San Diego Housing Bubble News and Analysis

It is a niche market, one that I have not studied enough to make a reliable prediction. I can say that it has lagged the tract home market in town as far as price reductions go. Everytime I meet a wie country person I find they don't always fit the typical fb, they tend to be transplants in their 40's to 60's, with money taken out of the O.C. and S.D. markets, while others have been there 10-20 years. They tend to be more financially stable than the fb's from town. These are generalizations and I do know there are plenty of stable owners with few places to go (these are not the kind of folk that can move to a rental easily). I have to think there are very few buyers out there and fewer coming. I think it is wise to wait longer, even though it is only a few miles away, it is a different demographic, for the most part these are not 9-5 working stiffs, like the townies. It may take longer for economic stress to set in.

Horses and land for the recreational gentleman rancher/crazy horse lady are an incredible money drain. Logic says that in these times, people will reduce expenses, making these non income producing ranches less appealing. The problem is that horse people are different, it isn't a hobby, it's like a cult. I understand them no more than I understand suicide bombers, the Raiders owner Al Davis or breast reductions. Some things are just too much for my little mind to grasp.

Hi Temeculaguy,

What are the best Temecula areas to buy and rent them for a while. I am not familiar with full area details like where is main commerce in Temecula and where people live and commute. What I am looking is just buy some good demand area for giving it to rent if I buy a property.

P.S: Near and around Temecula is also fine if you want to suggest something towards my questions.
Thanks

tlefort: A gal I know moved from Fallbrook to Temecula horse country and picked up an 18ac place with a 3,000sf home (backside of wine country) for $616k (priced down from $900k). This was during the summer.

I don't know how far prices have declined since then, but my daughter rides locally (Bonsall) and I know the "horsey" set has been hit particularly hard as of late and folks are selling horses, trailers, trucks and properties due to the financial drain TG mentioned.

Thanks TG,

I have enjoyed your comments and congratulations on your recent purchase. I myself have been tempted to blow off the idea of buying a place with acreage and pick up a nice house in town like you did. It sounds a lot simpler than what my wife has in mind. The only problem is my wife has 18 horses and runs an upscale horse trail riding business for the tourist/wine tasting crowd out of Wilson Creek Winery. (Here is her website so I can plug her business. http://www.winecountrytrailsbyhorseback.com ) and she has been doing fairly well considering she just started in June 2008 and she is already profitable (Except for the last few weeks of rain has dampend her rides). So she wants to hold out to see if we can get a place that will house her animals and cut her 1700$ rent she pays to house her animals on the ranch where we rent a small home.
You are right about the crazy horse people, but I am married to one so I have to deal with it. She actually has a good business and if she can control the overhead I.E. bording for her horses, then she can make a decent living doing something she loves everyday. That in itslef is something I think we all would like to be able to say.

The area out there is really quite interesting and it really is hard to compare to what happend "in Town". It seems to be laging a bit behind but I am starting to see the low end dip below 300k. I found a place behind the French Valley airport, short sale for 259k on five flat acres but a tear down house on it. My wife was not up for that much work. Every month I am seeing better and better properties popping up out there, but there is still a lot of people thinking that their "Estate" should fetch over 1 Million when they only paid 400k 4 years ago. Overall it is a nice peacefull area, but it is by no means, Rancho Santa Fe.

Thanks for your input and I will continue my search. I hope by the time all the Alt A loans start to default in mass this next year we will see these proerties taking a haircut like the rest of Temecula. I have talked to a lot of the people out there over the last few years and one comment that I keep hearing over and over that will make you laugh is they all think that the area is "Special" and won't be impacted like town will.

I do not think anyplace is "special" any more. And I hope to be able to pick up my mini 5 acre ranch for under 300k soon. Wish me luck..

Till then, best of luck with the new home. I am envious because I am tired of waiting and watching. But patience is a virtue and it even may save me a few hundred thousand bucks...
Tlefort

This thread is exactly what I am looking for... I did a search on 92592 zip code for houses over 2 acres and listed under $800,000.

