4S was created during the boom and pushed up most heavily by speculation. Having it’s creation and overall pricing dictated by rationale not tied to economic or basic fundamentals it is a near-perfect micro-model. What happens there should directly correlate to the health and direction the overall SD market will go in the next 3-10 years. Being a lifer in San Diego and seeing what pricing is like from the great ranges of mortgage rates we’ve seen historically one should keep an eye on the 10year bond. It’s been popping lately and more popping will destroy pricing power in the near term and force price cuts. We may see the market begin to play out rather quickly.
The broad range of 20-60% I predict is due to the possible changes in the economic environment. If salaries increase at a fast rate in the next couple of years the housing may not go down much to meet with fundamentals. If the overall earning power of Americans vs. inflation continues to decrease as it has and interest rates continue to rise then 60% would not be out of the question.
