What next for residential and commerical real estate markets in Southern CA?

In one sentence - Down we go!  Caveat is that very long term things still looks good due to demographics.  

It should be clear to all now that the lending problems in the subprime market have not stayed within the confines of that market. Foreign agencies in Germany have bailed out at least one of their smaller banks that uses commercial paper to fund the purchase of US CDO's. One the other side of the Ocean the US Federal Reserve added liquidity to the credit markets by buying bonds that banks were holding.

The economic fallout from reduced spending by those involved (agents, brokers, escrow offices, loan officers, painters, tile workers, ect.) with the housing market should soon begin to show up in the aggregate numbers.  In Saturday's, LA Times, Christopher Thornberg, former UCLA economists now with Beacon Economics, indicated that "people are hurting."

Consumer spending will likely be effect by the downturn in housing as the slump continues this year and next. Additionally, as commercial real estate activity slows, as it will due to lack of available affordable financing, job growth will at least slow and possibly stall. That will also likely reduce consumer spending.

One significant unknown is how deeply consumer spending will be effected. As consumer spending becomes more deeply effected the more likely a recession becomes.

The recent drop in the demand for oil is not a good sign. The demand for oil, the price of oil, and global growth are directly related. Is the drop in oil a sign the global growth is stalling?

And what does this all mean to the price of your home? It means that there is almost nothing in the environment that will support price and that the price of most homes will fall in the months ahead. The slump will not end before most of the adjustable rate mortgage have reset. It may not end there but it will not end before that time.

Is this a time to buy? Not for most people. Is this a time to try an sell? Not for most people.

However, any home priced well will sell within 90 days. The key is correct pricing. Most are unwilling to market there home at a price that will sell. It will mean taking a loss when compared to 1 or 2 years ago. Of course, if you bought your home 5 years or more ago, you have still made a good deal of money.