If you look at Esmith’s blog he shows a distribution of home prices in San Diego.
http://sdhpi.blogspot.com/

According to his estimates the $1 Mil mark is about 10-12% of the homes as of April 2008.

As of 2006, Census Bureau shows about 5.25% of San Diego households have income exceeding 200K. At 200K income one would need a sizeable (~25%) down payment to afford a $1 Mil house.

So, the number of households who can afford $1Mil or more must be less than the number of homes valued at 1 Mil +.

I would not make any conclusions or assumptions based on this. At least the number of $1 MIl + homes is only about 2X the number of people who might marginally be able to afford it.

I don’t know whether to or how to account for long-time owners who purchased at much lower levels than today and who (except for their current equity) could not afford to buy their own $1 Mil+ home today.