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Southern California home sales continued to slump in July, falling 27% from year-ago levels, and are now running 54% below peak levels reached in July 2003, DataQuick reported today.

Some industry experts have warned that August sales may be even weaker, given the widening credit squeeze that has spread to non-subprime mortgages.

The only area of sales growth: foreclosed houses

, which now make up 8.3% of the Southern California home sale market, up from 7.7% in June and just 2.0% last July, DataQuick reports.

‘The last time we had sales this slow, Southern California had been in recession for a few years. Jobs were being lost in droves, people were leaving the area and home prices fell significantly. This time around we haven’t seen that, sellers are holding out and we can only assume demand is building up,’ said Marshall Prentice, DataQuick president.

For the Southern California region, sales were the slowest since July of 1995. Sales were particularly weak in the Inland Empire, where sales are down 42% from year-ago levels.

The DataQuick numbers show continued price increases in parts of the region -- median selling price in LA, for example, inched up from $545,000 in June to $547,500 in July. But DataQuick has said for some time now that those numbers are misleading, because lower-priced homes are not selling, creating the illusion that overall prices are rising.

‘When adjusted for shifts in market mix (i.e. fewer lower-cost homes selling now), year-over-year price changes went negative in January and are now roughly three percent below year-ago levels. The declines are in the lower half of the market, while prices are flat or even increasing in the upper half of the market,’ DataQuick said.

That said, the DataQuick numbers show declining median sales prices in the Inland Empire, and many analysts expect further price declines across the region: ‘A decline in prices, like increases, tends to be self-fulling,’ Michael Carney, head of Cal Poly Pomona’s Real Estate Research Council, tells the LATimes here. ‘If buyers see prices falling, they hold off and don’t buy and cause prices to fall even further. But it takes a while.

Photo Credit: Reuters