Billing itself as “by far the leading Real Estate News site on the Internet” (whatever), the Realty Times analyzes Robert Campbell’s November edition of The Campbell Real Estate Timing Newsletter:

In his November, 2005 edition, Campbell writes, “Creative financing can be very dangerous when the price of the asset loses significance. People start believing that it doesn’t matter whether a home sells for $200,000 or $400,000 because the monthly payment is the same. Sorry, but when mortgage loans are based on fictional values as opposed to true values that are supported by economic fundamentals, financial bubbles can develop that eventually implodes.”
If the market reverts to the mean, housing in California should cost about $314,000, which makes it susceptible to a stomach-lurching 42 percent drop.
“Pushed to extreme levels of overvaluation by greed and easy money,” writes Campbell, the California real estate market is now a bubble. Housing prices have risen to a price/earnings ratio that is significantly out of balance with sustainable economic fundamentals. When a bubble bursts, history shows that, at a minimum, prices will retreat back to levels that are consistent with long-term norms.
That would represent a 44 percent decline from today’s median home price of $544,000.

California Market Timer Pessimistic [Realty Times]