I took a couple of charts from a NAR report for Riverside. Using their median price chart and drawing a line from the start (1980) through the top of the last peak and out to today we come up with a median price of approx $225k. Since this line is through the top of the last peak it's probably on the optimistic side (After all that was the peak of the last bubble). Taking another line and going through the low in 1995 (after the bubble popped) the median drops to about $150k. We can see, had there been no super-bubble the median price of a home would probably have been between $150k and $225k today.
Looking at another NAR chart on Price to Income ratio's we can see that this ratio stays between 2 and 3 from 1980 all the way through late 2002. After 2003 the ratio goes parabolic, jumping to nearly 6x by late 2005. I believe it's closer to 7 or 8 now! If we go back and use this traditional measure of what a home should cost we once again come up with a number close to $150k. Riverside currently has a median price of about $360k putting it about 240% above the $150k number I keep coming up with. Even if I use the higher $225k number, prices are still 160% overpriced. In other words, to fall back to traditional values homes would need to decline 60% to hit the $150k number or 40% to get to the higher $225k number
And if it's not clear enough yet that home prices are WAY out of whack, take a look at the last graph.
Don't think the prices will fall that far? I'm not convinced myself that we will ever see the median under $200k again. However, some of the Northern California counties have already fallen into the mid $200s The difference between us and them? The price declines started in Late 2005 in Northern California. They have over a year head start, but we are catching up fast! Riverside's median has fallen nearly 20% in only 6 months (housingtracker.com)