Regional Spotlight: Experts Disagree on California’s Housing Slump’s Severity

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RISMEDIA, May 25, 2007-(MCT)-Sales of single-family homes dropped nearly 46% in Riverside and San Bernardino counties during April, the second consecutive month housing sales dropped so dramatically in the two-county region.

Riverside County recorded a 45.1% drop and San Bernardino County a 46.7% drop, according to DataQuick Information Systems Inc. in La Jolla, which tracks the California real estate industry.

Prices remained static. The median price of a home in Riverside County in April was $409,000, a 1% year-to-year drop, while the price of a single-family home in San Bernardino County was $370,000, a 2.8% increase.

Statewide, the housing market was sluggish during April. Year-to-year sales dropped nearly 29%, though the median price of a home rose 6.1% during April, to $505,000, DataQuick found.

That was the lowest number of sales recorded in April since 1995, according to DataQuick.

The last time Inland home sales dropped as dramatically as they did in March and April was in December 1990, when sales dropped 47.4%, said John Karevoll, DataQuick analyst.

The words “December 1990″ cause local home builders to break out in a cold sweat. Home sales in Riverside and San Bernardino counties were so bad during the early 1990s that some builders, especially in the High Desert, say the region’s housing market slipped into a depression during that time.

Signs of a slow Inland housing market are evident, including record foreclosures in both counties, an increase in home auctions, incentives from developers to increase sales, even companies that specialize in “dressing up” houses for sale.

The local housing market is merely returning to normal, and coming down from sales and price peaks it could never sustain, Karevoll said.

But Karevoll admitted the region’s March and April sales numbers were “grim” and worse than he expected them to be.

“We knew sales were going to come down — they had to — but we didn’t think it would get much worse than 35%,” he said. “I think maybe the extra 10% has to do with the loans some of the banks have been giving out. But there is definitely a lot of readjusting going on.”

Inland economist John Husing also doesn’t believe today’s housing market is anywhere near as bad as it was during the early 1990s, but he admits this slowdown is a lot harder to explain.

“There’s no chance of us going back to the early 1990s because unemployment was in double digits back then,” he said. “Right now we have the lowest unemployment we’ve had in 42 years, and interest rates are low. That’s why this market is so hard to explain. But I still think we’re seeing a readjustment.”

Rollie Heschong, owner of High Desert Homes in Joshua Tree, has sold one house this year, in Twentynine Palms, and he had to reduce the price by $50,000 to make the sale.

Analysts and economists may believe the housing market is coming back to normal, but Rollie Heschong isn’t so sure.

“It’s tough up here, and I have to think there’s more going on than readjusting,” Heschong said. “There are 300 houses for sale in Twentynine Palms right now, 19 of them are mine and no one is buying any of them. My electrician had 30 people working for him last year at this time, and now he has two.

“It used to be that as soon as we got a frame built-as soon something looked like a house-we had a sale, but not anymore.”

Heschong believes high gas prices have added to people’s anxiety.

“I think that has caused people to get out of their comfort zones about buying things, and that’s bad because home building is such a big part of the economy up here,” he said. “When home construction slows down it hurts everything.”

Bruce Norris, president of The Norris Group in Riverside, which loans money to and trains investors, believes the Inland housing market is down, not readjusting, and that it won’t come back for a while.

“I think that when people say ‘we’re going back to a normal market’ it’s code for ‘we aren’t sure what’s going on,’ ” Norris said.

“I guess I’m a pessimist. I don’t see the market coming back for about three and a half years.”

Part of the problem has been banks loaning money to unqualified buyers, resulting in defaults and too many houses going back on the market.

“I don’t think gasoline selling at $3 a gallon has anything to do with it,” he said. “I think there is so much inventory out there that the banks can’t deal with it. They aren’t in the real estate business, and with so much inventory out there they’re reluctant to loan money.”

Copyright © 2007, The Business Press, Ontario, Calif.
Distributed by McClatchy-Tribune Information Services.

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