BIG CHILL SETTLES OVER FORMERLY HOT MARKET.

Byline: Gregory J. Wilcox

A couple of months ago Alice Chan and her husband put their home in West Hills on the market for more than $700,000 and waited for the buyers to arrive.

And waited, and waited and waited.

Now the for sale sign is also dressed up with a "Price Reduced" banner.

Alice Chan is not happy, either.

"Our agent told us to reduce the price but I don't think so. This is a nice area," Chan said one day last week.

The 1,602-square-foot, three-bedroom, two-bath home is now priced at $663,000 and it's the second reduction, too, said Realtor Josephine Chan of Paramount Rodeo Realty.

"We do have an offer on the house, but the seller thinks the market is going to go up so they aren't going to sell," said Josephine Chan.

The Chans can afford to wait. They just want to move to Northridge, but are comfortable where they are.

Whether they are comfortable with this new market in a couple of months remains to be seen.

Their agent recognizes the fact that a significant chill has settled over what was once a hot market.

Two reports out last week - one from DataQuick Information Systems and the other from the Southland Regional Association of Realtors in Van Nuys - came to the same conclusion: Sales are well off the year-ago pace but price appreciation remains strong from year-ago levels.

But on a month-to-month basis, prices have been flat in most areas.

In other words, the sky is not falling, but it's not as high as it used to be, either.

In their 2006 market forecasts, analysts and industry executives predicted that sales would be off from 2005's exceptionally strong level and price appreciation would moderate.

But the big dips in January and February are somewhat surprising.

So what's the residential real estate market going to look like this time next year?

San Diego County probably offers the best example, since it is farther along in its cycle than either Los Angeles County or the San Fernando Valley.

According to DataQuick, sales in San Diego County fell an annual 16.8 percent last month while the median price rose by only 6.4 percent.

It's been stuck on a single-digit gain for 10 consecutive months.

In the Valley the median price jumped by 18.2 percent, and in the county it increased by 15.6 percent.

But a year ago the price increases were in the 20 percent to 25 percent range.

The expectation is that we're going to look a lot like San Diego, price-activity wise, one of these months down the road.

Dan Blake, director of the San Fernando Valley Economic Research Center at California State University, Northridge, saw some of the directional signs in February's numbers, most notably the one that had inventory soaring 77 percent to a five-month-plus supply in the Valley.

"What typically happens in real estate markets is the quantity leads the price," Blake said.

As inventory moves up, prices move down.

By how much depends on lots of variables.

In June 1990, the median price of a single-family home was $240,800, down from $245,000, then a record, a year earlier. Prices then went on a protracted slide.

But the economy was also in a protracted jump and the local labor force was shedding jobs.

Inventory swelled to more than a two-year supply because people losing jobs could not afford to hang onto their homes.

Now as this market is turning the economy is on sound footing.

And it's expected to continue to grow.

That could keep prices from collapsing or the so-called bubble from bursting.

Of course, back in June 1990 no one could see a price collapse heading down the road.

But on the upside it did create one heck of a buying opportunity for lots of Valley residents.

And anyone who bought a house or condo here during that time into the early 2000s has done quite well.

That equity gain is not expected to evaporate in this cooling market.

But recent buyers aren't likely to see big annual increases in their investment, either.

The California Housing Finance Agency is now offering a 40-year, fixed-rate mortgage.

The state agency acts as a bank and helps first-time buyers. The new loan program can fund up to 100 percent of the purchase price or appraised value, whichever is less.

This loan can also be used in conjunction with other agency programs.

More information is available at www.calhfa.ca.gov.

greg.wilcox(at)dailynews.com

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