The fundamentals of square foot replacement and land costs are better observed in communities with an older, less youthful population, such as those found in La Jolla and Santa Barbara. In more aged populations, property values do not increase during real estate booms at nearly the same percentage rate as they do in communities with younger populations such as are found in Riverside and San Bernardino counties.

Likewise, communities with a more aged population are slower to adjust downward in a recession as the values have less distance to fall to return to the equilibrum or historical value trend line – which will happen as we complete this recessionary phase of the business cycle.

Accordingly, the La Jolla sales reflect a mere weakening in price paid per square foot since 2007. However, this will turn into a price decline over the next three or four years, until prices return to the flat levels of per-square-foot costs for the period of 2000 to 2002, just prior to the acceleration of prices in 2003 through 2005. As can be seen, prices flattened in 2006 and 2007, having peaked in 2006.