[jkarolyi]

Lets see how good we are at predicting the future. In 5 years, how far will Southern California real estate prices drop? I use rents to determine actual real estate values. One percent of the value of the property should be the monthly rent.

My 3BR 3BA 1600 sq. ft. condo in Riverside, CA, probably the least desirable place to live in SoCal, is in escrow for $299,000 (I've decided to rent for a couple of years). Rents in my complex are around $1500 per month. I paid $149,000 for the condo three years ago, which I think is about the "true" value of the property.

Therefore I'm predicting a 35-50% decrease in RE values over the next five years. With all the new houses going up in SoCal without a corresponding population increase, supply and demand has to level this out to rent-sustainable values eventually. There was a 20-35% decrease during the mid-90s after an RE run-up that was much smaller than the one we are currently in.

What's your vote? It will be interesting to visit this thread in five years and see how close we were.