In "Froth in the Silicon Valley Housing Market"?, John Quigley examines why the bursting of the dot-com bubble in 2000 did not cause an equally precipitous drop in Santa Clara county's house prices.
The author makes a number of interesting points. One of them is the tightly regulated supply-side of the housing market in California -- the pride of many planners as they continue to make "the rich" richer but promise that more regulations and developer arm-twisting will enhance the pool of "affordable" housing.
Quigley also notes that many Santa Clara residents found work outside the county in the greater San Francisco area job market. A willingness to commute as well as passable commuting connctions helped the market to absorb the shock.
Quigley also notes that many people enjoy high-amenity Santa Clara county and that its natural charms are also in short supply.
Re the commuting safety-valve, we can manage the auto-highway system better with time-of-day pricing and/or build capacity. In California, we have done too little of each. But it seems that the state's movers and shakers have dodged another bullet. As usual, the choices made by market participants bailed them out.