Where is the bottom?

Is it just around the corner? Is real estate in a never-ending freefall from which it will never recover? More importantly, how can I tell when we do hit bottom?

These are the multi-billion dollar questions -- how low will real estate go?

Historically, median houses cost 3x the median household incomes of a given area. By that logic, places all over Southern California have another 50% or more to drop.

This isn't completely logical, because of the simple availability of loans. Prices are inflated heavily based on the assumption that as good Americans, you will borrow to buy your home.

It is impossible to tell what is ultimately going to fix everything, but fortunately, we have an easy indicator.

Real estate has historically had "sticky prices" in its downturns. What it means is that at prices drop, and increasing number of people stay put, and do not sell until the real estate market recoups. What this causes is, instead of a natural sine curve that dips down, is an protracted period of relatively flat prices. How long? Well, the crisis of the late 80's had a price plateau for 10 years. And this boom was even larger.

So when are we at bottom? When the market has been flat for at least 6 months -- that is when we will again have stability. But don't be in a major hurry to buy for appreciation: because your hold-out, along with everyone else, will be quite long.

For Los Angeles commercial real estate agents, visit our website.