CHESSNOID

California’s economy is going from bad to worse. And even though we are just one state of the US, I have heard many comparisons of how big our economy truly is if we were an independent nation. We would rank somewhere between #7 to #10 in the world based on Gross Domestic Product. That is amazing isn’t it.

So when this state suffers, the domino effect it has goes beyond its US borders and extends throughout the world. Right now, we have record foreclosures and record gas prices. On the housing scene:

The state-wide median price for a home sold during the month was $384,840, down from $594,530 last May. That severe drop probably reflects the fact that there are so many distressed sales and low-priced homes on the market, according to CAR.

“[It's the result of] a large number of short sales and foreclosures in the market,” said CAR Vice President and Chief Economist Leslie Appleton-Young.

Too much inventory

The Santa Barbara County area has been particularly hard-hit by falling prices; the median home sold there in May for $400,000, 24% below April prices, and 55% below May 2007.

Monterey County, down 49% since last May, and the Riverside-San Bernardino area, off 35%, also suffered steep losses.

Los Angeles prices fell 21% from a year ago, while San Francisco prices dropped 20%, and San Diego was down 27%.

The increased sales volume helped reduce the inventory of homes on the market to 8.4 months at the present rate of sales. That’s down from the 10.7 months of inventory that was on the market a year ago.

Additionally, far fewer new homes are being built.

“Builders have aggressively slashed housing starts,” said Weiss. “That is working inventory levels down.”

Most industry analysts agree that the big inventory overhang will have to be whittled down substantially more before home prices can begin to recover.

California experienced some of the biggest run-up in prices during the bubble years, and the state has been hit hard in the slump.

Foreclosures have become a major problem. California recorded 72,000 foreclosure filings in May, the most of any state. Its rate of one filing for every 183 households trailed only Nevada.

As far as gasoline goes, the nation’s average price looks cheap compared to what we pay here. We are in the $4.70 range for the low grade stuff. According to AAA:

Prices are now about 3% higher than they were last month and are more than 36% higher than year-ago levels.

Retail gas prices are highest in California, where a gallon of gas averages $4.602. Alaska had the second highest average gas price at $4.574 a gallon.

Today was the first time I noticed on Redfin that there are decent condos going in the low low $100,000 range. I found one in Corona, California for $99,000 but it is actually a short sale. When I called the real estate agent, he indicated that is the highest offer on the place and the bank has not and will not accept it. I asked him what he thought they would accept as the minimum. He said he honestly couldn’t say because the bank didn’t seem too cooperative and really didn’t want to lose money on such a big loan. He says those people making offers are just moving on if they don’t accepted because there is a lot of gloom and doom talk in our local markets that bargains are everywhere. He asked me if I was a broker or buyer. I told the agent I was neither that I was just a lookie loo at this point. I told him I did make an offer a few months ago on another property but the bank wouldn’t accept my offer. I still watch that condo sit there for sale. They have since lowered the price and it still sits empty. Countrywide is crazy! And now being sued by the AG’s of California and Illinois for fraud and predatory lending. The agent was a little bit more realistic and said that once the bank takes back the condo, it probably would get even less than the short sale bids, if it decides to realize the final loss by unloading the property.