This argument has nothing at all to do with Joe Blow. He can wait for the prices in Clairemont or San Marcos or Eastlake to fall to 350 or 400k. Not a problem there. I don’t believe the average Joe Blow lives in Encinitas. I think that is why my point is being widely missed.

Brae Mar Ct is not exactly the playground for the super-rich. It is 2 miles from the beach and relatively far from areas with well-paying jobs. 4br houses in this neighborhood are only going to sell for a million if 4br houses in Eastlake and San Marcos go for 800K. And those will only sell for 800K if 4br houses in Temecula go for 500K.

And, by the way, the average Joe Blow can very well afford to buy a million dollar house in Encinitas, that’s what negative amortization option ARMs are for. You could get a 1M neg-am loan with monthly payments of less than $4000 for a few years (until it resets to fully amortizing).