Tuesday, October 09, 2007

Empty Houses, Full Shelters

From CBS 5 (and video):

In the Central Valley community of Manteca, police have a new job: patrolling hundreds of foreclosed houses left empty and abandoned. They are half million dollar houses, often bought with nothing down, turned into suburban blight. To get a firsthand look, CBS News correspondent John Blackstone rode along on patrol with Manteca Police officer Rex Osborn, who explained, "you make one right-hand turn and immediately this is what we see - dead grass, bushes are dying, trees are dying. The next thing you know you have squatters in the house..."
But for neighbors the problem that really bites is fast-falling house prices. ust-retired Corky Hine retired wanted to sell for $400,000. Now his home is worth $339,000 and his real-estate agent still can't get anybody to look. "I already dropped it $60,000 (from the original appraisal price,)" Hine said. "She said 'There's like 500 homes for sale within a two-mile radius of mine, and 150 of them are in foreclosure within a mile or something.'"
"You can’t give these houses away," Osborn said. And neighborhoods are left with the wounds of a mortgage meltdown: the houses nobody wants.
From News 10 (also video) (hat tip Max):
Roughly 10,000 homes in the Sacramento region are in some stage of foreclosure. That means thousands of homeowners, often with their children, are in a fix to find some place to live. Shelters in the area are showing the first signs that some in search of a new roof over their heads will be luckier than others.
St. John's is limited in what it can handle. It's already at capacity, and the shelter is now turning away 55 women and children each day. That's more than twice the 25 a day it had been turning away during the first half of the year. "Though you can't tie anything directly to the economy and the foreclosure rate, something has to be there because we've never seen an increase like this so rapidly and so dramatically," said [director Michelle] Steeb, who adds a third of the women have jobs.
From M&C:
Newlywed Sheila Haller had her doubts when she and her husband plunked down 425,000 dollars in early 2006 to buy a nice, three-bedroom home in the fast-growing California town of Folson in the arid foothills outside the state capital of Sacramento. 'It seemed too much like that TV show Pleasantville, cookie-cutter homes with no character,' Haller said.

From her small, tidy back garden, you can see what she means. Throughout the area, on hill after hill, earthmovers have cut ribbons of road that have been lined with thousands of new homes and apartments in recent years. 'It was the American dream,' Haller says. 'Everyone was (buying a house) and making money, so we went for it.'
The housing crash is worst for those unable to afford to stay in their homes. But it has also come as a life-altering shock to those like the Hallers, who are still paying their mortgage but see other houses in their neighbourhood selling for significantly less than they paid. 'It's definitely wrenching,' she said. 'We worked so hard to get a downpayment on this house, but now the mortgage is greater than what the house is worth.'
From Realty Times, Market Conditions - Stockton:
The entire Central Valley of California (and, in fact, the entire State, with a very few exceptions) is in the worst real estate downturn in my 30+ year career.
First: This is not a time to play or test the market. If you don't HAVE to sell...absolutely...don't list it now and, if it is listed... get it off the market.
Second: If you know you will have to sell in the next five years...SELL NOW..as in... TODAY! Everyday you wait your equity is melting away with the market. So, if you're retiring and moving in 3 years...SELL TODAY! If you're taking over your Dad's business in Iowa in 2009...SELL TODAY! If you have a new home being built due to be finished in six months...SELL TODAY! How serious am I? From 2005 to 2006 we lost 13% value. From August 2006 until now we've lost another 18%! Many of you have lost more than $100,000 and it's getting worse.
Oh, and if you bought your home with 100% financing with an ARM with Neg/AM thinking you could refinance when the payment went up...think again. You now owe more than the home is worth, so no refi for you.
From Kiplinger's California Letter via the OC Register:
[California] median home prices should slip by 7% [in 2008], with new houses taking a hefty 10%-15% hit. Biggest declines will be in the Central Valley, the Inland Empire and the San Diego area.
From the Sacramento Bee:
Just weeks after lawmakers enacted a state budget amid partisan turmoil, finance officials say revenues are slipping below projections, making it likely that next year's problem will be worse than expected. Based on major tax receipts collected in the first two months of the new fiscal year, California could face a $8.6 billion operating deficit or more in 2008-09 if the state's economy and soft housing market continue at the current pace. That would be 40 percent higher than the $6.1 billion gap officials anticipated in August...State departments have been told to propose no new spending next year unless they cut a like amount from an existing program.
[T]he soft housing market continues to have a ripple effect on the state treasury [said Stephen Levy, director of the Center for Continuing Study of the California Economy in Palo Alto]. While property tax goes directly to local governments, the money is counted against the state's share of school funding under a complex formula set by Proposition 98. If property taxes local government generates declines, the state shoulders a bigger burden to fund K-14 schools.

