Bay area ‘logjam’ lacerates prices

San Francisco house prices suffered a major decline in December 2007, according to a new report…

For the nine-county area, the median home price fell 4.9 percent and sales volume plummeted 43.2 percent to a record low in December - the 35th consecutive month of decreasing sales.

The median price for an existing, single-family home in the region was $620,000 in December, down 4.9 percent from $652,000 a year ago, DataQuick said. The resale median dropped in every county except Santa Clara, where it was up 4.6 percent.

Including condos and new homes, the median was $587,500, also a 4.9 percent drop from a year ago, when it stood at $618,000. It has now fallen 11.7 percent from the peak of $665,000 reached in July.

Largest decline since 1993

DataQuick analyst Andrew LePage commented: “For Bay Area home sales, the price drop was the largest year-over-year decline since February 1993, when the median fell 5.5 percent”.

"December was extraordinarily weak. We have lower and lower sales, and a higher concentration of stressed sales - such as people who were in foreclosure, facing foreclosure, or lenders trying to sell houses they've taken back. The market can't seem to gain any traction here."

"There is still a credit crisis out there," said Marc Savoy, a mortgage broker with SF Pacific Mortgage Consultants in San Francisco. "The secondary market is in a logjam where these jumbo loans are not as tradeable as they once were."

Just the beginning

Ken Rosen, chairman of the Fisher Center for Real Estate and Urban Economics at UC Berkeley, stated: the 5 percent decline is just the beginning. Our outlook is, going forward, that this very tight credit will continue for at least six more months and might be there for longer.

He added: ”We’ll see further corrections. A year from now, (the median) might look like minus 10" percent”.

Mr Savoy concluded: “While price declines are bad news for home sellers, they might encourage more buyers to jump in. For well-qualified buyers, conforming mortgages under $417,000 carry interest rates of about 5.625 percent with no points, Savoy said.