Of those houses (24), 46% are bank owned or short sales. Average REO price is $615K (4 houses) and $196/sq ft. Average short Sale is $528K (7) and $170/sq ft.

Of the remainder that are not obviously distressed, they have been on the market an average of 181 days for an average price of $717K at $245 sq. ft.

So, the sellers are optomistic over the banks over the short sellers.

The missus and I are going to rent until the distressed property percentages fall into the teens, at least. I can't imagine prices stabilizing right now, when the undercut of foreclosures and short sales are so sharp and numerous.

I agree with you, I think the wine country area has more to fall. It is hard to compare to the properties in town because the houses with some acreage are all so diverse. There were a lot of spec homes built or half built that are coming on the market as well out there. I have seen some fixers at about 2000sf on 2.5 acres for the low 300s. With the current economic situation I think we can be assured that it will get worse before it gets better. I would say a few more years of declines. Maybe not as dramatic as the last 12 months but declines none the less. With unemployment climbing, stock market crashing, state budget in the dumper, I think there is a very large indication that this mess is not turning around any time soon.

All that being said, I am in the school of thought that when the right place comes up at the right price I will buy and not worry about going up down or sideways. I plan on living there a very very long time, God willing...

Good luck and if anyone is interested in this area I have been watching and have looked over almost all of the listings under 600 k out there. Would be happy to compare notes...
TL

I think that temeculaguy's assessment of WC demographics is generally correct. Many owners are OC/SD transplants and retirees that are probably more financially stable than the general population. (There are also a lot of professional dirt bike riders - amazing how much money these guys make...)

I think another segment of the WC population are those from the local construction/real-estate/banking industries that quickly "moved up" when times were good. Of course these folks are getting hit hard now and probably in denial more than most (I've noticed the same for the De Luz area also...) It seems that those who make money easily and quickly are less likely to accept reality when it's gone.

Of course this is all based upon anecdotal information, I don't have any real statistics to back up my conclusions. But, FWIW, my bet would be that prices are going down in these areas.

I have lived in Temecula for about 18 months, so I dont have TG's "street cred." I agree that it seems to be made up of "new money", people who have lived here forever, or O.C. transplants who made a killing on their home and bought a "hobby farm."

I love visiting the wine country. It's lovely. But I'm not sure I would want to live there. It feels hotter in the summer, and where do you go to buy a quart of milk? Get gas?

I also wonder about water costs and acreage? Maybe it wont matter so much with a horse property, but water use is a big problem.

This is based on the handful of people I know in WC, but my impression is that it can be more on the conservative side. I've met a handful of people who immediately wanted to know what Church I attend and started talking about the joys of Rush Limbaugh.

Good luck!
DG

I agree charmagirl. Wine Country has it's pluses and minuses. It all depends of personnel preferences and needs. My wife has a horse business and her business requires the boarding of 18 horses. So to own a small 5 acre ranch that could house her animals would be a big savings for her overhead. For others, some people just like the solitude and peace and quiet of not living so close together.
You are right about having to drive to "Town" to get supplies. But in reality you just adapt and plan your shopping and errands so you take care of everything at once.
As far as conservatives, I think that area is about the same as Temecula as a whole. It is the "Bible Belt" of the inland area I think. And that is Ok by me butI know some people take offense.
As far as prices are concerned, I think the Wine Country area has taken a bit longer and is lagging the homes in town. But I am starting to see the cracks and there is quite a bit of discounting going on. When I moved out there 4 years ago everything was 600k and on up. Now a few are hovering in the mid to high 300s.
Also, the expense of water is not an issue as most places are on wells. If you have an orchard and you use Rancho cal water, you also get discounted agriculture rates which are about 90% cheeper than residential. I personally feel this is unfair but that is how it is. All those 3-5 acre mini so called "Vineyards" are likley paying less in water than your average track home while using 10 times the amount of water.
For us, horses don't use as much as vines so water will not be an issue.
Thanks for your input..
TL

I'm a wine country ranch owner, been here 12 years, poured every last dollar into my 2.5 acre beauty. Used it as an ATM. It's the best spot on earth and was valued at a million at the peak of the bubble. The poster is right - denial is strong here. It's difficult to admit that we are "under water" but I can't keep justifying throwing money away so I am considering short-selling or foreclosure. The horse culture is passionate, but at least two of the big ranches in Valle des los Caballos are for sale and one is for lease.

