By ANDREW JEFFERY

This post first appeared on Minyanville.

Increasingly, US real estate is becoming a tale of 2 markets.

In low-income neighborhoods, overbuilt suburbs, and other areas besieged by foreclosures, home sales are through the roof.

Data released this week by MDA Dataquick, a real estate information service, show December 2008 sales in Southern California’s hard-hit Riverside and San Bernardino counties up a whopping 300% from a year ago. Southern California as a whole has seen transactions spike more than 50%, while pockets of the San Francisco Bay Area are showing similarly robust numbers.

Prices, however, continue to plunge.

Foreclosure sales are driving distressed markets, and since repossessions disproportionately affect lower-priced homes, data are being skewed downward. Record-low interest rates, bottom-fishing investors and relentless marketing efforts by the National Association of Realtors are all spurring renewed buying activity.

Lenders are so overrun with new business that Wells Fargo (WFC), which plans to cut over 10,000 jobs as it absorbs recently purchased Wachovia, is hiring hundreds of temporary workers to handle mortgage applications, according to MortgageDaily.com.

Meanwhile, buyers are on strike in high-end markets, and supply is creeping towards materially unhealthy levels.

Jumbo loans – those not guaranteed by the government via Fannie Mae (FNM) and Freddie Mac (FRE) – are nigh impossible to get, leaving would-be buyers of expensive homes in the lurch. Transactions are down in some of California’s — and indeed the country’s –  most prestigious markets, leaving a host of recently minted real estate millionaires wondering if they’re next to get stuck in the subprime slime.

Conventional wisdom among real-estate professionals is that these well-to-do areas are in “wait-and-see” mode. This attitude, while comforting to the rich, is dangerously naïve.

Transparent, real-time sales data is carefully concealed from the buying public by the country’s real estate brokers; it tells a very different story. In these illiquid high-end markets, inventory is building, forced sales are on the rise, and prices are starting to head south.

And contrary to popular belief, value drops aren’t just taking place in far-off exurbs where palatial Toll Brothers (TOL) McMansions litter flattened hilltops. Established neighborhoods — many close to job centers with top schools – are seeing home prices fall for the first time in decades.

These high-priced markets, particularly because of the troubles in the jumbo loan market, have become dangerously illiquid. In many neighborhoods, just a handful of homes are currently listed for sale. If one seller gets antsy, loses his job or otherwise jumps at a low-ball offer, the entire market can gap down. The new, lower price sets the bar at which potential buyers begin their negotiations, putting sellers at the whims of their skittish neighbors.

Due to dramatic appreciation during the boom, many wealthy homeowners are sitting on huge equity cushions. While not something they often complain about, this could encourage quick sales, as sellers don’t need to hold out for the absolute highest price like their poorer, more levered neighbors on the other side of the tracks.

All this adds up to an increasingly bifurcated market. The most distressed areas are currently going through the final, violent throws of a real estate collapse for the ages. The process could still take months to run its course and some communities, sadly, may never recover.

Previously strong areas, on the other hand, are just now beginning to feel the pinch. Many, after decades of unfettered appreciation, have a very, very long way to fall.

By ANDREW JEFFERY

This post first appeared on Minyanville.

Speculators have been flocking to California for centuries. Gold, computers, absurd dot.com start-ups, real estate - if it’s an asset, it’s probably boomed and busted in the Golden State.

The bursting of the latest bubble — real estate — is still in progress, as foreclosures push up inventory and drag down prices. Nevertheless, for every speculator that got burned on the way down, reinforcements are flooding the state with new money, hoping they’ll be lucky enough to pick the bottom.

In a trend that’s just beginning to emerge from the smoldering ashes of California’s housing market, the next wave of buyers could be armed with armloads of cash that’s red, rather than green. The Chinese are coming.

The Los Angeles Times paints a colorful picture of “Caravans of cash-rich Chinese in Hummers and Lincoln Navigators weaving through American neighborhoods in recent months, looking for foreclosures and other bargain properties to buy.”

What used to consist of small-scale, individual trips by wealthy Chinese buyers to scout for properties have turned into massive, safari-like operations. According to the Financial Times, SouFun.com, the biggest real estate website in China, received over 300 inquiries within days of announcing a home-prospecting trip to California.

For now, the groups are focusing on areas with existing Chinese populations, making San Francisco and Los Angeles prime targets. Almost 20% of San Franciscans hail from China; parts of LA, specifically the UC Riverside area and the San Gabriel Valley, boast large Chinese American communities.

And while not every potential Chinese investor is itching for a foreclosed tract house, a penchant for paying cash makes them desirable buyers in troubled markets. Big lenders like JPMorgan (JPM), Bank of America (BAC) (thanks, in part, to Countrywide) and Citigroup (C) have massive portfolios of foreclosed homes they’re trying to unload. Countrywide has over 6200 in California alone, up from 3900 just a year ago.

With mortgages increasingly tough to come by, banks are typically willing to knock 10% or so off the asking price for a cash bid. Countless sales have been falling through because the buyer can’t line up a loan, and cash is now king in the world of distressed home sales. This is no secret, and investors trying to snap up foreclosed properties at the courthouse steps tell stories of buyers showing up with millions of dollars in cashier’s checks at the ready.

Experts in China, however, are urging caution. Home prices in California are down 40% by some measures, but few expect the declines to taper off any time soon.

One tour operator told the LA Times he aims to give visitors a better sense of what life is like in America before they take the plunge: “What we sell is the culture, American culture.”

And what better souvenir to take home from a trip to the US than a shiny new…house.