Hope for economic recovery if you want a fairly priced home.

Yes, it may fly in the face of common sense but here are the facts.

The economy WAS much too dependent on real estate during the early 2000’s. When the economy starts improving it will be improving far more in non housing areas. Since there is a glut of housing inventory housing construction will remain in the doldrums long after the economy starts humming. Home sales in fairly priced markets like Riverside or Phoenix will rise but stagnate in bubble markets like S.D.

Once the economy picks up interest rates WILL rise. Rising interest rates will be the catalyst to finally once and for all end this housing bubble.

Once rates rise banks that have nonperforming loans will foreclose quicker because of the opportunity cost. Right now if someone is not paying on their mortgage it is costing the bank ZERO on the money since they can borrow that money from the Fed for Zero or nearly zero. When rates rise it will cost the banks a lot of money to let people live in houses that they are not paying for.

So, an improving economy will increase supply and in markets that still have bubble pricing higher rates will cause demand to fall due to affordability issues.

Think about this, the property tax on an OK house in San Diego is about what the ENTIRE payment is on a nice house in Phoenix!!

Housing is and should be 2 to 3 times more expensive than places like Phoenix, it always was in the past and will be in the future, but 5 to 10 times?

Perhaps if California became more expensive over the course of decades you could conclude it is permanent pricing but the increase occurred from 2001 to 2006 during lax lending practices and the Federal Government has been spending trillions trying to sustain it, yet even with that it is faltering.