This is off topic to the thread. Since the last poster shared his name via AOL, I took the liberty of posting his biography for all those who love to paint Temecula as a gun toting, Bible thumping, tricked-out truck driving outpost for those who can't afford to live in the culturally advanced (?!) OC or SD counties:

"Composer/conductor XY showed his prodigious musical talent early, playing piano at age three, composing and improvising by age seven. His formidable training included mentoring in compostion from Darius Milhaud, Vincent Persichetti and Roger Sessions. After graduating from The Juilliard School of Music in 1969, X's fluency at the piano landed him jazz gigs with Elvin Jones, Clark Terry, Nick Brignola and Lee Konitz; pop gigs with Hall & Oates, Judy Collins, Esther Phillips and Maureen McGovern. He became Bette Midler's Musical Director in 1976, arranging and conduct ing the wildly successful Clams On The Half Shell Revue, The First Annual Farewell Tour and the Live At Last album and HBO show.

From 1976 to 1991 X put most of his effort into his collaboration with legendary choreographer Paul Taylor. As Musical Director of the Paul Taylor Dance Company, he scored eight ballets, conducted fifteen New York seasons as well as engagements with the Paris Opera Orchestra, Israel Philharmonic, Montreal Symphony, Danish Radio Orchestra, Scottish National Orchestra, Edinburgh Festival Orchestra, Sadler's Wells Orchestra, San Francisco Ballet Orchestra and Buffalo Philharmonic. Two of his Taylor scores are represented on PBS' Dance In America series. He also conducted eight seasons for New York City Ballet, composed and conducted for Miami City Ballet, Mark Morris Dance Group, Jose Limon Company and Ballet Marseilles/Roland Petit. On Broadway Mr. Y has conducted or arranged I Love My Wife, Little Me, Can-Can, Merlin, 5-6-7-8- Dance!, Sunset, The Marriage Of Figaro, The Life and Sweet Charity. Since moving to California in 1995, X has arranged and conducted the tour of The Ann-Margret Show and conducted national tours of Beauty and the Beast, Fosse, Hello Dolly! and The Producers. His reworking of Duke Ellington's neglected musical Beggar's Holiday recently premiered at the Marin Theatre Company.

X Y lives on his ranch in Temecula, California with his wife, Anne, and their three children, eight horses, five dogs, two goats, a pig, a cat & "Kirby" the scat singing cockatiel."

The longer I'm in Temecula, the more I encounter accomplished people like Mr. Y, people who left behind city life and chose to live in the IE.

People are giving up their horses, some dropping them off unannounced at shelters.

http://www.cnn.com/2009/LIVING/03/22/hom...

Thanks to all for your responses.

This board (and several others) have helped me make smart decisions these last few years.(Actually my decision has been to sit and wait this out). Now that a lot of the S%*t has already hit the fan these last few years, the big questions left are, how low will it go and how long will it take?
I think Wine country has a ways to go. There were a lot of spec homes built these last few years. People had big dreams of big profits. I know a lot of them and a year or two ago when I told them this was going to end bad, they all blew me off as chicken little. Now I see places that wanted a million and will be lucky to get 500k. And the smaller, older original homes on acreage are getting into the 300k range. I am still in the school that if the right place comes along and it solves my horse boarding problem I will jump. I have noticed a few bank owned properties coming on line listed at 20% off the short sale price. Only to be bid up past the short sale price.

I think some people think this will all blow over after the stimulus package takes over. I have news, we may never again see in our life times those inflated prices. They just are NOT coming back. I think as time wears on more and more people will realize this. I still hear people saying to me, "better jump in before these prices take off again". Until I stop hearing that and all the people who are buying homes as "Investments" or get rich quick schemes are weeded out, we still have some down side.

