It’s no fun eating peanut butter sandwiches every night for dinner in your new house. I think one of the things we have to keep in context here is that as SD Realtor pointed out prices are in the process of falling. The Case Shiller index is a much more accurate measure of this and it shows prices are actually falling from the peak. In some cases they are falling as fast as they can in RE. The affordability issue is not going to go away. Without lax lending these home prices can’t work. Even if we are at full employment the entry level and move up buyer still cannot afford those homes. We don’t have an underlying recession, yet. So basically we have a bunch of homes for sale that employed people can’t buy with today’s ever tightening credit. The people that own homes and did not HELOC themselves to death don’t have to move because they still have a job. The primary pricing pressure is at the bottom of the market due to foreclosures. What we are seeing is the resulting drop in sales volume. And that is where the true danger lies. The lower the volume the harder it is on the local economy for everyone. The best thing that could happen to San Diego’s economy right now is if home sellers adjusted their home prices to the prevailing wage and credit realities. That ain’t going to happen and we are going full sail into a recession as a result IMO.
