Floor falls out in California housing

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On the LA Times blog today there is a distressing bit of news about the distressed California housing market. Home prices in the state, the blog notes, fell 26 percent (three times the national average) between February 07 and February 08!

–Statewide, median sales prices fell by a stunning 26% in February, with home prices dropping at a rate of nearly $3,000 a week, the California Association of Realtors reports. Further, the CAR says the Fed’s interest rate-cutting campaign “will have little near-term direct effect on the housing market.”

–In the San Fernando Valley, losing a home to foreclosure is now almost as common for families as buying a home. The L.A. Daily News: “During January and February, there were 1,084 foreclosures and 1,335 sales of houses and condos in Valley communities from Glendale to Calabasas, according to the San Fernando Valley Economic Research Center at California State University, Northridge.”

“It’s bad. It’s really bad,” market analyst Nima Nattagh told the Daily News.

We’re lucky. We don’t build houses anymore in Massachusetts (1980s production was around 40,000 units, from 2000-2006 around 20,000-23,000, and currently we are building at an annual rate of about 12,000 to 14,000). Very small increases in supply means that in a recession our housing prices should decline much less than elsewhere. But also expect a sharp upturn in already high prices as soon as consumer confidence comes back.