Property taxes aren't expected to be as robust this year, particularly in places like Sacramento, as homes stop appreciating and sales weaken. Forecasters recently predicted the housing market won't begin to recover until 2009, and a recession could quickly delay that recovery by more than a year.

There's even a possibility that homeowners in the Central Valley -- where home prices have dropped -- will seek reassessments on their homes in an effort to pay less property tax. "If a house down the block just sold for $100,000 less than yours, you'd want a reassessment," Levy said.


SacramentoCrash said...

I called out this mess back in mid to late 2004 when well capitalized national DevelopWhores, LendWhores, "New Home Professionals" (SalesWhores), stupid flippers, ignorant landlords, knuckle draggers from the slums all descended like Locusts on the Sacramento Valley.

DevelopWhores were jacking the prices $10,000 a month and the Sheeple bit like robots.

I called out this house of cards as what it was and noooo..... They kept coming.

Anytime prices go up that fast... look out below!

Jacob said...

It was just the perfect storm brewing for a long time. Many people (who were not personnaly involved) saw it for what it was, but nobody cared.

Banks lending cheap money to people on liar loans. Homes increasing 10-20% each year, far outstripping wages. People refinancing to buy TVs and cars.

Nobody wanted to hear the truth, but now they have no choice.

If a car manufacturer trippled the price of a car w/o much improvement and all of a sudden their sales dropped would people be wondering why...

But somehow homes becames an investment intead of a place to live. And these would be investors could only make money if the prices kept rising.

"Now his home is worth $339,000 and his real-estate agent still can't get anybody to look."

No, your house is worth what it will SELL for. Not what you think it is worth, not what your neighbor got in 05, not what you think is below marked. Take what the home or comp home was worth in 2000 and add 50% and that is closer to what the market price really is.

RMB said...

Actually Jacob,

If you take the 2000 price you add about 20% to get to the long term trend line for housing.

This is 2000 price plus 1% over inflation for a year.

In the last 2 bubbles in california's recent history the home prices have always retreated to the long term trend line.

It may be different this time, but somehow I doubt it.

That would bring houses down somewhere like 40-50% from the peak in 2005.
It is just a matter of time. The last time it took 6-7 years to hit the bottom, and we are only 1.5 to 2 years into this downward spiral.

Gwynster said...

I saw a big time fixer in the area I'm looking at drop to $139k. That is huge!

We're definately at early 04 prices and should go back to late 02 prices next year.

What a year this has been. I'm just waiting for my USC and BEA numbers to come out.

Gwynster said...


Our prices started to rise dramatically in '98 and BA speculators looked for some "safe" assests to invest in. I'd go back to 97 then adjust for inflation and appreciation annually from there.

What's interesting is if you take MHI, assume FHA style affordablity ratios, you come right back to that adjusted number above. It's unavoidable.

Don't we all have spreadsheets on price calculations by now? >; )

SacramentoCrash said...

Its similar in Phoenix:

Rising tide of foreclosures.

This neighborhood has a still-unfolding story to tell, and it is not always a comfortable one to hear.

Not long ago, builders were raising home prices here thousands of dollars week after week. Families pitched tents in front of sales offices and waited for Saturday morning lotteries to win the right to buy. Buyers -- including more than a few speculators -- gambled with loans whose risks were obscured by euphoria.

This is the tale of how America's real estate boom came to a seemingly ordinary subdivision called the Villages at Queen Creek, where the whipsaw of easy credit has led to some extraordinary times.

They were the best of times, for a while. The empty homes, though, raise serious doubts about what comes next.

"You drive around this subdivision and there are 'For Sale' signs everywhere,"

smf said...

Originally, it was easy to justify the price rise in Sacramento, especially if compared to BA or LA prices.

