Disappointing, disturbing, and traumatic.

That's how Ed Albers, president of the California Association of Realtors, describes what it's like to be a real estate agent in the Golden State these days as the nation's largest housing market remains mired in a slump.

"Its been kind of traumatic," said Mr. Albers. "We're working harder to put transactions together and keep them together."

After an all-too-brief upswing last year, home sales in California fell again this year.

That's part of a national pattern. But in California, the decline hit especially hard because sales had fallen each year since 1990, except for last year.

TRW Redi Property Data reported last week that home sales in California dropped 21% in the first quarter from the total in the same period last year. Nationally, home sales fell 17% in the same period because of higher interest rates and a slowing economy.

And lenders, real estate agents, and home builders in California report that volume continued to be soft in April and May.

Lower interest rates should have translated into higher sales, but they have not, said Mario Antoci, chairman of American Savings Bank, Irvine, Calif.

"We keep looking for excuses," Mr. Antoci said. "In January and February, we said it was because interest rates had gone up. Then in March and April, we said it was because we were having so much rain.

"And now there is no explanation. We've had great weather, low interest rates, and the activity is still not picking up," he said.

Mr. Antoci and others cited low consumer confidence as an important factor in the continuing slump. Consumers are unwilling to move up into larger homes and make higher monthly payments, as long as the state's economic prospects remain uncertain, they said.

At the UCLA Business Forecasting Project, Tom Lieser, associate director, attributed disappointing sales to falling home prices. Falling prices have deterred homebuyers who would like to see some stability before they invest in the asset, he said.

Home prices may be nearing the bottom, Mr. Lieser added, but it's too early to tell.

For example, in the state's largest county, Los Angeles, home prices fell a whopping 23% from January 1991 to January 1995. The decline continued in the first quarter, with prices falling another 2% through March.

How are lenders coping?

The state's largest lender, Bank of America, is stressing the basics - lots of customer contact and an educated sales force, according to Arthur D. Ringwald, executive vice president of the residential lending group at the BankAmerica Corp. unit.

Also, like thrifts, which have normally concentrated on making and holding adjustable-rate mortgages, Bank of America is broadening its focus.

It has beefed up its secondary market operations and is making more fixed-rate loans, Mr. Ringwald said. That means it does more business in all rate environments.

Recently, the bank hired Muir Atherton to head its secondary market trading. He had been senior vice president for secondary marketing for American Residential Mortgage Corp., La Jolla, Calif.

In May, almost one-third of the bank's loans had fixed rates, Mr. Ringwald said.

At mortgage banks, the weak real estate market has intensified the pressure to price aggressively and originate at a loss, said William Jacobs, president of the California Mortgage Bankers Association.

The situation is not "tenable in the long run," he said.

Still, as rates have fallen and consumers have shifted away from adjustable-rate loans to those with fixed rates, mortgage bankers have gained market share, Mr. Jacobs said.

"This year, we are off our backs and on our feet and fighting for every loan," he said.

Mr. Antoci of American Savings said he expects sales will pick up this summer.

For the time being, the thrift is maintaining a full staff of loan consultants. Because they are paid through commissions, that's not hard, Mr. Antoci said.

But if sales don't pick up, the thrift will probably cut back its office staff, such as underwriters, he said.

As at Bank of America, loan officers at American Savings are stressing fixed-rate loans, along with the thrift's bread-and-butter ARM business.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.