San Bernardino County homes sold at the slowest rate in nearly five
years last month, yet prices still went up, a real estate information service
reported Thursday.

The median price for new and existing San Bernardino County
homes was $375,000, up 3.7 percent from 12 months earlier, according to
DataQuick Information Systems.


Sales declined 25.8 percent to 3,236. Although that number is
down sharply from 2005, it's still 16.5 percent ahead of the average for a
September going back to 1988, said John Karevoll, senior DataQuick
analyst.


"The market is coming down from an unnaturally high level," he
said, pointing out that last year was the strongest September on DataQuick's
charts. "There is a loose connection between sales and prices. Sales have to go
down significantly - and they have to stay down - to drag down
prices."


Christopher Thornburg, formerly a UCLA economist who now has a
private economics consulting firm, said that "there needs to be a severe
economic shock for prices to drop dramatically."


That's what happened in the early 1990s, as some 500,000 jobs
were lost around Southern California, he said.


If the overall economy remains strong and there is not a
collapse in the mortgage market from homeowners who

are
overextended, then prices are unlikely to fall dramatically, Thornburg
said.

Some home industry observers worry that consumers who recently
bought homes and did so with creative financing with below-market interest rates
for an initial time period are in for problems.


As many of those loans convert to market rates next year,
there's concern that foreclosures will rise considerably, putting additional
downward pressures on pricing.


But perhaps a bigger threat to the housing market may be the
ripple effect as this sector reacts to declining sales, Thornburg
said.


As homebuilders build fewer homes, there will be less work for
construction crews, less work for sales staffs, less work for mortgage
companies.


If these cutbacks are large enough to pull down the overall
economy and many homeowners can't keep their houses when faced with market
rates, that might be the "one-two punch" that shocks the market into a dramatic
price decline, Thornburg said.


Karevoll said he believes that if San Bernardino County home
sales continue their decline, prices may dip slightly negative for a brief
period of time.


In San Diego County, prices declined 4.4 percent from 12 months
earlier, marking the fourth month in a row in which home prices have
depreciated.


But in San Diego County, sales have been declining on a
year-over-year basis for more than a year. Sales in San Bernardino County have
only been declining for about six months, he said.


Thornburg said the Southern California housing market is 30
percent overpriced, and if prices don't tumble as the result of a secondary
shock, then they will remain substantially flat until 2012.


One way or another, the market has to work out of this imbalance
between market price and fundamental price.


Across Southern California, the number of new and resale homes
fell 28.6 percent from 12 months earlier as prices increased 1.9
percent.


In Los Angeles County, sales dropped 27.9 percent and the median
price increased 3 percent to $509,000.


The median prices in Ventura County turned negative for the
first time, dropping 3.3 percent to $584,000 last month, down from $604,000 in
September 2005.