'Flips and scams' in California

Reuters has a good piece tonight on how "flips and scams" helped inflate the real estate bubble in California. The story tells of a couple, the Gordons, who paid $741,000 for a 4,000-SF home in Corona; they're still paying the mortgage, but two homes on the street are in foreclosure, and one is listed -- by the bank that now owns it -- for $550,000.

"We have no recourse," Joe Gordon told Reuters. "We'll have to live here eight to ten years before we get our equity back."

Thoughts? Comments? When do you think the Gordons' house will be worth $741,000 again?
Photo Credit: Reuters

Comments

[Ace]

$741k for Corona sounds good to me. Wait. $741k for ONE house? I thought it was the whole city of Corona for that price. That is pretty rough. Good luck!

[amir]

Prediction? The house was bought probably at the top of the market, so its real value is about half. It will reach that price in two to four years, and then start to go up in price again maybe at 5% to 7% a year.

With a little luck they'll see the same price in twelve to fifteen years.

[longdriver]

I can see homes in the IE falling to about $100 sq/ft. So that home will hit about $400k at the bottom. I think it will take 10 years (at least) before that thing is worth $750.

[lefty]

please don't state there is a housing bubble in california. there may be a lot of homes for sale but prices are not really down much. also it depends very much on the area.

[tarbubble]

scammers have crippled our HOA (townhouse complex). at one point we've had as much as 20% of owners not paying us a dime and playing the foreclosure/bankruptcy laws to their benefit. i know everybody hates HOAs (i do, and i'm on the friggin' board), but we still have to pay the trash company and carry insurance and occasionally do repairs. our foreclosed units are finally starting to sell and hopefully we'll go back to being a functioning organization with homeowners who actually give a rat's you-know-what about the neighborhood.

[Phil Apino]

In 1991 home prices declined.
In 1992 home prices declined.
In 1993 home prices declined.
In 1994 home prices declined.
In 1995 home prices declined.
In 1996 home prices declined.

Get ready for lower prices.

[John]

Amir is way off base. I can see IE prices falliing to maybe $250 or $200 per sq ft. But that is a worst case scenario. I purchased my 1748 sq ft home in 1985 in Corona for $120k, Today would sell for $450-$500k. At the top of the market about $600k. Will sell in the next 5-10 years for $600-$750k, you watch!

[DP Ludwig]

People here seem to think with a little luck Corona house prices will recover in ten to fifteen years.

All owners need to do is think long term. The reality isn't that bad... until one considers that they're stuck in Corona for that long.

Noooooooooo....

[Saul]

Take your head out of the sand for a second and look around if prices havn't started falling much in your area wait a month or two then you will get your money's worth! Gone are the days when 100% stated,would get you a 500K loan welcome to the new reality and its not going to be pretty. A 20 to 30% correction is coming.

[SK]

4,000 sq ft for 750k is not TOO bad. Plus, there is going to be a boom again in housing there within the next 5-10 years, guranteed. With the change of Presidency, the economy will rise again and people will be looking to move spread out. A huge supermall is being built and if you go down a little further south towards Temecula and the Indian resort Pechanga, you can see that there are development non-stop in that area. Althought the real estate game is hitting a downslope, there will always be another boom and when there is, you might just be glad that you bought the house if you can sell in 5-10 years for 1.5 mil. or maybe more. I live in Los Angeles and in Orange County and I will tell you that the inner city(metropolitan Los Angeles) is getting WAY too crowded, even with all the condos and highrises going up, people would rather have a 4,000 sq ft. home with a nice backyard rather than 1500 sq ft and no driveway and yard.

[Al Bundy]

I cannot believe how many ignoramuses posted here. Very few of you know a thing about the Inland Empire. I'm a native Angeleno who moved to Riverside 20 years ago. I bought a house brand new in Canyon Crest for 109,900. That house today in a down market would sell for 500,000. Corona is damn nice. Certain houses in Corona and Riverside are untouchable for less than 2 mil. It's a different ball game out here. Wake up. There's nowhere else to go except east for middle class people.

[Pat]

Since when could middle class people afford $2,000,000 or even $500,000?

[alan]

everything is going to crash this whole region is a graffiti trash can dumb hopefully people are waking up to it

[Enlightenment]

We are just at the beginning of the housing price dive, and the big wave of house repo's haven't is still far away. I predict Housing Bubble markets like SoCal to fall below 50% into the 40% or even the 30% region, and only a FOOL thinks that it won't!!! Suckers!

[longdriver]

There are already hundreds (if not thousands) of homes in Corona that are selling for around $150 sq/ft. Many of the REO's are selling close to $130 Sq/ft (these are large homes 1-5 years old). All you need to do is go look at what's for sale. You can buy new brand new homes for about the same price at several tracts in or around Corona. My wife recently got a job at Riverside Community Hospital so we have been looking out there. In the last 6 months the prices have started to plummet! There are so many REO's in the area that it would take you a year to look at them all. We looked at about a dozen last weekend. Most were around 4000 to 4500 sq/ft selling for $500~$600K. There are still plenty of homes listed at $200 sq/ft but what are the chances of those selling when there are so many listed at 150 or less? $200-$250 sq/ft days are long gone in that area (at least for the larger homes). We are less than a year into this downturn and the sale prices have already dropped (not the asking (wishing) prices in most cases though). The last downturn took 3 or 4 years for the prices to bottom out and another 3 or 4 years before they started back up. I see no reason to expect anything different this time.

