I always welcome contrarians to these boards, it keeps everybody honest. I guess in response to your post “I’m holding my breath” You make a very good point that people won’t put their living situation on hold but in the case of Southern California there is no choice but to put that on hold or leave, which people are doing in droves. Simply put home prices are not supported by incomes virtually anywhere in the state of California.
Here is what is going to happen, these over priced homes are going to sit on the market as they are now and just sit. The people who have to sell will begin competing against each other in order to close the deal. And you will see and are already seeing the price per sq ft nose dive. Southern California is facing a huge storm of foreclosures because people took out exotic loans banking on continued appreciation of their homes. They gambled and they lost. They can’t make their payments and the potential buyers will not take out these loans when they see prices falling. How far this thing tanks, i really don’t know. Right now the disparity between what people pay in rent verses the financial cost of owning is too great in face of a falling market. I save over $1k per month renting verse owning (after tax break). Combine that with flat and falling prices, it literally makes no financial sense to own. We are in totally unchartered and untested waters here. I have no problem holding my breath when I’m saving more money.
