As noted here, L. A. County home values have now dropped 36% in one year.
But, that time period does not show the depth of the plunge. Southern California median home values have dropped 50.4% from the peak of the housing bubble. This is partly a statistical anomaly: few top-of-the-line or new homes were selling. This 50% figure is an aggregate of all SoCal counties. Some counties have it far worse and we know which they are. Riverside prices have plunged 55% from $432,000 median to $195,000. San Bernardino had it worse: median values are down from their height of $380,00 57.4% to $162,000.
Adding to the general misery is the news that about 20% of all mortgage holders in the U.S. are underwater or owe more than their homes are worth. California’s rate of negative equity is 30% of mortgage holders placing it on a par with Florida–in 5th place. It’s not quite so bad in L.A. County even with the statistical drag of the Antelope Valley and the High Desert areas. In L.A. County about 23% of homeowners are in negative territory.
Of course, owing more than the home is worth is a difficult situation for homeowners. It hardly seems worth the struggle to make the payment. In fact, many don’t. They may have made a” business decision” [does it make sense to pay on a $400,000 mortgage when the house is worth $300,000?] More likely, they can no longer afford the payment due to job loss, job cutbacks or readjusting mortgages. Across the country, 4% of mortgage holders were at least 60 days late in the last quarter of 2008. A year earlier, the figure was 3%.
How’s California doing? Not so good, as we might expect, given the rising unemployment statistics. Of California home owners 6.9% were categorized as delinquent in Q4 08. This compares to Florida, highest in the nation with 9.5% rate. We are still behind also Nevada and Arizona.
But, these four populous states really are like the Four Horsemen of the Apocalypse. Their condition does presage disaster for the rest of the country. We four are huge markets for the rest of the country and the world. California alone has something like the 10th largest economy in the world. If our economic engine is stilled, what will happen to our trading partners and our fellow citizens in other states?