Southern CaLifornia Real Estate Market Dies
From glistening highrises and blue-collar enclaves, Southern Californians are watching the treacherous regional economy batter their most prized asset: real estate.
The Texas-style collapse predicted three years ago by many East Coast economists finally has come to pass for many owners of Southern California property. Prices also have dropped in Northern California, but real estate experts say the drop was not as sharp as in the south and that northern property values will recover much sooner.
"The south is dead, and the north is still alive," said Ken Rosen, chairman of the Center for Real Estate at the University of California at Berkeley.
Rosen pegs the decline of Southern California real estate to an exodus that began more than three years ago, when many Los Angeles residents fled the area's high housing costs, pollution and congestion for cleaner, less expensive towns such as Portland and Salt Lake City.
But he and other experts say the differences between the northern and Southern California markets are rooted in long-term trends that began emerging nearly a decade ago: In the mid-1980s, San Francisco Bay Area cities including San Francisco and Walnut Creek adopted strict controls limiting new construction. By contrast, Los Angeles developers continued unrestricted building, and the amount of downtown office space rose fivefold to 33 million square feet from 6.3 million square feet. As Southern California developers grew unable to fill their buildings with tenants and pay back development loans, Southern California foreclosures nearly tripled to $4.1 billion last year from $1.1 billion in 1988. This year alone, four of every 1,000 properties in the Los Angeles area went into foreclosure, compared with two of every 1,000 Bay Area properties. The mounting foreclosures and subsequent collapse of many Southern California savings and loan associations led to sales at steep discounts of properties once held by these thrifts. …