Those figures elicited a collective groan from the audience atyesterday's annual UCLA Real Estate Conference. While Gabriel,director of the Ziman Center for Real Estate at UCLA, said hedidn't necessarily concur with the Goldman figures, he added thathome prices in California could drop 10%-20%. The state's inlandarea – from Sacramento down to the Inland Empire – would be hit thehardest.

"California was the epicenter of non-affordable housing and theepicenter of subprime loans," Gabriel said. "You can go up and downthe (interior part of the) state—this is where a huge amount ofthese (subprime) loans originated." Subprime loans accounted for40% of loans in California in 2006.

Gabriel said domestic GDP hit a surprising 4% for Q3 2007, butthat robust growth will slow to a trickle beginning in Q4. "Weexpect growth to decelerate sharply. GDP could go as low as 1% (forQ4).