buy a new home in Torrance before selling their Harbor City home but had to terminate the deal when their buyers suddenly backed out in mid-escrow.

The couple eventually sold their two-bedroom 978-square-foot home for $257,000 before moving up to their new Torrance home, which cost $438,000.

"We sweated out the whole process," Kate Halling said. "You're competing with buyers that have no contingencies. We were appealing to the sellers only because we had a 20% down payment."

Even if buyers come in with 20% down, many are stretching to make the monthly payments, experts say. Buyers who put 20% down on a $258,000--or median-priced--home, for example, must earn at least $60,000 a year to qualify for a loan, said David Soleymani, managing director of First Capital Corp. in Santa Monica. The monthly payment in that scenario is $1,305.

Buyers who can afford only a 10% down payment for that same house must earn $72,000 a year and will pay $1,563, Soleymani said.

First, however, buyers must find something to buy. And that's the toughest hurdle.

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