I find it perfectly amazing that the author of that piece was able to talk about San Diego millionaires and not connect any of them to the RE market. Unless my understanding of it is in error, “net worth” would include RE equity, and between 2003-2006 a lot of people “earned” a lot of RE equity.
That doesn’t even count the individuals in SD County who work in the RE business.
He has no data to suggest all or most of those new millionaires moved into town.
At any rate, the initial assertion – prices won’t go down in those neighborhoods because there are plenty of buyers to isolate them even as everything else crumbles also displays a dazzling lack of of understanding of how the RE markets work. Rancho Santa Fe homes don’t sell for $3mm plus because they’re intrinsically worth that much; they sell for those prices because they are that much better than the $2mm homes, which in turn are percieved to be that much better than the $1mm homes, and so on.
When the $2mm home declines back down to $1.2mm, the more expensive $3mm home will also decline to reflect that still-present premium for the differences between them.
If anything, the last RE recession demonstrated price compression, wherein the gaps between the different price ranges narrowed. This basically means that on a percentage basis the expensive homes lost even more than the cheaper homes.
Here’s a little factoid that belies the assertion made by the author of that piece. In the wannabe areas surrounding Rancho Santa Fe (92130 and 92128 zip areas) the MLS shows 6 sales in excess of $3,500,000 in the last year. Of the 6, there were 2 sales above $5,500,000.
There are currently 37 active listings in $3,5mm+ price range; of which 15 are listed for $5.5mm and above. At this pace that indicates to a 6-year supply of homes in the $3.5mm ranges and a 7.5 year supply for the $5.5mm and up range. That doesn’t count the other homes in these price ranges that the specuvestors are still building, of which there are quite a few.
Apparently we’ve been adding McMansions a lot faster than we’ve added Millionaires. So tell me one more time how the upper price ranges are isolated from the laws of supply and demand.
