peter, it is 2010 in Temecula, The Tsunami came through already, the price movements have already occurred, there may be some more but the bulk are behind us, now the fear for a primary long term house is interest rates.

I won’t argue that housing wont continue to decline all over the country but this question is about a specific area. 2001 prices, more than 50% off peak are commonplace in my valley, sub $100 a square with some larger homes at 80 or 90 a square are approaching building cost and well below replacement cost. New building has stopped. Some condos are now priced at $100 a square and 100x rent multiplier with cash positive on day one. The downside risk has diminished, inventory is falling slightly and nods/nots are down significantly (jury is still out because of the new state law, they may rebound). This only pertains to my zip code, not all of So Cal, and I would be more fearful of areas that have held, than those who have already imploded. I see about another 10% decline over the next six months in my hood, then inflation or higher rates keep things flat. That 10% will come not because of unemployment but because S.D. and O.C. will fall and fall hard, stopping the flow of impatient fence sitters from relocating here and perhaps some reverse migration.

I’ll give you an example, 3/2 1400 sq ft townhouse with a 2 car garage listed for 165k http://www.redfin.com/CA/Temecula/33513-Emerson-Way-92592/unit-C/home/12509148
it was bought new in 2003 for 187k, these were high 300’s at peak with some touching 4. They rent for $1500 right now, vacancies are rare. 3% down fha and the P&I is just under 1k a month, tax and hoa, still under $1500. Figure the tax deduction and it is about 3-400 a month cheaper to buy than to rent, experts may not like that but people do, thats when people buy. So what does bruce norris think this unit’s bottom will be, he doesn’t know, because it’s a micro market, I don’t expect him to understand every micro market. Will it go down to 100k? I seriously doubt it. So the downside risk in my opinion is 10-20k (10%). If someone could show me an 800k carmel valley home selling for 325k that rentd for 3k, I wouldn’t talk them out of it, I’d say you are near bottom, these numbers are exactly the same as that example.