Temecula/Murrieta – Same Bubble?

[23109VC]

Most of this site focuses on the San Diego market. I’m planning a move to the Temecula/Murrieta area soon. It’s Riverside County, not San Diego, but it’s almost like a suburb of San Diego – given how many people live in the area, but came originally from SD and still work down there.

I’m wondering if the same likely price decreases that are being forecast for San Diego on this site – will also probably happen in Temecula/Murrieta?

I think it will. I’ve been planning my move for some time, and started informally researching the market over a year ago. My wife and I would go to open houses, grab flyers on resales, and collect brochures/price sheets from new developments.

We’ve been back to some of the new developments and are amazed to see prices are down. We can remember just a few years back, when each new phase release meant a $10-25k price jump. Now, a new phase release means a price DROP. One area, a nice subdivision in Murrieta called Shenandoah – off Clinton Keith – dropped prices. It’s a Lennar “EI” property – so every unity is pretty much exactly the same. We have price sheets showing one of their plans listing for $480k. No incentives. Nada.

Now – that exact same house is selling at $449, and they are throwing in $15k for flooring upgrades and $10k in closing costs. Add that up and it’s about $75k less than what some poor sucker paid less than a year ago. The homes in there that the flippers are trying to sell are stagnating b/c they are being undercut by the builder!

I’m thinking of just renting something in the area and waiting for it to really get bad. I have a rock solid stable gov’t job that makes good money. I won’t see any pay drops if the market crashes. I’ll be earning more in 2-3 years, and I’m hoping my money will go further.

I’m just a little nervous that maybe prices will drop, but rates might go up too much and even though I’ll have a bigger write off and a lower purchase price – I might wind up paying more for the same house.

Any of you been watching the Temecula / Murrieta market as well and feel the same way – that it will go bust like San Diego?

[sdrealtor]

Dont know much about prices there but one thing you want to check into are the Mello Roos which tend to be very high there. Many communities have tax rates nearly double that in SD so you would be paying 300 to 400 extra per month in taxes.

[powayseller]

Regarding the stable gov’t job -my husband’s company does a lot of gov’t work, and through the years, we’ve learned that good times for companies doing gov’t work (as well as gov’t employees)depend on tax revenue and gov’t regulations. In a recession, not even teachers are safe. So we all need to be careful in assuming our jobs are stable. Even if the job is stable, the actual person doing it can be voted out of his position. However, if you are really safe, then you can plan better for your future.

Someone posted a question on the forum recently: is it better to buy high at low interest rates, or wait for lower prices even though interest rates may be higher. You can scroll back through the forum to see the answers.

I saw an article in the U-T about Lennar. They posted a profit and had an increase in orders, although their orders were down 10% on the West coast. They sold some land, and made double their expected profit on the land sales. I wonder if they had to sell that land to show a profit. I picture increasing sales, each at a loss. Thus, the land had to be sold to show a profit.

[23109VC]

My job is pretty safe. it’s gov’t / public safety. I’ve been there long enough that if layoffs occurred, as unlikely as that would be, I’m high enough up the ladder of seniority, that I’d never get let go.

Taxes are much higher in that area. Average of 1.7 – 1.8 % in most areas. That adds up. It is a tax writeoff, but it’s still money out of my pocket.

[seniormoment]

Hi, Rich,

I am a secret admirer of your writings, through your articles I have learned quite a lot about the true downtown 92101 condo market.

Do you have an eductaed guess or prediction about a good period to buy in 92101? What is your guts feeling? Should I buy in 2007 or 2008? or later? I plan to retire there.

Thanks a million!

[sdrealtor]

If you have time to wait, watch the market. I dont know whether this scenario will ever come to pass but here is how the samrtest folks made a killing last time around. If prices come down diginificantly, wait until they are languishing at a low level for at least 6 to 12 months. Wait until everyone including the media is saying real estate is horrible investment and why would anyone buy anything….that’s when the biggest winners bought.

Of course you have to keep living so dont wait too long if you can afford it. My father spent his whole life preparing for a well funded retirement and died 3 months after retiring at age 68 after barely being sick a day in his life. He never got to enjoy it, though Mom is set for life.

