Home prices in California slumped in June 2008 amid tight liquidity, rising number of foreclosures, poor income and local area rental facilities.
According to the California Association of Realtors, the median sales prices of homes in California during July 2008 slipped down 40.3% against the same month last year, as reported by Los Angles Times.
The median sales prices, which reached $600,000 in last year’s summer season, dropped to $350,760 in July 2008 from $587,560 in July 2007. It was a staggering fall as prices going down by $4,500 every week. The median prices in the Bay Area plummeted 21.2% to $663,190 in July 2008. Moreover, the actual home prices in important urban areas declined between 10% and 15% but the home sales in July 2008 rose by 43% over the level registered in previous year same month.
The main reason for slump in homes prices in California is a significant rise in foreclosures, which is caused by defaults on adjustable-rate mortgages and loose mortgage lending. Huge upsurge in home foreclosures has caused prices fall and dragging it into the inland markets of California. Also, the high-end sales slipped down, which, in turn, declined the home prices in California.
Moreover, prospective home buyers, a key industry driver, are facing problem in getting loans due to liquidity crisis resulted from tight lending guidelines. Also, the housing prices in the country are disconnected from fundamental market values. Poor income and local area rental facilities also contributed in bringing homes prices down in the country.
However, the industry analysts supported the fall in home prices as it will encourage people to invest in properties, which will lead the housing industry towards growth. Moreover, low prices have made homes affordable for ordinary people but realtors are not happy with the present situation as their profits have come down.
According to a Research Analyst at RNCOS, “The Californian housing industry sales slumped due to tight liquidity and mortgage meltdown. However, it is benefiting the industry indirectly by attracting the first time buyers and full time investors. Buyers view the present situation as the perfect time to own homes and investors see it as an opportunity to churn out more profits.”
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