THE MUTED MARKET

THEY filed into the Eagle Rock open house alone and in groups. Others came in pairs, as if boarding Noah’s ark. Some had been looking for two years, some longer.

Twenty-three families checked out the bedrooms (small), dining room (large) and kitchen (upgraded) during the four-hour open house on a recent cool, cloudy Sunday. Three expressed interest in buying the three-bedroom “character home,” as Coldwell Banker agent Denise Barnes described the 1,364-square-foot 1922 California bungalow, reduced to $605,000 from $645,000. But most said they were waiting for prices to drop further.

“It’s pretty ugly out there,” said longtime Coldwell Banker broker David Toyama, who specializes in Eagle Rock, Glassell Park, Highland Park and Azusa. His business is down 50% from a year ago, he said, “and that wasn’t our best year either.”

Hope springs eternal, however, and spring typically is the season of highest hopes for buyers and sellers. Despite slumping consumer confidence and ever-worsening economic news, some hardy souls are venturing into the housing market, and not all of them are just looking.

“This won’t be a silent spring; we’ll have a muted spring,” said Andrew LePage, an analyst with DataQuick Information Systems, which tracks home sales and prices. “We’re not diving into the abyss, but it’s very slow.”

Those who can stomach the risk of some short-term equity loss on a home they expect to keep for several years and eventually see appreciate are inching their way back to the market, economists and agents say.

That’s because mortgage rates have ticked down from 6.07% for a 30-year fixed-rate loan in early January, according to Freddie Mac, to 5.88% early this month, conforming loan limits have gone up in some Southland areas -- from $417,000 to $729,750 -- and there are plenty of homes for sale, said economist G.U. Krueger of IHP Capital Markets, an Irvine residential real estate investment firm.

Buyers waiting for the market to scrape bottom, however, probably will have to wait longer, economists say, as those who aren’t in a hurry to list their properties will be sitting tight.

“There are a lot of foreclosures to compete with,” Krueger said. “Eventually, that inventory will burn off, and we’ll have stability in the prices. You’ll see a slew of buyers then . . . thinking the market’s bottomed out.”

Deal sweeteners

Many buyers are on hold while awaiting that outcome. But with new and resale home and condo closings in Southern California down 41.4% in March from a year ago and the median price off 23.8%, at $385,000, some sellers and builders are luring buyers into the market with discounted prices and concessions, such as paying loan points, helping with closing costs and upgrading kitchen amenities or carpeting.

In Los Angeles County, the March median home price fell 18.5%, to $440,000, from a year ago; in Orange County, 19.6%, to $506,000. The hard-hit Inland Empire saw values tank 27.1% and 28.2% in Riverside and San Bernardino counties, respectively. Meanwhile, sales in Los Angeles County plummeted 49%; in Orange County, 46.9%; and in Riverside and San Bernardino counties, 26.9% and 38.0%, respectively. Nearly 38% of existing Southland homes that sold in March were foreclosure resales -- houses sold after they were foreclosed on last year.

By a widely used measure of inventory, there has been an average 8.3-month supply of homes on the market in Los Angeles County during most of the last two decades, according to the California Assn. of Realtors. That’s how long it would take for the supply of homes to be sold at the prevailing pace. In February, that supply was 21.2 months, compared with 10.6 a year ago. It went as low as 1.1 months in December 2003.

The market slide means bargains galore in areas hard hit by foreclosures, such as Hemet 92543 in Riverside County, where median prices plummeted 48%, to $130,000, during the first quarter this year, compared with the same period a year ago, according to DataQuick.

Different realities

First-time buyers priced out during the run-up that peaked in 2005 can get killer deals on foreclosed homes all over the Inland Empire, said Vicki Carpenter, director of the Inland Valleys Assn. of Realtors. About 75% of her 50 listings are foreclosures, and it’s not unusual for those listings to have multiple offers, she said.

In Menifee in Riverside County, for example, a three-bedroom, four-bathroom foreclosed home on a cul-de-sac with a $500,000 loan recently sparked a bidding frenzy when it was listed at $320,000. The deal is in escrow for the full asking price.

“We haven’t seen that scenario in years,” Carpenter said.

Step outside the inland valleys, however, and some sellers still are stuck in the fantasy world of 2005, insisting on prices that buyers won’t entertain for a minute, then despairing when their homes attract no offers.

