Bank Homes Foreclosures in LA Still Affected Home Prices

by Donald Hanz on cities

Bank homes foreclosures in Los Angeles County still put a downward pressure on home prices, as shown in the drop in median prices of houses sold in January, despite a steady improvement in prices since April last year.

Based on sales data from HomeData, the median home sales price in the county dropped to $342,000 in January from the $348,000 median in December 2009. The median sales price for condos also dropped to $305,000 from the median of $315,000 in December.

The 8-percent drop in sales volume in January compared to December was normal, according to realtors, because buyers are still in the holiday mood. But the drop in home prices was not normal because home prices in the county have been steadily rising since April last year.

Nevertheless, the median sales price for single-family homes in January this year was higher than the $320,000 median in January 2009, but the $310,000 median price for condos last year was higher.

Analysts said that the rise in sales volume compared to January last year reflected the positive effect of the federal tax incentive for both first time buyers and move-up buyers.

A sense of optimism also pervaded analysts when they saw that the pace of pre foreclosures and foreclosure sales in California slowed down by 24 percent in the last quarter, compared to the third quarter. The default rate decline in the final quarter of 2009 is significant because it meant a slower rate of bank homes foreclosures in the first quarter this year.

In 2009, Los Angeles foreclosures stepped up from 2008 by more than 37 percent, reaching a total of 175,810 filings, representing 3.99 percent of all households in the Los Angeles metro area. The number of filings also marked an increase of 203.4 percent from filings in 2007.

These foreclosures pulled home prices down, including prices of properties in affluent communities. In January, homes in high-cost neighborhoods like Manhattan Beach, Beverly Hills and Brentwood that were previously priced at around $2 million were being sold at around $1.4 million.

Meanwhile, in low-cost neighborhoods, city and nonprofit officials are using Neighborhood Stabilization Program funds to repair fixer upper homes to prevent further erosion of prices. Recently, the city was allocated $100 million from the second NSP funding round to carry out its program. In addition, the Los Angeles Neighborhood Housing Services was also given $60 million to help rehabilitate bank homes foreclosures in struggling neighborhoods.