[steve billings]

The inland empire is still the armpit of so cal , and it will always be !

[John Brodey]

Many areas in So. Cal. will be bullet proof as far as housing prices are concerned. But the I.E. is not going to be one of them, sure Redlands has some nice neighborhoods with more expensive homes etc., but the I.E. is the area that will be most heavily impacted by foreclosures which will drag down prices in general. As is the case with condos, the homes in the I.E. were the first to fall and will be the last to go back up.

[Bill]

All the doom and gloomers either don't own property and wish they could buy but can't afford it or have lost their shirt in an area where ARMs are prevalent. They want to see prices fall so they can finally buy a house. I don't see prices falling much in my neighborhood. It's still very much in demand, and there are a lot of communities like that. Stagnant prices, yes. Significant falling, no. Hype by the doom and gloomers are what drives a market downward, not the reality of the market. Population is increasing, demand is there and will continue to be for many areas. I say ride it out if you're a seller. Don't drop your price. That itself will establish the market.

[DP Ludwig]

With all the doom and gloom surrounding the real estate market, one really has to wonder about the dopeheads who bought a house in the first place. Dopeheads you say? Yes, you heard me right.

Anyone signing up for a $600K mortgage on a middle class income (let's say <$75K/yr) has to be dopey. I'm sorry - there's no other way to put it.

Homeowners have no right to complain about falling real estate prices. YOU GOT WHAT YOU DESERVED.

[Fred Savage]

Oooohhh. Now I'm just itching to move to Corona!!

Who needs good weather, short commutes, beach proximity, and hundreds of cultural attractions?

LA is the armpit and Corona is the crown jewel. I hear they have a Trader Joe's now, too!

[DB]

I hear a bunch of losers on this blog. 'Oh I don't own a house and all of you who do should all lose what REAL EFFORT you have done to own a home.' Do us a favor, LEAVE! Just think, you could move to New Orleans. I hear you can buy some water front property cheap there. Non-home owners have a large reality shock coming your way. With people unable to buy, rents are going to go sky high!!!

[DB]

Lending rates are a joke. Who makes them? The market? No way! The State needs to go into the lending business. A fixed 5% would give the State a nice income and allow people to buy at a reasonable rate. There wouldn't need to be a "bale out" of home owners and we could possiby lower taxes or get rid of property tax all together.

[Happy in Corona]

I live in South Corona. When we moved in 2000 you could have bought any house on our street for less than 200k. At the peak, prices had doubled and in some cases trippled. Now days every where you go in South Corona except for a very few areas there is more than one house in foreclosure. This market is definitely not done with the correction. My guess is it will take at least another 2-3 years before things start to turn around price wise. What will save Corona and other places like it is the affluence of good jobs to the area. If the 15 corridor between Ontario and Temecula can be commercially developed to bring well paying jobs to the area then home prices will take care of themselves. It is supply and demand in play at that point. Come and visit Dos Lagos and you will understand what i am talking about, a piece of OC in IE.

As for the family in the piece, my advise is, if you can afford the mortgage and can stay in Corona, keep on going until it is time to move, why worry about the price until then?

[longdriver]

There are some Doom and Gloomers that are just loonies. Those are the ones predicting depressions, global meltdowns etc. I own a home and it's nearly paid off. I've been actively looking at Corona, South Riverside (Mockingbird Canyon, poly high area) and the surrounding areas not because I want to live there but because that's where my wife (the Doc) works. We can afford the homes even at the current insane prices that many are listed at. I've been to every new development several times. I've looked at probably hundreds of open houses. I have seen the prices dropping. I have price sheets showing the declining prices. I've lived through a previous bust where prices all over SoCal dropped 20-40%. The people that think home values are not declining or that thier areas are "special" are the ones that are in for a shock. This cycle is only beginning and I will be waiting until next summer to see what the trends are then. If the values are continuing to plunge I will wait longer. If they have settled down I'll buy.

BTW, After looking all over the IE I've seen that there are some nice areas. lot's of it is still a dump but then again there are lots of crappy areas in LA and OC (such as Compton, Lennox, Lawndale, South Central etc etc, Santa Ana, Tustin parts of Anaheim etc..)

[gerber]

Happy in Corona said; "I live in South Corona. When we moved in 2000 you could have bought any house on our street for less than 200k. At the peak, prices had doubled and in some cases trippled. Now days every where you go in South Corona except for a very few areas there is more than one house in foreclosure. This market is definitely not done with the correction."

If you take 2000 prices and add 5% a year, you will get the most accurate price for ten years from now.

Ask yourself what caused the dramatic increase in prices;
was it a sudden spurt in job growth? was it a huge influx of people from out of town? or was it because ANY-ONE could get a loan and they didn't CARE how much the house price was?

And if the housing market is still going strong, why aren't all the foreclosures being snapped up, and why are the banks delaing putting the foreclosures on the market?

[buckwell]

This is a list of 11000+ foreclosures owned only by Countrywide Financial. Very scary. http://countrywide-foreclosures.blogspot.com/ and this is the California list: http://www.streamfx.com/CW/9-5-2007/REO-California7.html

[jojo]

The big earthquake is coming, everyone is saying that, wouldn't you think it's quite crazy to get a house around corona, like right on the edge of the major fault zone?