Riverside and San Bernadino were recently rated as two of the most affordable regions in the state of California, undoubtedly due to their price collapses in real estate. This report came from the California Association of Realtors and actually used household income and home values as a measure of affordability. Looking back on the history of home values in California, the Inland Empire appears to be making its way closer to a nominal lost decade, never mind already being at an inflation adjusted one.
Since May of 2010, prices in overpriced counties of Orange County and Los Angeles are both down $45,000. San Diego dropped by $15,000 and Ventura by $25,000. Prices in Riverside County and San Bernadino are shown to have fallen by $23,000 and $10,000, respectively. Looking back a near decade ago in January of 2001, San Bernadino is up only 7 percent and Riverside is up 13 percent, as compared to increases of nearly 30, 46, and 50 percent in San Diego, Orange, and Los Angeles counties.
When looking at the rise and fall for Riverside city, which experienced a crash of nearly 60 percent from its inflated peak of $400,000, a more accurate picture of the bubble bursting is depicted. Viewed objectively as the removal of the toxic mortgages, not much has occurred in the region to justify those peak prices. Many investors are snapping up the properties out in Riverside and San Bernadino, with the typical all cash purchases of $200,000. And there is no shortage of homes since investors last month purchased nearly 30 percent of all Southern California homes with cash.
With so many investors looking to purchase in the Inland Empire because of low prices, we are faced with the reality that the economy in this region is struggling. Shadow inventory data for both counties reveals some 16,000 distressed properties in Riverside county, and some 37,000 in San Bernadino, not counting the year end filings that have not yet entered the market. These numbers tower over those of MLS listed properties, exemplifying that not even low prices can revive a stagnant market. Another reason for lack of pickup of cheap homes in these areas is high unemployment rates, which essentially should be cause to lower prices below the 2001 point, as unemployment then was only in the natural 5 percent range; three times lower than at present. It would appear then, that current record low mortgage rates are simply trying to cover up the fact that the economy, at least in some areas, is still hurting.