That's not the complete explanation, though. A lot of people can trade up using their appreciated real estate prices as equity for their new homes. That also helps bring down the amount actually financed.
I don't know if it's sustainable or not. The prices simply reflect the demand, and somehow people are scraping together the money to buy homes there. I don't quite understand it myself.
I've lived in housing markets where the prices were collapsing rapidly, and anyone who doesn't believe it hasn't been there. I couldn't afford to move to Southern California, because I'd want a similar house to what I have now, and I'm not going to spend several million bucks to get it.
Southern California does have an outstandingly rich and diverse economy, which is what makes housing here so expensive. Well, that and our legendary rigourous winters, where the temperature can plunge into a positively arctic 50s during the day.
My understanding is that markets in your neck of the woods can collapse when the oil industry does badly, since oil is such a substantial percentage of your economy. This doesn't strike me as a danger in Southern California.
The problem with Southern California is the high cost of housing and this has definitely made many companies look elsewhere for expansion.
On the other hand, as Joel Garreau's 'Edge City' points out, a company rarely moves far from where the CEO wants to live, and - let's face it - this is a great city for CEOs. If you're paid a million bucks a year, it's tough to beat the great restaurants, the recreational opportunities, the wonderful variety of architectural styles to choose from, and the prestige.
But those below your level are going to suffer, even the $100k guys.
D