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California’s once hot market continues to cool. The state’s association of Realtors reports that home sales were down 33% in December. Median homes prices fell a surprising 16% to $475,000.
The numbers illustrate that the slowdown that began in San Diego and in the once booming Inland Empire east of Los Angeles has now spread north. The median price was down 16.9% in Los Angeles; 18% in Santa Barbara County.
It also illustrates the impact the evaporation of credit in the jumbo loan market is having. Half of California’s home purchases are over the $417,000 conforming loan limit. Because Wall Street is no longer funding riskier loans, the spread spread between jumbo and conforming rates is three to four times greater than normal, the Realtors report.
Golden State Realtors got one big wish granted in the President’s stimulus package. The cut off for conforming mortgages will rise from $417,000 to $729,000 for one year.
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.