San Diego Housing Bubble News and Analysis

There was an article somewhere I saw that predicted that within the next 10 years the suburbs will become the new ghetto. Poor families living 2-3 to a McMansion and driving used SUV's to local minimum-wage jobs.

I personally think that is what is going to happen.

I've said a few time, that even if you can pick up a house in the IE for ten cents on the dollar, think of who your neighbors are gonna be before you move in!

kewp, you hate the burbs, we know you are rooting for it to take the ghetto population but it wont. There are places in the I.E. and in S.D. that will be attractive to poor people....the same places that they are already in. Why would they leave their current ghetto, prices and rents will go down or stay the same, there will no longer be redevelopment pushing them out. If you ever really spend time in the ghetto, you can gain an appreciation for what it is that attracts them to a specific area and Temecula/Murrieta has very little to offer them. I have detailed it on another thread, master planned areas purposely design against it, older mixed use areas are ripe for it. If you can't walk to a liquor store, check cashing place or a minimum wage job, from a cheap place to live it repels them. Most ghetto inhabitants lack consistent vehicle licensing and insurance, walking distance is key. Zoning is the best defense a community can have.

There will always be poor people all over but in order to proliferate and reach the tipping point where they scare off everyone else, it takes the right lack of zoning, not just cheap housing. Those used SUV's still need a license and insurance, when they cops pull them over they actually lose the car for a month, have to pay a grand to get it back plus insurance and most never get it back. That's a hell of a tax that drives them into mixed use places where houses are next to stores. Look at the rotton part of any of the larger S.D. burbs (Esco, San Marcos, Vista). The ghetto part is always where you are with a few hundred yards of stores. There are examples within those same cities where rent is the same but a few miles from basic services and they just don't go to hell because that couple of miles is an eternity to a permanent pedestrian.

Excellent rule of thumb for the future of any development or area, if you can get by without a car, it's in the "risk" category. Look at the coastal areas, can you get by in Imperial Beach without a car? yeah. Can it be done in Del Mar? not really. More of Oceanside can be pedestrian than La Costa, compare most any two areas and apply the pedestrian principle, it's better than tarot cards for telling the future. Land use is far more important than price when determining potential decay.

Oh Shit! Hillcrest is going to be next! Actually TG I think you are wrong. Most of the truly wretched areas are out in the styx. Its easy to look at Logan or City Heights and see ghetto. Its much harder to look at low density environments and see them, but they are there just the same. Lots of extreme poverty and ignorance in the Central and Imperial Valleys and most places there you can't walk to anything.
Josh

Slightly different scenario, this is no way a defense of rural or agricultual areas but a theory regarding areas that were once nice and fall from grace as opposed to just an area that is, was and may always be poor. Hillcrest very well could have been next, in the 1980's it was going to crap, creeping in from North Park (which fit the theory as well) but both benefitted from revitalization, being a little hip and being the gay area is the X factor, that is the antidote to pedestrian ghetto theory. Golden hill was once a nice area too. Having mixed use zoning can go either way. Kensington became hip, while city heights went bad. Downtown was once a mess, then hip and cool, it can always go back up or down. Rancho Bernardo or Scripps has no advantage over any of these areas or any ghetto, in fact climate and location are inferior. they are some of the older examples of this type of planning and I'll bet it never goes ghetto, while the mixed use areas can go either way in the next 30 years, it's all about zoning and planning. Or I could be wrong.

The current ghettos are large enough for the poor folks. Short of a complete meltdown of the economy creating a much larger percentage of po-folks Temecula and other outlying burbs should be just fine. What makes you think the po-folks want McMansions? They are probably smart enough to stay in Compton, O-Side or Santa Ana in the small duplexes they currently live in.

I see Temecula much in the same way as Valencia in North L.A.,

At first it was considered out in the sticks and was a low cost bedroom community, now because of correct business friendly zoning and large business parks that were developed, there is almost as much traffic flowing into Valencia as there is out on any given morning.

That for better or worse depending on how you view things is what I see happening in The T.V.

Also I see the U.S.A public responding in much the same way as they did in 1973, there will be in just a few years many more high mileage (35+) car’s on the road than SUV’s , within two years electric cars will be main stream.

There's no way Temecula can be compared to Valencia or anywhere in coastal San Diego county. For the future of Temecula think Palmdale, Victorville, or Stockton. To hell with the zoning, all those foreclosures are going to be tomorrow's meth labs.

