As home sales increase due to pent up buyer demand in California, it's apparent the bottom of the market won't hit for some time yet. However, Housing Predictor projects the California housing market to be in a recovery by late summer.

It will take years for the Golden State to recover fully. Despite the credit crunch, an ailing economy, increasing foreclosures and growing unemployment California will join Florida in coming out of the housing mess. The growing volume of home sales is aiding the state's recovery. A special $10,000 state tax credit for home buyers, $8,000 federal tax credit and the lowest mortgage interest rates on record are getting home buyers off the fence.

More than anywhere else in the country, California has been through major ups and downs in housing prices. Every time it happens more people move out of the state than move into California. But that means little to true Californians, who keep their residences in the state known for being the leader in dozens of industries. After all, it is the Golden State, the home of Hollywood and the best weather in the nation.

Foreclosures compose the majority of home and condo sales with more Option Arm Alt-A mortgages set to reset in 2009, which will send hundreds of thousands of additional foreclosures on to the market providing a growing inventory of property for sale.

As the recessionary economy worsens in Los Angeles, home prices are falling at some of the fastest rates in the country. Record high foreclosures are hurting, but have triggered an increase in home sales. Mortgage companies and banks are slashing prices in order to unload inventory before the second round of foreclosures hits. Greater Los Angeles area home values are forecast to deflate an average of 20.1% in 2009.

City	Forecast
Los Angeles	−  20.1%
Riverside	−  21.2%
Inland Empire	−  21.2%
Anaheim	−  19.3%
San Diego	−  17.3%
San Jose	−  19.2%
San Francisco	−  17.6%
Oakland	−  18.2%
Orange County	−  19.3%
Fresno	−  23.1%
Bakersfield	−  19.3%
Tulare	−  19.8%
Sacramento	−  15.7%
Stockton	−  26.4%

Foreclosures have been selling in Riverside, Ontario and San Bernardino, also known as the Inland Empire and as one of the hardest hit foreclosure capitals of the nation. The disastrous epidemic has battered neighborhoods and left foreclosed homes vacant. The Inland Empire is forecast to deflate an average of 21.2% in 2009.

In Orange County, where foreclosures have practically been the only homes selling and account for 4 in 6 sales, home prices have been falling at double-digit rates. The medium price was the highest in the state in Orange County, but as prices deflate so is the median value. Housing values are forecast to drop 19.3% in Orange County, which includes Anaheim in 2009.

In San Diego home sales have also picked up due to lower prices. The erosion in housing values is projected to remain high in 2009 and is forecast to deflate 17.3% on average for the year.

The collapse of the housing market took longer in San Jose in the San Francisco Bay area than many other places in the state. But as San Jose and neighboring Santa Clara home prices deflate the market will make inroads towards stabilization. San Jose is forecast to deflate 19.2% on average in 2009.

In San Francisco home values are deflating at a more rapid rate than they had been, and are projected to worsen over the coming year. Deflation in home and condo prices is forecast to hit an average of 17.6% in 2009. The City by The Bay is feeling the pain of the credit crisis, but has the economic strength to handle the housing downturn much better than many other areas of the country.

In the East Bay in Oakland, subprime and Alt A mortgage foreclosures have been at one of the highest rates in the state. The market has seen an up tick in sales, but is projected to remain slow through 2009 on average housing deflation forecast at 18.2%.

In the Central Valley, the migration of Mexico citizens has slowed with the recessionary economy. Unemployment levels are rising in Fresno and neighboring Tulare. More homes are now selling in Fresno, triggered by record high foreclosures. The San Joaquin Valley has been rocked by the foreclosure crisis. Fresno is forecast to sustain average housing deflation of 23.1% in 2009. Tulare is forecast to suffer average home value losses of 19.8%.

In Bakersfield thousands of homes are sitting vacant foreclosed by banks. The fallout from the credit crunch is making it tougher for perspective buyers to get mortgages. Some local banks are lending, but only to those with exceptionally high credit scores. Bakersfield is forecast to sustain average housing deflation of 19.3% for the year.

But up in the state's capitol of Sacramento, which has been one of the states harshest hit areas, the increase in foreclosure sales is also helping to boost the ailing home market. The crisis is forecast to deflate home values in Sacramento another 15.7% by year's end.