During GD1 the smart money lost the bulk of its fortunes during the second leg down. Where are we in the GD cycle?
FIRE economy is dead, on this we all agree? What is on the horizon to replace those jobs? The average household income in Temecula WAS around $50k, what is it now that unemployment is a rose colored glasses, 10%? The FIRE economy allowed people without degrees to make really good money.
Does anyone see some new high paying industry popping up in the next few years that will hire thousands and thousands and pay very well?
Three times incomes in Temecula is $150k. So historically the average house should be selling for $150k. I am sure the average income is down and dropping fast. Also, this is not an historical time when things should be selling for averages. In times like this things should sell for less than historical averages.
Where is Temecula now? Not many homes for $150k, and none that I would call an average Temecula home. IMO the average price for the average house in Temecula is about $250k. So buying today might earn you a cool $100k loss before things settle.
TG example of his neighborhood was interesting. I spend a bit of time looking at Temecula/Murrieta and the neighborhoods I see have a few new buyers, but those are severely outnumbered by homes lingering in REO status, currently in pre-foreclosure and many that have simply fell off the records. Then add in the many who are living free each month (on a side note, this explains why you still see restaurants full, not paying a mortgage gives you lots of free money) and the banks are ignoring them.
Then consider any tract built 2003 or later will see everyone in the tract way under water. IMHO all of those houses will eventually foreclose (with the exception of the cash and very large DP purchases). Its only a matter of when the loans reset, when the owners capitulate or when the bank finally decides to take the house. Obama is not going to save anyone who is underwater by $200k and that describes everyone in the newer tracts. Lots of resets coming later this year and 2010.
Right now, today on RealtyTrac I see tons and tons of homes in almost all areas of the IE. In many areas you have to zoom in on a neighborhood in order to fit the 300 max foreclosures which are able to display at one time. I am sure there are small hoods like TG’s that have a different story but most are in for trouble for a long time to come.
I know of people who bought REOs 12 months ago in Temecula and they are conservatively underwater $80k today. Will we see a second wave of forclosures as well?
