The decline is being exacerbated by record numbers of homeowners defaulting on their mortgages each month, with most of the homes ultimately being repossessed by the lender and sold at a discount.
The market is also being weakened by "short sales," in which homeowners price their homes for less than what they owe on their mortgages in hopes of avoiding foreclosure.
In addition, most lenders have tightened their standards, eliminating many potential home buyers who might have qualified for a loan during the boom.
There is also concern about the health of mortgage finance giants Fannie Mae and Freddie Mac, which buy the bulk of the nation's home loans. Speculation that the two companies may be facing a government takeover helped trigger a sell-off on Wall Street on Monday.
But with buyers returning to the marketplace, lenders that got burned after approving risky mortgages and that then retreated are becoming slightly less wary these days, some loan brokers and real estate agents say.
"There are a lot of good, well-qualified people out there," said Mitch Ohlbaum, president of Legend Mortgage Corp. in Los Angeles. "People feel, 'OK, I can put down 10% or 20% and do this and the payment will be OK, even with a 30-year fixed mortgage.' "
For bargain hunters like Dale Smet of Santa Clarita, the timing is perfect.
"I've been waiting for this market," he said.
Smet, who works in marketing for Southern California Gas Co., said he carefully conserved an equity line of credit during the boom years, which he tapped to pay $300,000 cash last month for two foreclosed condos near his house.
And that was after being outbid on a handful of other bank-owned homes in the Santa Clarita area.
After a 15-day escrow, Smet did the necessary cosmetic repairs himself and said he had no trouble finding renters willing to pay about $1,500 a month for each unit. He hopes eventually to take a first mortgage on each with monthly payments that he figures would be less than his rental income.
"This isn't risk free. But I don't care if home prices go down," Smet said. "I'll just buy more."
Smet acknowledges that the housing downturn's drag on the broader economy could accelerate, putting his job at risk.
"That's definitely a weak link. The job situation is always an issue," he said.
Andre Ocampo, the buyer of the Lake Elsinore home, has seen firsthand how falling home prices can affect one's livelihood.
