Roughly 50% Chance of Price Declines in Various CA Markets

This article reports that a computer model estimates the odds of price declines in various California real estate markets.

Some choice quotes:

"The Vallejo/Fairfield area has a nearly 48 percent chance of seeing real estate prices drop in the next two years, the report indicates."

"In Napa, odds are better than 50-50 that home prices will drop in the next two years, the study shows. Napa's 54 percent chance is barely beat by Boston, which tops the list with 55 percent."

"When home prices become unnaturally inflated and outpace most people's ability to afford a home, prices may start falling, said Beth Haiken of PMI Group, which released the study."

"California tops the 10 states most at risk for a housing price decline, containing six of the riskiest areas, the study shows. These areas include Oakland, San Francisco/peninsula, San Jose, San Diego, Santa Ana and Riverside."

"Historically, the market seeks to correct that kind of disparity, usually by bringing down home prices, since incomes rarely rise to meet home prices, Haiken said."

""There's a herd mentality in real estate - when they sense problems, they stay away," Haiken said."

"Haiken said the study only predicts the direction of any likely market change, not its severity, she said."

"Making the list of the least risky states for a predicted housing price decline are Washington, Idaho, Wyoming, Utah, New Mexico, North Dakota, Oklahoma, Arkansas, Mississippi and Alabama."