Prices must fall

Today's LA Times says it succinctly: prices must fall for the market to recover. That needs to become the reply to NAR spin and narrow blame on subprime.

James Baker, a Lancaster agent, said years of unrealistic financing, such as loans with artificially low "teaser" rates, led to wild price inflation. For the market to recover, "the median price has to come down to match incomes," he said.

Edward Leamer, director of the UCLA Anderson Forecast, agrees with that assessment. The White House plan "focuses on a sliver of individuals at risk of foreclosure but ignores the bigger picture," he said.

"Californians need to get interested in buying again," Leamer said. That won't happen, he said, until prices inflated by the shaky loans of recent years fall further.