Well, if it ain't po' folk gonna live in those empty houses, who is it then?

I've seen it happen before. Where I grew up, Plainfield NJ, was all gorgeous colonial homes from the turn of the century. I would be afraid to walk around my old neighborhood during the daylight now. Many of the homes are even burned out/gutted and its not even economical to tear them down, let alone replace them.

I wish I could find the article, the point was that the ghetto city dwellings would gentrify to the point that it was unaffordable for typical ghetto-dwellers, whom would then flee to the suburbs.

http://www.cnn.com/2008/TECH/06/16/subur...

There you go. It's pure speculation based on some university professor's (wrong) assumption that the majority of people who can afford it now suddenly want to live downtown. I don't, nobody I know does, and most of the posters I've seen on this board focus on the suburbs as well.

TAN, bring the data, I dare you. How much do you know about meth labs. Would it suprise you to know that tract home suburban meth labs are almost non existent these days in Southern California, that tracking and restrictions on the precursor chemicals have driven the production into mexico and finished meth is being smuggled into the U.S., with mexican drug cartels controlling most of the supply. Throuhout the U.S. there were 17,000 labs in 2003 and 2004, 7500 in 2006 and only 5000 last year. This is one job that has been sent to another country that nobody is complaining about. Use is down over 50% in the last three years.

http://www.whitehousedrugpolicy.gov/news...

Valencia and Temecula are very similar, have you lived in either place or both, have you been to either?

"There's no way Temecula can be compared to Valencia or anywhere in coastal San Diego county. "

As a relatively long time Temecula resident I am thankful for that, and personally I like Palmdale, Victorville and Stockton.

I think Temecula will evolve to be more like Escondido.

Temecula won't go down with a fight though, rest assured of that!

temeculaguy, I stand corrected. All those foreclosures probably won't be meth labs.

I bought my first house in Valencia for $107K in 1986, paid 10% down and $1100 per month on a 10.75% 30-year conventional mortgage (including taxes and insurance). I sold it in 1991 for $179K, moved to Solana Beach and never looked back.

Valencia was a nice place to live, excellent schools, virtually no crime, etc. but it can't compare to coastal San Diego. And Valencia was relatively close in compared to Palmdale, where the really cheap housing was in LA county. From Valencia I had a 25-minute commute to my job in Burbank, which I doubt is even possible in Temecula. Unless you're commuting to Elsinore.

It's called Section 8

When the home prices get into the 1's investors with connections buy them up, get the Section 8 deal, and move the ghetto in. See Palmdale, Lancaster, Moreno Valley.

Not as likely in Temecula, but it can happen.

And yes, the impoverished are just fine with The McMansions. See what's happened to Tuscany Hills and Canyon Hills in Lake Elsinore, Sections of Wildomar, Murrieta, Temeucla, and much of Menifee and French valley. Family and their kids (say 5 conservatively) both sets of grand parents (add 4) throw in a few cousins and extended relatives (3) add the daughter's new baby and boyfriend (1.5) and now you have 13.5 in the 5br 3000 sq ft home with the garage converted. With 7 cars outside.

And so no one throws the race card out, I have seen this scenario for ALL backgrounds.

Many in the RE blogsphere are rooting for rock bottom prices. The truth is that is not always the best scenario. As pointed out earlier by others, think of who your neighbors might be.

One last point, and we have seen this more than once at REO's in the area.

When you see a home with linoleum floors throughout (upstairs too) with plant pot watermarks throughout, an extra ac unit and a swamp cooler, central vacuum system that when you hit the wall switch the vents make your hair stand up, all kinds of light fixtures that have been ripped out, guess what this house used to be?

And these do exist in the aforementioned areas.

For what it's worth, Looking around North L.A. is just now starting to get hit really hard, down 25-30% now looking to go much lower from what I am hearing from the realtors I have talked to up here (many more foreclosures just now hitting the market in North L.A. Ventura area). There will be no shortage of formerly nice low cost homes in many area’s to choose from it seems (the whole place is starting to look like T.V. as far as foreclosures).

Palmdale is no way comparison to Temecula, Palmdale is a good two to two and half hour drive to the nearest coast, it is a true desert area, with thousands of square miles of mostly flat land available stretching east to Vegas and beyond.

There is almost no June gloom effect ever and it snows every winter, black ice is a frequent road hazard in that area in the winter.

Also for what it worth, there are more Fortune 500 companies in Temecula than there is in Valencia so Temecula definitely has a good start going here.

