"We're on our way down and still picking up speed," said Christopher Thornberg, a Los Angeles-based economist who four years ago warned that the pace of housing price gains in the region couldn't be sustained.
Washington, where Treasury Secretary Henry M. Paulson Jr. called the U.S. housing downturn the "most significant current risk to our economy." Paulson echoed a prediction by Federal Reserve Chairman Ben S. Bernanke on Monday that the slump would be a "significant drag" on economic growth into next year.
Adding to the sobering picture, the National Assn. of Home Builders said its builders' confidence index hit a record low. The index, which tracks builders' views of market conditions and sales expectations for the coming six months, fell to 18 from 20 in August. It has been below 50 -- above which indicates a positive industry outlook -- since May 2006.
In Southern California in September, home sales in six counties -- Los Angeles, Orange, Riverside, San Bernardino, San Diego and Ventura -- fell 48.5% from the same month last year. They were at their lowest since DataQuick Information Systems, a real estate service, began compiling such statistics in 1988.
The median price in five of the counties slipped, and in Los Angeles County it moved up only 1.2%.
The relatively high price of property in L.A. County can prop up the region's median -- the point at which half the homes sell for less and half sell for more -- even as overall sales fall.
Garden Grove real estate broker Patrick Schwier, who specializes in apartment buildings, said he had sold 70% fewer buildings this year compared with the same period in 2006, and recently saw one sale fall through when the potential buyer's loan application was rejected.
Schwier said he saw two more years of falling sales and prices.
"Prices were too inflated when credit was easier," he said, and now home prices, though they've been slipping, still "don't make sense. And they will drop until they make sense."
DataQuick President Marshall Prentice blamed the declines on the trouble people had last month obtaining jumbo loans, which are for more than $417,000 -- loans many buyers need to purchase property in Southern California, where the median price in September was $462,000.
"It's likely there will be some catch-up sales activity as jumbo loans become available again," Prentice said.
Delores Conway, director of USC's Casden Real Estate Economics Forecast, said September sales were probably hurt by tighter lending standards that went into effect in August in response to the sub-prime mortgage meltdown. But she said weak sales and prices also showed the market was correcting itself after years of surging prices.
Los Angeles mortgage broker Mitchell Ohlbaum, however, said that although jumbo financing was tougher to obtain for many of his clients, all were able to finance their purchases.
"We had some challenges, but we were able to get them done," Ohlbaum said.
Thornberg discounted the overall credit squeeze's effect on the housing market. He said housing prices, pumped up for years by questionable mortgages, had to drop considerably.
The median income of L.A. County homeowners, he said, is at 60% of what's required to buy a median-priced home in the county, assuming a housing budget of 35% of gross income.
Many people have mortgages they can't afford, such as those that start with a very low "teaser" interest rate that rises dramatically over time. When those loans reset at higher rates -- as many are scheduled to next year -- the market could be in for another shock as more over-extended homeowners go into foreclosure.
"This thing's going to get worse when the peak of resets occur next year," Thornberg, the L.A. economist, said. His prediction: Southern California sales and prices will decline into 2009.