Affordability, is that true for Los Altos California, Is the Key

One of the interesting things about what is currently happening in the real estate and financial markets to me is all the pet theories people have about what drives prices. Folks will create spreadsheets and graphs that somehow prove, or at least don't disprove their ideas, and then other folks will agree or disagree based on their personal prejudices.
One theory floating around out there is the "Time Delay" theory. The Time Delay theory says that Los Altos and the surrounding area real estate pricing trends tend to lag trends in other parts of the country by 18 months to 2 years. It seems as though what the theory attempts to do is simply that some rule exists whereby you can predict what will happen in the Los Altos and the surrounding area market by looking at other real estate markets around the state or country. What this theory doesn't do, is indicate any understanding as to why markets may or may not behave differently. The proponents of this theory are quick to discount any strengths that the Los Altos and the surrounding area has that would mitigate the effects of a slowdown in the economy or real estate market.
In a nutshell, I would refer to the Time Delay theory as the idea that whatever happens elsewhere must inevitably happen to Los Altos and the surrounding area, and we are just late to the party. Obviously, the flaw is that you are looking at an effect and trying to imply causality.
I am not saying the theory is completely without any basis, however. It does seem to be true that our local economy may at times be up when other parts of the country are down, or vice versa. However, there are reasons why this happens, one of which is international trade. We are somewhat unique in that we have one of the strongest balances of international trade in the country. So, if the dollar is weak, and the economy overall is somewhat weak, our local economy can sometimes be buoyed by selling more of our goods overseas.
Not to say we are immune from economic factors that plague the rest of the country, but we do have the good fortune of not being tied as closely to the domestic economy. Conversely this can be a negative when the dollar is really strong, as our products then become more expensive domestically--this explains partially why Boeing orders go up when the dollar is weak, and Airbus orders pick up when the dollar is strong. At any rate, these factors lend validity to this idea that when the US at large is up, Washington might be down, or vice versa. But the important thing to note is that any time a trend like this exists, there will usually be reasons why it is, or is not so. It's an effect, not a cause.
The problem for us is when the global economy and the domestic economy go down the drain at the same time. Because then, there is no one to buy our stuff. And if no one buys our stuff, people tend to lose their jobs.
To return to this time delay theory, one of the theories that is floating around that I take the most exception to is this idea that Los Altos and the surrounding area real estate market is following in the footsteps of other inflated markets like San Diego. The theory seems to indicate that if San Diego has fallen 30%, then so too inevitably must Los Altos and the surrounding area --it is just taking us longer to get around to it. After all, the theory goes, San Diego what with its sun and fun, is a more desirable place to live than Los Altos and the surrounding area. How can our economy hold up when we don't even have a Sea World?
In my introspective moments, I've sometimes wondered this myself. There are days (rainy ones, usually) when I would rather be living in San Diego than here. But, there are a few factors that have always kept me here. Obviously, the first would be my family situation--being part of a Los Altos tends to limit the number of places that one might conceivably live. Another is the fact that I have actually visted San Diego, and did not like it. It is the proverbial place that is nice to visit, but not to live.
This is partly because of the sun and fun factor. Like most of California, San Diego has always had a boom and bust real estate market. Like it's bubble cohort Miami, part of what has always driven the market in San Diego is the 2nd home market. When times are good real estate in San Diego becomes very expensive because not only are companies that are located in San Diego expanding, you also get a lot of retired people (they call them Snow Birds) buying 2nd homes that they live in during the winter when the weather is bad in their home state. And because the 2nd home market tends to dry up whenever times are bad, that means that San Diego's real estate market is more volatile than our market here.