California New Home Prices

Are new home prices finally in line with incomes and, in some cases, an outright bargain? Has the bottom for the best home prices in Southern California already past? The housing market has suffered considerably due to a multitude of factors, creating some of the steepest declines in home values and largest increases in foreclosures in a generation. As a result, an environment of unprecedented buying opportunities has developed.

According to the National Association of Realtors, (NAR) in the first quarter single family home prices dropped 7.7%, representing the largest year over year decline since 1982, when NAR first reported prices. Nationwide, when compared to the 4th quarter of 2007, the median price fell 4.8% to $196,300.

In California, as compared with last year, quarterly home prices plummeted for places such as Riverside, where prices fell 27.7% to $287,100 and Sacramento, which fell 29.2% to $258,500.

Before the summer of 2007, jumbo loans in California accounted for 40% of sales but now represent only 10%, after sharp declines in available funding. Since then, conforming loans were allowed to rise from the $417,000 limit to $729,750, offering more guaranteed liquidity in a market virtually devoid of available funding due to the credit crisis.

Nationally, high volumes of foreclosures have accelerated price declines, as delinquencies have doubled in the last 12 months, and more than 150,000 bank repossessions occurred in the first quarter, contributing to average inventory of 10 months worth, or 2.9 million homes.

Amid the downward trends of this market, there is a very clear silver lining: a great opportunity exists for potential home buyers with good credit. The inventories of foreclosed properties have risen considerably, selling by an average discount of 20% than similarly valued non-foreclosed properties, according to some studies. In addition, prices on non foreclosed property have come down very fast, and some industry analysts say we may have seen the bottom of this market. Inevitably housing prices will rise, starting with the increases in transactional volume already seen this year in some areas. The media has noted this, so the question now is: have the best buying opportunities already passed?