LAT: Price of Southern California homes falls 41% from peak

[JohnLockesGhost]

Should this be celebrated or not?

The median sales price in the region drops to $300,000 in October, dragged down by the large number of foreclosed homes on the market.

With the median price of Southern California homes down more than 40% from its peak, the housing market has now slid further than most economists expected.

The median sales price for homes in the region fell to $300,000 in October, a level not seen since 2003 and a 41% drop from the peak price set in the spring and summer of 2007, according to San Diego-based MDA DataQuick.

Los Angeles County's median home sales price was $355,000, down 29% from a year ago.

Prices were dragged down by the large number of foreclosed homes on the market. For the first time since the slump began, repossessed properties in October accounted for more than half of residences sold.

Low prices did drive sales up 56% from a year ago. But a market bottom remains elusive, and a rebound in prices is not on the horizon.

Unemployment is rising and consumer spending has slowed, adding another dimension to the crisis and making it even harder to find a light at the end of the tunnel.

Just a year ago, several market analysts interviewed by The Times predicted that Southern California home prices would drop 15% to 25% from their peak.

It took only until July for the median price to fall 25% below its 2007 peak of $505,000, and it has kept falling since.

Barring a dramatic economic reversal, the median sales price is on track to slip below $300,000 when November sales are calculated next month.

Thomas Davidoff, a UC Berkeley economist, said he and others underestimated the drop in value because it was tougher a year ago to know just how many people had mortgaged their homes for more than they could really afford.

Those earlier forecasts proved off because "it was hard for people to get their arms around just how bad lending standards had gotten," Davidoff said.

During the real estate bubble, banks and brokers offered mortgages that required little or no money down, minimal proof of income and "teaser" mortgage rates that lowered initial monthly payments but later jumped to a much higher rate.

Last year, it was unclear how many of those loans would default. But much of that mystery has been solved by now, as massive numbers of homes have been repossessed.

In October 2007, 16% of the homes sold in Southern California had been foreclosed, compared with 51% last month. Mounting foreclosures flooded the market with discounted repossessed homes, further depressing home values.

The ripple effect from that put even more homeowners underwater -- owing more on their homes than they were worth -- and led to more foreclosures.

Now, "we're probably seeing an over-correction" in the most depressed inland areas, Davidoff said. In communities overrun by foreclosures, "you couldn't build a house for less than what [existing homes] are selling for," he said.

Christopher Thornberg, principal of Los Angeles consulting firm Beacon Economics, is among those who predicted a 25% price decline last November, making him one of the more bearish forecasters at the time. By March, he was estimating a 40% decline. Now he predicts that prices will keep dropping throughout 2009, until they've fallen 55% from their peak.

[BigMike619]

the housing boom got so bad out here that they were taking every day normal apartments and turning them in to condos to sell and people were snatching them up like hotcakes. now these same "condos" are being sold for 150K.

[Toe Jam]

Awesome!

A drop of $300,000 to a low, low price of $1.2 million!

[JohnLockesGhost]

the housing boom got so bad out here that they were taking every day normal apartments and turning them in to condos to sell and people were snatching them up like hotcakes. now these same "condos" are being sold for 150K.

I celebrate this correction. We really need to embrace it not fight it.

[China]

I celebrate this correction. We really need to embrace it not fight it.

I agree. Housing costs were outpacing salary increases to the point that it became difficult if not impossible for people to afford to buy a house. No wonder so many people defaulted on their mortgages; they tried to buy beyond their means. Maybe now people will actually be able to afford the houses they buy.

[BigMike619]

I agree. Housing costs were outpacing salary increases to the point that it became difficult if not impossible for people to afford to buy a house. No wonder so many people defaulted on their mortgages; they tried to buy beyond their means. Maybe now people will actually be able to afford the houses they buy.

it was really sad to drive down the streets and see for sale signs with "bank owned" as the realtor.

[Predicto]

I read the other day that there are only 5 zip codes in the entire state of California where houses have not fallen in value. 5 out of over 2000. That's brutal.

And, just to be a jerk, I'll note that my zip code is one of the 5.

[JohnLockesGhost]

I read the other day that there are only 5 zip codes in the entire state of California where houses have not fallen in value. 5 out of over 2000. That's brutal.

And, just to be a jerk, I'll note that my zip code is one of the 5.

I'm all for affordable housing. Let prices fall.

[SnyderShrugged]

I just hope that the Kentucky correction waits until I sell my house! Otherwise, I totally hope that the market is left alone enough to correct itself (as markets always do)

[Brad_Edwards_Fan]

Of course places like california that shot up like a rocket are free falling at a faster rate due to all the foreclosures, that inventory will eventually sellout and prices will then "re-adjust" up faster then the rest of the country again. Rinse and repeat.

Then you have more stable markets like chicago that never really jumped that out of control that have lost value...but not that much. I think they say out here that the city lost 3% last year and 3.5% this year, i can live with that

[The 12th Commandment]

We're still going up here. Not nearly at the pace of 2 or 3 years ago but still going up as a whole. The McMansions have come down quite a bit which is not surprising because the buyers were typically California retirees. But regular guy houses like mine are still seeing about 3% and I've seen several sell on my street in the last month. Probably foreclosures.

[BigMike619]

We're still going up here. Not nearly at the pace of 2 or 3 years ago but still going up as a whole. The McMansions have come down quite a bit which is not surprising because the buyers were typically California retirees. But regular guy houses like mine are still seeing about 3% and I've seen several sell on my street in the last month. Probably foreclosures.

everyone went from Cali to Vegas to Phx and now NM. It was like a wave and you could watch it happening.

[twa]

everyone went from Cali to Vegas to Phx and now NM. It was like a wave and you could watch it happening.

And Texas as well,it is hard to believe the new houses still going up.

I wish the value on mine would fall...less taxes

[BigMike619]

And Texas as well,it is hard to believe the new houses still going up.

I wish the value on mine would fall...less taxes

my entire company shut down a center out here in sd and moved to texas. amazing...

[twa]

my entire company shut down a center out here in sd and moved to texas. amazing...

It is getting ridiculous around here with all the continuous expansions and new people/traffic.

I'm about ready to flee to Mexico.

[Metskins]

I hear that, it just makes me want to walk away from my mortgage.

[Brad_Edwards_Fan]

Also, i think part of the reason you see different numbers in states like California is the fact that you can walk away from the property with no personal responsability for any shortage between what I owe and what the bank recovers in sale (most states the fact that you retain personal liability encourages people to try to work it out). So in CA, once the investments turns south, many are deciding it is worth blowing their credit and just cutting there losses, which leads to foreclosures, which leads to lower prices, which leads to more people being under water, which leads to more walk aways...and so on, and so on.