I find myself in a conundrum in this situation. I am rooting for home prices to come down to their fair valuation. I have no problem with paying the CA coastal premium. Current valuations transcend that premium. Yet when looking at the decline in sales and rising inventories in San Diego I feel a knot developing in my stomach. I believe that 25% to 30% of jobs created in the past several years have been related to RE. Outside of RE related jobs, job growth has been weak throughout the entire state of CA . If San Diego breaks that threshold into falling prices, that means a significant downturn in these jobs. The R word will be floating all over the place by that time. If this scenario is to play out instead being happy that home prices are more affordable now I am going to be worried about keeping my job. Point being don’t count on all the people sitting on sidelines to jump in when their sweating layoff notices. Many times that money sitting on the sidelines is the last gasp of the current appreciation cycle, or what some call a “dead cat bounce”. I can tell you one thing all eyes are on San Diego.
