Personally, I don’t see any reason to harass realtors. The real estate market has taken an odd course, and it doesn’t need my help in correcting itself.

What the realtors will always be able to argue is that people like us have been saying for years now that the bubble is going to burst, and it hasn’t happened. Of course, they are right about that. I would never have imagined that the bubble of 2003 was not only not going to burst, but that it would continue to expand at a record pace. I told people then that investing in inflated CA real estate was nuts, and two years later, people who did that and sold made a lot of money.

Rather than talking about bubbles, I think it’s more important to talk to people about not buying houses they can’t afford. Maybe the bubble won’t burst and prices won’t drop, but you know damn well they aren’t going to continue going up like they have, and people shouldn’t get themselves into lending situations where they NEED that to happen. We need to dust off the old guidelines of 20% down/30 year fixed/mortgage no more than a third of your income and remind people that until a few years ago, this was practically law.

here goes nothing:

The Mrs. and I recently moved to the North County and we are RENTING a nice, spacious 3 bd/2.5 condo. near the beach (<1 mile).

Well, since today is Sunday I decided to go and look at the open homes in my complex only. There are SIX....SIX...condos for sale in my complex alone. Five out of the six have the exact floor plan (sq ft. bd/ba ratio etc.). One is a 2 bd/2.5 bath so it is the cheapest of the bunch.

here is the breakdown for the 3bd/2.5ba:
1.) 608 - 625....smallest patio but look at the ocean!!
2.) 539,000
3.) 500,000 - 549,000
4.) 568,000 - OBO....OBO?!?! what am I buying, a car?!?!
5.) unknown...no flier but it had a for sale sign out front.

the lone 2 bd/2.5 bath:
495,000....holy denial, batman. this owner better drop the price and fast.

Let's see, everyone wants to live in California....the market is different this time....we have a stable, diverse economy that isn't tied to one sector....San Diego has beautiful weather....yep, I'm sold!!! Honey!? Better call that guy you know who has a cousin in real estate that we want to lock in our 100% financed I/O option ARM because we are going to overbid on one of these little gems in our complex before it's too late!!!!!
"End of line."

Back in 2003, the bubble was just hitting it’s stride

True, but the reasonable perception at that time was different. Have a look at the graph that Rich posted in his latest Voice of SD column:

In terms of median house price/median income, a peak was met in 2002/03 that was the equal of the two previous peaks. People who were paying attention, reasonably, called it as a peak. We were incorrect in that prediction, as a number of factors (loose credit, aggressive sales tactics) kept the runaway train on its tracks. That doesn’t mean that it wasn’t the best prediction at the time, it only means that it didn’t turn out that way. And the fact that it didn’t turn out that way does harm to our position of authority on the matter. Sure, the argument from authority is a logical fallacy, but that’s what most people are going by.

I am concerned that you have given up on economic cycles, as you suggest “maybe the bubble won’t burst and prices won’t drop”.

I agree that the bubble bursting is the best prediction, easily. But the best predictions don’t always come true, just as they didn’t in 2003. I can’t think of what tricks are left to keep things on course, but that doesn’t mean something won’t happen at least to keep current prices propped up for awhile.

And if the deflation of the bubble occurs as I expect (a slow process that will take years, with occasional market rallies in reverse of the overall trend downward), we will hear again and again about Chicken Little. No, I do not believe in a soft landing: I expect a significant decline in prices over the next several years.