California freefall: Home prices down 26% in February

Signs of distress are piling up in the California housing market, where prices are falling at three times the national rate of decline.

--Statewide, median sales prices fell by a stunning 26% from year-ago levels in February, with home prices dropping at a rate of nearly $3,000 a week, the California Association of Realtors reports. Further, the CAR says the Fed's interest rate-cutting campaign "will have little near-term direct effect on the housing market."

--In the San Fernando Valley, losing a home to foreclosure is now almost as common for families as buying a home. The L.A. Daily News: "During January and February, there were 1,084 foreclosures and 1,335 sales of houses and condos in Valley communities from Glendale to Calabasas, according to the San Fernando Valley Economic Research Center at California State University, Northridge."

"It's bad. It's really bad," market analyst Nima Nattagh told the Daily News.

The California Association of Realtors  reports median prices fell 27.2% from year-ago levels in the hard-hit Inland Empire east of Los Angeles, 30.9% in Sacramento, and 39.1% in Santa Barbara County.

On a percentage basis, the California price meltdown is more than three times as severe as the national decline of 8.2% in median prices reported this week by the National Association of Realtors. On an absolute basis, the California meltdown is even more severe: Nationally, prices fell over the past year at a rate of $338 per week; in California, prices fell at a rate of $2,788 per week.

According to the CAR, "The median sales price of an existing, single-family detached home in California during February 2008 was $409,240, a 26.2 percent decrease from the revised $554,280 median for February 2007." The February 2008 median price fell 4.8 percent compared with January’s revised $429,790 median price.

"The Federal Reserve Bank’s recent action to reduce the federal funds rate will have little near-term direct effect on the housing market," said CAR Vice President and Chief Economist Leslie Appleton-Young. "However, Fed rate cuts should result in more favorable real estate finance rates as we move through the year."
 

Median home sales prices sometimes exaggerate swings in market activity. A year ago, median home sales prices in California continued to show price gains, even though the market downturn had begun. At the time, the collapse of sub-prime lending had the effect of freezing the lower end of the market. With fewer sales of less expensive homes, the market was dominated by sales at higher price points, and median sales prices showed gains.

The opposite appears to be happening now, as lower-priced foreclosed homes come onto the market, increasing sales at lower price points, while the market for more expensive homes has slowed dramatically.

Thoughts? Comments? E-mail story tips to peter.viles@latimes.com
Photo Credit: Associated Press

Comments

[Santa Barbara Real Estate Voice]

Peter,

Thanks for the post. I just read a few articles about this in the last few days. Here in the Santa Barbara area we are seeing huge reductions in prices in certain areas while others are remaining fairly stable (having reached a bottom seemingly). The problem for us with a lot of these statistics is that they include Lompoc and Santa Maria for Santa Barbara and these markets are very different.

With that said, we are seeing a fair amount of activity in the last 7-8 weeks with a lot of pending sales. No price increases to speak of but a lot of activity. Condos though are still up in the air.

[John]

I am ecstatic to see the collapse of home prices in California...I do feel sorry thought for middle class families that were duped into bad loans.....Yet, it is great to see this collapse in the real estate market happening....

[Joe smith]

More hysterical nonsense.

The drop is related to foreclosures being dumped on the market........skewing the numbers.

Ignore this nonsense

[John]

Let's see some more on the positives to come from the CA housing correction.

Greedy idiots will be punished.

What's left of the intelligent and rational middle class will have a higher likelihood of being able to afford a decent home without moving out of state. (A few months ago, you needed a 6-figure household income to afford a home in L.A.'s worst neighborhoods.)

Our politicians will actually have to show leadership and think and make difficult decisions, since they can't just ride along taking credit for the sunshine and ongoing prosperity. (Business punishing laws and taxes, combined with terrible public schools and a high cost of living IS NOT a recipe for sustainable community and economic development.)

[Mark]

Median prices were half a million..hahha..What a joke. People don't have that kind of rea money. Living way above their means. I hope they are all homeless for years. They have cost people who do it the rigfht way much now in taxes and stoack market collapse.

[Darrell]

The California prices were inflated and overpriced to begin with. Who wants to live in a liberal state where you are taxed to death, gas prices are inflated due to everyone bowing to the extreme environmentalists?

Sell those houses to graduating students from Berkley....oh wait, you have to be productive human being with a job to get a house.

[Jim Roof]

To say that median prices are down 26% does not necessarily mean that every million dollar home is now worth 740K. It could mean that million dollar homes are sitting on the market while 500K homes are selling at a brisk pace. It could mean that there are no more million dollar homes ON the market and all the 500K homes are selling slowly.

