Worst U.S. housing market in 2008? California! (2024)

FAQs

How much did housing prices fall in 2008 in California? ›

California's housing market grabbed a dubious honor: Worst in the nation in 2008! First American Loan Performance's year-end stats show: Home prices fell in 35 states, with California worst at down 26.9%.

Two proximate causes were the rise in subprime lending and the increase in housing speculation. Investors, even those with "prime", or low-risk, credit ratings, were much more likely to default than non-investors when prices fell.

The housing market collapse of 2008 was caused by a number of factors, including subprime mortgages, predatory lending practices, and securitization by lenders. The housing market collapse of 2008 had a devastating impact on the global economy. Millions of people lost their jobs, and many businesses went bankrupt.

Causes. The imbalance between supply and demand resulted from strong economic growth creating hundreds of thousands of new jobs (which increases demand for housing) and the insufficient construction of new housing units to provide enough supply to meet the demand.

It took 3.5 years for the recovery to begin after the recession began. A lot of buyers who bought in 2008, 2009 or 2010 saw their home prices decrease before the recovery started in 2011. Condos deprecated by only 12%, while single-family homes depreciated by 19% after the recession.

In 2007, real estate crashed completely with hundreds of thousands of homes going into foreclosure, multiple subprime lenders declaring bankruptcy and the market requiring government bailouts. The market continued to slow down, with flat prices and home sales being the biggest trend.

The Great Recession was a period of market decline in economies around the world that occurred in 2007 to 2009. The scale and timing of the recession varied from country to country (see map).

There probably won't be a housing recession in 2024 based on current expectations, as limited inventory is likely to push prices up further. Once rates drop, more buyers should re-enter the market as well.

The subprime mortgage crisis occurred from 2007 to 2010 after the collapse of the U.S. housing market. When the housing bubble burst, many borrowers were unable to pay back their loans. The dramatic increase in foreclosures caused many financial institutions to collapse.

Years before the housing bubble burst in 2008, housing analyst Bill McBride began chronicling the troubles in the U.S. housing market in his blog Calculated Risk. Not only did he predict the crash, but he also called the 2012 housing price bottom.

Is the CA housing market going to crash? ›

Experts suggest there may be some moderation in price growth, but it is unlikely that we will see broad declines in the California real estate market. Compared with previous cycles, 2024 shows similar trends around tight inventory and high demand.

Housing price indices

As measured by the Case–Shiller index, the US experienced a housing bubble peaking in the second quarter of 2006 (2006 Q2).

5 of 10 US cities with the worst housing shortages are in California, new report finds. (NEXSTAR) — It's no secret the U.S. housing market has been hot in recent years. That has continued into 2024, despite mortgage rates staying close to 7% so far.

Natural and environmental threats like wildfires, droughts, pollution, and earthquakes pose concerns for residents' safety and well-being. Traffic congestion and overcrowding in major cities like Los Angeles and San Francisco make commuting a nightmare and finding affordable housing a challenge.

Housing, transportation, food, utilities and taxes are the biggest factors driving the state's higher cost of living. Lack of affordable housing is one of the state's most pressing challenges.

The bursting of the housing bubble has brought the steepest and swiftest decline in house values in recorded US history. The national median house price fell from its peak in July 2006 to January 2009 by 29 percent.

Large, nationwide declines in home prices had been relatively rare in the US historical data, but the run-up in home prices also had been unprecedented in its scale and scope. Ultimately, home prices fell by over a fifth on average across the nation from the first quarter of 2007 to the second quarter of 2011.

Home prices barely declined in 2007 in many coastal areas, while prices tumbled in many inland areas. In the San Francisco metro area, prices fell 0.9%; and prices in Santa Cruz, San Jose, and Los Angeles fell less than 4%.

It was among the five worst financial crises the world had experienced and led to a loss of more than $2 trillion from the global economy. U.S. home mortgage debt relative to GDP increased from an average of 46% during the 1990s to 73% during 2008, reaching $10.5 (~$14.6 trillion in 2023) trillion.