Home prices down by record amount in September Good news for Bay Area - a smaller drop

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Home prices plunged by a record amount nationwide in September, but California's price decline in October was less than the record drop posted the previous month.

The two reports released Tuesday left industry experts split on whether the market will worsen or stabilize in the immediate months ahead.

The closely watched Standard & Poor's/Case-Shiller 10-City Composite Index plummeted 18.6 percent from September 2007, the steepest decline in 20 years of available data. The 20-city index dropped 17.4 percent, also a record.

The indexes, released on the last Tuesday of each month, track sales and resales of individual houses. The losses or gains correspond to actual price changes.

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"There wasn't a good number in there, but these numbers don't really reflect what's happening now," said Patrick Newport, U.S. economist with Englewood, Colo., consulting firm IHS Global Insight, noting that the bad economic news began midway through September and has worsened since. "We should expect really awful housing (data) for the rest of the year."

Among the 20 cities tracked by Case-Shiller, the San Francisco metropolitan region experienced the third-largest annual plunge, 29.5 percent, and by far the largest monthly decline, 3.9 percent. Case-Shiller defines the area as Alameda, Contra Costa, Marin, San Francisco and San Mateo counties. Phoenix led the list with a 31.9 percent annual decline, followed by Las Vegas at 31.3 percent.

A more up-to-date report released Tuesday also showed worsening conditions in California, but not in as dramatic a fashion as some had expected.

The California Association of Realtors said the median price for existing single-family homes fell 39.9 percent in October from the same month last year to $311,060. That was down 1.9 percent from September and fell short of the revised record annual decline set last month of 40.8 percent.

Transactions across California rose 117.1 percent, reaching an annual level not seen since late 2005, largely due to rising sales of priced-to-move foreclosed or distressed properties.

The median declined to $520,920 in the Bay Area, down 35.8 percent annually. The Los Angeles trade group defines the region as San Francisco, Alameda, Contra Costa, Marin, Solano, Santa Clara and San Mateo counties.

Association President James Liptak said in a statement that most October sales probably opened escrow before the credit freeze set in, so the full impact won't become clear until November and December.

Economist Esmael Adibi, however, said the liquidity crisis has had ample time to drag down sales in the state and by and large has not. He believes that the housing market could be at the beginning of what will be a long bottoming out period, with sales of foreclosed homes and new defaults slowing next year.

"There will still be negative numbers showing up, but I would think you'll see moderation in the decline," said Adibi, director of the Anderson Center for Economic Research at Chapman University in Orange.

Since May, Case-Shiller's national monthly declines have rested around or below 1 percent, leading some observers to speculate that the markets were approaching a bottom several months ago. In Tuesday's report, the declines were 1.9 percent for the 10-city index and 1.8 percent for the 20-city index. The change isn't large and could in part reflect seasonal home-buying patterns, which typically slow down at the end of summer, but isn't good news in any case.

"The key point is we do not yet see a deceleration," said Susan Wachter, professor of real estate at the University of Pennsylvania's Wharton School of Business. "This is another historic decline and the drivers are still pointing down."

The October index is sure to fall further, she said. Beyond that, the health of the housing sector will depend on how markets react to government efforts like the $800 billion plan to loosen lending announced Tuesday, as well as stimulus measures to come, she said.

Standard & Poor's expects it will take at least until the middle of next year before the housing market bottoms outs and until 2010 before prices begin to climb, Newport said.

Case-Shiller is a repeat sales index, meaning it tracks the actual price gains or declines for existing single-family homes that have traded hands at least twice. The California Association of Realtors calculates the median value of all homes that are sold in a given month.

Industry observers say both methods have strengths and weaknesses, but that the large proportion of foreclosure sales in today's market is skewing the results of both. More local reports show that while prices are off 35 percent or more in areas plagued by foreclosures, such as eastern Contra Costa County, the declines are far less in coastal areas with relatively few distressed properties, such as San Francisco and Marin counties.

In a separate report on Tuesday, the Construction Industry Research Board said California housing production in October was the lowest on record. Developers obtained permits for only 4,140 single-family homes and multifamily units during the month, down 49 percent from a year ago.