[quote=Blissful Ignoramus]I just want to re-emphasize that in the long-run, I think Temecula has promise. It’s a good location in a region that over the next couple of decades should see strong growth. If you look at the (relatively) unpopulated areas of Southern California, Temecula Valley is probably the most promising.
The problem is, what is someone moving into that $280K house going to do and how are they going to live NOW? Sure, telecommuting and alternative energy are going to improve the distance issue. I think we’re looking at at least a ten year window there, and in the meantime I think we’re going to see more Dec. 2007s than Dec. 2008s when it comes to fuel prices.
As for slums, sure, the Hemets and Perrises are in worse shape, and they aren’t slums. Well, not entirely…yet. The bubble JUST burst. It’s going to be years before the dust settles. As an example, look at Riverside and San Bernardino counties, and the wake of the 1990s real estate slump. There are a lot of areas there that turned pretty crappy pretty quickly. They re-expanded in the current bubble (and of course burst) but in the meantime the older parts (i.e., 1990 vintage) remained pretty rough around the edges. I can’t imagine how all of the current foreclosures are going to happen without some pretty serious effects on quality of life everywhere in the Inland Empire (and elsewhere, to a lesser extent).
I sincerely hope I am wrong about this. But even if I’m not, I think folks buying in the best areas with a 10+ year commitment to the region will do very well.[/quote]
I agree with you about the location. We’ll see how foreclosures play out, however just from my experience on the ground – the brown lawns are gone and decent places are getting multiple offers when they are priced right.
You asked how is someone moving into the $280k house going to make do now? Well 280k is closer to the higher end of the market now out here, but let’s say the family puts down 20%. A $224k loan at 3x income requires the family to make about 74k a year. Teachers, police officers, retail, Abbot factory line, restaurant manage, blackjack dealer etc. Local jobs with two wage earners can support a loan of that amount.
And remember, that is the high end of the market. 74k is also about the median household income. I would say that is a recipe for a stable community of owners that do not need to stretch or even commute to make do.
Now if we assume one wage earner does commute (at least 30 miles, maybe 50):
50 miles x 2 = 100 miles x 5 days/wk = 500 miles/wk
Car: 30mpg. 500/30 ~ 17 gallons a week.
Gas @ $5/gal = $85/wk -> $340/month
@ 5% interest and 20% down, the family is paying $1700/mo (principle, interest, tax @ 1.6%, insurance and $100 hoa). That doesn’t include the $291 dollar tax saving @ 25% tax rate.
Total monthly housing outlay, including gas @ $5/gal = $2034
This same house would rent in Orange County or San Diego for significantly more than $2034. Of course there is the issue of the cost of seat time for a commute and other soft variables, but just look at the hard numbers.
A family making $74k would take home about $4500/mo. After mortgage and gas, this leaves them with $2500 for food, savings, car payment, etc.
If gas was $10/gal, the total monthly outlay is only $2374. Let’s say they still take need to get around town and use a few gallons a month – $2500/mo.
So no matter how you slice it…3500 sq ft, new construction, excellent schools, low crime area. Minus the awful location (major street, no light left turn), but there are smaller homes with better locations for the same or less.
$2500/month at $10/gallon gas.
Now the folks that bought out here at the top of the bubble for 500, 600k? They’re in for a world a hurt but from what I’ve witnessed in my home search, there are plenty of people waiting on the sidelines with cash in hand to pick up those places for a reasonable, sustainable amount. I’ll get worried when we see a lack of buyers and full neighborhoods becoming distressed. So far, so good.
