The low inventory mark was in the Spring of 2004, but that in no way means that point was the top of the resale market. In almost all areas, prices were substantially higher in the summer of 2005 than they were in the summer of 2004, even though there were less cases of multiple offers on listings. Although the inventory did go from 3K, to 6k, to 12k, the 12k was still a fairly low inventory level, and prices continued to climb even as inventory went from extremely low, to low, to normal levels.
There are some areas that have seen fairly large price declines over the past 6-9 months, including some new home communities with lots of homes left to build, but many areas have held fairly steady up until now.
This is my prediction: The low point in the market will be sometime in 2008, and the median SFR price in the County, which has held mostly steady over the past year, will drop no more than 15%, and possibly by only 10%, then stay level for 3 years, then regain the loss over the following three years. That means 10 years with no overall gain, not even keeping up with inflation. Houses will be for living in, not for investment – those days are long gone.
For condos, I think the median resale price will drop more than SFRs, but only because of the thousands of conversion which have hit the market, and which continue to hit the market. Just take a drive around places like North Park, University Heights, Hillcrest, Escondido, and El Cajon. They are still trying to sell them everywhere, and they’re going to really hit the median price, because they are almost all selling below the existing median condo price. Many established condos which were not conversions may not drop by more than SFR prices, but the median price will be less.