Home Price Decline Fuel California Sales

by Donald Hanz on States

Last May, home price decline in California reached 30 percent, the sharpest so far in almost two years. Surprisingly, the situation attracted more buyer interest.

The decline in home prices is considered to be the result of the growing number of foreclosure homes for sale. Since these repossessed properties are sold at a fraction of their market values, neighboring home prices can be expected to drop.

For many months, home sale remained sluggish, not because there were no buyers but because interested buyers were waiting for prices to hit rock bottom. Today, average median home price in the state is pegged at $322,500. It actually peaked last year at $484,000. With the huge decline, it can indeed be expected for buyers to finally make the decision to buy.

In the last two years, California consistently posted one of the highest foreclosures rate in the country, along side Florida and Nevada. Speculative buying is considered to be the reason why the state is now at the epicenter of the foreclosure mess. Aside from this, there were also the predatory lending practices.

Although the current home sales activity can not be considered as the start of a complete recovery for California, experts feel that it is a good thing. Obviously, buyers are no longer hesitant about making an investment especially considering the great savings they could enjoy from these foreclosed houses.

Nationwide, the number of foreclosure filings continues to rise. In addition to the re-setting adjustable rate mortgages, distressed homeowners are also coping with the high fuel and food prices.

As a result of collective efforts between lenders, non-profit organizations and the federal government, many distressed homeowners have been able to keep their homes and prevent foreclosure. Most of them have managed to work out new repayment terms, while some were lucky enough to have their loans modified to make mortgage payments more manageable.