Readers suggested a topic on housing bubble prices, "I propose a discussion of a topic the MSM-quoted cheerleaders avoid like the plague: How will the market absorb the huge glut of new homes targeted at the $500K+ price range now that home equity appreciation has gone into reverse?"

"Consider who was buying these homes four years ago versus who can buy them currently. Four years ago, when prices were going up by 10%+ forever (and 20%+ forever in El Aye), buyers with very little labor market income or accumulated household wealth could roll home equity appreciation on their current home forward into a move-up purchase."

"Now that equity appreciation has stalled and, in some cases, gone into a tailspin, it seems as though only trust fund babies and CEOs can afford to purchase in the $500K+ price range, although there is no shortage of recent and current construction targeted at that price range."

"The current median list price on ziprealty.com for our zip code (Rancho Bernardo W 92127) is $1.3m, but depending on whom you believe (DataQuick or Sandicor), the April 2007 median home sale price was somewhere on the range between $725K-$775K — at least $500K below the current median list price. This appears to me as prima facie evidence that there is a serious shortage of junior executives currently out looking for homes in the $1m+ price range."

"As further evidence on this point, the used SFR inventory listed for sale in 92127 has increased by 30% since February 1 (from 200 to 260), while the median list price has dropped by $95,000 (from $1.395m to $1.3m). I believe the median list price has quite a bit of downward adjustment ahead of it before the market works through the housing bubble stages of grief. Sellers are still stuck in denial at the moment."

One replied, "I posted here a few days ago about the news that my friends received down in SW florida. Their 1.2m condo purchase might now go for 750K IF someone were to be out buying. However, there are almost NO buyers out looking at these condo’s and there are something like 160 out of 180 that are EMPTY!"

"It is virtually empty in all 3 buildings and these are all upper-end condo’s on the west coast of Florida! The builder is offering the penthouse suites for 1.2M, formerly offered at 3.0M. No one knows how far this has to fall but I’m going to predict that ALL of these units are going to be well below $500K before this is over."

"The number of people who can ACTUALLY afford a $500K condo or house is miniscule compared to the number of listings that exceed this price. Just imagine what is going to happen in places like Miami if this is happening on the West coast! This crash is just starting folks. No need to push, plenty of seats still available up front!"

Another wrote, "It’s the same here in Queens, You cannot get a SFH or rowhouse in a good neighborhood for under $500,000. The median income is $45,000. Unless every Wall Street type wants to live in Queens, I don’t know how these prices are sustained. Though there still seem to be a few greater fools buying."

One from Arizona, "The higher end stuff ($600K to $850K and above) will crash much worse than the lower end stuff ($100K to $200K). There is almost no one who can actually afford a $750K home in the U.S. Even with 10% down, you would need roughly $225,000 per year."

"There just aren’t that many people that make that kind of money. Granted this blog may skew to the higher end of payscales, but the majority of people make a household income somewhere between $50,000 to $80,000 per year. That doesn’t equate to median home prices in the $600,000’s."

"The NAR keeps arguing that R.E. is local, but everywhere the homebuilding industry just decided to build homes and charge $500K to $800K (as based on loose lending). Just like with cars, the purchase is predicated on payment qualifying and not on purchase price."

"Places like West L.A. and the beaches there will crash. So will most of South OC as the people are mostly fronting and dont have the incomes to back up the show."

"In our Zip Code in Scottsdale, the median household income is about $85,000, meanwhile the median asking price is about $650,000, so something doesn’t equate. Prices will have to correct and anyone who is into an Alt A or pick-a-payment is screwed. This 15% to 20% correction stuff is b.s., everything will go back to pre-1997 prices guaranteed, and will probably overshoot as many here have predicted."

One sees buyers remorse, "People are brainwashed into payments vs. purchase price. When it’s easy to get a $500k home for $1650 a month (interest-only), hell everyone wants a nice house. But as the piper comes to collect his dues, reality sets in and these asshats go running to the gov’t for a bailout 'I didn’t understand the loan,' 'I was screwed over,' etc."

One doubts a policy influence. "I just don’t see how policymakers could reflate the bubble at this point. The Fed can’t drop interest rates significantly without creating inflation. They can’t drop regulations on lending standards any lower than than they have already."

"Regardless, I don’t think any business entities want to follow New Century’s path. We already have huge tax breaks for with the mortgage interest deductions. What else could they do? I don’t think policymakers can stop this bursting dam."