California Home Price Decline

The California Association of Realtors is forecasting that the median price of a California house will fall 24% this year to $424,000 — a price not seen since 2003.

In March, CAR was forecasting a 9.5% price drop statewide, to $505,100. The median price of an existing single-family house in California has been above $500,000 since 2005.

“This 24% decline just has no precedent,” said CAR Deputy Chief Economist Robert Kleinhenz, who delivered CAR’s latest forecast today at the annual expo at the Disney Hotel by the Pacific West Association of Realtors. He said afterward that association economists still are unsure how much the median home price will fall this year. The 24% drop is CAR’s best figure at this point, he said.

Here are CAR’s median price figures for existing single-family homes:

Year	Price	Vs. 06
2000	$241,350	11.0%
2001	$262,350	8.7%
2002	$316,130	20.5%
2003	$372,700	17.9%
2004	$450,770	20.9%
2005	$524,000	16.2%
2006	$556,640	6.2%
2007	$558,100	0.3%
2008*	$424,000	-24.0%

*Forecast / Source: California Association of Realtors

Kleinhenz repeated earlier CAR predictions that the number of home sales in California may have bottomed out and are starting to pick up in recent months. CAR forecasts that 332,100 single-family homes will sell this year, down 6% from last year. Sales peaked at 625,000 house sales in the state in 2005, CAR figures show.

“I know I’m the bearer of bad news. I’m just trying to give you a sense of how we got here,” Kleinhenz said. “The housing market fundamentally needs one thing to move forward, and that’s jobs.”

Other highlights from Kleinhenz’ presentation:

• The market will bottom out sometime later this year, with the latter half of 2008 stronger than the first half.
• Foreclosures represent about 2.2% of all home loans in the state. “It’s not like everybody’s losing their house. Still, we have a huge number of distressed properties on the MLS, and it’s driving prices down. So it’s not like it’s not a problem.”
• Adjustable-rate mortgage resets peaked in late 2007 and early 2008. Hence foreclosures likely will peak later this year and decline in 2009.
• “We do think this is the year we’re going to see our low point for sales. … Monthly sales have already bottomed out.”
• “All these numbers are going to stabilize and slightly improve. … We’re basically climbing above the liquidity crunch to pre-liquidity numbers.”