The scale of this is incredible:
$1.2 billion worth of property / average value of $525K per property = 2,286 houses! The city of Murrieta has a population of 92,000. Assuming an average of 3 people per house, thats around 31,000 houses in the city. If 2,286 of them are owned by this investment group, that’s 7% of the total number of houses in the city! Every one of them will probably foreclose or become a short sale. If half of the houses are in Temecula and half in Murrieta that would still be around 3.5% of the housing stock of both cities – just involved in this scam alone.
Add to that all of the people who got in over their heads with teaser-rate loans and all of the people over their heads with home equity loans and you’ve got a major meltdown underway. My guess is that the % of houses involved in this scam is dwarfed by the number of houses where people just got in over their heads and will not be able to continue making mortgage payments. What would happen to R/E values if 10%-20% of the houses in Temecula/Murrieta goes into foreclosure? Is this going to be another Texas oil-patch situation where there are thousands of empty houses no one wants?
