I would tend to agree with the different price ranges reacting differently, but would add something else to that train of thought. During our last 2 RE recessions, the averages not only overshot the point of equilibrium, but the different pricing strata compressed. In the mid ’90s, the difference between a $200k home and a $300k home was a lot more than what we would find right now between a $600k home and a $900k home. That’s because (except for the primo areas like RSF and La Jolla) the higher the price range, the greater the decline.
If anything, I’d say the price range most susceptible to the biggest hits are the $800k – $1,500k homes. Think about it: if a $500k home declines back to $250k, the step up from that would be the $325k home that used to be $700k. And the step up from that would be the $400k home that used to be $900,000. The $75k increments may not seem like a lot right now, but in a market that is completely dependent on local wages it would represent a $500/month increase in mortgage payment on an 8% mortgage. That’s almost 10% of the net for an $80,000 annual household income.