Lies, Damn Lies and Statistics...
Not disputing that the market has slowed down, but the perception of imminent collapse is bogus. Take San Mateo county as an example (biggest median decline for resale homes of 6.7%). Digging deeper into the stats shows that while the median sale price is down 6.7%, the price per sqft of home is actually UP 6.1% from $579 per sqft to $615 per sqft. breaking it down to the county level reduces the sample size and increases the impact of the sale (or non-sale) of a few VERY expensive properties. a few 1000 sqft homes that sell for $800K (not unusual for san mateo county) is more expensive per foot than a 10,000 sqft home that goes for $5M. The stats only show a market tendency toward smaller homes. My personal take is that the market is flat right now, and will remain flat to down VERY slightly in norcal... too many people with too much money and not enough development. as interest rates increase, rent prices bound the lower end of the market... a 3 bdrm 2 bath home in the nicer areas of san mateo county is renting for about $3-4K per month. Anyone who bought their home more than a year ago is paying less in mortgage than they could rent it for. It would take a depression, not a recession, to cause a significant drop (>10%) in values. not that it can't happen, but the sky is not falling yet.
You might want to read the following for the bigger picture. I think what we are experiencing is a massive credit bubble. Real estate is just one of the major symptoms. The following requires some attention and focus to get through it, but I think you will find that it was well worth your time once you're finished. If you do choose to read it, I'd appreciate your comments--GGG:
http://www.findarticles.com/p/articles/mi_m2633/is_3_18/ai_n6276704
If you are a lender, do you lend tons of cash into a market if prices are falling?
I didn't think so.