[quote=sdrealtor]And I have to disagree back. It is easy to sit back in cyberspace and throw out theories like that which make sense but do not represent reality.
The low is completely dettached from the high end. The low end crashed because the buyers never could really afford paying their mortgages even if the interest rate was zero. Today’s buyers on the low end are heavily dominated by investors picking up properties that cash flow. The low interest rates are bringing 1st timers also but they are having a tough time against the investors.
Buyers in each tier stick to their tier and dont move as freely as the Butterfly theory suggests. A perfect example is the CAR family. They could have gotten a much bigger nicer and cheaper home long ago had they been willing to migrate like butterflies to Oceanside, Vista, San Marcos, Escondido but that was never a real option for them because of location of work and lifestyle. Sure they romantisized the idea of a big house on a 1/2 acre or more lot in areas like SW Esco around Lake Hodges but if they were up for that they would have gotten it long ago.
The high is getting smacked now for two reason that I can see. Sellers finally capitulating that no recovery is coming soon combined with the drop in the superconforming loan limit (the main culprit IMO) by $150K this Fall. Prior to then you could buy up to 850K with an easy qualify gov’t backed loan and put 20% down. That now only gets you up to about $700K. The jumbos are harder to qualify for and many want 25% down. What is going on in the Upper Tier has nothing to do with the mid or lower tier. They are completely different buyers.[/quote]
Buyers in “upper-tier” neighborhoods are usually move-up buyers. Easy to find move-up buyers when they are taking $200K+++ from their starter homes to use as down payments. Now, all that bubble money on the bottom end is gone; the move-up market is dead.
The only reason the higher-mid and higher-end areas have held up so well is because there was less distress, largely due to the fact that all the foreclosure moratoriums, govt-backed mortgage market, etc. kicked in AFTER then lower end had already collapsed but right as the declines were heading into the better areas. Additionally, the large down-payments brought into the higher-end areas (from sales of starter homes) provided a buffer that the zero-down crowd at the lower end did not have. Those with this “buffer” were able to sell at a profit, or at least break-even, while the lower-end bubble buyers were upside down on day one, especially with 100%+ financing and the selling costs involved. If they needed/wanted to move, they HAD to short sale or foreclose.
In our case, the SW Escondido area really wasn’t that much cheaper than what we could find here, all things considered (maintenance, commute, etc.). To buy our house/lot in a comparable neighborhood in Esco, we probably would have paid about the same, maybe more. We also would have had to deal with an HOA or architectural committee in many Esco neighborhoods, which we don’t have to deal with here. So, it was a no-brainer. IF we could have gotten a comparable house/lot/neighborhood in Esco for 40-50% less than here, we would have jumped on it. We DID make multiple offers in Esco at prices we were willing to pay, but they were never accepted.
