If you examine the last two RE cycles we’ve had here in SD county, the greatest factor to indicating a rise in RE prices has been declining unemployment. Even with high interest rates and other factors, when unemployment goes much below 6%, we start to prices stabilize and then rise.
Right now we have more foreclosures entering the market and liar loans (Alt A) about to join the party…couple this with rising unemployment and we’ve got more room for price declines. There’s very little, if any, evidence of this trend subsiding for the next 12 months.
Having said this, home prices have a historical average in SD County of about 5 times annual income. These are mediums, of course. But if you are considering buying a home that’s 3 times your annual income and you have stable income, then you would be paying a multiple that’s more common in KS than CA.
