I have to say that UCLA is wrong. I have been telling my friends from an economic standpoint I didnt undertand the boom for years. Real wages have been stagnant for years, yet real estate has gone nuts. With the affordability index being so low (I think it is at 10% for SD area) we have a long way to go to reach the 70% historic rate. To many people used RE as a short term investment. RE is not liquid like the stock market.
We are gonig to see a worse bust than the housing bust in Japan. At least the 100 year fixed morgages in Japan were fixed. A lot of people are going to go bust when options arms reset in the next couple years and RE has depreciated and real wages have remained stagnat.
It is also hard to forecast what effect Option ARMs will have on the market as there is no historic data for it. Without the data economists cant make acurate predictions.
