The long, sharp slide in Southern California home values is all but eliminating demand for new houses.
Just 1,813 new homes sold in the six-county region last month, down 53% from December 2007 -- and down 63% from the 20-year average for the month of December, a real estate information firm reported Monday.
By comparison, sales of all homes rose 51% last month compared with a year earlier as bargain hunters continued to snap up foreclosures and other distressed properties. The median price of a Southland home slipped to $278,000, down 35% from December 2007, MDA DataQuick said.
With prices falling and lenders off-loading foreclosed properties at deep discounts, few want to pay "retail" for a new home, so builders have put the brakes on new construction.
"The builders are in a holding pattern, staying alive until the market recovers," MDA DataQuick President John Walsh said.
That holding pattern, however, could also further put off a market recovery.
Although the home-building freeze could help clear the oversupply of homes, the loss of construction jobs has also been a leading cause of unemployment in the state. There were 67,700 jobs lost in residential and commercial construction statewide in November compared with the year before, according to the latest figures from the California Employment Development Department.
Those construction job losses were 32% of the total jobs lost in that period.
The spillover effect from lost construction jobs -- additional job losses in areas such as retail, for instance -- will probably delay the broader economic recovery needed to stabilize the housing market, economists say.
Slowly reviving home building "will be helpful in stimulating the economy," said UCLA economist Edward Leamer.
It would produce a benefit not only by boosting employment, he said, but because "it's an important symbol of the healing of the market," which could bring back investors who've fled the mortgage market, easing credit, Leamer said.
Early in 2008, builders slashed prices to lure buyers for their glut of homes. But the foreclosure avalanche moved faster than builders' price cuts.
In January 2008, the median home sales price in Southern California was $415,000, and 23% of the homes sold had been foreclosures. By year-end, 56% of homes sold had been foreclosures, pulling the median sales price down to $278,000.
