When you live in an area with fairly anemic real estate inflation, while the rest of the country is percolating along at double digit raises, then it speaks to the wages being paid in that economy. Rising interest rates will mean that these lower income people will be even LESS able to afford the prices you have already. I agree, the amplitude of the shock is greatest at the center, but the ripples spread out eventually.
Let's not forget the "paper wealth" factor. Whether we're talking about values of tech stock portfolios, or home values, when people perceive themselves as suffering a loss, they spend less on everything. That affects essentially every segment of the economy. I just hope we can snap out of it by late 2007, or be prepared for President Rodham.
"Well, then, why should someone move to Greensboro, NC, when a lender overburdened with foreclosed homes (in other areas) is letting people walk into them with zero down, no closing costs, and even moving expenses?"
Oh, I don't know, job growth maybe? There are other factors at work, as to why some areas have not skyrocketed. There is very little to prevent new residential construction here, with readily available tracts of land. This tends to limit appreciation of existing housing to the rate of inflation, with new construction pulling existing up as costs increase. New will always trump existing, with the exception of the very close in, older "charming" neighborhoods built in the teens, 20s, 30s and 40s. Or, at least that's true here, and in Dallas and Atlanta and Memphis and Indianapolis and, and and.