The only thing slower than molasses in January, it seems, is Riverside County's home-sales market.

Buyers closed escrow on 1,939 new and existing houses and condominiums last month, the lowest number since January 1997, when the county's population was roughly half as large as it is now, a research company reported Wednesday. A separate analysis by The Californian, showed a small, tentative rebound among existing homes in Southwest Riverside County.

Prices continued to plummet across Southern California, with Riverside County's median sale falling to $331,500, its lowest level since July 2004, according to the monthly report by DataQuick Information Systems.

The 20 percent decline in that figure since January 2007 - when the median was $415,000 - was the steepest in Southern California. The county's real estate market has won or tied for that dubious honor in five straight months now, a grim mirror-image of 2002 through 2005, when its prices skyrocketed toward the stratospheric levels of Orange and San Diego Counties.

Southern California's median price fell to $415,000 last month, down 14 percent from January 2007, DataQuick reported.

Economists and many real estate agents interviewed in recent weeks have blamed tighter lending standards and a rising flood of foreclosed houses onto the local market. Agents have also blamed would-be buyers' expectations that prices will remain in free-fall for another few months.

Such expectations derive at least partly from economists' warnings that the region's prices put homes far out of reach for most buyers. The gap between Southern California's home prices and workers' incomes has grown significantly since the late 1990s and grew wider still in 2004 and 2005, thanks in part to wider use of nontraditional mortgages, including loans with no down payment and options to pay off only interest - or not - each month.

Burned once by the wave of mortgage defaults, lenders are now shy about making such loans, and the result is that some borrowers who might have qualified two years ago are no longer able to do so.

Borrowers have been defaulting on those loans at an alarming rate. Banks seized as many as 2,800 of the underlying properties last month in Riverside County, according to Foreclosureradar.com, a California tracking service.

That number looms ominously over the 1,939 sales figure. The result is that the number of homes for sale has continued to grow at an alarming pace. Lenders are increasingly aggressive in cutting the prices of foreclosed properties, undercutting individual sellers even further.

"As long as we keep inventory up and banks keep shoveling them in, we're going to see a little more depreciation," said Gene Wunderlich, a longtime real estate agent with Coldwell Banker Residential Brokerage in Wildomar.

But the lower prices and interest rates have brought more buyers and would-be buyers into the market since late January, a development that could halt the two-year decline by the end of 2008, Wunderlich said.

That's already showing up in the sales numbers in Southwest County, where escrows closed on 359 existing homes last month. It was the first time since December 2005 that number has risen from the same month a year earlier, and the largest monthly sales figure since June 2007.

Existing single-family homes sold last month for an average $364,500, 27 percent below the level of January 2007, according to The Californian's analysis of data from the Multi-Regional Multiple Listing Service.

The median prices reported by DataQuick for Riverside County, in contrast, represent the level at which half the homes sold for more and half for less.

DataQuick President Marshall Prentice attributed the ever-lower median prices partly to the fact that sales of more expensive houses have been hit more severely in recent months.

"We don't know how much of this downturn is driven by market fundamentals, and how much is due to turmoil in the lending industry," Prentice said in a DataQuick news release.

Interest rates on mortgages of more than $419,000 - known as "jumbo" loans - have risen markedly over the last year, even as rates on smaller "conforming" mortgages have fallen slightly. Jumbos can't be resold to large government-backed lenders, and loan originators generally charge slightly higher interest rates to compensate for the slightly greater risk that they perceive. The average rate on 30-year fixed-rate jumbo mortgages is now 6.7 percent, a full percentage point higher than comparable conforming mortgage. That gap has grown from just 0.25 percent in February 2007, according to daily surveys by Bankrate.com.

An economic-stimulus package pending in Congress would raise the conforming loan limit in the highest-cost areas of California, a change that Wunderlich said would probably buoy or even boost prices somewhat.

"That's got to help, especially here in California," Wunderlich said.

- Contact staff writer Chris Bagley at (951) 676-4315, Ext. 5444, or cbagley@californian.com.