New seven-year lows for SoCal home prices

Dataquick reported April real estate sales data for Southern California yesterday and it looks as though there's still work to do to get home prices back to more reasonable levels, particularly at the high end where the work has barely started.

The overall median price fell to a seven-year low of just $247,000, which still sounds like a lot of money if you've ever seen a median house in Southern California.

Foreclosures accounted for 53.6 percent of all sales last month, the seventh straight month where distressed sales made up more than half of all resales, as the combination of job losses and falling home prices continue to pressure homeowners.

Sales volume continues to improve as the April total was the highest for that month since 2006, however, this improvement is relegated to low cost areas that make heavy use of FHA financing that accounted for a record 39.1 percent of all home purchases.

Higher priced homes still languish on the market as jumbo loans remain relatively expensive, however, the real estate industry has begun lobbying Congress for assistance, suggesting that the Fed begin buying loans that are beyond the limits of Fannie Mae and Freddie Mac.

While changes to median prices continue to be heavily influenced by the disproportionate number of sales at the low end, prices are clearly still falling sharply, all six counties continuing to report year-over-year declines in excess of 20 percent as shown below.
Median home prices going back to late 2002 are shown below - note that prices at the low-end, where foreclosures dominate sales, continue to fall sharply whereas prices in more expensive areas have been relatively stable in recent months.

This may change dramatically in the months ahead as foreclosures pick up in higher priced homes due to Option ARM and Alt-A loans souring at a quickening pace, though, this could be obscured by the very nature of calculating the median price (i.e., if and when heavily discounted higher price homes do begin to sell, all else being equal, they will put upward pressure on the median price regardless of how much prices are falling at the high-end).
Since Marshall "almost all if not all of those gains are here to stay" Prentice is now retired, new DataQuick President John Walsh provides the commentary:

In many markets we’ve seen signs you’d expect to see not long before prices would normally stabilize: robust investor and first-time-buyer activity, 10-plus months of year-over-year sales gains, and less price erosion, if any.

The problem is that we still face two big threats to price stability: layoffs, which can cause foreclosures across the home price spectrum, and possibly a new round of foreclosures triggered by defaults on ‘option ARM’ and ‘stated income’ loans used in mid-to high-end markets. Also of concern are reports of lenders holding back for many months before making a public foreclosure filing, which we track. If job cuts remain deep and foreclosures spike, then the past few months might later be viewed as nothing more than a brief calm before the next foreclosure storm.

Wow. That's a pretty gloomy outloook...

Not more than two months ago, Mr. Walsh was talking about the floodgates opening for sales.