I’m not sure I follow. Less desireable areas have lower prices. There are always going to be people on all areas of the income spectrum. Some of those people have income lower than they need to buy real estate. No matter how low prices go, there are people who can’t afford a house.
I would say yes and no. Less desireable areas have balooned up in price at a far greater percentage than more desireable areas in this boom. So while in absolute dollars they are cheaper, percentage wise they are not. There is a floor below which prices can fall and yet no-one will buy a house, ergo Phoenix or Palmdale in the 80’s. This is because at that time there are so few buyers and so many sellers that at a certain point Phoenix or Palmdale weren’t considered an option. From the buyers perspective there are always lots of options and they have to narrow them down. Usually this is done in some geographic fashion, then by type of dwelling, schools, etc. I suppose the fundamental point I was trying to make here is that as the pool of buyers shrinks areas that were previously considered less desirable become flat out undesirable, and for those with money to buy not an option.
There are always going to be people on all areas of the income spectrum.
This is not true. Our economy is hollowing out in the middle. There are a fair amount of jobs in IT/Biotech/Law/Medicine and alot in retail/services, but not alot in the middle.
“If they can afford Del Mar, CV probably isn’t really an option at that point. Then the competition is between a much smaller group of sellers for a particular buyer.”
I’m missing the logic leads to that statement. What does buyer preference have to do with the number of sellers?
In short, everything! If there are generally more buyers than sellers prices go up! If the opposite is true, prices go down. When a buyer makes an initial location choice he has automatically elminated alot of potential sellers from competition for his money, but from a sellers perspective that is one potential buyer, that isn’t. This shrinks the pool of potential buyers even further(for the areas that are out). Mutliply this by how undesirable the area is and you get my point. Essentially prices may decline, even significantly, but it pays to be in a more desirable area, because ultimately you are at the top of the heap, most likely the last to become undesirable.
I suppose the fundamental concept that is being juxtaposed here is that there are a continuum of buyers. Your assumption is that for every move up buyer there is someone on a lower rung to take his place.
I think history is ripe with examples where that is not so. I tend to think of it this way and yes I am over-simplifying. There are basically five areas of San Diego that are very desireable, all others are a compromise.
Del Mar
La Jolla
RSF
Coronado
Mt Helix
As the buyer pool shrinks, those less desireable areas fall of the radar and prices plummet even harder. I am not sure that in SD I can make the case that there is no price a home will sell at, but there are large swaths that are marginal at best.
I am not sure I answered your counter-points but I tried.
