Like SD Realtor said, the lower end has already shaved off 40-50%+ in many areas, and is very close to breaking even for investment purposes — if we could be sure that rents won’t go down in the near future.
The higher-end areas were pushed up by loose lending in the lower end — a number of people could sell their starter homes for a $300K++ profit and buy a house in CV with another neg-am liar loan, etc. They have an equity cushion (the down payments from sales of the starter homes) that the starter market didn’t have because the starter homes were purchased with 100% LTV loans, for the most part.
IMHO, the huge declines are pretty much over for the lower end (still expecting some drops for awhile, though) and now we will begin to see the drops in the higher end. I think 2008-2010 will bring dramatic drops in the higher-end areas, because fewer people will be able to bring those huge down payments from the starter homes. We have to wait out the resets, “above-water” sales, and refis enabled by the equity cushion they have.
