Many markets in Orange County barely corrected during the bubble collapse. Many of the most desirable markets are already selling for more than peak values due to the stimulus intended to revive the rest of the national market. This will be the story over the next few years as some markets inflate mini-bubbles in reaction to stimulus while some markets languish under the weight of shadow inventory liquidations. Over time, the substitution effect will kick in and the markets will reestablish the equilibrium they once had prior to the housing bubble. Of course, that assumes politicians stop stimulating and manipulating...
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