Rt.66, If I give you a little history lesson, you will whine and complain that the ministry of misinformation is spinning again.
So before I explain that this has happened before, will happen again and has been profitable in the past, let’s agree on the fact that we are in an R/E meltdown, we did just have an epic bubble and we are experiencing the worst nominal price drops and foreclosures of our lifetimes. These are things we all agree on, we disagree on where we are going to end up, what 2010, 2011 and 2015 will look like. Without furhter ado:
In the early mid 1990’s, in Temecula, a number of tracts that had yet to open, shut down. In about 1995 they demolished the models to a tract on the north side of town, off nicholas road on the north side of N.General Kearney. Foundations for the first few phases were poured, all utilswere in and the models were framed and roofed but not quite done yet. After they mowed them down (unknown if “they” was the builder or the bank) they sat for a few years. In 1997/1998 they built bigger models and began selling them. The market had changed a little, the houses were larger than the old models had been but they were priced higher and as things turned around, each year they sold them for more and then opened a few other tracts and so on. But during the down cycle, whoever owned that land chose to not build and not to finish or maintain a dozen houses. When they shut down, houses were going for 120-140k, they started selling them in 1998 for about that same price and by the time they finished in 2003, they were getting 330k. So in hindsight, they made the right call, scrap the project, wait a few years and then build when demand returns, they recouped the loss of the models, the taxes and the interest by selling a few hundred houses for double or triple what they were selling for just a few years earlier. That is what investors try to do, they try to time things, in that case they were right. On the opposite side of the street, there were two tracts and they were more than half done when the downturn hit, so they just finished their tracts, made less or no money and stopped building new tract, they chose to finish up because they were mostly done but if they had started, they likely would have quit.
Temeku hills also fenced in a beautiful golf course and built nothing for a few years, I used to think they were crazy, but in hindsight it made them more money to wait. It also may have changed hands wile it was fenced in, we didn;t have the internet and I didn’t follow things that closely then.
It’s not the apocolypse, it’s business, it’s part of the cycle.
