Southern California median home sale prices are down about 30% from their peak. That's about as far as they fell in the 1990s real estate downturn, and enough of a decline to have many asking: Is it time to buy?
Some are already answering with their checkbooks. In the inland areas where prices have crashed hardest, buyers are slowly returning.
But many of those who study housing markets say the worst is yet to come for real estate. Buy now, they warn, and you'll regret it as prices continue falling.
Others contend that prices are low enough that renters who aspire to own should buy now so they can start building their equity.
Predicting price trends is a dodgy business, and there's no one right answer for everyone. But if you are thinking about buying now, here are some pros and cons to consider.
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Buyer beware
The main argument against buying a home now is that values are still spiraling downward. Stay on the sidelines and you'll be able to buy that dream home for a much lower price than now -- about 25% less in Los Angeles County, predicts Celia Chen, director of housing economics for Moody's Economy.com.
Chen bases that guess on several factors, including the high inventory of unsold homes and the gap between current prices and income.
During the housing boom that began in the late 1990s, the relationship between home prices and incomes grew increasingly out of whack. Mortgage lenders offered subprime loans with low introductory teaser rates, as well as "no-documentation" loans that didn't even verify a borrower's income.
This allowed people to buy more expensive homes than they could afford, helping inflate values. But many of those loans have gone into default as teaser rates expired and borrowers couldn't make their payments. And lenders are no longer handing out loans to people who can't demonstrate their ability to repay them.
That has made the relationship between home values and incomes relevant again, economists say.
More than half of the adults in the Los Angeles metropolitan area own their homes. But because of the price run-up that began in the late 1990s, fewer than 11% of adults in the L.A. area earn enough to buy a median-priced home of $412,000, according to a National Assn. of Home Builders index.
As recently as 2001, when the median was lower, that figure was about 38%.
