Here’s why it’s going to spread everywhere – substitution. The amount of the sale price is a reflection of how much the buyer will pay for that set of attributes, and the way most buyers come to that decision is based on what their alternatives are.
If the house in Scripps or Kensington sells for 30% above the same house in Escondido, it’s because those buyers are willing to pay the 30% more for that location. Conversely, the Escondido buyers are willing to make the drive to save the 30%. The premium might vary somewhat depending on overall demand (less during good times, more during hard times), but these two markets are never disconnected from each other.
Scripps has never been worth 100% more than Escondido. The bust-in-progress isn’t going to change that and put Scripps into uncharted territory. That location will still be worth a premium, but in the end it will be quantified in terms of a percentage, not in absolute $100,000 increments. It will never be a market where Esco sells for $400k and Scripps continues to sell for $900k.
One other thing to remember: if an appraiser can’t find enough recent sales data in a neighborhood, they simply expand their geographic radius. Because of that, no neighborhood can exist in a vacuum, desireable or not.