Price of SoCal homes plunged in March

 

SAN FRANCISCO (AP) — Southern California home prices plummeted 24 percent in March, jerking property values to a nearly four-year low amid the real estate market’s deepening distress.

The median price of homes sold in a six-county region stood at $385,000 in March, a sobering comedown from the same time last year when the area’s median had reached a record $505,000, according to data released Tuesday by DataQuick Information Services.

 

The 24 percent drop in value of homes represented the steepest one-year decline recorded by DataQuick since the research firm began tracking Southern California home sales in 1988.

There’s little reason to believe the worst is over yet, given the sagging economy and the unwillingness of lenders to gamble on prospective home buyers who had no trouble qualifying for home loans just a year or two ago.

In many cases, even borrowers with solid credit ratings and good jobs are being rejected for loans, reducing the pool of buyers who might create enough demand to stop the real estate market’s hemorrhaging.

 

“If we go into a recession and it turns out to be long and deep, things could still get a lot worse,” said DataQuick analyst Andrew LePage.

In another telling sign of the market’s malaise, the number of Southern California homes sold in March increased from February at the slowest pace in the last 20 years.

About 19 percent more Southern California homes were sold in March than in February, far below the historical average increase of 38 percent for the two months. That’s notable because March heralds the start of the busiest home-buying season — a period that typically lasts through the summer.

A recent government-mandated change designed to encourage lenders to offer more mortgages above $417,000 could still lubricate the market by expanding the number of buyers who can afford to bid on Southern California’s more expensive homes.

As it stands now, Southern California homes haven’t been worth so little since April 2004, when the region’s median price stood at $380,000, DataQuick said.

 

The median price represents the point where half the homes sell for more and half sell for less.

The report covered Los Angeles, Orange, Riverside, San Bernardino, San Diego and Ventura counties — a region that once ranked among the nation’s hottest real estate markets as lenders aggressively lowered their rates and standards for qualifying for home loans.

As it turned out, many borrowers couldn’t afford their mortgages after the monthly payments ratcheted up from temporarily low rates that were set up to qualify people with tarnished credit ratings or low incomes — or sometimes both.

The fallout from those ill-advised loans has triggered a wave of foreclosures that is prompting lenders to sell Southern California homes at sharp discounts, depressing the value of neighboring properties.

 

More than a third of the Southern California homes sold last month had been through a foreclosure at some point during the past year, according to DataQuick.

At the same juncture last year, foreclosure sales represented just 8 percent of Southern California’s housing market.

Riverside and San Bernardino counties — a rapidly growing region known as the Inland Empire — were particularly hard hit.

Foreclosures accounted for 56 percent of the sales in Riverside County, where the median price of a home fell 27 percent to $306,250. The erosion was even worse in San Bernardino County, where the median home price plunged 28 percent to $265,000. Foreclosed homes generated 49 percent of San Bernardino’s March sales.

Orange County remained Southern California’s most expensive housing market, with a median sales price of $506,000, but that was still 20 percent below last year’s level.

The eroding home values have created a vicious cycle that makes it difficult for homeowners to refinance out of mortgages imposing unaffordable payments.

 

Unable to escape these mortgages, borrowers are returning the keys to lenders who then dump the abandoned property onto the market, further depressing property values.

The moribund market is prompting many prospective home sellers and buyers to stay on the sidelines until they see signs of a revival, said Marshall Prentice, DataQuick’s president.

“Often, what we’re left with, especially in inland areas, are sales driven by foreclosure or the threat of it,” he said.

 

The median price and annual percentage change of homes sold in March in selected Southern California counties:

COUNTY           Median Price      Percent Change

Orange              $506,000     -19.6

Los Angeles     $440,000     -18.5

Ventura             $430,000     -24.1

San Diego         $395,000     -19.4

Riverside           $306,250     -27.1

San Bernardino                     $265,000   -28.2

Source: DataQuick Information Systems