The headline alone does not really tell a complete story.

[Tony]

Who could be surprised by the California real estate price meltdown? Many parts of that market have been grossly over priced for years!

[Dan]

"the median sales price of median price of an existing, single-family detached home in California during February 2008 was $409,240..."

That's still very high, something like three times the national average. CA prices are falling far because they had climbed to such ridiculous levels.

It's bad, but it was an inevitable correction.

[Etosamoe]

This isn't a big surprise. Home prices were 3 times higher in CA than the national average, it makes sense that they would fall at 3 times the rate. The CA median home price is still double the national average. I think it still has a ways to fall before normal people will be able to buy a house.

[George]

The first stage of a real estate recovery has to be price capitulation, which we are now entering. While painful for the people who bought at inflated prices, the price adjustment to more realistic levels will help people who are now able to buy or will soon. CA home prices got disconnected from reality. Reality is back in Vogue.

How long will it take for the excess unsold homes to get to "normal" levels in So. CA?

[We Help-U-Buy Guy]

Sales volume is up dramatically at the low end of the market. The banks are putting their inventory of foreclosures on the market at well below market prices and it has spurred sales. It's not uncommon to see 5 to 10 offers on properties.

All the action is on properties under $500,000 that are priced 25% to 40% lower that two years ago. While sales numbers will be up, the median price is going to plummet when it get's reported for March and April sales.

[Cal]

Since the realtors have been utterly unable to manage seller expectations (i.e. list price) in this protracted down market, news like this will help to do so. Volume will start picking up and inventory will start dropping, all signs the real correction has begun.

Prices falling at $2,788 a week, imagine what that does to buyers urgency.. If I dont buy today I will just get tmw for cheaper. This psychology wont change until prices hit a fundamental support level defined by available financing, the local economy and available effective demand (demand backed up by purchase power).

[Steven]

California sucks. Prices are falling because there are too many illegal immigrants there. We should deport them all. Prices drop in neighborhoods where 45 people are sharing a single family home.

[Mike]

The headline is misleading. The fall in prices is a year to year number. The headline implies that the fall took place in Feb. The rise in prices over the past few years was stunning, not surprised by the decline. Maybe the people that could not afford houses can afford them now. Following every foreclosure is a lucky buyer....

[John Norris]

you fail to mention California real estate was increases at 3 times the rate during the housing boom. therefore California will be hit at a larger scale than the rest of the nation.

[bruce hughes]

The average sales price is not a reliable indicator of much of anything. It just means the more expensive homes are not selling, so the average sales price has declined. It's analygous to presenting the average height of people who stop at starbucks during any given time period. If in a selected time period, the averge height of people at starbucks is 5'0 feet, then the conclusion would be that americans are getting shorter. It's just meaningless information.

[Sarge]

Holy mother of all misleading headlines - - home prices didn't "fall 26% in February;" they fell 26% in ONE YEAR, from February 2007 to February 2008. Based on the numbers in your own story.

I realize LAT reporters are challenged by the hard subjects such as math and statistics, but you would think they could at least manage to read a calendar.

[KiplingsJungle]

They home prices in CA need to keep dropping another 26%, then they might actually flirt with reality, every home in California is significantly overvalued and unaffordable to the average person.

[Earl Lutz]

wow another 400% and most of us in the real world might be able to aford to live there...

No, maybe not.. your taxes are still SKY HIGH

[IToldu2CashOut]

Looks like my broker was wrong when he told me last month it was the perfect time to buy. This is going to take years, but what we are seeing is a good start.

[Frank]

The housing slump is more than just a reaction to immigrants, or bad banking policies but a history of bad credit in our country. The credit bureaus have caused rates to go up for the poor working class Americans and good viable commerce cant be sustained by only groups with good credit. Penalizing the poor with higher interest rates only hurts the general public. Either don't give loans to the poor or expect this to happen every time we have 15 years of stagnant wages in this country. Until companies start paying American's wages that keep up with the cost of lving you are going to have the same problems in the future.

[Chris]

This is really, really good news. We need to flush the fraudsters and the speculators out of the market. Lower prices mean less borrowing and more families can afford to buy a home. Another 50% drop and we should be about right, given the 100% run-up in the bubble and the many new units that were built.

[Condo Sitting in LA]

Thank goodness that the CORRECTION is finally taking place and my wait is over. Maybe now I can, with my $150,000 income, afford to purchase a home.

[yourkillingmelarry]

Peter,

How is the traffic today, you got posted on Drudge. Way to go!