Lots of people are probably saying that they’ll jump in if prices drop 25%. But will they, really? It makes it sound like there’ll be a floor, or a support, for house prices at a certain level. And that is possible. But consider the following:

I’m not saying prices will drop 25%, but if they do, I think lots of people will say, “homeowners are getting hammered. Prices have dropped 25% in 3 years. Those bubble believers were right all along. If I buy a house now, I’ll lose money. I’ll wait until they stop dropping.” I think fewer people will say, “prices have dropped enough and I’m confident that they’ll stop going down and start going up.” Fear and greed seem to play a more important part in San Diego’s real estate cycles than anything else, and if prices drop 25% in 3 years or so, fear will approach panic, and there will be very, very few buyers.