Renterclint,
I just checked the most hoity toity of streets in LCV. Out of 89 homes, 2/3rds are under original ownership. Of the 1/3rd that have resold, many have very low LTV’s. I also know of several resales that were purchased by individuals with deep 8 figure net worths as well as a bunch with very substantial incomes that will have no problem sleeping. I live relatively close to that community and know it very well. I would guess that 10% would be the upper limit there and the real number is more likely about 5% potential REO’s.
I have several good and very fiscally prudent friends living there that wont move because they have such a low tax basis. If prices fell, they would be more likely to move than if prices rose as strange as it might seem. However, here’s the problem. If prices fell another 30%, they would buy the bigger home they wanted and could easily afford but they would keep their current home as an investment because it would still be cash flow positive by at least $500/month with lots of upside on value.
I dont know if you want to own a home there if it makes sense financially for you at some point in time, but if prices ever reach $700K for a nice 4BR/3ba home there I wouldnt expect to see it go any lower. At that point, the monthly PITI+HOA would be around $4200 and aftertax it would be roughly equal the $3000 homes like that rent out easily there.
