Snaith: 'I didn't anticipate the severity of the sub-prime issue'

Another for the "surprised expert" category. From the Stockton Record:

California's economy is headed for a soft landing, not a recessionary crash, according to the latest forecast [pdf] from University of the Pacific's Business Forecasting Center.

"To say we're going downhill is a fair characterization, but we're not going off a cliff," said Sean Snaith, consultant to Pacific's Forecasting Center and director of University of Central Florida's Institute for Economic Competitiveness.

Slumping conditions in the state's housing market and energy price volatility are contributing to the downturn...Defaults on sub-prime loans, which are mortgages made to borrowers with poor credit ratings, are magnifying the problem, particularly in the Stockton-San Joaquin County area, Snaith said.

"I didn't anticipate the severity of the sub-prime issue," he said. More borrowers than he thought jumped at loans touting low interest rates and monthly payments....

From the Sacramento Bee (hat tip Gwyn):

Weighed down by the housing sector, the job markets in California and Sacramento nearly ground to a halt last month. The Sacramento-area unemployment rate jumped four-tenths of a point in June to 5.2 percent, the Employment Development Department reported Friday. Although the region added 200 construction jobs, financial-services payrolls shrank by 1,300 - a reflection of cutbacks in real estate and mortgage lending.

From the Associated Press (via Forbes):

It was supposed to be contained slump, but there's no avoiding it any more: The housing sector's woes are spreading, squeezing makers of everything from the fireplace to the kitchen sink.

The market's two-year meltdown has already claimed a number of obvious victims, from the homebuilders who overextended themselves trying to satisfy unsustainable demand, to aggressive lenders who scuttled vetting procedures to cash in on commissions - but the recent round of earnings reports indicates the turmoil is more widespread than people first expected.
...
As the housing slump spreads to a wider swath of the economy, economists and industry groups that long claimed the turmoil would be contained are warning otherwise.

[Sacramento Bee] newspaper publisher McClatchy Co. reported a 9.5 percent decline in second-quarter profits Thursday....McClatchy attributed the weaker results largely to a severe decline in real estate advertising in two of its key markets, California and Florida, where the housing market had been booming.

Gary Pruitt, McClatchy's CEO, said in a statement that advertising revenues were down 17.8 percent in those two markets in the second quarter, with auto and employment advertising falling in tandem with real estate advertising given the importance of the housing sector to those economies.

From the Sacramento Bee:

The McClatchy Co.'s latest earnings show the Sacramento-based publisher is still feeling the impact of a one-two punch: the newspaper industry's overall advertising slump and a housing market downturn that's slammed two of McClatchy's biggest markets.
...
The downturn mainly reflected a significant drop in ad sales, especially at McClatchy's California and Florida papers. Nearly three-quarters of the drop in ad revenue came from those two states, which are suffering from real estate woes. Real estate advertising was down 32 percent in California and Florida, causing a spillover effect that depressed other ad categories.

Also from The Bee:

Dallas-based auction giant Hudson & Marshall says it's expecting about 1,000 people Sunday for its first foreclosure auction here of 175 houses...What's attracting the auctioneers -- and buyers: More than 4,000 bank repossessions so far this year in Amador, El Dorado, Nevada, Placer, Sacramento, Sutter, Yolo and Yuba counties, according to Foreclosures.com of Fair Oaks. That's roughly twice last year's total of 2,082 bank repossessions.