The MLS inventory is suspect, because there is evidence that a majority of the bank-owned homes are not on the MLS. I forgot where I read it, but somebody claimed that out of the 6000 bank-owned homes in the area, only 2000 are listed on the MLS. If that’s true then there is a glut of must-sell homes sitting vacant.
Bank-owned properties and short sales are currently the real-estate market for San Diego. As long as we keep hitting record foreclosure numbers, my guess is that prices will continue to drop and then stagnate once the foreclosures come back to normal levels. A 4-5 year stagnation would be a significant price drop in real terms. If there is some major government bail-out I think that the nominal price drop will be less, but the stagnation period will be longer and we’ll end up with a similar real price drop in the end.
