Comments on: Point of Impact? http://sandiegohomeblog.com/2008/03/14/point-of-impact/ A San Diego Real Estate Web Log Tue, 09 Mar 2010 21:40:55 -0600 http://wordpress.org/?v=2.8.4 hourly 1 By: Kris Berg http://sandiegohomeblog.com/2008/03/14/point-of-impact/comment-page-1/#comment-146194 Kris Berg Fri, 14 Mar 2008 20:07:01 +0000 http://sandiegohomeblog.com/2008/03/14/point-of-impact/#comment-146194 Dave, What you are talking about is what I have long called the Trickle Up phenomenon. What this ultimately means is anyone's guess, but you make a valid argument. Dave,

What you are talking about is what I have long called the Trickle Up phenomenon. What this ultimately means is anyone’s guess, but you make a valid argument.

]]> By: Dave http://sandiegohomeblog.com/2008/03/14/point-of-impact/comment-page-1/#comment-146191 Dave Fri, 14 Mar 2008 19:57:02 +0000 http://sandiegohomeblog.com/2008/03/14/point-of-impact/#comment-146191 I agree that the "higher-end" areas will ultimately hold up better than the "lower-end" areas, which are currently in high distress. BUT... areas like Scripps Ranch and Poway - just to pick two - will decline substantially from here because of the substitution effect. The price declines start at the bottom, then buyers who might have paid up a little for a house in a "medium-end" area will notice how cheap things are one rung below (on a ppsf basis) on a relative basis and they'll move down a rung to capture the better "value." This will move up the chain and impact everything above it, albeit to varying degrees. But it always starts at the bottom. It's the Plankton Theory of real estate. Once the plankton disappears, everything above it is impacted. If Chula Vista's median is down 50%, Poway's will ultimately decline 30% or so, and RSF and La Jolla, 20% or thereabouts (just to use some round numbers). The real estate plankton is just beginning to affect the medium-end areas and higher. I agree that the “higher-end” areas will ultimately hold up better than the “lower-end” areas, which are currently in high distress. BUT… areas like Scripps Ranch and Poway – just to pick two – will decline substantially from here because of the substitution effect. The price declines start at the bottom, then buyers who might have paid up a little for a house in a “medium-end” area will notice how cheap things are one rung below (on a ppsf basis) on a relative basis and they’ll move down a rung to capture the better “value.” This will move up the chain and impact everything above it, albeit to varying degrees. But it always starts at the bottom. It’s the Plankton Theory of real estate. Once the plankton disappears, everything above it is impacted. If Chula Vista’s median is down 50%, Poway’s will ultimately decline 30% or so, and RSF and La Jolla, 20% or thereabouts (just to use some round numbers). The real estate plankton is just beginning to affect the medium-end areas and higher.

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