| LOS ANGELES
LOS ANGELES Feb 23 California's tortured real
estate market has brought heartbreak and ruin, but some
investors, speculators and first-time home buyers are also
dreaming big and finding opportunities -- a silver lining in
the Golden State's epic housing crash.
For many young couples, plummeting prices and near
record-low interest rates make it possible to own a home in
California for the first time.
Investors and real estate speculators, meanwhile, can snap
up foreclosed properties on the cheap to sell during the next
boom in California's boom-and-bust real estate cycle, a boom
they believe is inevitable and possibly not far off.
"This is the buying opportunity of our lifetime," said
Bruce Norris, who heads an investment group that expects to
purchase some 100 homes this year in Southern California's
Inland Empire region.
California -- which would be the world's eighth largest
economy if it were a country -- saw a near-doubling in home
sales in the fourth quarter, a pace surpassed only by Nevada's
133.7 percent growth.
But experts warn it's a dangerous game to play when nobody
is really sure how low home prices will go or when they will
rebound as the recession lingers, jobs dry up and residents
pour out of the state in search of better prospects.
Norris concentrates on the Inland Empire of Southern
California, made up mostly of Riverside and San Bernardino
counties, one of the fastest-growing areas of the country
during the housing boom, driven partly by immigrant families
who couldn't afford pricier coastal cities.
It's now one of the hardest-hit. In the past 18 months, the
median home price in Riverside and San Bernardino, pummeled by
the subprime meltdown and now recording some of the highest
foreclosure rates in the state, has plummeted 55 percent.
Norris Investment Group looks for homes built between 1980
and 1990, typically under 2,000 square feet (186 sq metres).
Older houses come with too many maintenance "surprises," Norris
says, and larger places can be tough to sell or rent in hard
Last month the group paid $55,000 for a foreclosed home
that was worth $360,000 at the top of the market. Norris
expects to spend $30,000 on repairs and rent it for $1,200 a
month until the market turns around.
The group also hopes to minimize risk by owning the homes
free and clear, thus accruing little debt.
"You cannot have this (low) level of pricing be permanent
because it costs too much to build a home here," Norris said.
"That's how you know you're making a logical decision when
everything is falling around you. When you can buy a finished
product someone will want to live in for $55,000, that just has
to make somebody pretty wealthy someday."
Experts agree California home prices will ultimately
rebound but caution that real estate investing in this economy
-- the worst contraction since 1982 -- should not be undertaken
by amateurs or the faint of heart.
"You have to have a pretty strong feeling about where this
is all going," Stuart Gabriel, director of the Ziman Center for
Real Estate at the University of California, Los Angeles, told
Reuters. "This cycle is so different from prior cycles that
it's very difficult to extrapolate."
"Most would argue that California is not going into the
sea," he said. "On the other hand it's not totally out of the
question that this particular period of weakness could extend
for a while, and that means multiple years."
California's roller-coaster real estate cycles can be
traced to the 1970s, when home prices tripled, ignited in part
by foreign investment and the end of the gold standard
following decades of explosive population growth.
Home prices plunged in the early 1980s, turned around and
doubled within 10 years, slumped in the mid-1990s and then
blasted off again at the end of the decade. The subprime
meltdown and recession pushed them back off the cliff.
"It's a great time to buy for people who are willing to
risk a little more and be optimistic when everybody else is
doom and gloom," said Daren Blomquist, marketing and
communications manager for RealtyTrac, an online foreclosure
But he warned: "They will probably have to wait it out,
possibly for several years."
Chris Twoomey and his wife Jennifer illustrate the risk
underlying the perceived opportunities. They moved to
California from the Midwest in 2004 to pursue acting careers
and had just begun to think the dream of home ownership was out
of reach when the crash came and they saw their chance.
The couple pounced in January, right after Jennifer, 39,
learned she was pregnant with their first child, making an
offer on a small, bank-owned home in suburban Los Angeles.
But the day after the Twoomeys' offer was accepted, Chris
was called into the cafeteria at his job in a cosmetics company
warehouse and laid off.
"Sometimes in our dark moments we sit around and say to
ourselves, 'Look, forget the acting, forget everything, this is
the time to bail' (from California). We can be doing this
someplace else that's still warm but doesn't cost as much,"
Chris told Reuters in an interview.
"But we're sticking it out," he said. "It's perverse, but
something inside of us does want to stay here. It's sort of a
belief that because it is Southern California and because it is
the kind of place where everybody wants to be, it will come
(Editing by Edwin Chan and Eric Walsh)