It was easy to justify the rise in prices, since our town was 'special'. Of course, when every town became 'special', no town is.

For some, looking at the local picture only, everything seemed OK. But once the national picture came to light, it was obvious that it was not too last.

It is easy to see something and realize it makes no sense.

During the dot.com bubble, Cisco was worth more than GM. It made no sense to me. Of course, Cisco 'corrected'.

Same with this bubble. When Stockton's mediam price was higher than Sacramento's, you should have known that logic had left the housing market.

andnee said...

Its nice to be correct about this market, but also scary in what may happen to the economy. My wife and I sold our home in early 2006 (we bought in jan 2000) and have been renting. People were telling us what FOOLS we were and that we would never be able to purchase again. This is when I whipped out the spreadsheet I had done with a friend showing current housing price appreciation vs. current income appreciaton for the sacramento area (numbers all available anywhere). We forecasted out to 2050 (because everyone who was a "expert" was saying that cycles are over)and at the current appreciation rates the median home value in Sac would be 1.12 billion dollars and the median income would be 342,000 a year. On a simple loan your payment would be around 3 million a month on a 342,000 dollar a year income. People would look at me and go "it will never do that, and those numbers cant be right" well its basic math, and with everyone saying it will never stop and betting on that, the numbers were where we would be. Guess what, none of those people listened. WOW what a suprise.

mbc said...

I got a kick out of the Realty Times link. It looks like the realtors are starting to crack and moving away from the everything-is-roses "script" being fed to them by the NAR/CAR.

Jacob said...

I was just thinking a 50% increase at the very most. And there better have been some improvements made.

For a couple years it was really depressing to see people making less $$ than me buying a nice house, several cars, taking nice vacations and I couldn't see how I could even come close to affording to do that.

I decided in 04 to just keep saving and either home prices would come down, stay level for many many years to give me time to catch up, or they would just keep going up and I would never buy.

I'm feeling much better about my decision now.

I do feel bad for the people that bought a home (to live in) and didnt take out money for toys and are now losing their homes.

But I have no sympathy for the people that tried to profit, or used their house as an ATM, thinking somehow that they would never have to pay the money back...

commonsense said...

commonsense said:

So 2000 homes average price 50% appreciation should bring sacra. current average at $150,000? Anyone please correct me if I'm wrong.

watchingthebubble said...


I can appreciate your passion on this issue, but can you tell me precisely what you mean by "knuckle draggers"? I've been seeing this term a lot on the housing bubble blogs, and I'm wondering what it's "code" for.

Gwynster said...

1. knuckle dragger
Reminiscent of the hunched over cave man, with his arms to the ground. An insult used against those of extremely low intelligence, or general stupidity.

Also see low brow
"Bubba is such a knuckle dragger."

I just called them people who couldn't think their way out of a paper bag.

Jacob said...

"So 2000 homes average price 50% appreciation should bring sacra. current average at $150,000? Anyone please correct me if I'm wrong."

The median income is around $50k so the median price should be around $150k in my thinking.

The days of people buying a home at 10x income are long gone. So prices gotta come down.

watchingthebubble said...

Thanks, Gwynster. You're ever the fount of info.

SacramentoCrash said...

knuckle dragger:

Many species of knuckle draggers of all ethnicities can be found in the Sac region.

The guy with the green pickup with flames painted on the side with loud mufflers. Fires it up whenever potential buyers come to look at the Paseo West Anderson home that will be auctioned off.

The idiot in Elk Grove that bought the $50,000 Escalade with 20 inch gold rims using a HELOC to impress the others on his court.

A guy or gal that is constantly sniffling and wearing heavy jackets during the peak of a hot summer day. Their complexion is bad and they have alot of dental problems. Commonly found in the north area.

The guy running around with real 14K gold front teeth and thick bling chains.

The doofus driving around in a Granny Wagon (Olds, Buick or old Caddy) on 14 inch gold rims.

A guy that has a lime green Honda four door that he got from his mother. The car is equipped with a loud trumpet exhaust pipe and a raised spoiler akin to an airplane wing.

The hyper religious anti gay types with shaved heads and heavy accents hanging around the north 80 area.

Yes, there are some real knuckle draggers around this area.