"It's Hard To Be Optimistic"

From the Sacramento Business Journal:

Sales of existing homes in California will keep falling in 2008, but at a slower pace, while median home prices across the state will decline for the first time since 1996, the California Association of Realtors said in its 2008 forecast released Wednesday... The projected 2008 sales figure would be the state's lowest since 1985....
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Across California, the median home price is expected to creep up 3.5 percent to $576,000 in 2007, then turn down in 2008, losing a projected 4 percent to $553,000. That shift has already hit the Sacramento market, where the median price of $332,510 in August was down 15.7 percent from the peak price of $394,450 in August 2005.

The recent housing construction boom in affordable markets such as the Central Valley and high desert is contributing to softness in the resale market, exacerbated by fallout from tighter loan underwriting and defaults in the subprime mortgage market, the group said.

From the Central Valley Business Times:

Central Valley cities are among the most likely in the nation to see further home price drops within the next two years, according to figures compiled by PMI Mortgage Insurance Co., the Walnut Creek-based subsidiary of PMI Group Inc. There is a 62.3 percent chance of price declines in Stockton, says PMI. That’s the third highest in the nation, it says, exceeded only by Salinas at 63.9 percent and Naples, Fla., at 66.1 percent.
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PMI’s list of Central Valley cities’ likelihood of price declines by this time in 2009:

• Bakersfield: 56.4 percent
• Chico: 41.8 percent
• Fresno: 48.1 percent
• Hanford-Corcoran: 41.2 percent
• Madera: 42.1 percent
• Merced: 59.3 percent
• Modesto: 57.0 percent
• Sacramento: 52.2 percent
• Stockton: 62.3 percent
• Visalia-Porterville: 53.3 percent

PMI Report [pdf]

From TheSteet.com

Downey Financial dropped 4% in early trading after the savings and loan warned that rising loan losses will lead to a loss for the third quarter.
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"We are clearly disappointed with our third-quarter results," said Daniel Rosenthal, Downey's president and CEO. "The continued weakening and uncertainty relative to the housing market, coupled with third-quarter disruption in the secondary mortgage markets, unfavorably impacted our borrowers and the value of their loan collateral. This has been particularly true in certain geographic areas such as the greater Sacramento and Stockton areas of Northern California and San Diego county. As a result, single family loan delinquencies, as well as losses from foreclosures, rose significantly during the third quarter and led to this quarter's large increase to the allowance for losses."

From CBS News (hat tip spacebar):

What I witnessed on the steps of the County Courthouse in Stockton, California struck me as strange and sad and worrying…particularly if you think the worst is over in America’s mortgage meltdown.

An agent for lenders stood on the courthouse steps, his hands full of official documents. He was preparing to auction several houses with mortgages in default. He’s there almost every day at 10 AM. On this day, at least, he had a lonely job: there was nobody there but me…and I wasn’t there to buy. Still, the agent read aloud what he was legally required to read and declared the bidding open. The first house up had an opening bid set at $465,000. Less than two years earlier a buyer had paid $620,000 for the same house. But now, even with a $155,000 discount, nobody was interested.
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In one subdivision I drove through in Stockton, four houses in a row were all in foreclosure. The houses are easy to find. Often the lawns have turned brown. Plants in the garden have died. Mail is piled up at the door. There may still be a “For Sale” sign on the lawn but it may be broken or blown over and nobody has done anything about it. The lender that now owns the house seems to have given up on selling it anytime soon.
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If they can keep up their mortgage payments and the market turns around in the near future it may all turn out fine. But on a block with two or three houses with the brown lawns of foreclosure, it’s hard to be optimistic that the real estate boom is going to return anytime soon.