Peter Viles Los Angeles Times July 2, 2008
A financial analyst fresh from a tour of construction sites in the Inland Empire is warning Wall Street of a "ghost town" where finished homes sit vacant and additional homes are still under construction.
"At several properties, there were a significant number of fully built homes sitting vacant along with a large number of additional homes still under construction," Sandler O'Neill & Partners analyst Aaron Deer wrote today after touring developments in Corona and Ontario. "At one master plan community, the entire development appeared to be vacant -- with the exception of crews working on new construction, it was a ghost town."
Median home prices in both communities have dropped sharply over the last year, declining 33.6% in Corona and 30.3% in Ontario, according to DataQuick Information Systems. In Corona, the median sales price fell nearly $200,000 from May 2007 to May 2008, dropping from $565,000 to $375,000.
More from Deer's note: "The homes all appeared to be empty, and there were no prospective buyers anywhere to be found. Surprisingly, the sales office was open ... but the woman working there had questionable English fluency. When asked how many homes had been sold in the past month she simply responded, 'Uh huh. Thank you. Yes!' and handed us some additional literature on the property."
More: "Perhaps the most interesting aspect to the development was what it revealed about the nature of the housing boom: that at the peak even the most undesirable and remote locations were worthy of expensive, high-end homes."
Overall, Deer's note on the California economy -- and the relative health of California-based banks and thrifts -- strikes a balanced chord, reporting that, while the "outlook remains gloomy," "the pace of new problems has slowed somewhat."
Other highlights:
"Not surprisingly, the banks said they are seeing continued deterioration in their single-family residential construction portfolios."
"In areas where developable land is scarce, namely San Francisco and west Los Angeles, markets are still holding up. Several banks noted very little, if any, deterioration in credit quality in these markets. Specifically, residential construction projects in San Francisco ... and western Los Angeles (mostly teardown/rebuild projects) are seeing stable prices despite slower activity."
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