Real Estate

Hot Home Market Eases Into Slower Gear

First-quarter numbers are in and the evidence is irrefutable. The real estate market is off to its weakest start in years and the sellers are making big adjustments in therir asking price to fantasy ratio.

For January to March period sales are well undcr year ago levels across the state, Los Angeles County and San Fernando Valley.

Inventory is up, giving buyers more leverage than they've had in years. Inventory levels, also offer a glimpse of what direction prices might take. To find a market this anemic in the Valley we have to go back to 1997.

In this year's first quarter 2,153 previously owned houses changed owners down 22.8% from 2,789 sales in the 2005 first quarter. The last time sales were this week came in the 1997 first quarter, 2,120 single family transactios.

Preliminary numbers from the California Association of Realtors show a similar trend. Statewide sales fell 18.3% from last year first quarter, one that was on a record pace. Los Angeles County sales dropped 19.1%

Prices have stayed in a narrow range since last July, rising from a low of $ 590,000 in September and December to March's high. Lots of market analysts and economists expect prices to behave in this fashion for a while.

There are also ample signs of the inventory build up. Neigborhoods are festooned with the most "For Sale" sales signs in years, some sporting "Price Reduced" tags. Sellers, can no longer slap 20% on top of what their neighbor's house sold for, sit back and wait for the cash to roll in.

The bigger the supply the more downward pressure is exerted on prices. Research found that when inventory levels are seven months or lower, the state media price goes up 11% on average. When inventory streches nine months or more, the median fall on a consistent basis.

March ended with state-wide inventory at 5.2 months. A year ago was 1.8 months. Inventory in the Valley was 3.6 months.

Last March it was 1.2 month supply. The market is going to continue to unwind. Wheter it's more that 10 years worth remains to be seen.