Two things describe California’s property market situation: alarming and dreary. For two years, the state has been rocked by the mortgage crisis that resulted after excessive lending to homeowners. One culprit is the mismanagement of option adjustable rate mortgage that had borrowers scrambling where to look for loan payments. Another would be Alt-A mortgages where thousands of applications were granted to Californians with high debt-to-income rations. In fact, the state is considered to have the highest percentage of delinquent mortgages at 10 percent.

Los Angeles investment property &  home prices are deflating rapidly along with other cities like Las Vegas and Miami. This has set off a series of foreclosures from one town to another and consequently pulled down home values to the slump. When ARMs reset this second quarter, expect foreclosures to worsen unless lower mortgage rates can’t still influence buying among bargain hunters. We see prices going down in 2009 by 21.5 percent.

The southeastern part of the state consisting of Riverside, San Bernardino and Ontario was severely affected by the property debacle. The affordable housing was marred by fast rate of foreclosures when Alt-A loans reset their rates. This year, these loans’ rates are yet to change again and provide a more disastrous real estate scenario for the Inland Empire. Home prices are forecast to drop by a catastrophic 23.5 percent. Alt-A resetting is also hitting the East Bay with prices deflating by 18 percent. RealtyOutlook.com expects more foreclosures in these areas.

San Jose has not been affected immediately by the property downturn even though it is the third largest city in California. However, 2009 bids a depressing twist to the real estate sector as housing values still won’t take off from the previous year’s late downturn. Silicon Valley won’t be even recovering from the technology bubble as the technology industry takes a backseat in the economy this time.

One of the hardest hit by the credit crisis is Sacramento most especially in the Central/Eastern and Southwestern areas. Borrowers can’t keep up with the monthly payments in their mortgage. This year, house values are going down by 15.5 percent.

The San Diego market isn’t different from the other California cities as well. Buyers took advantage of foreclosed properties last year. With their cheap prices, foreclosed homes became attractive to San Diego buyers. Deflation in home values will continue to worsen this year, most likely plunging by 19 percent.

The San Francisco area directly benefits from the Silicon Valley enterprises but because the downturn isn’t abating anytime, the Wall Street of the West is highly susceptible to further financial trouble. Expect prices to slide by 17.5 percent this year.

Orange County’s foreclosed homes provide the lifeline to its ailing real estate market. Because of the presence of a number of Fortune 500 companies, the average home price of single family homes rose to $766,000 three years ago. RealtyOutlook.com expects prices to fall by 21.1 percent.

Entrepreneur-city Fresno feels the crunch this year when home prices will drop by 19.5 percent. Tulare, a tiny city near Fresno, will have home prices slightly lower than its neighbor dropping by 18 percent.

The only thing that remains flat in Central Valley is the land itself. Jobless rates are rising and so are foreclosure rates. Furthermore, many of the agricultural and military centers have shut down. The San Joaquin valley in the south has also suffered the same fate. Foreclosed homes are rapidly increasing in number even with the stable oil companies providing employment to thousands of Californians. Nearby Bakersfield is highly dense with foreclosed homes even if its population is fast multiplying. Housing prices are set to slip further by 17 percent this year.