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I think you are 100% spot on. The socal buyer right now is a mix of SF/norcal deep pocketed tech employees(see my other post on this article) and just folks that are extremely desperate to buy a house, ie. they are cashing out everything they have(pension/401k/stocks/other assets) and getting themselves into a very risky position. If the stock market or housing market were to tank you would end up in a situation where all your assets(remember that you cashed out everything) are tied into the house and it crashes in value and you could also lose your job so you lose everything(a very scary situation).