I don't know where anyone was getting a $600-700 price based upon the specs; it's still a console and $500 is the upper limit of what a mass consumer console can be moved at without being a small niche product.
For whatever reasons, my assumption was that the XBOX would be priced at $500 realistically. $400 would have been a theatrical E3 style bombshell, but the reality is SCE probably had a contingency plan in place to drop the PS4P down $50-100 to let the air out of that announcement, which MS would have predicted, hence no price war/selling at zero margin.