Just as a reasonably educated guess, I’d guess it’s a combination of a few factors.
Primarily, I think that for many of them, their loans – even at bubble prices – are still largely affordable, hence you don’t have the massive downward pressure caused by forced sales (either short or foreclosed). A couple of reasons for this:
1) Upper middle class buyers have larger reserves, and can hold out longer when rates reset, etc, before they have to give it up (typically, their credit rating is also substantially more important to them as well, meaning that they are more likely to cut expenses to continue to make payments. They also probably had more discretionary expenses that can be cut out to be able to stretch to make the payment.)
2) They probably weren’t subprime, meaning that for many (most?) of them, they’re still making probably the same payment they bought at. This might change when the alt-A neg-am mortgages start to hit their caps and go bad en masse, which I believe is predicted to start this year.
3) Many were move-up buyers, so they probably entered these markets with a down payment that was just as inflated by the bubble as the real estate they bought. It’s probably a lot easier for a household making 100K a year to afford a 600K home they bought in 2005 when they went in with a 300K downpayment from the sale of their previous Mira Mesa home for 450K that they bought for 200K 10 years before than it would be for a first time buyer who neg-am financed that 600K home. Dunno how common this was though, or whether most of these type of move up buyers took their bubble appreciation as a windfall and spent it.
My personal feeling is that they’ll still get hit (over the long run, they have to come down to the historical relationship between move-up housing and entry level housing), but it will probably take longer (though I expect them to get hit with the alt-A tidal wave this year most likely). They’ll probably also bounce along at their areas bottom for longer while inflation raises other areas that bottomed sooner and lower to the point where they reach that historical price relationship between entry level housing and move-up housing.
