Residential Real Estate Market – Some Cities Are No Where Near a Recovery
Although, it doesn’t look like the United States economy will go into a double dip recession, many might conclude that the residential real estate market actually has already. Normally, when real estate recovers it helps the overall economy recover and thus is one of the economic indicators showing that the recovery is moving forward. Unfortunately, that didn’t happen this time, and no new construction jobs were created, as has been the case during past economic recoveries.
California had some counties that were hit extremely hard, for instance Riverside County, which had foreclosure rates that were very near that of South Florida, Las Vegas Area, or Phoenix AZ area. It grew extremely fast, and many people bought new track homes at the top of the market for much more than they could afford to spend, and then with all the job losses, there was no way for them to make their payments. Meanwhile the homes they bought lost 40% in value, some almost 60% if you can believe that.
Not long ago, I talked to an acquaintance who is currently unemployed in Riverside County, but has gone back to school to get a degree so that he can personally financially recover from this tragic economic occurrence. He lives in a very nice suburban community of Marino Valley. When he explained this to me I told him;
“I know Moreno Valley, it’s nice there but with the recession, it sure hurt real estate prices there, what a bummer, one of the worst areas hit in the US actually, mostly because it grew so fast, but all those middle class tract-homes they built are very nice, how is the neighborhood now, I worry about the gangs and crime moving in now?”
Indeed, I asked him if it was very bad, with the gangs, violence, and crime. He said there was some crime, but then the very next day I read in the newspaper that a teen aged girl, only 17 years old, was shot in front of a friend’s house where she attended a party in that city. She was able to drive her car away, but was bleeding very badly, and started screaming for help in the middle of someone else’s neighborhood. They called the paramedics, took her to the hospital, but she died.
It has often been said that the crime rate increases 2.5% for every 1% increase in foreclosures. During this last real estate crash, those numbers did not seem to jive with the past FBI data. However, maybe all of that data is now catching up with this reality. And it still looks as if the residential real estate market in these suburban areas such as Marino Valley may not come close to recovery for at least three years, but most likely five more. That would be over eight years total, just to get back to where things were.
Much of California goes through a ten-year residential real estate cycle for valuations, and it appears that this cycle may be somewhat longer either due to government economic policy, or just the reality of the size of the bubble that burst in late 2008. Indeed hope you will please consider all this and think on it.