California's housing market may be dragging along the bottom.

That could mean it will be one of the first statewide markets to recover from the housing hangover.

Home prices were in free fall in the Golden State in February, but home sales showed signs of improvement, according to the California Association of Realtors (CAR).

The median price on a single family home was down 26 percent from a year ago. The $409,000 median price in February was down $160,000 from the market's peak price of about $570,000 set back in late 2006.

Condo prices were down 15 percent.

The bright spot was home sales. They were down about 29 percent from a year ago in February. The year-to-year home sales decline in California has been as high as 40 percent, according to CAR.

Also February marked the fourth consecutive month-to-month increase in home sales.

CAR president William E. Brown tied the California housing market's fortunes to the ongoing mortgage credit crunch and stiff underwriting rules. Brown hopes FHA loans, higher conforming loan limits and other mortgage relief efforts will help put the market back on track.

California mired in price declines

Except for the posh Santa Barbara South Coast, an enclave for homes of the rich and famous, every major region in California saw home price declines in February.

Ironically, hardest hit was the full Santa Barbara County where prices crashed more than 39 percent. Eight of the 20 regions CAR tracks saw home prices drop by 20 percent or more over the past year.

The smallest annual median price decline was in Silicon Valley, technology's ground zero, where home prices fell only about 1 percent. Home prices in Silicon Valley, at a median $780,000, remained among the highest in the state.

Silicon Valley's neighbors were the only two other regions that saw home price declines in the single digits. Prices slipped by about 5 percent in both San Francisco and Santa Cruz.

Dismal sales, prices elsewhere too

The California Condition of falling home prices is mirrored elsewhere, according to recent reports.

• The Standard & Poor's/Case-Shiller Home Price Index for 20 cities revealed home prices dropped nearly 11 percent in January, the largest since they began compiling the numbers in 1988. Hardest hit were over-built Las Vegas and Miami where prices slumped 20 percent.

• For February, the National Association of Realtors said existing home sales were up 2.9 percent from a year ago, but prices (condos and single-family homes) dropped 8.2 percent during the same period.

• New home sales fell to their lowest point in 13 years as prices dropped 2.7 from February 2007 to February 2008, the Commerce Departmentreported.

RealEstateTiming.com's San Diego owner, investor, developer and broker Robert M. Campbell, says expect more of the same. The fundamentals apply.

Nationwide, at their peak, housing prices soared 3.9 times as much as incomes, far beyond income levels necessary to afford ever-more expensive housing.

"We witnessed an event that was statistically more rare than a 1,000 year flood. That explains what is happening right now -- the ratio is in the process of reverting back to the norm," Campbell says.

Published: March 31, 2008

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