Although it doesn’t look like the US economy is going to enter a double dip, many might conclude that the residential real estate market already has. Normally, when real estate recovers, it helps the economy in general to recover and is therefore one of the economic indicators that shows that the recovery is moving forward. Unfortunately, that didn’t happen this time, and no new construction jobs were created, as has been the case during past economic recoveries.
California had some counties that were hit hard, for example, Riverside County, which had foreclosure rates very close to South Florida, the Las Vegas area, or the Phoenix AZ area. It grew extremely fast, and many people bought new track houses at the top of the market for way more than they could afford to spend, and then with all the job losses, they had no way to make their payments. Meanwhile, the houses they bought lost 40% in value, some nearly 60% if you can believe it.
Not long ago, I spoke with an acquaintance who is currently unemployed in Riverside County, but has gone back to school to get a degree so he can financially recover from this tragic economic downturn. He lives in a very nice suburban community of Marino Valley. When he explained this to me I told him;
“I know Moreno Valley, it’s nice there, but with the recession, it certainly affected real estate prices there, what a bummer, one of the hardest hit areas in the US -The houses they built are very nice, how is the neighborhood now, am I worried about gangs and crime moving in now?
Indeed, I asked him if he was very bad, with the gangs, the violence and the delinquency. He said there was some crime, but then the next day I read in the newspaper that a 17-year-old girl was shot in front of a friend’s house where she was attending a party in that city. She was able to drive away from her, but she was bleeding badly and she started screaming for help in the middle of someone else’s neighborhood. They called the paramedics, took her to the hospital, but she died.
It has often been said that the crime rate increases by 2.5% for every 1% increase in foreclosures. During this latest housing bust, those numbers didn’t seem to match up with earlier FBI data. However, perhaps all of that data is now catching up with this reality. And it still looks like the residential real estate market in these suburban areas like Marino Valley won’t come close to recovery for at least three years, but probably five more. That would be more than eight years total, just to get back to where things were.
Much of California goes through a ten-year residential real estate cycle for valuations, and it appears that this cycle may be a bit longer due to government economic policy or simply the reality of the size of the bubble that burst at the end of 2008. hope please consider all this and think about it.