Break out the bubbly, hang up the festive piñata, and dig out those togas because the goods times are here again! Southern California home sales are up an “unprecedented” 65% from last September. That is right folks, happy days are here again. That is until you look at the actual data in this report.

Leave it to the spin masters to turn a pathetic report into an amazing feat of economic accomplishment. I’m surprised these people don’t give each other a Pulitzer just for getting out of bed and brushing their teeth correctly. Yes, the sales volume is up an unprecedented 65% but you can also say in the same headline that the median price is down a record 38%. Both are unprecedented records and guess which one the media ran with?

Oh yes! Fantastic. Time to get my agent on the phone.

Shouldn’t the headline above be 50% of all Southern California home sales are foreclosures? The L.A. Times does a better job with their headline. After all, they are here in the area so they have a better sense of what is going on:

The L.A. Times headline offers a much more tempered report and headline. But leave it to the Orange County Business Journal to tell you how it is:

That is the true headline here. The incredibly steep drop in prices. The peak for Southern California was reached only last summer and stood at $505,000. The current price for a median priced home is now $308,500. Why is this significant? Because Southern California has more people than many states in the entire union:

Population: SoCal by County:

Los Angeles: 9,948,081

Orange: 3,002,048

Riverside: 2,026,803

San Bernardino: 1,999,332

San Diego: 2,941,454

Ventura: 799,720

Total SoCal Population: 20,717,438

To put this into perspective, Texas has 23 million people in their entire state. Alaska on the other hand has 670,053 people, or the size of Ventura Country. Bwhahaha!

Enough of that. Let us now put on our thinking caps and dig into the craptastic numbers that really show an ugly and Medusa like picture. You’ll turn away quickly once you see the data but be warned, you may turn into your favorite granite counter top:

Let us first work through the numbers. I’ve circled the two biggest counties responsible for the sales jump. You’ll also notice one important point here. They are the cheapest and have seen the steepest price drops of all counties! Even though San Bernardino and Riverside account for 19% of the Southern California population they made up 36% of all sales last month for the region! That is why Riverside is up 106% from a year ago. Then again, the current median price is $237,500 so how will that person feel that bought a home near the peak in December of 2006 when the median price in Riverside was $432,000? That is over a 45% drop from the peak price. The price of a home in San Bernardino county in December of 2006 was $370,000. The current price of $205,000 is a 44% drop from that point. What a shocker that homes are selling after having prices cut in half.

Every county in the area is down approximately 30% in one year and much more from the actual peak. If you really dissect the numbers, this September jump isn’t that big. Let us take the largest county, L.A. and see how the past 8 Septembers have done:

L.A. County September Sales

September 2008: 6,274 <—“Amazing” 65% jump from last year

September 2007: 4,361

September 2006: 7,917

September 2005: 10,988

September 2004: 10,501

September 2003: 11,395

September 2002: 10,808

September 2001: 8,831

Is this really a number to go running home about? Just because we had a horrific September last year of course any anomaly is going to give a minor boost in home sales. In this case, it was the fact that Riverside and San Bernardino had a crazy amount of swap meet like bargains and people bought them up. It is also the case that 50% of all sales last month were foreclosures. How is this fantastic news?

In addition, many of these sales occurred in the middle of the summer before the global stock market smack down occurred. With these numbers my thesis on why home prices in California won’t see a bottom until 2011 is even further reinforced and all 10 reasons are even more viable today. It is also the case that the summer selling season data has just come to a close. This is a typical seasonal pattern. Take a look:

*Click for a bigger picture

Like clockwork, the end of spring and summer are the best selling seasons for housing especially here in California. The above chart highlights this trend to perfection. Take a look at the seasonal drops in fall and winter. The frightening thing is that if you look at the final point on the chart which includes the unprecedented rise this summer, we are at the lowest peak from the last few years. It will only go down from here since:

(a) Option ARMs are going to recast in large numbers Q4 of 2008 and Q1 of 2009.

(b) This last month does not include the global market fiasco.

(c) California is in a deep recession. 7.7% unemployment rate and the budget is being held together with chewing gum.

(d) We are entering into the slow fall and winter selling season

Although there are glimmers of hope in this report, there is much more to be pessimistic about. Prices are going to drop 50% from their peak. This isn’t some doomsday prediction because as you saw, Riverside and San Bernardino are already down approximately 45% from their peak so they will arrive at this milestone first. L.A. County which hit a peak of $550,000 is now at $360,000 or a drop of 34%. If L.A. County can see the median home price lose $190,000 in value in one year, is it a stretch to say we will see another $85,000 reduction in the next 3 years? Or a better question is what is going to push prices higher? Jobs? Demand? Somehow I think believing prices are near a bottom is unprecedented.

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