[powayseller]

I would add to watch these leading indicators: days on market, inventory, HAI (housing affordability index), mortgage applications. You’ll need to work with a realtor to get the first two metrics.

As sdrealtor said, the media is great at telling you what happened 6 months ago in the market. When I listed my house in 10/05, only this site and a few bloggers informed of the bubble. Now, it’s in every media outlet. Even I missed the top by a few months. I took a 5% haircut on my offer.

[sdrealtor]

Do you think the reason you missed the market and got $780K has anything to do with the fact that your Help-U-Sell agent initially overpriced the property at $850K when the market was a little better? (pretty resourceful….huh)

[23109VC]

so how long until Temecula hits rock bottom?

[ocrenter]

look at it this way, sign a 1-2 year lease, 2 years preferred. even if you and your wife do find that perfect home within that 2 year mark, plenty of builders will be willing to buy you out of the lease.

I would be extremely careful with who I rent from though. Temecula is very saturated with upside down flippers in danger of foreclosing. make sure you find out how much your future landlord owes on the rental.

[temeculaguy]

Only in the rear view mirror will you be able to figure out rock bottom. As far as this area goes, this is my second time through the cycle here and my 16th year in town. In 1992 it was a different town, now Temecula has over 500 jobs per 1000 residents (murrieta still is in the mid 200’s) but the two towns can be almost considered the same market. In 1992 and 1998 (my last two purchases) almost everyone worked elsewhere, now it is more autonomous and a recent nctimes article predicted commuters will be commuting to Temecula in the near future. In 1998 on my street of sixteen houses almost everyone commuted, now there are only two of us who drive more than 20 minutes. I was wrong in 1992 and right in 1998. I am looking to purchase again and think this fall will be a good time. I am not looking to hit the absolute bottom, just close, and when things are affordable for me then my guess is that they will be affordable for others. 300k for a 2000 sq. would be ideal (another 50-60k to go), my fingers are crossed. 300k would mean a loan of 200k on a 100k salary so i won’t be stretched at all and I will stay for years, if that house falls to 200k later i still won’t lose my house, that for me is when it is time to buy.

As you get into Murietta you lose marketability to the San Diego commuter (but you might gain it to the o.c.). My last purchase in Redhawk was particularly good because residents there can exit the freeway in SD county at Rainbow canyon, thus avoiding the border patrol checkpoint and the traffic. There is no more land south of Redhawk as it becomes National forrest and indian reservation land for twenty miles so there will only be limited new homes, all of the development and traffic is to the north. Currently I can get to Esco/Vista/San marcos in under 30 minutes during rush hour and that is why many of the S.D. commuters buy their second Temecula home in the South. My old house on the Temecula/Murrieta border off Winchester is almost twice the commute time during rush hour.

With all that said, we fall and rise with S.D., when prices decline there people don’t flee to Temecula and when prices rise there, they start coming back and drive up the price. Rents on the other hand seem to stay low here, few people move here unless they are families that purchase. Lake Elsinore, Perris, Corona and Menifee are suburbs of Riverside but Temecula is a suburb of San Diego despite what the map says.

[FormerOwner]

temeculaguy,

I’ve lived in Temecula for a number of years and I agree with everything you said except for the jobs part. I think there are a lot of jobs being created in Temecula, but they’re mostly retail and the salaries aren’t enough to support any real estate purchases even if prices drop 50%. I don’t see that chaning anytime soon. I think Temecula needs a better transportation infrastructure and probably a university – then it could really become its own independent economy. Until then, it will remain largely a commuter suburb.

-FO

[23109VC]

I agree there are more jobs now in Temecula than their were years ago…but i have no clue how many.

i can remember about 8-10 years ago when I would drive on the 79 out to the palm springs area…and the only thing there..the ONLY thing there was that jack int he box….

now there are minimalls as far as the eye can see, and houses, houses, houses..and even more houses. the place is unrecognizalbe to someone who saw it a decade ago.

there must be a decent number of professionals and businesses to service the multitude of “locals” but I would agree.. there aren’t any mega firms here hiring lots of highly paid professionals..

you have the doctors, dentists, lawyers, and other “professionals” to service the local people..but you don’t see Microsoft, or any other huge corp making Temecula their “headquarters” and then bringing in hundreds of people making six figures….