No question that Temecula is much nicer than Palmdale, Lancaster or Moreno Valley.

The point is, if prices dip too low, investors who know how to access Section 8 WILL buy, and areas like French Valley, Menifee, et al are prime targets.

And because there are jobs in the area, especially lower wage like Pechanga staff, PHS, light industrial, etc., the likely Section 8 worker can have a job in the area, and now subsidized rent in a McMansion.

Tan,
"From Valencia I had a 25-minute commute to my job in Burbank, which I doubt is even possible in Temecula. Unless you're commuting to Elsinore."

For the 30+ years I lived in Valencia, I commuted 35-40 miles to the Tech Jobs in Simi Valley and WestLake ,

Which took anywhere from an 1 to 1.5 hours on any given morning, You will have to trust me on this But you guy’s in SD/Temecula area really have nothing close to the Traffic we have in the L.A. area.

Really how far is it to Polway from Temecula ,

Valencia is very similar to Temecula you would have to have lived in both I think to understand.

Bearvine,

Yes I agree in the short term, the area could degrade some do to investment rentals ,

But I think the long term prospects once the housing market starts to recover (and this will happen some day) are very good.

But this is just my Opinion .

Actually I think North L.A. and corona area's are going to start to be much better for rental investments soon.

it's mixed use or ruins swallowed by the desert.
temeculaguy,
you make a point on how zoning laws and lack of public transport makes unwalkable neighborhoods safe from going ghetto. It seems to have had some truth to it when you describe the past few decades. It a poor guide for making predictions. You don't seem to grasp the implication of the coming $10/gallon gasoline. It will be the middle class who will not be able to afford routine driving. The end of commuting alone in their cars. The only neighborhoods that survive will be those with housing and jobs within walking distance of each other, and functioning dense public transport coverage used by the entire population, not just the poor. The neighborhoods that fail to transform themselves in this manner will not turn ghetto, that's ridiculous, instead they will turn into ghost towns for future archeologists to study.

I have seen a transformation in my 'hood' in Temecula since I first moved in a number of years ago - I am speaking of Paloma del Sol for those familiar with the area.

At this very moment, 3 doors up from mine, we now have a dorm house in our community.

Probably six cars in front of the house, one literally up on blocks, oil all over the street.

It could be the beginning of the end for our community as I used to know it.

Stranded in Suburbia

Paul Krugman has a couple of columns on the relationship between cost of transportation and its impact on urban growth and also international trade.

http://www.nytimes.com/2008/05/19/opinio...

I have seen the future, and it works.
.....
If Europe’s example is any guide, here are the two secrets of coping with expensive oil: own fuel-efficient cars, and don’t drive them too much.

.........
Any serious reduction in American driving will require more than this — it will mean changing how and where many of us live.

To see what I’m talking about, consider where I am at the moment: in a pleasant, middle-class neighborhood consisting mainly of four- or five-story apartment buildings, with easy access to public transit and plenty of local shopping.

It’s the kind of neighborhood in which people don’t have to drive a lot, but it’s also a kind of neighborhood that barely exists in America, even in big metropolitan areas. Greater Atlanta has roughly the same population as Greater Berlin — but Berlin is a city of trains, buses and bikes, while Atlanta is a city of cars, cars and cars.

And in the face of rising oil prices, which have left many Americans stranded in suburbia — utterly dependent on their cars, yet having a hard time affording gas — it’s starting to look as if Berlin had the better idea.

Changing the geography of American metropolitan areas will be hard. For one thing, houses last a lot longer than cars. Long after today’s S.U.V.’s have become antique collectors’ items, millions of people will still be living in subdivisions built when gas was $1.50 or less a gallon.

Infrastructure is another problem. Public transit, in particular, faces a chicken-and-egg problem: it’s hard to justify transit systems unless there’s sufficient population density, yet it’s hard to persuade people to live in denser neighborhoods unless they come with the advantage of transit access.

And there are, as always in America, the issues of race and class. Despite the gentrification that has taken place in some inner cities, and the plunge in national crime rates to levels not seen in decades, it will be hard to shake the longstanding American association of higher-density living with poverty and personal danger.

Still, if we’re heading for a prolonged era of scarce, expensive oil, Americans will face increasingly strong incentives to start living like Europeans — maybe not today, and maybe not tomorrow, but soon, and for the rest of our lives.

See also

The world gets bigger

http://krugman.blogs.nytimes.com/2008/06...

