Homebuying Like It's 1989

For some parts of Southern California housing prices have returned to what they were during the Reagan Administration:

In parts of Southern California, the housing crash has upended a basic tenet of the American dream: that home values always increase over the long term.

Properties in several areas are selling for less than they did 20 years ago, and that's not even counting the effects of inflation.

The reversal is a bonanza for some first-time buyers. They're nabbing houses for less than what their parents paid in the late 1980s, jumping into a real estate market that has become a kind of economic time machine.

To return to the past, take a stroll down Mulberry Avenue in Lancaster. John A. Beatrice, 55, bought his spacious two-story Spanish-style house there brand-new for $120,000 in 1989. It was a price he could comfortably afford, and he planned on staying through retirement, so he wasn't worried about price swings.

"I always knew real estate goes like this," said the aerospace engineer, moving his hand in an undulating motion like bell curves on a graph.

But he never imagined his neighborhood would drop off the charts. In April, a slightly larger home two doors away sold for $66,500. That's just over half the $130,000 it went for new in 1992. In 2005, that house sold for $330,000.

Beatrice's 29-year-old daughter is now shopping for Lancaster houses priced lower than when she was a kid.

Home prices across most of Southern California have not fallen nearly as far. The median price in the six-county area was $247,000 in April, about what it was in 2002.

But in 14 Southland ZIP Codes, mainly desert communities in the Antelope Valley and Inland Empire, median prices have fallen below levels recorded in April 1989, according to MDA DataQuick, a San Diego real estate information service.

That means thousands of homes in those neighborhoods -- even houses barely 20 years old and in decent shape -- have lost every dime of their appreciation, giving back not just the gains of the recent bubble but steady increases logged over a generation.

For those unfamiliar with Southern California, the areas described are locations that rapidly expanded as prices climbed in the main suburban areas of Orange and Los Angeles Counties. People seeking affordable housing headed farther and farther out of town to find homes they could afford, even if it meant long commutes and weather that ranged from frigid to firestorm.

Now that there's a lot of housing inventory available in the more desirable parts of Southern California, the outlying suburbs are dying. Why live out there if you don't have too?

And in other Southland real estate news, the 5-star St. Regis Resort is up for a foreclosure sale. That's where AIG held their ill-fated retreat after getting a big government bailout.