FLU has it right. Check the historic correlation in CA between unemplpoyment and house prices. Anything about 7% is a killer for the RE market. And we just came in at 8.2% and rising. If you estimate that this recession started about a year ago, we probably have at least a couple more years left for the unemployment level to increase.
I could see interest rates go down more just because the volume of mortgages will decrease. This is deflation. So the old 5% is the new 7%. Perhaps this could happen if the risk was mitigated with a high downpayment? 25% down, with a 4.5% for 30 years? Might happen.