All this being said, I am looking for a home to live the rest of my life in and finish raising my faimily in. As well as house my wifes horse. When this happens to come along, and I am able to borrow a reasonable amount of money to make it work, I will buy and not look back. I need a place to live and the mental security of having my own place is hard to resist. I just refuse to pay the old wish prices on past.

Thanks again for everyones help. This site has been a wonderfull education.
TL

After much hand-wringing, my wife and I have decided to walk away from our beloved ranch. Our research tells us that are way under water and the place is worth under 500K. Land in the wine country is now of no value because houses are selling for less than it would cost to build them. Depressing that our spot - one of the most beautiful in Temecula - is worthless. Also our research indicates that perhaps the market is at the bottom, but that foreclosures will keep coming for at least another year and prices will not go up anytime soon.
Thanks to all for the informative posts. I still passionately believe in the long-term potential of Temecula (and the wine country) as SoCal's premier resort area. Wine country will be the Beverly Hills of Temecula. But we're moving to Aguanga: open spaces and more horse trails than you could ride in a lifetime!

there's gotta be a lot of mini-mogul wannabe ranchers who atm'ed their wine country spreads and who are hanging on by a thread. can the last poster be the only one? since nothing, like, nothing at all, is selling out there, who has an idea at allw hata place out there is worth?

also, the place is definitely not "wrothless"...i'd buy it. i'd pay a lot for it. i just wont pay 500k. somewhere nice for around 1999 price? sure. that's a far cry from worthless, though it's also a far cry from the cool million give-or-take that the place was atm'ed for...

what possible research could indicate the place is at the bottom, with no recent comps out there, at least according to one agent i talked to on a place. i'd say of all places, wine country seems far from the bottom, expensive to maintain, maybe justa little too bad for some commutes...

Short sale, and be done with it. I still can't believe you bought at the perfect time 12 years ago, then used it as an atm during the bubble. :(

You know, I keep reading on this board that we will never see home prices where they were two years ago again in our lifetime.

First, I think that comment depends upon whether you're 20 or 60...it may be true if you're 60, it certainly isn't true if you're 20.

Second, to get where they were, home prices would have to roughly double. That has certainly happened before in as little as 10 years, and I have no doubt it can happen again.

My pop bought a home in Podunk, CA (not the town's real name) in 1970 for $21K. Ten years later, he was able sell it for over $50K and he had done very little to the home...not even paint or carpet.

True there was quite a bit of inflation in the 1970s, but that sort of thing could certainly happen again. I don't think it is far-fetched at all to believe home prices could double in 20 years, and perhaps much less than that.

Smart moves. Buy low (1997), HELOC every dollar out of the gain to peak since then, and walk away from the downturn. This is how to use the system for maximum personal gain. All made possible by the US taxpayer, thanks to the controllers of the public purse, the US Congress.

Thanks for posting such an honest anecdote. It's a shame you are going to lose something that sounds like your "dream home," especially since you bought it at the right time.

Aguanga, huh? Isn't that a bit of a change? Renting or buying?

patientrenter: I suspect you are somehow attached to the mortgage scam business - you know, the same people who committed mass fraud for commissions, ran banks into the ground - many who would later accept TARP money and huge bonuses courtesy of the tax payer - and then claim moral hazard when a borrow defaults.

Screw the banksters!

To Tlefort:

I went to your wife's website to see if my horse-loving wife Anne knew her or knew about her. Turns out Anne designed the "Wine Country Trails" logo! Small world.
Chances are you will find what you are looking for - putting that much passion into the pursuit of a goal usually reaps rewards. Tip: when you get it, don't borrow on it!

Wow,

Don, sorry to hear your story. My wife talks about your wife all the time. She does great work. As far as your story is concerned, I have heard it over and over. It becomes a personnel economic decision. As far as my comment "we will never see these prices again in our lifetime", the poster is correct, depends on your age. I am mid 40s, so I think a doubling of prices might be a stretch for me. But if your 20 something, it is a bit more possible.

