“…my co-workers are mostly in their 40s and 50s, live in CV, and bought their houses a long time ago. I doubt they went to the housing ATM at all.”

And that is NOT an assmuption? Sure sounds like it to me. We just hit a 63 year low record in home equity levels here in the US. Gee, I wonder how representative SoCal is of that? http://www.usatoday.com/money/economy/housing/2008-03-06-foreclosures_N.htm

“They have (and still will have, even if the market goes down a lot further) enormous equity in their current homes.”
Really, and that is not also an assumption? What part of the equation Assets – Liabilities = Owner’s Equity don’t you seem to understand? Hint, the asset part can variable. In case you doubt that here is another “anecdote” from the SF Gate:
http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2008/04/05/MNI1VS96B.DTL.

If that is happening in SF what the hell do you think is going in SD, which has a considerably weaker job market??

“But a pretty large pool of move up buyers with ample equity does exist and will continue to exist for a long time.”

Based on what? Who will they sell to in the future?

Oh yeah, just so you know and others know. I am also in the category that I cited. The only difference is that I think there fewer of us than is really needed to clear the market in the next few years at the current price levels.

YOu go ahead and believe what you want, I’ll continue to watch the inventory and transaction levels to tell what is happening and what is not.