Well, 18 in 1000 houses means less than 2%. And as we know, only a fraction of NODs result in foreclosures. The average for all of California is probably less than a quarter of the NOD rate in Perris. In other words, this relatively high number of NODs is still not high enough to make prices collapse.

Prices are moving down, no doubt, but they are sticky as we know, and I expect houses to remain overvalued for several years while inflation slowly erodes real values until they become more “normal” relative to rents and incomes.

Two things are true: (1) This NOD rate will increase as more ARMs reset and more subprime borrowers default over the next months, and (2) the fraction of NODs resulting in foreclosures will probably be higher than in recent housing busts (early 80s, early 90s).