"Bottom line, on a monthly payment basis and relative to income needed to qualify for a loan, a house in California is far more 'expensive' than from 2004 to 2008, even though house prices are not back to peak levels," said Mark Hanson, a California-based housing analyst. "Put another way, it costs a lot more today to pay for a house using a mortgage than it did from 2004 to 2008. Thus, if 2004 to 2008 was a "bubble," then this must be, too."
On the flip side, home price gains are slowing in Phoenix, which like California saw prices jump over 25 percent recently. Now they are up just 16 percent annually, according to CoreLogic. Sales fell 8 percent in September, despite a 32 percent jump in inventory, according to the Cromford Report.
(Read more: Use this map to track the recovery where you live)
Investors may be putting some properties back on the market again in Phoenix, eager to take advantage of higher prices, but those same higher prices are crimping demand. If this is an indicator of what is to come in California, that is a clear red flag.
The rest of the nation did not see the same dramatic swings as most Western markets, but the supply, demand and pricing dynamics are similar. Prices are up over 12 percent nationally and inventories are down across the nation. For those predicting the national housing market over the next six months, watching the West is a good idea.
—By CNBC's Diana Olick. Follow her on Twitter