Californian homes are overvalued by as much as 40 percent and stricter lending standards will probably contribute to ``material'' price declines, according to analysts at Goldman Sachs.Prices in the state ``have proven surprisingly resilient, given the severe curtailment of credit availability and rising unemployment,'' the analysts said in a note to investors. ``However, we believe that a downturn is imminent.'' In August, the median price for houses in California was $589,000, though economic conditions only support prices of $350,000 to $380,000, the analysts said. The average U.S. home is 13 percent to 14 percent overvalued, the report estimated. Home sales in California, as in the rest of the U.S., are being hurt by the collapse of the subprime-mortgage industry. Lenders are requiring higher credit ratings from borrowers seeking mortgages and are demanding larger down payments. Standards are particularly strict for jumbo loans, mortgages higher than $417,000, which are common in California.
The median price for houses and condominiums in California will probably drop 4 percent to $553,000 in 2008, the California Association of Realtors said Oct. 10. That would be the biggest decline in 15 years.
