Don't count on that housing recovery any time soon.
Southland home prices tumbled again in September, according to data released Monday, continuing a trend that began 14 months ago and bringing median values down 39% below their peak last year.
What's more, the September sales figures reflect many homes that went into escrow in July or August -- before the financial crisis rattled nerves, depleted the investment savings of millions of Americans and cast fresh doubts about the economy's strength.
"Buying a home is a big decision, and it's not one you want to make when you're not sure where prices are headed," said UC Berkeley economist Thomas Davidoff. "Now a lot of people are facing unemployment, so there's the risk they'll lose their income and not be able to make their payments."
For The Record
Los Angeles Times Friday, October 24, 2008 Home Edition Main News Part A Page 2 National Desk 2 inches; 68 words Type of Material: Correction
Southland home prices: An article in Business on Tuesday about home price declines incorrectly reported the September median home sales price in San Bernardino County and its decline from the same month a year earlier. The article said the median price was $215,000, down 40% from a year earlier. The actual median price, as shown in an accompanying chart, was $205,000, a 37% decline from a year earlier.
The median Southern California home sale price was $308,500 in September, down 7% from August and 33% from a year ago, according to real estate research firm MDA DataQuick.
More homes were trading hands, with last month's sales total 65% higher than a year ago. But MDA DataQuick President John Walsh noted that the figures were recorded "before the dramatic worsening of the nation's economic crisis in recent weeks."
"Over the next few weeks our sales data will begin to show how the meltdown in financial markets this fall has impacted housing demand," Walsh said in a statement.
The increase in sales activity is being driven by bargain hunters scooping up distressed properties. Fully half the homes sold in Southern California last month were fore- closures, MDA DataQuick said.
Before the financial crisis hit full force last month, some observers had predicted that a market bottom might be near -- citing the rise in sales activity.
But now, rising unemployment, weakness in the economy and a jump in mortgage interest rates could cause the market to "overshoot" its natural bottom, loosely defined as the point at which a middle-income person can afford a median-priced home.
The last time Southland home prices were at the level was from late 1996 to early 1999.
"If you're fearful and expecting a weak economy, you're not going to buy a home. That will put downward pressure on prices, which has a cumulative effect as more people start postponing buying a home as they try to wait it out for a better deal," said UCLA economist Edward Leamer.
Although values are plunging throughout the Southland, the steepest declines continue to be in the Inland Empire, where builders created a glut of new homes aimed at first-time buyers.
In San Bernardino County, the median price sank to $215,000, 40% lower than a year ago. Riverside County saw a 37% decline.
Falling prices had been making homes more affordable this year. About 15% of Los Angeles-area residents could afford to buy a median-priced house in the second quarter of this year, according to a National Assn. of Home Builders index, up from less than 11% the previous quarter.
Leamer called the rise in September home sales "a very hopeful sign," because he sees rising sales as a leading indicator of a market recovery.
But now, "just as things started to get better, we've frightened everybody to death," Leamer said, singling out government officials he said used fear to sell the federal economic rescue package. "All that fear could make the next quarter very difficult" for housing, "but we'll find out in a few months," he said.
Christopher Thornberg, principal of Beacon Economics, a Los Angeles consulting firm, said the housing market was bound to overshoot its bottom even before this month's economic meltdown. That's because the economy was already in a recession and consumers have been fearful for months, he said.
"The downward momentum occurred before the economic turmoil," he said, although he acknowledged that in the last few weeks the nation had "gone from denial to hysteria."
"The truth is somewhere in the middle. It's bad, but not that bad," he said.
Thornberg is sticking by his prediction that home prices will bottom late next year, with the Southern California median sale price falling to about $250,000, or roughly half the median price at the 2007 peak.
Real estate agent Nadia de Winter said she saw the mixed picture of the housing market in her current transactions. Five of her clients have properties in escrow, De Winter said. Those homes are selling for less than $400,000, a price she said was low enough for some first-time buyers.
But she thinks higher-priced homes have not dropped enough in price to lure buyers. Meanwhile, many individual home sellers at all levels are still not willing to lower their prices to compete with foreclosed properties flooding the market.
About 10 people stopped by to look at a four-bedroom, three-bath house listed for $550,000, and De Winter didn't foresee any offers coming.
"Three months ago this would have been a good deal at $550,000, but there's a foreclosure across the street for $450,000. When will we see the bottom? I don't know. But are we there now? I don't think so," she said.