I just have one observation for bugs on this post. Everyone here talks about house prices going down, and how over valued they were/are, and uses current rents as a multiplier to identify a current “market driven” price that excludes all the bubble mania. My point repeatedly (sorry, I know I harp on it too much) is that rents have risen faster than incomes and normal fundmentals too. Just not nearly as much as housing has.
So in my opnion the 1998 rents need to also be included in the picture and worked into the equation. The basement price wont be based on todays rents, but on past rents+ fundamental growth(population/income changes). In my unknowing mind, take between 5-10% off current rents and you have something more telling. 5% off 1000 is only $50, and wont mean a thing in the long run. But 10% off a $2500/month rent in SFR’s is $250 bucks and that will change bottom pricing. If peoples rents are not going up, or are going down, people will be less inclined to buy than if rents were still going up.

Rents move in real time and are even more based on preception than house prices. They are also more impacted by population changes than purchase prices are. In the last bust people fled Socal, reducing demand and consequently price. I personally know 5 people who have left the socal area for other states in the last 6 months, 3 of which was for the reason of being fired, 1 because she got married, and 1 because they graduated college and moved home to Boston. All 5 were college educated and in their mid to late 20’s with great jobs or futures. All left because oppertunities were greater elsewhere. These are your future entrants to the housing market, not permarenters like HS dropouts without a clue will be. Without them rents and entry level house demand gets killed. That will affect the higher priced houses every pig seems to be thinking about.
BTW, I personally have not met anyone new to the area in a while.