by Calculated Risk on 10/21/2008 03:17:00 PM

From DataQuick: Bay Area home sales up 45% over '07; median price falls to $400K

Bay Area home sales soared last month above the record-low levels of a year ago, marking the largest gain in over six years. The median sale price did the opposite, diving to $400,000 - 40 percent below its summer 2007 peak - as more sales shifted to lower-cost inland markets laden with foreclosures.
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Although sales rose in some coastal communities in September, it was the region's less expensive inland markets that pushed sales up so sharply.
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DataQuick's September sales reflect closed escrows, meaning buyers made their purchase decisions in mid-to-late summer, before the worst of the economic news hit in recent weeks. Statistics over the next month will begin to show how housing demand has fared this fall.
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[N]early 42 percent of all existing homes sold across the Bay Area last month had been foreclosed on at some point in the prior 12 months, up from 36.1 percent in August and 6.9 percent a year ago. Foreclosures tend to sell at a discount and are concentrated in relatively affordable neighborhoods.
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Foreclosure activity is at or near record levels ...

The inland areas have seen the most foreclosure activity and largest price declines. The increase in sales (prior to the recent wave of the credit crisis) suggests prices are closer to the eventual bottom in the inland areas than for the higher priced areas.

We have to be careful with median prices because so much of the activity is foreclosure resales in lower prices areas, and this distorts the mix of houses being sold and lowers the median price.