Other sellers, however, understand the market reality and are pitching in to close deals.

Agent Toyama recently brokered a sale in Baldwin Park in which the first-time buyers, stretching to afford the $325,000 home they wanted, were told by their lenders that they had to pay off some debt to get the green light for the loan.

The sellers, eager to clinch the deal, paid a portion of the closing costs, freeing up money for the buyers to settle some of their debts. The sale went through.

“When sellers tune out reality,” said agent Adriana Toyama, David Toyama’s wife, “I refuse their listing.”

Elizabeth Powell, 28, learned how tough the market is. She first listed her four-bedroom West Covina house for sale for $600,000 in February 2007.

Two buyers fell out of escrow due to lending problems -- they had difficulty qualifying for jumbo loans -- so she lowered the price to $550,000, then $480,000, $460,000 and in August, $430,000. She sold the 1,489-square-foot house in January for $440,000.

“I’m very glad it’s over with,” Powell said of the selling experience she described as frustrating and stressful. “The loan terms kept changing; neighbors started selling their homes for less. I can’t imagine having to sell another property.”

Jumping through hoops

Not that buying is much easier. Edith and Nik Howard, first-time buyers and admitted open-house junkies, looked for an affordable house for a year.

They wanted to live in Silver Lake. A friend tipped them off to a six-unit condo conversion there, and after “jumping through a lot of hoops for lenders” and getting some financial help from their parents, they closed escrow in January on a three-bedroom unit in 1,200 square feet for $539,000.

“We were very, very lucky,” Edith said. “We pushed to get it.”

The most popular areas -- and the most difficult for good deals -- are those near transportation lines and employment centers, agents say. Homes in the revitalized parts of Hollywood, Los Feliz and Silver Lake are maintaining their value, but Mt. Washington and Echo Park, which are in the midst of hipster makeovers, have softer prices.

Lower-priced neighborhoods in Los Angeles County sank faster than those at the high end and are where bargains can be found -- places such as Paramount, Lancaster, Palmdale and Moreno Valley.

And then there are the communities that rarely feel pain, such as Beverly Hills, Indian Wells, Pacific Palisades and Newport Beach, where prices have continued to climb.

But even homes in those tony areas must be in pristine shape, said Beverly Hills Coldwell Banker agent Ruben Perez.

“No one’s buying fixers or homes that are overpriced,” Perez said. “They have to be in top shape to get top dollar.”

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(BEGIN TEXT OF INFOBOX)

Some markets sizzle, while others fizzle

Here are the Southern California communities with the greatest increases and greatest decreases in value comparing the first quarters of 2007 and 2008, based on at least 20 sales. The median sales prices are for existing, detached homes.

*--* Biggest gains Community ZIP Code Q1-2007 Q1-2008 % change Newport Beach 92663 $1,649,000 $2,750,000 66.8% Indian Wells 92210 $ 970,000 $1,352,500 39.4% Newport Coast 92657 $2,048,750 $2,610,000 27.4% West Hollywood 90069 $1,690,000 $2,121,000 25.5% Santa Barbara 93108 $2,866,364 $3,587,500 25.2% Irvine 92603 $1,430,000 $1,687,500 18.0% Rancho Palos Verdes 90275 $995,000 $1,170,000 17.6% Palos Verdes Peninsula 90274 $1,425,000 $1,659,500 16.5% Brentwood 90049 $1,815,000 $2,100,000 15.7% San Diego 92107 $725,000 $829,500 14.4% *--*

Biggest losses

*--* Community ZIP Code Q1-2007 Q1-2008 % change Hemet 92543 $250,000 $130,000 -48.0% Twentynine Palms 92277 $150,000 $85,000 -43.3% Moreno Valley 92553 $355,000 $201,500 -43.2% Sun City 92587 $560,000 $322,500 -42.4% Paramount 90723 $450,000 $260,000 -42.2% Palmdale 93550 $325,000 $190,000 -41.5% Moreno Valley 92551 $375,000 $229,500 -38.8% Oxnard 93033 $520,000 $320,000 -38.5% Lancaster 93534 $290,000 $180,000 -37.9% Adelanto 92301 $283,000 $176,000 -37.8% *--*

Diane Wedner

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Source: DataQuick Information Systems