April Orange County Home Sales Slide 40% : Real estate: Experts blame the ‘psychological impact’ of the bankruptcy for the decline.

In a clear sign that the bankruptcy is continuing to paralyze Orange County’s housing market, home sales dropped by nearly 40% last month from the year before.

It marks the fourth straight month that home sales have fallen in Orange County. The drops there have been much steeper than in neighboring Los Angeles and Riverside counties, according to TRW REDI Property Data, a real estate data company.

“When you compare Orange County to other counties, this drop is substantial. And there is only one difference about Orange County from those areas: the bankruptcy,” said Anil Puri, head of the economics department for California State University at Fullerton. “Bankruptcy has had a substantial psychological impact on buyers here. People are just holding back on making financial decisions,” he said.

Of the houses that did sell in April, the average prices were up slightly from a year ago, from $237,496 to $239,579, an increase of 0.9%.

For the first three months of the year, home sales were down throughout Southern California because of the heavy winter rains and rising rates for mortgage loans.

Still, Los Angeles County reported declines of only 6.7% for the first quarter and Riverside saw a 13.6% decline, whereas Orange County’s home sales tumbled 26.2%.

Puri said home sales in Orange County should have been much better because its economy is growing and unemployment is down.

“It’s a huge drop,” said Bruce DeVine, regional economist with the Southern California Assn. of Governments. “It shows there are a lot of middle class people in Orange County just sitting tight right now because of the bankruptcy.”