Mountain House in the news.

I just read an article in NYT about Mountain House where 90% of the home owners are up side down. Is the Real Estate market really that bad here? Let's look at some facts.

• We had eighty months of inventory last year and now is down to three. Nobody was buying last year because prices were too high. Now you can buy a really nice 2000+ sqft home for under 300K. For what they are paying for mortgage in Mt. House, they can only rent a 2 bedroom apartment in the Bay Area.
  
• Also, prices are stabilizing at around $130/sqft in the last three months. Look at the chart and draw your own conclusion.
• The number of homes sold & pending in Sep 07 was 2. There were 61 homes sold & pending in Sep 08.

What do you think? Is it really that bad here?