Monday, September 24, 2007

"The Heart of Darkness" Real Estate Market

From the Sacramento Business Journal:

The developer that's been sued the most by contractors over unpaid bills in Sacramento County over the past year isn't a giant company with hundreds of home sites or the backer of a high-profile washout such as The Towers on Capitol Mall. It's relatively small Sixells LLC, which specializes in urban infill projects throughout the region.
Owner David Lonich of Redding said the slumping housing market is to blame. He admitted the company owes some money it can't pay until it generates more sales, but he also said some of the claims aren't legitimate and some contractors are overbilling the company. "The No. 1 overall event was not getting the sales to generate the cash flow to cover all the bills," he said, adding that the company is not going to walk away from its projects.
From the Modesto Bee:
These are tough times for Northern San Joaquin Valley home builders. They've got too many homes to sell and too few buyers who want them. That's causing some builders to auction off houses at bargain prices and others to indefinitely postpone construction. A couple of developers are in jeopardy of defaulting on construction loans, which has put their partly finished subdivisions in limbo.
"We're going to be lucky to weather this. It's hit us hard," said Bernie Heyne, vice president of Pacific Pride Communities. The builder has halted construction at its Thomas Terrace development in Modesto while it renegotiates with lenders, leaving nine finished-but-empty homes. It's laid off two-thirds of its staff and put its Modesto headquarters up for sale. "We are pulling back," Heyne said.
Owner Rick Lafferty [of Lafferty Homes] said this is the toughest sales market he's experienced in his 24 years in the business: "I don't think builders can give much more."

But some builders are offering even bigger potential discounts. Anderson Homes has agreed to auction off 59 houses in Manteca and Los Banos to the highest bidders next month...To lure back buyers, the opening bids for Anderson Homes will start about 40 percent below previous asking prices.
From the Stockton Record:
Stockton is the heart of darkness, at least in the real-estate business these days. The national and international media have homed in on the Stockton metro area - meaning San Joaquin County - as one of the top foreclosure hot spots in the nation. It's the bust part of the cycle that followed an unparalleled six-year boom.
The median sales price in Stockton fell to $295,000 in August, down from a high of $385,000 in January 2006 - a 23 percent fall over 19 months, according to figures from the latest Coldwell Banker Grupe-TrendGraphix monthly sales report, based on Multiple Listing Service data.
Edmundo de la Cruz's Spanos Park West home up for sale, but the Stockton sales market, with 3,000 listings that include hundreds of foreclosure properties, is rugged. He and his wife, who are living on pensions, are facing mortgage adjustments that they absolutely won't be able to cover, he said...He said he and his wife have considered turning over their house to the lender in foreclosure and moving out of the area to live near one of their children.
[Jill Rios] and her husband would just like to move out of state to somewhere else where this isn't happening, Rios said, but they feel trapped because they believe they would have almost no chance of selling their extensively remodeled home in this molasses-slow market...."I'd like to move out of California," she said. "I'm done."


Rob Dawg said...

Shiff. Sniff. The poor developer makes payroll for months and pays himself and walks away and leaves early buyers carrying Mello-Roos and HOAs and unable to control either and decreased property values and crime and we are supposed to cry for the developer who still has all their goodies?

Patient Renter said...

"I don't think builders can give much more."

"But some builders are offering even bigger potential discounts."

I love contradictions.

BMac said...

I spoke w/ a friend/employee yesterday. His baby momma and him (she is the only one on the mortgage) bought a 3/2 south of Mack betwixt Franklin and the tracks in June 06. Their $331k (103%) mortgage rate is resetting shortly. They already pay in principal and interest $1300/month more than renting a similar place.
Right now, he is trying to convince her that walking is the best bet. They can pocket $3000/month in expenses for the 4-8 months it would likely take for the foreclosure and subsequent eviction, then use his now largely repaired credit to lease for a while and then buy in 12-24 months.

They haven't even bothered considering putting the place on the market.

I can only imagine the number of similar versions of this story are being acted out in the Valley right now.

SacramentoCrash said...

Who pays the mello roos if the developer goes broke?

Do the current homeowners get hit with the unpaid balances?

Patient Renter said...

"Who pays the mello roos if the developer goes broke?

Do the current homeowners get hit with the unpaid balances?"

At least in some cases, yes, this is what happens. There have been stories...

Perfect Storm said...

"He said he and his wife have considered turning over their house to the lender in foreclosure and moving out of the area to live near one of their children."

Oh go right ahead it probably is for the best, just walk away. I would do it, if I were in the same situiation.

Housing/Mortgage Doom 2007.

Foreclosure Hell 2008.

Were right on track for a 50% decline by 2009.

David said...

"50% decline by 2009"

Has a nice ring to it; could be a slogan.