"Housing Crisis Has Hit Sacramento's Economy Like a Sledgehammer"

From the Sacramento Bee:

The nation's housing crisis has hit Sacramento's economy like a sledgehammer, prompting a city government hiring freeze this month and an urgent examination into how millions can be trimmed from the budget. A report that will be presented to the City Council on Tuesday spells out the grim news: By the 2008-09 fiscal year, a city deficit could grow to between $45 million and $55 million. The city's 2007-08 budget is about $960 million.

"We were hoping for a soft landing from the housing market problems, but it didn't turn out that way," Russell Fehr, the city's finance director, said on Sunday. "We have a widening gap that will grow and grow if we don't do something about it."
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Sacramento's financial picture has worsened rapidly, to the extent that city officials said they had not foreseen. Fueled by risky adjustable-rate mortgages and falling property values, home foreclosures have escalated at an astonishing pace in Sacramento. There have been far fewer sales of both new and existing residences than were anticipated in the city's budget, according to the report.

From the Modesto Bee:

Title companies were dealt a serious blow when the market turned, said Terry Harwell, division president of Alliance Title Co. in Stanislaus County. Transactions at the firm have plummeted 40 percent a year for the past two years, forcing the company to lay off employees and scale back operations...The downturn forced the company to reduce its staff by about 65 percent and shut three branch offices. The remaining 50 employees have taken a 10 percent pay cut.
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For real estate agents in particular, he said, times are extremely tough. "A lot are going hungry," Harwell said...The number of people with active real estate licenses in Stanislaus, San Joaquin and Merced counties nearly doubled from 2004 to 2006, jumping from 5,800 to 11,500. They are leaving almost as quickly as they got in. This year, there are about 2,000 fewer agents with active licenses in the region than last.
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"We are starting to see quite a few mortgage companies and a few construction firms that have folded," said Darlene Smith, the coordinator of the rapid response team for the Stanislaus Economic Development and Workforce Alliance...The changes in the housing market happened so quickly that, in many cases, the rapid response team wouldn't hear about the closures until it was too late. "So many are closing and as a team, we are not always able to find out," Smith said.
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Traditional upright pianos have seen slower sales nationwide, Kyle Barker [owner of Barker's Music in Modesto] said, but the situation seems particularly dire in this region. He noted that a piano store in Sacramento recently closed, and another store in Tracy has reduced its size. He believes it's all tied to real estate. "You can't pull back fast enough," he said. This downturn is worse than in the early 1990s or early 1980s, when two other real estate downturns hit California."
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Fewer people are calling the region's Handyman Connection for home repairs. Boats are not selling as quickly at Bob's Marine in Modesto. And the demand for real estate appraisals has fallen off. For these businesses and many others, the dramatic real estate decline is cutting into their bottom line as people cut back on discretionary spending and companies slash expenses. "It's affecting every type of business, across the board," said Sky Ucci, owner of Modesto Handyman Connection, the region's outlet for a nationwide chain of handyman service franchises. Ucci said retail business owners of all kinds have told him they're hurting, and many attribute it to the Northern San Joaquin Valley's real estate slump.
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With so many homes on the market, one might think it's a good time to be in the business of shooting homes for virtual tours online. Think again, says Marla Giddings, 49. The business she works for, CirclePix, has seen a marked drop-off since the height of the real estate boom two years ago.
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Shirley Cordero adored her job as a "variant configurator" -- in plain English, she would track upgrades that buyers wanted for their new houses. Her employer, Morrison Homes in Salida, held 11 grand openings in 2006 and "business was excellent." The downturn hit later that year and after about three slow months, she walked in and was handed her final paycheck...Cordero, 57, recently had to sell her boat to pay her monthly mortgage payment and she's had to cut spending on food, electricity and certain extras, such as tae kwon do lessons for her grandson.

From the Sacramento Business Journal:

After spiraling up for several years, the cost to build major real estate developments has stabilized, and in some cases has begun to fall. The most significant savings have been for the shorter, largely residential projects made out of wood, which along with certain types of labor has come down in cost amid the housing crunch.
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Signature Properties...President Mike Ghielmetti said construction costs have fallen approximately 10 percent to 15 percent for wood-based single-family homes, townhomes and smaller midrise buildings. The company has even seen concrete and steel costs for taller buildings soften within the past month, though it is too soon to tell if that will last.

From the Modesto Bee:

Don't blame real estate agents for the financial mess many homeowners are in. It's not their fault prices soared so high or crashed so fast. Housing is still a good long-term investment, and this is a great time to buy a house. That's the consensus of the region's largest real estate companies -- Century 21 M&M and Associates, PMZ Real Estate and Prudential California Realty.
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"Did the real estate agents do anything wrong? No. Did the builders do anything wrong? No," said [Larry] Matos [of Century 21], whose company has 600 agents. "I don't think there was a lot of bad advice out there. I just think a lot of people got caught up in the market conditions."
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"Real estate agents can't promise people their homes are going to go up and up in value. Neither can we predict they're going to go down in value," said [Mike] Zagaris [of PMZ], who has 500 agents.
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[B]uyers should beware whom they get advice from, according to [Craig] Lewis [of Prudential] . "We have people that are doing loans and they are selling real estate," Lewis said. "Quite frankly, there is a real conflict of interest. What are they really doing? Are they really trying to serve the client? Or are they really just trying to make money for themselves?"