San Diego residential real estate is crashing. New home median price down 17% y-o-y for September. That is a stunning crash in an assett class that is supposed to be sticky on the way down. To me that statistic already indicates that 20% of the top for resale homes already is in the cards…and this is before any real panic. I’ve been concerned that housing prices would not return to historic levels. This drastic drop in one year is the most encourahing data I’ve seen yet.
So, I think the California residential RE doom and gloomers will be right, and the drop will be significant enough to be called a crash when we analyze the data 10 years from now.
As for the equity bears who are completely out of the stock market, I just don’t understand the rationale. Sure NASDAQ hasn’t gotten back to what it was, but we all know that those pre-crash P/E’s were off the charts. The Dow, S&P500, and Russell2000 didn’t have nearly the peak and retrospectively obvious overvaluation, and they did not take a precipitous fall. Since ’03, the slopes of these indices have been more or less like they were back in the pre-exuberance days of 1990-1995 (coincidentally, the last Cali RE bust). I simply do not see a need for a large correction in any of these indices at this time.
