California turns

Posted by: Chris Palmeri on November 28, 2007

The once red-hot California housing marketing has officially turned. The California Association of Realtors reports that sales fell 40% in October while the median home price dipped below $500,000 for the first time in years.

Though sales had been slowing, California’s median home price held up due to still strong sales at the high end in places such as Los Angeles and Silicon Valley. Now sales at the upper end of the market declined as “even well-qualified borrowers had difficulty securing financing,” the Realtors said.

The median price of an existing, single-family detached home in the Golden State fell nearly 10% in October to $497,110. The median price in L.A. fell 8.6%; in Santa Cruz County, prices dropped 2.5%. One exception, San Francisco, which still saw average prices climb.

The affordability of a home had fallen to record lows in recent years as the price of property doubled in Cali. The state Realtors had been hoping the Office of Federal Housing Enterprise Oversight would raise the amount which qualifies a loan as “conforming.” That makes the loans cheaper and easier to finance. Instead, the cut off for a jumbo loan remains at $417,000 for 2008, unchanged since 2006. So even the median home buyer in California must take out a higher priced jumbo loan, until that is, prices fall further.

Reader Comments

JB

November 29, 2007 8:52 AM

This type of news provides previously un-analyzed indicators of the poor state of the nation. Jobs are scarce in the Midwest. Jobs are scarce in New York itself. Now we have a clear indicator that jobs and incomes in California, despite the resident technology giants, are not keeping up with basic costs of living, the largest of which is housing. Yes, we must realize that the housing market expanded too fast and should have been regulated. Subsequently, there will be an adjustment period where pricing will deflate to a steady-state. My opinion, though, is that America is in a more fragile situation than ever, with the economy ruled by computers that dump and buy hordes of stock when the price reaches programmed levels, the large banks gaining 20% interest and yielding 1% to consumers, and tangible advantages like making products, nearly wiped out.

Bill

December 1, 2007 1:15 PM

Couldn't agree more JB. You're right on target.

Dave

December 3, 2007 11:38 PM

You might check your facts...I believe Silicon Valley is in Santa Clara County not Santa Cruz County.

DOROTHY HARDEN

December 6, 2007 5:08 PM

In the East bay home prices are about 10 times the annual income of the people who live here. It is the worst for the kids who are getting out of high school and planning their careers and recent college graduates who are faced with salaries for proffessionals in the 35,000 to 50,000 range. Housing is too expensive for them. There should be housing affordable to all segments of the population. I make 80,000 a year and have to live in a tiny apartment that is at below market rate. The crappy houses in my nieghborhood are new and being sold for the low one millions. It cannot continue, prices have to come way down.

terry

December 8, 2007 12:27 AM

I disagree with Dorthy.
I made $18.00 an hour an bought a house in 2003 .I still own it .I now make 75,000 a year plus .I have fixed up my home ,I have raised my value of my home along with several others in our quite neighborhood .I pay over $2800 in property taxes per year .I pay all other taxes as well.I want my value to stay the same ,or double .I will not sell for less.Why so you can afford?
Do what I did pack a lunch and save .If the market will not allow someone who makes 80k a year buy then make 100k,or rent .Hey us capitalist are tough cookies.

ROCK110

February 20, 2009 11:05 PM

"Bush’s presidency sort of coincided with my political awakening,” he said, noting that he cast his first vote in 2000. “It’s been pretty awful and today, this is something to be happy about.”

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ROCK110

Home Loans

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About

BusinessWeek editors Chris Palmeri, Prashant Gopal and Peter Coy chronicle the highs and lows of the housing and mortgage markets on their Hot Property blog. In print and online, the Hot Property team first wrote about the potential downside of lenders pushing riskier, "option ARM" mortgages and the rise in mortgage fraud back in 2005—well ahead of many other media outlets. In 2008, Hot Property bloggers finished #1 in a ranking of the world's top 100 "most powerful property people" by the British real estate website Global edge. Hot Property was named among the 25 most influential real estate blogs of 2007 by Inman News.

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