California's housing market slowed in November, with both sales and prices falling. Some economists predict further declines next year if more foreclosures hit the market and the job engine remains sluggish.
The closely watched median home price -- the point at which half the homes in the state sold for more and half for less -- fell 2.3% from November 2009, to $255,000. That year-over-year drop was the second consecutive decline in the median price after 11 months of improvement.
"The California economy is starting to improve, but it is still weak," said Celia Chen, a housing economist for Moody's Economy.com. "The fact that the economy is improving is positive, but it's not improving very quickly. So demand for homes will remain weak."
California's home price recovery began with the state's least expensive properties -- those so beaten down by the fallout from the subprime mortgage crisis that both investors and first-time purchasers saw buying opportunities amid the wreckage.
But some economists believe that trend could be reversing with the absence of tax credits for buyers, the weak job market and rising interest rates.
An analysis of statewide home price data released this week by the investment bank Keefe, Bruyette & Woods found that prices for the state's starter homes -- those costing less than $417,000 -- fell in October, year over year, for the first time since January.
"If October's decline continues over the next several months, it may threaten the stability that has prevailed in the lower-priced market, thus threatening the overall market," KBW analyst Jacquelynne Chimera wrote in the research note.
MDA DataQuick, a San Diego research firm, reported Thursday that 31,403 newly built and previously owned homes were sold statewide last month, a 3.9% decline from October and a 12.4% drop from November 2009.
In the Bay Area, year-over-year November sales were down 11.2%, and the median price fell 1.8% to $380,000. In Southern California, November sales fell 15.5% even as the median price inched up 0.8% to $287,000.
Foreclosures constituted 37.8% of the statewide resale market, up from a revised 36.7% in October and down from 40.1% in November 2009. The high was February 2009, when foreclosures accounted for 58.5% of all resales.
In other housing news, the Commerce Department reported that national housing starts in November were up 3.9% from October but down 5.8% from November last year. Meanwhile, building permits, which some economists view as a steadier view of builders' intentions and less influenced by seasonal variations, fell 4% from October and 14.7% from November last year.