Supply also needs to be taken into account. If there are 1000 homes on the market and only 800 families who qualify to buy/rent them, something bad is going to happen to prices regardless of median income.
It would be interesting to know how overbuilt San Diego is right now. I seem to recall an article that discussed how the home ownership rate had gone up by a couple of percentage points in recent years, but the percentage of houses sold had gone up by something like 15%. This means that several buyers were buying multiple properties. No doubt a lot of these folks were qualifying with liar loans. When these homes come back on the market, who is going to buy them?
I think move-up equity is what allows higher-end homes to better hold their values. People moving in to higher-end homes are generally moving up and can bring some move-up equity to the table. Folks buying starter homes generally don’t have much to put down, so the prices of these homes more quickly adjust based on how easy it is to get a mortgage.
I don’t see how the median income doesn’t go down in San Diego over the next few years. Even if the rest of the nation doesn’t go into recession (unlikely), the downturn in RE-related income will decrease significantly thus driving down the median income.
