I spent a couple of weeks in L.A. earlier in the summer looking for a small pied-a-terre. In the best neighborhoods on Los Angeles's Westside prices have made only token rotations off the highs. Granted that may be changing-I follow the market there avidly and prices are less than buoyant-but basically the huge weakness one associates with SoCal real estate is in the newer, over built communities far, far away from the coast.
virtually all the foreclosures in calif are homes in working class neighborhoods or in the outlying, less desirable areas as you mentioned. in my city (25k people, median price > $1m) i didn't find a single foreclosure on zillow's site. i expect that as the economy continues to take a dump over the next couple of years, the foreclosure epidemic will spread to more affluent areas
waterfront and even close to to waterfront is scarce so i don't think those properties will go down in value, the houses built waterfront tend to be built in more established communities than the ones we see being closed in the "inland empire"
Re: SoCal...most people cannot imagine the amount of liquid cash available for the desirable parts of the SoCal/LA market. All the dogshit repo's in the former dirt farms in the IE that make all the headlines are just that. That being said they're perfect for the exorbitant of amount illegals that run across the border every day.
im guessin the same ppl pushing that chart up, are the same ones who are in debt to their eyeballs on their CCs as well.