I agree with Nor_LA_Temec_SD_Guy. Even if there are buyers who buy this line they won’t show up in the numbers. Affordability is way too low. There are two key things I am watching moving forward 1) Exotic loan resets 2) true impact on economy.
Especially here in CA how many people are discovering they over extended themselves? Home price appreciation was a central tenet to making these exotic loans work. What is the fallout now that home prices are falling? How will that further impact inventories and prices?
There is a great contraction of RE and RE related jobs that is now occurring that has not really shown up in the data. The new mantra on Wall Street is that a bottom is in clear site. The assumption of this bottom is that the economy will remain robust during the housing downturn. (And we all live happily ever after)
Lets apply another assumption, we are heading into recession (have you seen the deepening inverted yield curve?) Recessions erode demand i.e. job loss, loss of income, fear of losing job. Exactly how much will a recession impact demand? I don’t think we will have true answers or gauges to these questions until 2008 at the earliest. IMO I think many experts are under estimating the impact of these exotic loans. Thats where we as a nation and especially CA are in totally uncharted, untested, and very dangerous waters.
