OK, this factoid is just San Diego, one of the epicenters of the housing implosion. But the flip side is conventional wisdom is that the worst hit locales are bottoming first….right?

Maybe not. Again, generalizing based on one data point is not advisable, but this one is so striking that I can’t help but think that even a much lesser version of this pattern elsewhere would mean housing has a ways to go on the downside. That would be consistent with historic norms, since per Carmen Reinhart and Kenneth Rogoff, in severe financial crises, real estate takes over five years from its peak (which in our case was 2Q 2006) to hit the trough.

And this is the year when Option ARMs hit the wall in a big way too…

From Rich Toscano:

….there were 19,453 San Diego homes that were in foreclosure but that were not yet listed for sale…. There are currently 11,976 homes listed for sale in San Diego. If all the shadow inventory were to hit the market, inventory would increase by 162 percent to 31,429. The 11,976 figure in the prior bullet includes active inventory as well as inventory that is marked “contingent,” meaning that the property is a short sale or the like that has an accepted offer that is awaiting lender approval (thus, the property is not really available for sale). Using only the active inventory of 7,964 homes, shadow inventory would swell the number of homes for sale by 244 percent. Using the average number of sales over the past year, releasing the shadow inventory into the wild would add 7.3 months’ worth of inventory. By comparison, in November there were 4.6 months of inventory if you count both active and contingent homes, and only 3.0 months if you count just active listings. So adding all that shadow inventory would increase the number of homes actively for sale from 3 months’ worth to 10.3 months’ worth — more than a three-fold increase.

Yves here. So it may be that the working of the excesses in the worst hit markets is considerably overstated.