Another change of scale for SoCal home price declines

The Southern California housing market continues to look for tentative signs of potentially beginning to form what might be construed as the initial stages of a bottom in home prices.

Yesterday, DataQuick reported on Southern California real estate sales activity for the month of August and, once again, the results weren't pretty.

Sales volume was down slightly from July, but up significantly from year ago levels as foreclosures accounted for 46 percent of sales across all of Southern California in August. In Riverside County, 65 percent of all sales were foreclosure sales.

Naturally, this creates a lot of downward price pressure and, not coincidentally, neighboring San Bernardino County was the first to crash through the minus 40 percent year-over-year change in home prices, requiring another change in scale for the chart below.
And to think that "San Berdoo" had a plus 40 percent annual home price change just a few years back - last to the party, now with the biggest hangover.

Sales volume is sharply higher in the Inland Empire so, the market is doing what it is supposed to do - liquidating inventory at lower prices now that both borrowers and lenders have regained their senses.
Since Marshall "almost all if not all of those gains are here to stay" Prentice has now retired, new DataQuick President John Walsh again gets the DataQuick commentary duty:

It's the most common and pressing question we hear from Wall Street and Main Street: When will the housing market hit bottom? We see tentative signs that sales - not prices - have hit bottom in some inland markets. That's where home values have fallen the most, stoking a lot more demand.

Some expect prices to bottom out soon, too. That may happen, but history suggests that few of us will time the bottom precisely. Foreclosure activity remains high, credit is still tight, affordability remains strained on the coast and the job market is soft. Our take remains that a lot of buyers and sellers who don't have to act now are just sitting tight, holding out for a better time to make their move.

Good job John, mostly.

I think I know where you were starting to go there with that "few of us will time the bottom precisely" line - please stick to the facts and don't repeat the horrible mistakes made by your predecessor in being a cheerleader for the real estate industry.

Across all of Southern California, prices have reverted back to November 2003 levels, but there is much more work to do. Excluding the Inland Empire, median prices are still over $400,000 which, for a median home, is still way too much money.
I've been doing these charts for the better part of four years now and it's hard to imagine that we actually see home prices in some areas down more than 40 percent from the peak - not that this is unprecedented, because it happened in the mid-1990s as well.

With what is happening in credit markets and on Wall Street, 50 percent declines are now virtually assured in the months ahead - at least for the Inland Empire.