Because the California housing market is the most immense house of cards imaginable. It has not been affordable for 2 decades. Price to income ratios are astronomical. Each point down increases the total accumulated negative equity, but actually brings housing very littel closer to being affordable. There is a long long long way to go before, on average, the average house in California can be purchased on the average income. For instance a house in Scripts Ranch that a few years ago would go in the mid $200,000's had recently peaked close to $700,000. It needs to get back to somehere in the $2-300,000 range to be "affordable" again. That is a black black black hole.
Why?
Paper profits are just that - paper.
The economy - the real one - will be much healthier when those houses are down to $200K again.