Help! How can I head off a foreclosure?

Living in the big city of San Francisco, the home prices are ridiculous. How is it that the Bay area can keep this $1,000,000 median home price?
— J. Green, San Leandro, Calif.

Here's our answer: 1) the Bay area is one of the nicest places to live on the planet Earth and 2) most of the developable land there has been built on. So you have a fixed supply and virtually endless demand. That’s a formula for rising prices.

People tend to think of the “housing market” as a single entity, but it’s really a collection of hundreds of local markets, each of which is marching to somewhat different drummers.

The result is a huge disparity in prices — and price trends — depending on where you live. The national median price of a single-family home was $223,800 as of the second quarter, according to the latest figures available from the National Association of Realtors. That’s down 1.5 percent from the second quarter of 2006, when the national median price peaked at $227,100. (The median is not the average, it’s the price in the middle; half the houses sold for more and half sold for less.)

In San Francisco, the median price of a single-family house sold for $846,800 in the second quarter. That’s more than 10 times the median price for a home in Youngstown, Ohio ($76,700) or Elmira, N.Y. ($71,700).

And while the “national” median price fell, many parts of the country continued to see healthy price gains in the second quarter. Binghamton, N.Y. was up 19.8 percent; Salt Lake City was up 21.9 percent. Meanwhile, prices in Sarasota, Fla. fell 11.3 percent; Elmira, N.Y. was down 17.9 percent, the steepest second quarter drop among the markets broken out in the NAR data.

It’s very possible that homeowners in the Bay area face price declines. All of these numbers were collected before financial panic swept through the credit markets in August. And regardless of where you live, the rapid price rises of the past five years were fueled largely by unsustainable forces: too much easy-money credit being unleashed into the mortgage markets. As that “credit bubble” unwinds, it’s gotten a lot harder to borrow money, which has put a crimp in demand.

Still, in the priciest neighborhoods, some people don’t seem to be having much trouble getting together the money they need to buy a house. In California, for example, some of the biggest gains in home prices in July were in places like Manhattan Beach (up 11.7 percent; median price: $1,628,500) or Saratoga (up 9.6 percent, median price $1,414,000). On the other hand, prices in Santa Barbara’s south coast region in July (median price $1,100,000) dropped 19.7 percent in just one month, according to the California Association of Realtors.

So, while the "national" trend in prices appears to be headed lower, it’s very difficult to forecast what will happen in any given community. One big unknown is how many potential sellers have been holding back and waiting for conditions to improve. If those sellers all decide to list next spring, for example, there could be too many sellers looking for too few buyers.

But in communities where there are more people who can afford to buy houses than there are houses for sale, prices could hold up fairly well.

MORE FROM ANSWER DESK

Answer Desk Section Front

Repairing consumer credit  Jobless benefit bedlam Who needs overpaid bankers? Who gets extended jobless benefits Easing job losses point to wobbly recovery Long-term jobless face frayed safety net GDP growth overstates case Recession over? Readers don't believe it Breaking down the cost of health care Commercial real estate bust looms Answer Desk Section Front   Add Answer Desk headlines to your news reader: