The median home price in Los Angeles County hit a new high in February, but home sales continue to decline.

The county’s median home price rose to $616,230, a 5 percent increase from the previous month and up 9 percent from the previous year, according to figures released Friday by the California Association of Realtors.

Home sales dropped 15.9 percent in February compared with a year ago.

Los Angeles County continues to register large population gains amid a housing shortage, which fueled the median home price increase, said CAR Deputy Chief Economist Robert Kleinhenz.

Los Angeles County has an estimated housing shortage of 290,000 units, he said.

“Even with new home building in the first half of this decade, relative to housing needs we still have a very tight market,” he said.

Relatively low inventory levels also contributed to the price increases, Kleinhenz said.

Los Angeles County had an unsold inventory index of 7.7 months in February. The index indicates the number of months needed to deplete the supply of homes on the market at the current sales rate.

The index was at 7.9 months in January and at 5.9 months a year ago, Kleinhenz said. All these figures are below the long-run average of 8.3 months.

“When inventory levels are below that average, we see price gains,” he said.

Diamond Bar had one of the greatest median home price increases in the state at 26.5 percent. Baldwin Park’s 16.1 percent increase and Pasadena’s 13.4 percent increase also placed them in the top 10.

February home prices usually hold steady or decrease compared to January, and these are typically the two weakest months of the year, Kleinhenz said.

“It remains to be seen whether this is an aberration or we’re looking at some sort of change in a trend, which might suggest an improvement in the housing market,” Kleinhenz said.

One ominous trend in the housing market is growing problems in the subprime lending market.

First-time buyers must protect their credit scores so they can enter into a good loan program with good rates, said Marty Rodriguez, owner of Century 21 Marty Rodriguez in Glendora.

“Your first-time buyer market is going to get hit hard because now their credit scores have to be higher in order to qualify (for a loan),” Rodriguez said. “For buyers with good credit, the market is still there.”

She recently sold multimillion-dollar homes in Glendora and San Dimas, Rodriguez said. People who have the money and good credit can still afford to buy.

“That’s what’s driving the median price, not the entry levels,” she said.

The decline in sales is a case of sellers not being realistic about the market, said James Joseph, owner of Coldwell Banker Ambassador Realty in Whittier.

“They’re not succeeding in adjusting their price to meet the demands,” he said. “Well-priced inventory always sells, and it’s just a matter of whether the Realtor is successful in explaining to the seller the current market situation.”

Source:

http://www.pasadenastarnews.com/news/ci_5511220