On a general note, as far as picking a bottom. No one, and I mean NO ONE knows where the actual botom is until we are all looking back years from now. All we have is data and statistics. My personnel guess is, with the current overall economic data (Unemployment, GM BK, banks not lending) I think this correction will overshoot to the downside. (Don't shoot me if I am wrong, I said it was a guess). I think Temecula proper may be there all ready. But the area out east is harder to predict.
Neighbor across the street had a short sale on a 2.5 acre, 2200sf home for 319k. It went inactive today (My guess is the bank got it back. I am looking for it to pop back up as a REO in a few months in the mid 200$).

Another observation, I have been watching these types of properties and seeing a bidding war when they do get relisted. I have spoken to the agents and they say there is a lot of speculative interest from investors. I believe that we still have some downside to weed out these speculators. I think a lot of people still have 2005 prices in thier heads and think that they are going to see this market "Bounce back" and the good times will be rolling in again. If anything, once this market does actually find a bottom we will see very slow appreciation if any for some years to come. The overall economy, and tight credit will see to it that speculation takes a back seat to people who just want a home to live in.

Once again,
Sorry for your loss and now that I know who you are and what a nice place you live in, it makes me feel for you all that much more.

Just was out there today as I moved my horse to a stable in the wine country. Heard from the barn people there that lots of racing related barns have shut down in the area. Also one of the local guys that's more toward Hemet said that water costs are starting to be troublesome and the local water company is doing away with some subsidy that you'd get to give city water to your animals....water costs keep going up and on a big property that is not a good thing. Just something to consider.

From a personal note, we were also looking in wine country, but found our horse property in Temecula within the city boundaries. Personally didn't like the idea of being too far from everything, especially the freeway for commuting. We just bought and although I think we might see a bit more price adjustment down, I don't think it's that much more. If you see something that you love, that's almost all that you want and in a certain range you set, I would go for it! Best wishes.

[quote=tlefort]On a general note, as far as picking a bottom. No one, and I mean NO ONE knows where the actual botom is until we are all looking back years from now. All we have is data and statistics. "

It makes sense to me that when it costs more to build a house - just a house, no land - than it does to buy an existing property with a house on it then we are at the bottom. The land my house is sitting on is effectively worthless right now. Construction costs remain relatively the same while land prices fluctuate wildly and what fool is buying land right now?

A 4-acre property with a killer view and a 2005 manufactered home in Aguanga just went for 85,000. The home itself probably cost 120,000. Can't get much more bottom than that!

You are right. That is a very good argument. But to really understand the big picture there are a lot of factors to consider. Human psycology not being the least. Construction costs are dropping actually with the lower costs of lumber etc. Labor costs will go down as more unemployed construction workers take less pay just to have the work. Cities are lowering or limiting the permit costs. All these factors and many other factors of a slowing or crashing economy will contribute to possible lower prices in the future. It may not be "Logical" or make sense but neither did the fake prices on the way up. All I am saying is there is a real possibility of an over shoot on the down side.

Just looking at the straight numbers your argument for a bottom based on the Aguanga house seems to make sense. But the consumer is not always rational and as we have seen sometimes is completely irrational. Markets are driven by greed and fear. Right now fear has the upper hand and I just have a feeling we are in for worse times ahead.

I will also say as I said before, I am guessing. I do not know where the bottom is just as I did not know where the top was. I thought the market was insane in 2003. Look what happened in 04 and 05. So all I am saying is sometimes people do not act rational, in up markets and in falling markets.

Interesting:
"Based on past results, I think I’d rather put my faith in Professor Robert Shiller, who called both the tech bubble and the housing bubble. According to the Case-Shiller Index, home prices have dropped between 25% and 30% since the mid-2006 peak.

According to the Case-Shiller Futures Index -- which has performed better than a Jim Cramer appearance on The Daily Show -- the bottom of the housing market will occur in late 2010, with further declines of 5% to 25% in major markets.

How can anyone in their right mind say that housing has bottomed, when the supply of new homes is at an all-time high (13 months) and the supply of existing homes is at 10 months? Furthermore, there will be 2.1 million foreclosures in 2009 versus 1.7 million in 2008, and 7 to 8 million more people will lose their jobs in 2009. Housing prices will complete their trip back to 2000 levels."