Southern California home prices are now 19% below their peak last year, and the surprisingly rapid decline is leading experts to predict that the housing slump will be worse than initially thought -- surpassing the severe downturn of the 1990s.
Home values also plunged 19% during the last real estate bust, but that was over a six-year period ending in 1997. Prices have now fallen just as much in less than a year.
That trend is causing analysts to rethink their previous forecasts.
Delores A. Conway, director of USC's Casden Real Estate Economics Forecast, last fall predicted a 15% decline in home values. But now, "20% to 25% looks more likely," she says, "and that's not to say we won't see 30%."
Los Angeles economist Christopher Thornberg is even more bearish. He projects that home values will sink 40% from their peaks reached last year, double his previous estimate.
"It's the speed of the decline," said Thornberg, of Beacon Economics, a consulting firm.
Betty Palacios has no doubt that the slump is worse than originally thought. She's trying to sell her Upland condo for $140,000 -- or close to 40% less than what similar units in her complex were selling for two years ago.
Palacios, 46, said she had received only one offer, for $90,000.
"I'm keeping my fingers crossed" for a higher bid, said Palacios, who has already dropped her asking price once. "It's all I can do now."
Palacios has owned her condo since 1991 but still expects to take a loss because of home equity loans and refinancings over the years.
Billie Tircuit, 26, has already taken a hit. She bought a house in Altadena two years ago with 100% financing at the urging of her husband, a mortgage broker, she said. His income vanished with the housing crash, and the couple soon could not make their payments.
Tircuit split with her husband and unloaded the house last month for $455,000 -- a 22% loss and less than what she owed on the property.
With the falling prices putting many more homeowners "upside down" -- that is, owing more on their homes than they are worth -- analysts expect foreclosures to continue to escalate as homeowners abandon their properties. That could further weaken the market as lenders sell these foreclosed homes at discount prices.
Property records show that foreclosures are growing as a proportion of the home sales market. About one-third of Southern California homes sold in February had been foreclosed since January 2007, up from 3.5% of sales a year earlier, according to La Jolla-based research firm DataQuick Information Systems.
