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, says The Los Angeles Times.
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.
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.
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, the most depressed inland areas are probably “over-correcting.” In communities overrun by foreclosures, a home cannot be built for less than what [existing homes] are selling for.
Last month’s Case-Shiller Home Price Index, which tracks home sales by price tiers, showed that Los Angeles-area homes priced in the bottom third of the market had fallen 42% from their peak prices by late last summer — but those in the top third had dropped 21%.
Owners of higher-priced homes may put off selling during the early phases of a downturn, causing more expensive homes to decline in value at a slower rate. But eventually many high-end owners have to sell at prices well below peak levels. That means we can expect to see greater price declines among expensive homes in 2009.