There is another potential solution, American ingenuity.

I've posted a link to this company a few times:

http://www.flytheroad.com/

In a nutshell, they are on tract to create a 100mpg 2-person three wheeler, for around 20k.

Something like this could literally save the exurbs.

Have a hybrid or bio-diesel SUV to run errands and the VentureOne for the daily commute.

So I guess we will never have electric car's and , trams going down the center of every freeway.

We will never live like the Australian’s do and just use cars to go back and forth to the store and on week end’s.

Sorry I don’t buy it,

I think America will transform itself with amazing speed in the next ten years,

Right now there are so many large scale solar energy projects planned the Government is overwhelmed and has stop taking applications (which I think is a big mistake).

See article below:

The US Bureau of Land Management, overwhelmed by applications for large-scale solar energy plants, has declared a two-year freeze on applications for new projects until it completes an extensive environmental impact study. The study will produce 'a single set of environmental criteria to weigh future solar proposals, which will ultimately speed the application process.' The freeze means that current applications will continue to be processed — plants producing enough electricity for 20 million average American homes — but no new applications will be accepted until the study is complete. Solar power companies are worried that this will harm the industry just as it is poised for explosive growth. Some note that gas and oil projects are booming in the southwestern states most favorable to solar development. Another threat looming over the solar industry is that federal tax credits must be renewed in Congress, else they will expire this year."

Duplicate

kewp, I hope they get those into production soon, even with $4 or $5 gas they would sell like hotcakes and they look cool. Sometimes I think about $10 gas and how it would change much more than real estate, it will change travel, destroy industries (rv's, boats, remote recreation like skiing or camping) and make all shipped goods cost more. But before the doom and gloom sets it, I have to admit I have faith in the inventors, in this country and abroad. I think a few years ago if the 3 wheeler came out, people would be afraid of being out on the road with all the suv's and getting in an accident but now they would dominate the road if they hit the market. I see tiny cars all day, yaris, fit, smart, the teeny cars are taking over and I would buy one of those three wheelers because they look fun. $5 gas or even $10 gas may be the kick in the butt we needed, if everyone got 100 mpg I'm not sure if we would even need to import oil, so in the end it may turn out to be a good thing.

I also think that if the Venture one is successful there will be copycats and they will leapfrog into even higher mpg, 20 years from now you may be looking at apple's new icar. When i see the gadgets that apple comes out with it blows me away and I always think they need to get into the car business. And how nice will the air smell and look when the internal combustion engine is a thing of the past.

I think people overestimate the impact of expensive gas. At $4.50/gallon, my wife and I spend $300-$400/month now (no SUV's in this family). At $9/month, that will double, but it's not that noticeable when we easily spend $1k+ on groceries and eating out every month for the three of us (incl. baby).

Expensive gas has had virtually no impact on us, other than to make us pay more attention to how we use it. No change in our plans to live in the burbs. It doesn't take much in the way of sacrifice for a middle class family to eek out an extra $400/month for gas, if they're smart with the rest of their budget.

Ren, earnings wise, are you the "average" middle class? First off I believe there is a lot of debate on exactly what earnings range defines the middle class. If the general range is between 30k-100k, an "average" middle class household who are somewhere in the 40k-50k range is definitely going to feel the hurt of an extra $400 per month. Higher gas prices don't just add to driving costs, they translate to higher costs in food and clothing and just about anything you buy.

We're currently in the high end of the range you mentioned, which is less than almost every couple we know. My wife works an office job and I have my own company that is profitable but isn't yet pulling in a whole lot. When I'm working a "real" job in my profession, then our total household income is more in the mid-100's. Still, we don't need it, have money left over every month, and could live on less. We're renting a nice 2-bedroom condo in CV.

The key is budgeting well. We have zero debt (paid-for cars that are economical as well), pay off the credit card every month, use credit card points for travel, shop very carefully for major expenses like car insurance, buy in bulk, maintain high 700's fico scores, etc.

Oh and we tip well for good karma :-)

In contrast, my sister and her husband make much more than we do, yet have lived paycheck-to-paycheck their entire adult lives. It's all in the decisions you make every day.

Kewp, what's the deal? Are you trying to jinx Temecula?? Man...You can't be doing that!

LMAO.

Paramount, some college kids moved in and there goes the neighborhood?? You sound more than a bit paranoid to me.

Marion, Marion - no these aren't just a few college kids.

The term 'dorm house' can have numerous meanings depending on one's locale.