I have the feeling the sub-million dollar sales have been primarily sub-prime driven, whilst the million+ are more conventionally financed. I mean this in the most general of terms, however. I could also be totally wrong (and would love to be corrected).
Imagine all the FB’s taking out suicide loans, re-financing and HELOC’ing new cars, boats, kitchen remodels, etc. All that money has to go somewhere, i.e. local business. I’m sure the guy selling yellow hummer’s is doing great (for now).
So even if the FB’s foreclose and lose their toys the equity they pulled out is still going to be floating around the local economy. And since I don’t know too many folks using home equity to shop at the thrift store or buy big macs, its likely primarily going to end up in the pockets of the already very wealthy. This in turn creates a feed-forward mechanism that is further inflating prices in the high end.
Of course, this will all come grinding to a halt when the free money disappears and *everyone* feels the hurt. I have a hunch it will take a fair bit of time for this to percolate up into the high end, though. All those HELOC’s have created a massive equity cushion for the super-rich.
