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Limited inventory and high prices are making house hunting a long-term proposition in the Southland.

March 28, 2004|Jeff Bertolucci | Special to The Times

The "For Sale" sign is practically an endangered species these days in Southern California.

Soon after Trieu Nguyen and his wife, Jennifer, married in August, they began looking for a new home. "I work in Costa Mesa and my wife drives into L.A.," Nguyen said. "So we were looking for somewhere in between."

The couple set their sights on a 2,000-square-foot single-family home in the Lakes, a community in Buena Park, but the $500,000 model they wanted was already in escrow. So they waited until January for a similar model to come on the market. When it did, it was priced at $575,000.

"We put in an offer for $540,000 and thought an additional $40,000 over a span of four months was ridiculous," Nguyen recalled. "But we got outbid. The house sold in two days."

Such is the cruel reality for area home buyers. Low inventories of unsold homes, combined with record-setting prices, are limiting the choices for house hunters. And frustrated real estate agents report waiting lists of potential buyers but few homes to show them.

The supply of homes on the market has dropped below even last year's historic lows, according to the California Assn. of Realtors. In January, Los Angeles County had a slim 1.5-month supply of homes for sale, down from 3 months in January 2003. By comparison, the county's all-time inventory high was 27.9 months in February 1991. The inventory measure indicates the number of months it would take to sell all homes on the market at the current sales rate.

Conditions are even tighter in Orange County: 0.6 months in January versus 2.6 months a year ago.

Many prospective sellers -- fearful of becoming buyers and having to pay top dollar for what few properties are for sale -- are keeping their homes off the market. "We're thinking about selling our house, but we have to figure out what is available," said Sherman Oaks homeowner Marion Fainstein. What is on the market in Sherman Oaks is overpriced, complained Fainstein, who is looking for a home in the $800,000 to $1.3 million range. "There is no value for your money."

Among neighborhoods with only a fraction of the number of homes for sale they had just two years ago is Manhattan Beach. In January 2002, for instance, the beach city had 159 active listings. But this January it had only 34, according to Michael Davin, executive vice president of Catalist Homes.

When Dennis Nakasone sold his Manhattan Beach townhouse in December, he figured it would be easy to buy a larger single-family residence somewhere in the South Bay. He was wrong.

"There just weren't many homes in the price range we could afford," Nakasone said. "It was a bit of a panic."

He bid $10,000 above the asking price on one home, only to be outbid by nearly $40,000. "It was shocking."

Experts point to low interest rates as the fuel of the housing frenzy. "What surprises me is that mortgage rates have remained so low for so long," said Leslie Appleton-Young, chief economist for the California Assn. of Realtors. "That's why you see properties staying on the market for relatively short periods of time."

The lack of inventory is so severe that many real estate agents have multiple buyers waiting for homes. Cindee Zab- ner, a Re/Max agent in Oak Park, has a waiting list of about 12 clients seeking homes at prices ranging from $500,000 to $1.3 million. "I'm actually calling homeowners I've talked to over the past couple of years -- people who've watched the prices go up -- and asking, 'Is it time to sell?' "

Some prospective buyers have been waiting a year or more. Renters Maria and Nick Nicolacakis started house hunting in the Studio City/Sherman Oaks area last spring. They postponed their search for a few months after their baby was born in November and have since resumed their hunt. Finding a home has been difficult.

"It's frustrating because we grew up in the Midwest," Maria Nicolacakis said. "We could have a mansion with acreage for the prices that things are going for out here."

Is there any good news on the horizon? A rise in mortgage interest rates could finally dampen home buyer enthusiasm later this year, according to Appleton-Young, thereby boosting inventory and cooling an overheated residential market.

In the meantime, persistence and luck are buyers' best assets.

Elsa Tinoco, a teacher for the L.A. Unified School District, and her husband, Steven, recently paid $249,000 for a two-bedroom home in the L.A. community of El Sereno, which borders Alhambra, where the couple grew up.

"Last year I was very discouraged," said Elsa Tinoco, who had seen the house she wanted go to another buyer. But she kept her eye on the property and contacted the new owner, who was remodeling the property for resale. Yet again the home went to another buyer. In January, however, it fell out of escrow. The seller called Tinoco, who, with her husband, quickly purchased the home.

There are other success stories as well. The Nguyens, after being outbid in Buena Park, continued their search and paid $480,000 for a 1,600-square-foot home in Placentia. And Nakasone, who sold his Manhattan Beach condominium and then was outbid on another home, purchased a single-family residence in Redondo Beach.

"We had to make some compromises on size and location," Nakasone said, "but it's a pretty nice-looking place."

Elsa Tinoco's advice? "Sometimes it's going to take longer than you think, like six months to one year. You just have to hang in there."

Jeff Bertolucci can be reached at jbert@aol.com.

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