'An Artificial Economy'

From the Central Valley Business Times:

A total of 9,477 properties – with a total loan value of $3.86 billion – were sold at auction in California last month....Speculator-owned properties (non-owner occupied properties) accounted for $1.71 billion of that total and represented 44.3 percent, or 4,199 of the properties sold at foreclosure auction.
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The Central Valley holds half of the spots in ForeclosureRadar’s top ten counties for auction sales. San Joaquin County was ranked second in the state, the same position it held in July in ForeclsoureRadar’s figures. Stanislaus County was fourth, Sacramento County fifth, Yuba County sixth, and Merced County ninth. The rankings are based on population per foreclosure sale.

From the Stockton Record:

The California economy's soft landing is turning bumpy - with the housing slump, mortgage credit crunch, high-energy prices and dampened consumer spending providing the pot holes - but forecasters still predict no recession.
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Sean Snaith, Business Forecasting Center consultant, said housing is the primary drag on the U.S. and state economies. "Housing is worse than I thought it would be and I think it's primarily due to the subprime issue," he said Tuesday, referring to risky mortgages made to borrowers whose credit ratings are less than perfect, or subprime. Hemmed in by rising loan payments, tighter credit and declining housing prices, such borrowers are increasingly falling into foreclosure...Snaith continues to predict an economic "soft landing, but a longer runway before we take off again. That's just the whole burden of the housing correction."
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[T]here are potential pitfalls to what the Anderson Forecast calls a "near-recession experience." "No. 1 is if something other than real estate starts to turn south at the same time," [UCLA economist Ryan] Ratcliff said Monday. One potential problem would be if layoffs now associated with the mortgage-lending sector cut more deeply than currently expected.

From the Wall Street Journal:

"This recession in housing is more severe than the 1990 and 1991 downturn," Ms. Zelman said in an interview. "It could have a much broader impact on the economy than people realize, and it will be longer in duration." Ms. Zelman...[the former housing analyst at Credit Suisse who warned about trouble in the housing market months before the downturn] says proposals to bail out struggling homeowners might help, but "I don't think it will do enough to forestall the inevitable: that the consumer is going to roll over."

From the Associated Press:

Much of the nation is now in a housing slump, and an Associated Press analysis of new census data provides insight into the reason why: Since 1990, homeowners have faced a growing gap between their incomes and the price of their homes. The widening gap in all but a few of the nation’s 500 largest cities helped make the recent boom in housing prices unsustainable, analysts say. The rising prices were fueled largely by low interest rates and risky borrowing rather than increasing incomes.

“We had an artificial economy,” said Brad Geisen, founder of Foreclosure.com, a Web site that lists foreclosure properties. “There was all this wealth created in real estate, and it wasn’t really created.”
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Nationally, the median household income grew by about 60 percent from 1990 to 2006, roughly matching inflation. At the same time, the median home value — the point at which half were more and half were less — more than doubled....

From the Stockton Record:

When Louise Wohl bought her one-bedroom, one-bath Lodi condo in August 2005 for $180,000, she was delighted with her first home purchase. She financed the entire purchase price at a 6.25 percent annual interest rate, leaving a monthly payment of less than $1,175 - not easy to make but doable, she said.

Then in July, she got a letter from the lender saying her adjustable-rate loan was jumping after the initial two-year set rate to the going rate of about 8.25 percent. This, she said, was news to her, and bad news at that, because she can't afford the $200 jump in the monthly payment. Plus, she faces another adjustable-rate mortgage boost in six months....

"I talked to three different people, and none of them could help me," she said...[One] said, well, just try to hang in there. "I was like, OK, I guess I could make the payments if I don't buy gas and eat." She isn't sure what will happen now. "I wish I had never bought," she said. "I would have been better off renting."