The Retreat, a gated golf course community that boasted the Inland region's first million-dollar tract homes, has been hit by a tsunami of foreclosures, proving that even the most elite neighborhoods can't escape the devastation of falling real estate values.
Planned five years ago for 520 luxury houses, the scenic development abutting the Cleveland National Forest south of Corona was designed to attract successful business people looking to escape the stresses of the workaday world beyond their guarded gate.
Today, however, about every fourth or fifth house at The Retreat is in some stage of foreclosure and home prices have been slashed nearly in half.
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Kurt Miller / The Press-Enterprise
The Retreat, south of Corona, debuted as the region's first neighborhood of million-dollar homes at the peak of the real estate bubble.
The average asking price for homes in The Retreat plunged 46 percent from an estimated $1.3 million in June 2006 to $705,000 today, according to data recorded with a multiple listing service. Six resale transactions in the community this year averaged $675,916 on houses that sold for an average $1,123,000 at their peak, a decline of 40 percent.
And prices continue to drop, with about seven homes currently listed between $475,000 and $500,000, said Pat Patton, an agent with Re/Max Partners who has listings at The Retreat. As prices fall, the community is attracting bargain hunters. About 14 homes are in escrow.
Dotted with bank for-sale signs, brown lawns and empty houses, the community has been especially hard-hit by Southern California's real estate bust. That is because the houses were built and sold close to the peak of real estate prices, speculation and the popularity of lax lending programs that enabled people to buy homes with no money down and no proof of sufficient income.
Investors hoping to flip the houses for a quick profit let them go into foreclosure when the market collapsed, according to local real estate agents.
Inland Empire economist John Husing, one of several economists who had hailed plans for The Retreat as proving the maturity of the Inland real estate market, now says its debut was sullied by these unexpected forces and a subsequent tightening of lending that made the purchase of expensive homes difficult to finance.
A Gloomy Picture
Todd Dean, on the board of the community's homeowner association, said 388 houses have been built and sold there. Of those, about 80 are in some stage of foreclosure, from mortgage defaults to bank seizures.
Of the 52 homes recently listed for sale at The Retreat, 29 were bank owned and 15 were being offered at a price that's inadequate to pay off their mortgages.
The Retreat's master developer, the Ontario-based Empire Cos. founded by James Previti, recently sold its private 18-hole Nicklaus Design golf course. The course was opened to the public April 25 because it could not attract enough members to stay in business.
Repeated calls to the Empire Cos. were not returned. Several companies in the Empire group, including Prestige Homes, a former home builder at The Retreat, and Empire Land LLC, the group's land developer, filed for Chapter 11 bankruptcy protection in April.
Cutting Their Losses
Many people who bought homes at The Retreat to live in also considered them investments and have been disappointed.
Michael Kroitor, 37, said he and his wife, both Canadian immigrants, put $96,000 down in June 2006 to buy a $1 million, four-bedroom house in The Retreat. They were convinced it would be a great short-term investment.
Kroitor said he figured his family, including four children, would live at The Retreat for two years, then they would sell at a profit. Meanwhile, he said, they were willing to make monthly mortgage payments of $8,500, or two-thirds of their household income, on top of property taxes.
"We didn't think the value would go down at all ... There was no prevailing feeling of doom," he recalled.
Kroitor said he started to worry when the clubhouse opening was delayed and home building in the community slowed down. Then early last year, "for sale" signs started cropping up on neighbors' lawns that faded to brown as sprinklers were turned off.
Kroitor said when his wife took a new job in Carson, lengthening her daily commute, they decided it was time to cut their losses. He estimated it would take a decade for their home's value to rebound to what they paid and they don't want to wait.
They rented a house in Huntington Beach and listed their house at The Retreat for sale for $578,000. They hope the lender will take less than the mortgage they owe and that such a "short sale" will do less harm to their credit rating than a foreclosure.
But if the lender refuses to take any of the offers that the couple receives, Kroitor said they will let the lender foreclose.
Investment Rollercoaster
Some early investors at The Retreat made a handsome profit.
Ed Zorn, a broker at ZEC Realty in Corona, said a house he recently listed in the community was purchased from the builder for $900,000 cash in February 2006 then resold that November for $1.4 million in a transaction that was 100 percent financed.
"It was a fantastic deal" for the first buyer, Zorn said. But the next buyer saw the home's value plummet before the lender foreclosed.
Zorn said the same house recently was purchased out of foreclosure for about $600,000. The new owners, he said, are a couple of empty nesters who had been living simply and saving their money.
Marcel Alallah, another real estate agent working at The Retreat, said one of his investor clients paid $600,000 in cash a couple of weeks ago for a four-bedroom house with a movie room that would have sold for $970,000 six months earlier. He plans to rent it out for $3,500 a month.
Many who bought in The Retreat are staying put.
Tony Muriel, 52, said when he and his wife, Carmen, put down $350,000 to buy a $1.3 million house two years ago, they planned to stay 10 years. By then they expected their two children would be off to college, and their home's value would increase to $5 million and become their retirement nest egg.
The Muriels, like many of their neighbors, are upside down on their investment, owing more than $1 million on a house that most recently was appraised for $760,000. But with so much of their savings at stake, they said they are not moving.
"We have to make the payments and continue," Tony Muriel said.
The couple said they still enjoy their house with its super-size kitchen, koi pond and many other amenities, and their attractive neighborhood and good schools.
Time should solve their real estate woes, Carmen Muriel said.
"In four years, everything should be different," she predicted.
Reach Leslie Berkman at 951-893-2111 or lberkman@PE.com
