Monday, July 11, 2005

An Eye on San Diego

House prices at the Jersey Shore don’t seem as ridiculous as Southern California. When prices finally do fall in California though, I think that the whole nation will feel it as national banks are forced to raise their lending rates across the board in order to make up for increased loan losses.

["Trees don't grow to the sky," said Delores Conway, director of the Casden Real Estate Economics Forecast at the University of Southern California's Lusk Center for Real Estate. "Twenty percent annual price increases are not sustainable. We are anticipating a soft landing. That doesn't mean prices won't go slightly negative, a 5 percent depreciation or thereabouts in the next couple of years."

But California, with a history of boom-or-bust economies, may be on a different course from other high-priced areas.


"In most parts of the country when we have seen unsustainable price gains, rather than price declines we have seen a period of very slow gains," said David Berson, chief economist of Fannie Mae, the federally chartered mortgage company. "In California when we have seen rapid price increases, they have tended to be followed by declines." ]


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