The “Glamor City” argument has been put forth more than once, and I wouldn’t necessarily discount it as a whole. However, what exactly is it we’re saying when we say that people will always pay a lot more to live here? That’s basically saying that the demand outstrips the supply and that scarcity and competition between buyers is driving the prices. Meanwhile, we have net outmigration as people leave town, and they’re doing this at the same time that we have an ultra-high standing inventory of listings, with more in the pipeline. Some people may perceive there to be some scarcity but these wage/population trends appear to be demonstrating otherwise.
A true glamor city holds its ranking (if not its pricing) no matter what. How do they do that? Well, there are only so many ways to pay for that expensive housing. One way is to grow their buyers for these price ranges in the local economy. Jobs, businesses and wages. San Diego has done some of that, but only at a small fraction of what it would take to service the types of increases that have occurred. New York and San Francicso have much stronger employment situations to support their price levels.
The other way is to import your buyers, who have made their money elsewhere and are looking for their destination. No doubt some of the money used for housing purchases in the last few years has been money earned or inherited from outside the local economy. Again, it doesn’t look like the number of imports coming in would even be equal to the numbers that are leaving.
These prices will seek their own equilibrium, and maybe that equilibrium won’t be as low as the long term trendline. Maybe the average buyer will buy into the notion that in order to live in this “paradise” it’s worth it to them to spend 50%+ of their annual income. Even though they can buy the same house in Riverside County for about 35% less. Even though they can rent the same house in San Diego County for 50% less.
I do know that two of the main “fundamentals” driving the runup were speculation and fear, and that the departure from the market of those buyers have already been big factors in our recent declines. Glamor may be in there somewhere, too; but the money to pay for the glamor has to come from somewhere. So far, the sources of that money are proving to be very weak.
