Initially it was the ridiculous bubble that preceded it both in land and the stock market. everyone was paying huge prices for condos that were overbuilt. It took about 6 years for land prices to stabilize but deflation continues to be a persistent problem. Prices were simply too high as a result of the bubbles initially and falling prices were expected. However, it has become a spiral that continues today. By the way, the Fed invented quantitative easing and from what I have seen, it hasn’t helped at all except pile on massive debt. The economy is still in the dumps and in San Diego we still have housing deflation.
Everyone is paying huge price s of condos whose collapse wrecked the economy, Its having hard time understanding house prices. Thanks for the post.