Sunday, July 29, 2007

"A grim, telltale mark"

From the Sacramento Bee:

The onslaught of foreclosures in Sacramento's housing market has left a grim,
telltale mark: hundreds of vacant and boarded homes throughout the city.'

'Fueled by riskier adjustable-rate mortgages and falling property
values, foreclosures have escalated at an astonishing pace in Sacramento: 73 in
2005, 667 in 2006 and 1,066 through the first five months of 2007, according to
DataQuick statistics in a city report.

Skyrocketing vacant-building
cases have followed suit. Since 2004, the number rose 68 percent, to 300 from
178, said Max Fernandez, director of the city's code enforcement department.

"This is just chump change to them," McCarty said. "We need to take a
hard look at what policies we have for corporately-owned homes."

14 comments:

Sittin' Out This One said...

Good post Gwynster. You are Lander's chosen one. I am jealous.

So we are seeing 200 foreclosures a month in Sacramento. It sure seems like more. That must be only for the city or county, not the metro area. The reo current is picking up velocity. I wonder if we will ever see more foreclosures than sales in a monthly period. If it happens, it will be in the winter months.

Gwynster said...

My understanding is that Sac county only. So many people are sitting on vacant homes. It's not just the banks. What about all the out of the area owners that are letting homes sit because "they just know" the place will sell any day now that they reduced the price by 5k on a 400k home.

The new fines structure will hit the individual owner much harder then the banks. Will this be the impetus to move those vacant over-priced homes onto the overpriced and completely staturated rental market?

I'm most interested how the other 3 big counties react to this move by Sac county.

smf said...

The parallels with the dot.com bust and this housing bust are incredible to me.

There were stocks that were priced $90/share in 2000. It is now priced at $15/share. I heard from some how much of a bargain such stock was at $15, since not long ago you could buy it at $90. Of course, the likelihood of us seeing the $90 price in our lifetime is slim.

Same with housing. The prices that were seen were outrageous, and the likelihood of us seeing those prices again soon are slim to none, pretty much like the prior dot.com and Japanese asset bubble.

Just because prices got so high, it doesn't mean that they will go there again.

And there are plenty who still believe that even though prices are coming down, they will go back up to were they were soon.

Recent history tells us otherwise, because for a lot of those that were waiting for the Japanese Asset Bubble and dot.com bubble price recovery ARE STILL WAITING. And we are talking about price recovery without taking into account inflation.

Sittin' Out This One said...

SMF,

Your exact point was made in the December 2006 Business Week. There will be no appreication in Sacramento until 2015 or later. Until then, we will drift down for years, hit a bottom and drift along the bottom for 2-3 years, then resume modest appreciation. Remember when a home appreciating 2-3% per year was a nice feature?

Diggin Deeper said...

"American Home Mortgage tumbles on liquidity issues" Reuters

Exerpts

"American Home, based in Melville, New York, specializes in prime and near-prime loans. It has, however, made many loans that allow borrowers to produce little documentation. Such loans are often considered riskier. The company recently commanded a roughly 2.5 percent share of the U.S. mortgage market.

"Bankruptcy is not out of the question," said Matt Howlett, an analyst at Fox-Pitt Kelton Inc. in New York. "It needs to find a partner with alternative funding and hope the market turns around. It's going to be tough."

He added, "It's clear now we're in a liquidity crisis. Any loans that aren't pure prime are falling in value."

Looks like near primes not doing too well either. The longer this persists, the deeper we go.

SacramentoCrash said...

Wait til all those pot houses in elk grove hit the market.

You will probably have 100 more to add to the inventory.

That market is going to sink like a rock.

Blame the greedy developers, asleep at the wheel city council, lenders, loan officers, amateur landlords, ghetto type tenants, flippers and on and on.

What was once a really nice city back in the 90's has become an extension of South Sacramento due to the pond scum referred to above.

It is like San Jose (boring, bland, chain restaurant haven) without the high paying jobs and with scorching hot temps in the summer and gloomy winters.

Cmyst said...

The thing that gets me is that I've noted that several posters lately on HBB are bemoaning the overall effect this is going to have on the economy.

(For anyone who wants to hear my Grapes of Wrath story, I'll post it on my blog http://cmysticali.blogspot.com/)

The only thing I can figure is that all the money and jobs that were lost in the dotcom bust just slid into the housing bubble. Because it was only 7 or 8 years ago that there WASN'T a mortgage brokerage on every corner and people earning 40K a year WEREN'T buying 500K homes, and the world did not seem a living Hell and there wasn't mass rioting.

