I am a careful student of economic history as well as CA RE history. (Never cared much for Kool-aid, but I know what you mean.) I’ve studied the last few RE cycles in CA, and unemployment over 6% has by far the greatest correlation to a downward cycle. We’re at 7.7% and heading for more. This is a terrible sign for CA RE! (Not to mention Foreclosures at off-the-chart-levels and growing.)
On the national economic front, economic history tells us that a credit bubble burst of this magnitude will retrace all bubble prices back to pre-bubble prices. And then drag along at this level for some time before any uptick is seen.
Put these two histories together, local RE and national economics, and you’ve got some more down to go. Even somewhere as stricken as Temecula. $50 sq/ft. is not out of the question at all.
