Fearful, EconProf, concho and peterm are spot-on, IMHO.
We are seeing tremendous energy in the housing market because the housing bubble is still alive and well. People are price-anchoring to 2005 prices, and think today’s prices mark a good entry point.
One thing to consider is that there are very few native/long-time Californians. Many (most?) new buyers come from other states or countries. They lack a historical perspective of Californian housing prices and cycles, which explains why they are willing to overpay. They’ve been hearing about how expensive California is, and just pay whatever the sellers are asking, thinking that must be what the prices are.
And this recession isn’t your standard recession. We will see far more damage due to the reversal of the multi-decade-long credit expansion (bubble).
Agree with Fearful that we will see many waves all the way down. When it’s really time to buy, we will not see a bunch of speculators running around bidding against each other. Just MHO.