I don’t necessarily care if I hit the absolute rock bottom, i just don’t want to get the shaft and buy, then watch my house bomb another 100k…

i really feel sorry for the guy who bought a 500k house on my street in 2005….now that my landlord wants to sell to me for 350k.

boy will my neighbors hate me…IF i buy, and they see the comp. 🙂

maybe i’ll counter at 300k… 🙂

i did some research on my landlord..i now know where he works, what he does..and let’s just say the dude has MONEY. he is no poor dumb flipper.. i dont’ know his net worth…but from his business connectiosn..i would dare to bet..taht gaining or losing 50-100k is nothing that will do much to change his lifestyel..it might suck..but won’t change a thing..

[temeculaguy]

I agree it is and will always be a commuter suburb, which is why I mentioned the benefits of being on the south side for it’s appeal to the s.d. commuter. I threw the jobs data in because I just read an article about the increase of jobs per resident. I will say that the West side of the freeway is now full of business parks. I don’t work in town so I don’t know who they all are but Guidant is a big medical product manufacturer (shunts, stints, fake hearts) and one of the largest employers in town, so big that they actually have a tram to take their employees to their parking lots, not being in that industry i have no clue if those are good jobs but I bet they are better than retail jobs. Just from the parents of my kids sports teams I know employees of American Semiconductor and the Outdoor channel both have headquarters in town, I’ve done no research, just sideline talk and hardly a scientific study. My point is contradictory to my hopes, I want things to crash so I can buy at a great price, but my mind is telling me that it isn’t the same situation it was 16 years ago and 23109’s issue of his 350k purchase is well below comps and is also within the price range of the current demographic. I don’t see everyone’s balance sheet but the average Temeculan has changed since I moved here in 92, they appear to be higher on the social ladder and that makes me fear that I won’t get the deal I am hoping for. Please talk me out of it because I visited a new development today and I liked it and can afford it with conventional financing, that makes me in danger of falling of the bubble wagon.

[23109VC]

temecula is NOT the same place it was 10 years ago. I’m not saying it has an economy as diverse and vibrant as San Diego…and it will always have a large proportrion of people who are commuting to San diego or OC jobs… but it is a much much larger place than it was a decade ago.

the standard infrastructure needed to support all the homes/people is one factor. there must be more police stations = more cops. more firestatiosn – more fireman. there is a great big new courthouse up near the airport = judges/attorneys/jail staff/other county workers. there are more little medical clinics/ dentists/etc to cater to the people who live here.

yes a lot of the jobs are probably retail…and pay garbage…but there are also probably quite a few “good” jobs that have been added over the years… i have no idea what the ratio of local workers vs. commuters are…but there must be more local people than 10 years ago.

that’s not to say that the housing crash here won’t happen…but to say that Temecula is mostly commuters who will leave when prices get cheaper in SD is perhaps a bit simplistic. one would need to know the real numbers.

i live/work in temecula. i’ve got a good local job. my job only was created here in the past 5 years due to all the growth. if SD prices went down, i would NOT move down there and then commute to work up here. i like it here, and i like living close to work and being able to go home at lunch to see the family.

it would be nice to see the housing values come crashing down… but part o fme wonders if we will see bigger price crashes in the “nasty” parts of the inland empire – lke Perris, hemet, San jacinto…and the areas like Redhawk, North Temecula near the Mall, and nice parts of Murrieta may be more insulated.

isn’t it true that the more desirable areas may be hit less – partly b/c the owners thee tend on average to be more affluent…so tey are less likely to have ARMS that are resetting… and b/c the area itself is in more demand relative to the crummy areas where low income people took out toxic loans and now will lose their homes?

i’ve seen foreclosures in nice areas, i’m not saying it won’t happen..but i wonder if the foreclosures and real price hits will be concentrated more in the crappy areas…. it will still happen in the nicer spots, but to less of a degree???

[Author]

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