This whole industry and all these jobs boomed, and when it busts it will affect all of us in varyingly unpleasant ways, but life will sooner or later return to equilibrium. There won't be as many Hummers, but the granite counters will last for generations.
The mortgage brokers and RE folk should have been banking their commissions and not buying into their own horsehockey, and the true professionals will survive. The others will either find another scam, or find legitimate (if much lower paying) work.
I overheard a conversation this weekend between two co-workers about a former friend who they had not heard from. They were wondering if he had been working in construction the last few years, instead of working in our field (which was evidently a mid-life career change for him which was prompted by the last downturn in the early 90's). There are a lot of people who left perfectly decent jobs in order to make fistfuls of money in RE, and at least in my field, if they decide to come back they will find another job easily.
It will be harder work, but it pays well enough and it's in demand.

smf said...

"There will be no appreication in Sacramento until 2015 or later. Until then, we will drift down for years, hit a bottom and drift along the bottom for 2-3 years"

But what makes you believe it won't happen in the entire US and the rest of the world? I mean, the way I see it from people I know (that acknowledge that the bubble exists) is that sometime soon, the prices will go RIGHT BACK UP TO WHERE THEY WERE and then some.

If, for example, you take a look at the stock chart for Microsoft (symbol:MSFT), their stock is still HALF the value it was at its high.

No one right now is buying Microsoft presuming that it will reach its high soon (and they will swim in money), but they are purchasing homes assuming that homes WILL reach up that high again soon.

Diggin Deeper said...

"The parallels with the dot.com bust and this housing bust are incredible to me"

Cmyst is right...

The dot.com bubble just pushed investors to create the housing bubble as money got so cheap. When the real estate bubble burst money chased the now burgeoning credit bubble that's set up the M&A activity now driving the stock market. Looks like the credit bubble is now getting pretty unstable.

Thanks to Greenspan and Bernanke, there's so many dollars sloshing around world losing purchasing power everyday. Book a trip to Europe and you'd better tap deep into your savings to pay for it. Most would be astounded at what a Big Mac and fries costs in England, France, and Germany.

Imho, these bubble problems rest squarely on a dollar, that's in such great supply, its causing inflation in almost every counrty but ours(or so we're lead to believe). When these nations finally wake up and say "no mas" to the dollar, we get them back by the proverbial boatload.

Real estate would then become back page news for a long time to come.

Gwynster said...

Cmyst,

I agree somewhat. People who had normal jobs with skills may be able to return to their former positions. But I've also seen quite a bit of flight into stable areas already so there may not be jobs to go back too. It's like a game of musical chairs. Some people still marching to their own beat and they haven't noticed all the folks already sitting around them.

Besides RE and construction, I expect people in service area jobs driven by consmer spending will be hammered by the downturn in consumer spending.

I also expect costs for some services to deflate while costs for nessessities to climb.

And as always, I expect our crime rate to increase rapidly as low wage earners get desparate.

AgentBubble said...

According to MLS, there are 1,951 properties for sale in the 4 county area identified as REO. 1,023 REO properties have sold in the 4 county area since 1/1/07. Approximately 3,300 REO properties have been listed since that date.

Sittin' Out This One said...

AB,

You always come up with the interesting data. 2974 REO properties since 1/1/07 and approximately 3300 new listings since 1/1/07. That shows you right there how much impact the REO market is having in Sacramento. Potentially, the REO properties are responsible for 90% of all new product added to the listing rolls this year? There may be problems associated with my interpretation, such as some properties going off the MLS, others going on, for a net increase of 3300 units, but is my interpretation hold some water?

AgentBubble said...

Potentially, the REO properties are responsible for 90% of all new product added to the listing rolls this year?

No, there have been approximately 30,000-35,000 new listings entered in MLS since the beginning of the year for the 4 surrounding counties (I don't have an easy way to exclude the duplicates). Of those, around 3,300 were entered as REO (duplicates have been removed).

At present, approximately 24% of active listings are either short sales or REO. In about a week, I'll be posting an update to my monthly "distressed properties" post over on the Sac Real Stats blog.

SacramentoCrash said...

cymisticali's friend might have trouble getting his old job back if it is not in the health care field.

Her blog by the way is excellent.

He might have trouble because he has been out of his former line of work for I take it 4 to 5 years.

Since 2002 alot of job classifications are being outsourced.

Example:

Web interface programmers in Sac charge $45 to $80 per hour.

Web interface programmers in India (surprisingly good too) charge $7 to $12 per hour.

What has gone offshore to India?

To start with -

Software engineers

Tax and accounting financial statement preparation

Writers

Anything else that can be pushed through a broadband pipeline.

Yes, he could have trouble after his foray into the cyclical field of construction and real estate.

Might have to retrain for another field.