Analyst sees 'ghost town' in Inland Empire

A financial analyst fresh from a tour of construction sites in the Inland Empire is warning Wall Street of a "ghost town" where finished homes sit vacant and additional homes are still under construction. 

"At several properties, there were a significant number of fully built homes sitting vacant along with a large number of additional homes still under construction," Sandler O'Neill & Partners analyst Aaron Deer wrote today after touring developments in Corona and Ontario. "At one master plan community, the entire development appeared to be vacant -- with the exception of crews working on new construction, it was a ghost town."

Median home prices in both communities have dropped sharply over the last year, declining 33.6% in Corona and 30.3% in Ontario, according to DataQuick Information Systems. In Corona, the median sales price fell nearly $200,000 from May 2007 to May 2008, dropping from $565,000 to $375,000.

More from Deer's note: "The homes all appeared to be empty, and there were no prospective buyers anywhere to be found. Surprisingly, the sales office was open ... but the woman working there had questionable English fluency. When asked how many homes had been sold in the past month she simply responded, 'Uh huh. Thank you. Yes!' and handed us some additional literature on the property."

More: "Perhaps the most interesting aspect to the development was what it revealed about the nature of the housing boom: that at the peak even the most undesirable and remote locations were worthy of expensive, high-end homes."

Overall, Deer's note on the California economy -- and the relative health of California-based banks and thrifts -- strikes a balanced chord, reporting that, while the "outlook remains gloomy," "the pace of new problems has slowed somewhat."

Other highlights:

• "Not surprisingly, the banks said they are seeing continued deterioration in their single-family residential construction portfolios."
• "In areas where developable land is scarce, namely San Francisco and west Los Angeles, markets are still holding up. Several banks noted very little, if any, deterioration in credit quality in these markets. Specifically, residential construction projects in San Francisco ... and western Los Angeles (mostly teardown/rebuild projects) are seeing stable prices despite slower activity."

Your thoughts? Comments? E-mail story tips to peter.viles@latimes.com
Photo credit: Sandler O'Neill & Partners

Comments

[lucky]

California, land of fruits and nuts, LA LA Land. So the mid America, and conservative states with steady real estate values were the dumb ones?

[Cale Yarborough]

Marc S-

Believe me, I'm waiting for a once-in-a-lifetime buy. But gas is going over $5 gallon. Why would I want to drive all the way home to the Land of Dirt & Meth?

[Drew]

these assets will ultimately be foreclosed, and will then be re-sold to new residents at lower and more affordable prices. population projections have California headed for 40 million+ in the next several years; it's not as though there is no demand for housing, it just has to meet the 'market clearing' price. all markets correct, including this one. i know projects that are selling well in the Inland Empire and - no surprise - they are relatively affordable to their competition. year over year sales figures are up due to the lower prices. it's fundamental economics. supply will meet demand at price. period.

[General Jack D. Ripper, USAF]

40% of California's K-12 students can't even speak English. Over half the students are now Mexicans and over half of them drop-out. There's your future tax base and solid leftist-socialist voting block that will bleed California dry. Anyone with half a brain and any significant assets that they want to hold onto has either already left California or has a "bug-out" plan in place to do so.

[yours truly, Johnny Dollar]

Alert: After the next earthquake, everything east of the
San Andreas Fault will fall into the Atlantic.
(translation: Monday I paid $4.57 point 9 for ARCO gas at
Motor and Palms; Tuesday I paid $4.37 point 9 for ARCO
gas at I-10 and Date Palm/Vista Chino..go east young man.)
The Inland Empire Strikes Out.

[Syscom3]

As people move back into the cities where the jobs are, the displaced black and latino's will move here.

[Drew]

actually, the fact is that the new home standing inventory has been dramatically reduced over the past 12 months, as the markets work back toward equilibrium. there are many examples of new-home projects selling really well in the Inland Empire, but only when their developers have met the 'market clearing' price for their homes. many banks still 'don't get it' and are unwilling to allow their inventory to be sold at the market-clearing price. time will solve that problem, and there will be owners in each of those unsold homes over the near term. the laws of supply and demand require it. it is taking time with some lenders and builders to work out specific arrangements on some of these assets. and some markets are far worse than others, the article isn't specific enough and shouldn't be used to project over the entire market.

[Cecile Warbug]

I used to live in CORONA, CA. It's actually not that far to Fullerton, Brea, etc. There are plenty of jobs near Corona. And in the other direction, you have lots of jobs in Riverside. Corona is not the middle of nowhere, nor is it that bad of a place to live. It's nothing like Riverside or Los Angeles, which are really horrible from a crime perspective.

My understanding of things is that all of Southern California is screwed, as far as housing prices and lost equity. This is not just a Corona problem. People don't care about ghost towns. They care whether or not they will have home equity that will help them retire the way they want to.

And with central banker-controlled newspapers like the LA Times, you can bet you won't read anything about how the central bankers are destroying the standard of living intentionally, to properly prepare the masses for the coming North American Union -- just like they are doing in the EU, the African Union, the Asian Union, etc.

[nimhrat]

Regarding 12208 BRADDOCK DRIVE, that's like a block from some housing projects. I used to rent right near there, and although it's not the worst place I've ever lived, I certainly wouldn't consider it to be a "nice" area. There's no way I'd spend 900k to live there. I have since moved into a "luxury" apartment about a mile or two south-west, closer to Marina Del Rey and Playa Vista, and the area is much, much nicer. It never ceases to amaze me how much difference there is within such short distances in this town.

[slim pickman]

Ha!
They didn't roll down the window because of the smell (if this was anywhere near cow pasture Ontario...!

