I've always felt that the average family household in any town should be able to afford the average house payments. If not, then the local RE market is flawed. At that point, the builders should be building homes that will cost what the average household can afford, rather than something 1.5X that. Strangely, I would expect them to sell lots of homes then, and make more money...maybe they don't want that?

True, but how many can really AFFORD to live in CA? Note that when I say afford, I mean actually pay the bills with money left over. Not your typical ARM, maxed out credit cards, car payments, one stumble away from bankrupt "afford".

Out of curiousity I looked up LA in Zillow. Median home price is listed as $433k. Median household income is listed as $37k.:eek:

From the outside looking in to California, one of the things that I've noticed that it appears that prices remain high because everyone wants them to. So someone has a house that they bought for $750K -- and they can't accept that no one is going to pay $750K for it. Not for a long time. Why do they live in this fantasy world? Because they are heavily leveraged -- maybe they only put down 10%. Maybe because for most of their life the prices kept going up and there always seemed to be another buyer willing to pay more then the last one. Maybe because all of their neighbors share the same fantasy.

It's good as long the pyramid scheme keeps working. But one day the buyers dry up and then there is a problem. The numbers seem to suggest that there are a lot of unsold homes in California which could be resolved if they sellers reduced their price. But for some reason this doesn't seem to happen. The seller seem to be happier sitting on an unsold house then to have cash in hand.

We're the 4th largest city in the US. So a few people do want to live here.

It's a similar mentality to the "OMG my house lost $200K in the market!!"

No, it didn't. It's still the same wood, steel, concrete, appliances, etc, and still has the same inherent value. You simple were willing to pay $200K MORE than that value. Your *house* didn't lose value, but your *investment* did.

I have friends in SoCal that bought in the peak of the housing boom. They've been trying to sell for close to two years now, and are currently asking less than what they paid (by a lot). I think for many owners, there's only so low you can really afford to go. They're in slightly better shape than most because they can still easily afford their place. They WANT to move, but they don't HAVE to move.

yep.

Furthermore, those people don't seem to understand that a dollar is worth more now, than then. What we are seeing is a significant reset of the value of a dollar.

People seem to really have a hard time accepting a world w/o the ever-inflating dollars. ...a bunch of linear-extrapolaters for sure.