Sacramento Housing Market Underwater: 1 in 5 Homes is a Short Sale

From USA Today:

Here's an alarming fact about Sacramento's housing market: About one of every five existing homes on the market is a "short sale." That means the home is worth less than the value of the mortgage, and the lender is willing to accept less than full repayment of the loan to avoid foreclosure, says Tracey Saizan, president of the Sacramento Association of Realtors.

That, in turn, puts pressure on the remaining 80% of sellers, who have equity in their homes, to cut prices. The median price in the state capital, one of the most overheated metro areas during the real estate boom, fell 4.3% in December compared with December 2005.
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"There is a sense that we are going through the tunnel, and the light at the other end is sunshine, not another train heading at us," says Greg Paquin of The Gregory Group.

From the Auburn Journal:

Citing shifting economic factors, Auburn Harley-Davidson owner Bob Holmes has scrapped plans to move his North Auburn dealership to a Bowman parcel. The plan would have seen construction of a 30,000-square-foot store and service facility at the corner of Luther and Bowman roads.
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Holmes withdrew his application last month but stated that once the project makes economic sense again, he would re-apply...Citing the recent financial difficulties on a 55-story condominium and commercial project in downtown Sacramento as an example, Holmes said that it's a difficult time for a development to move forward because of the slowing housing market and economic conditions in northern California.

Businesses like boat, auto and motorcycle dealerships depend on discretionary income to remain high and with the housing market continuing to soften, the Auburn Harley-Davidson focus will be on the Locksley Lane location.

From the Sacramento Bee:

Holding back: The builder of one of two planned downtown condo towers hasn't sold a single unit in months. But that's strictly by design, says Craig Nassi, the Denver developer behind the long-awaited Aura project at 601 Capitol Mall.

He says he reached the sales threshold he needed for a construction loan last fall. Since then, he's held off sales in the expectation he can get higher prices for the remaining units after construction begins. "We do that on every project," Nassi says. "You get a lot more money (for condo units) later in the game."

Nearly 200 of the project's 268 units have been sold, according to Hanley Wood Market Intelligence....Nassi says he expects to finalize his main construction loan from Corus Bank of Chicago by mid-March. When will construction start? "The next day" after the loan is finalized, he says.

From the Sacramento Business Journal:

Centex, the region's eighth-largest builder last year, is one of at least 10 homebuilders in Sacramento that have had a change at the top ranks, a turnover rate that's been pushed by the market.

"The builders are shuffling," said Angel Ahumada, founder of Integrity Recruiting of Roseville, which specializes in placing executives and mid-level managers in construction industry positions nationwide.
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Most of the turnover occurred during a stretch that saw new-home sales in the region drop from 14,095 in 2005 to 9,588 last year...New division presidents have taken the helm in the past year at KB Home, Meritage Corp., Morrison Homes and Pardee Homes.
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Some of the first moves by the new leaders have been to trim the work force. Construction-related jobs fell by 1,500 between December 2005 and December 2006.
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Richmond American Homes reduced its Sacramento staff, including division president Jim Gillette, who was hired in December 2005 and then departed about nine months later, said Mark Butler, Northern California president at Richmond American. Gillette is now working as a real estate consultant.

Butler, based in Richmond American's Pleasanton office, said the company hasn't pulled up stakes in Sacramento but has reduced its land holdings. "Our goal is to keep buying land," Butler said, adding that the company has not closed a deal since early 2006. "(But) the next deal we do has to reflect today's sale price and incentives."

From the Stockton Record:

The coming layoffs of about 100 Stockton-based workers at Washington Mutual should surprise nobody. A good number of those people work in WaMu's sub-prime lending arm, Long Beach Mortgage, one of the nation's biggest sub-prime mortgage lenders.

Sub-prime loans are not your traditional 30-year, fixed-rate mortgages. Anything but. They are loans aimed at higher risk borrowers, people with little to put down, and people who, to be honest, might be buying more home than they can afford.
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But funny-money loans? It probably will be a while before we see what we saw at the height of the boom. In the first quarter of 2005, 42 percent of all mortgages in San Joaquin County were interest-only loans.

The heady times started heading south by the end of that year. Regulators have become more and more outspoken about the dangers of the sub-prime, put-'em-in-a-house-at-any-cost industry. Financial institutions loan money. They should not be in the real estate business and that's what might happen if a bucket of mortgages go south, regulators warn. And they might. Foreclosures are climbing. In the fourth quarter of 2006, foreclosure notices in San Joaquin County reached their highest level in at least 10 years.

Also from The Record:

The rising number of foreclosures in San Joaquin County isn't helping home sellers, because that pumps up the competition, makes it tougher to sell and depresses prices. Still, builders, brokers and industry experts said that even with defaults climbing, the impact may not be significant because homes-for-sale numbers have plummeted in recent months anyway.
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David DiDio, mortgage broker with Greene Dream Homes and Loans in Stockton, said the foreclosures downturn should end soon, adding that the last foreclosures upswing a decade ago lasted about a year and a half. The housing market has picked up noticeably recently, he said, "so by spring, we'll be out of this, because most of these homes will be able to sell."