As to Temecula area. It may be a buy, since 'there is a (bit of a) there there". And with gas prices high, the traffic isn't as bad as it was. The drive towards S.Diego is actually a pleasant one, unlike north 15, where you have hold your nose through much of it.
So, the value proposition for the "wannabe middle-class" buyers is now: Pay a little more for gas and commute time, but get a huge, new McMansion house for much less than replacement cost.
Of course, the schools and other public facilities may be a little dicey for a long while.

[Tent]

They're living in tent cities in Ontario:

http://www.latimes.com/news/local/la-me-tents
18mar18,1,5139391.story

[yours truly, Johnny Dollar]

I am now getting unsolicited telemarketing phone calls...
in Spanish. Please I don't, nor have I ever, had a 909
area code; I don't speak Spanish, nor do I buy stuff from
people who do. And, I don't listen to KGGI 99.1.

[yours truly, Johnny Dollar]

"Anal-yst see ghost town......"
How about "ghost state?"

[christine fredrickson]

I went to high school in Corona and lived there from 87-90. It was a hole then and is so much worse now it is unrecognizeable to me. At least then, the development was just really on the start and we had those lovely orange blossoms perfuming the breeze in the evening. The only thing salvagable about Corona is Miguels. Wish they had them in the midwest, where I moved, so I could afford a house and achieve some quality of life. But keep in mind it is the outrageous home prices in OC and LA that created the "Inland Empire". At that time, it was the only affordable play to buy despite the gruelling commute folks had to endure (tho gas was just $.99 a gallon at the Thrifty gas station on the corner of Lincoln). I can't beleive how the house prices in the IE climbed, considering it is still a pit but even worse now. And the air quality is horrific, chokes you with the pollution and desert heat and dust. I'm just happy to be enjoying my rainstorm and summer evening peppered with fireflies. Do miss Miguels wet burrittos though.

[David]

Wait just a minute!!!! Don't you all know they are not building anymore land.

here is another gem, buy now or you could get priced out of the market!!!!!!

[Wade Collins]

I'm constantly amused by the mentally challenged who fancy themselves as foi editors or newspaper consultants. The constant questioning why the article was written, leds me to believe thou complain too much. Perhaps some of you are the unlucky owners of these homes. Dave Martin: attacking the messenger does eactly what? Makes you feel better?

[Gardner]

The impending Inland Empire Ghetto along with skyrocketing oil prices will actually slow down the price drops in the city of LA as more and more people begin to migrate closer to their jobs. I bet you anything that house prices will bottom out and begin to rise by Fall of 2009.

[Alan Rodgers]

12208 BRADDOCK DRIVE, Culver City, CA 90230 is a little southeast of Culver and Centinella. Aren't there projects on Centinella near the highway? No, I think they're on Inglewood. Regardless, they aren't far away, and they turn what'd otherwise be a fine neighborhood (the climate in this area is amazingly better than the rest of LA -- cool and pleasant where most of the city is a hotbox) into a sort of nasty place. (Try shopping at the grocery down the street from the projects. Ick.)

[Brian]

Those homes will be filled with Illigal Alien squatters soon, don't worry. Then they'll do what they do; breed, deal drugs, and steal. All the while, they'll thrive off gov. assistance, under the table wages, and free housing cause no one will have the balls to come in and kick them out.

LA needs to be burnt to the ground. Start from scratch.

[E]

What will the call all the empty condos?

Ghost Towers?

[Clown Willie]

Stop speculators. They were a big problem, buying up
several houses for resale at inflated prices. If you buy
a house, you should be required to live in it for at least
a year, not buy up whole sections of tracts by investment
companies to then immediately relist at inflated prices.
After that happened in the 70's in Orange County, they
enacted rules against speculators. Don't they have that
in the I.E.?

[Clown Willie]

Stop speculators. They were a big problem, buying up
several houses for resale at inflated prices. If you buy
a house, you should be required to live in it for at least
a year, not buy up whole sections of tracts by investment
companies to then immediately relist at inflated prices.
After that happened in the 70's in Orange County, they
enacted rules against speculators. Don't they have that
in the I.E.?

[Mike]

Lets knock down all these godforsaken homes and lets put in some agriculture. I hate when the cities and developers all say that we need to continue building for the future population growth. This is all Malarky and is based on false data. It was all greed and now we are paying the piper.

[F. Zappa]

'Uh huh. Thank you. Yes!' She was just showing her Inland Empire "can do" spirit. In truth, this area has seen bad times before, as when General Dynamics was chased from California. It will bounce back.

The Metrolink provides reliable access to Los Angeles, Gold Line will eventually expand to Ontario Airport. If you need an affordable warehouse to service Southern California, (or an affordable house, for that matter) I.E. is still your best choice.

[ASterling]

As a fifth generation Southern California native, currently working in downtown Los Angeles, and having grown up in both Hollywood and Redlands - the article is right about the huge tract developments that were stuck in the middle of the collapse. Many of these areas were insanely overbuilt, and speculatively so, just as the first commenter suggests.

People are very ignorant about the area in general, do not know the communities, and make offensive statements because they probably think it makes them sound "smart." There is no higher quality of life in many areas of the LA Basin; in fact - quite the opposite. Weirdly, there's no reason for houses in Panorama City or Sylmar to be supposedly "worth more" - yeah, like the air quality is better there! I think not (and there are more than enough studies to back it up). The air quality in general all over the southland is SO much better. What a bunch of bozos. It's really "funny" isn't - people's livelihoods and communities destroyed by greedy, speculative developers.

I think houses are going to go back to where they were in the 70's/80's - and people know which locations are desirable to live in, and which not. Hopefully, some decent thing will happen to all these miles and miles of giant tract homes.