Wednesday, October 31, 2007

Sabbaticals for Sacramento Homebuilders

From the Sacramento Bee:

When times get tough, the tough ... take a sabbatical. That's the philosophy of developer Martin Tuttle, who is temporarily leaving his VP post with Sacramento builder New Faze Development.
...
Tuttle says his wife's job offer came at the right time – just as the tough housing market forced New Faze to reduce its staff by about one-third, through layoffs and attrition.
...
"I don't really think we have much choice," he [New Faze boss Allen Warren] says of the firm's decision to downsize and wait out the current downturn...And what if there's no quick turnaround? "Maybe when Marty comes back, I'll take a sabbatical," Warren says.
From Reuters:
The fires that scorched California may be out, but a bigger man-made disaster, the housing market, burns away, threatening the U.S. economy and holders of billions of dollars of debt backed by homes...[W]ith some analysts predicting top to bottom falls in prices of as much as 40 percent, California looks headed for a recession.
...
"We are heading into a state recession and that will take an already horrendous mortgage problem and take it over the top," said Christopher Thornberg, of Beacon Economics in Los Angeles. "Prime loans will be in trouble too. We've got a giant mess on our hands."
...
Market rates have gone up, lending criteria have gotten tighter and a bunch of borrowers have handed the keys back to the lenders, who then try and sell into a plunging market. In Sacramento County in September, 27 percent of all sales were by lenders who had repossessed homes, according to DataQuick.
From the Stockton Record [updated]:
When Consuelo Magat bought a Mossdale Landing home in Lathrop three years ago, she had no idea she was buying into an area that would emerge as one of the hotbeds of foreclosure activity in California. Magat, who now lives in Vallejo, said she bought the Lathrop house for $636,000 as a residence but then had to buy a home in another area when it turned out that a daughter was unable to get into a nearby Catholic school.

Magat rented out the Lathrop house in April, she said, but was in mortgage trouble by June because she became unable to carry the monthly payments on two houses. Her lender was unsympathetic to her plight and declined to refinance because there was no equity in the house and its valuation was less than the loan balance, Magat said. She wanted to sell the Lathrop house, she said, but in this slow market, "nobody wants to buy it."
...
[F]ormal foreclosure proceedings hit record levels both in California and in San Joaquin County...Nearly 3,000 households in San Joaquin County received a notice of default in the third quarter, DataQuick reported. That was up nearly 230 percent from 898 notices issued in the third quarter of last year.
...
Dave Harmon, a Coldwell Banker Grupe real-estate agent with foreclosures now accounting for 80 percent of his listings, said that over the past six months, the number of foreclosures quadrupled and then doubled again. Foreclosure activity has been quickening in the past couple of weeks, and he expects the pace to continue picking up over the next six to 12 months.
Here's what the Stockton Record reported back on April 1, 2007:
The market is showing signs of picking up, said David DiDio, mortgage broker and real-estate agent at Greene Dream Homes and Loans in Stockton. If buyers indeed are moving into the market, foreclosure homes could be bought up by fall.

20 comments:

Jacob said...

If buyers indeed are moving into the market, foreclosure homes could be bought up by fall.

That's a big IF. There are few buyers and of those few, only a fraction would likely qualify for a loan.

rocklin renter said...

It's an even bigger "if" than that. It assumes that people actually want the REO homes.

Giacomo said...

"leaving his VP post with Sacramento builder New Faze Development."

Is this for real - "New Faze?"
Did they bother to look "faze" up in the dictionary first?

(Faze means to frighten or cause hesitation.)

paranoid renter said...

>>>>>>>>
It's an even bigger "if" than that. It assumes that people actually want the REO homes.
>>>>>>>>>

Good point. I've only been into one so far and it was in such bad shape that I don't even feel like visiting any others. The house is now off the market, so either someone has bought it or the bank may have decided it needs to be spruced up a bit.

Gwynster said...

I've been in some bad REOs and some that were in pretty good shape. I've seen a few REOs in better shape then your basic "OMG I really need to get rid of this albatros" resale houses.

When you buy the house, you are going to redo it to suit your taste anyways so as long as there are no major structual issues, buy a dirty one and save yourself some nice dough.

Sometimes the REOs are preferable since owners will do the stupidest stuff like painting gorgeous original built ins white to make the place look bigger. If they would have the woodwork alone , I might have even made an offer. If you think that sounds extreme, you've never striped paint off a 100 year old 2000+ sqft old Eastlake or Delta Queen home before. Undoing these crappy hasty flips is a nightmare.

anon1137 said...

Gw - Funny you should mention white paint on wood cabinets. I don't think you can find a single resale house in East Sac that hasn't been covered with about 40 coats of white paint, including every cabinet and built-in in the house. The only thing that doesn't get a coat of white paint is the front door, which is always painted red.

Cmyst said...

I used to love red doors, back when they were unusual. But just like granite counters, when everyone has them they are no longer special.

The main reason I watch HGTV is to get tips on how to do remodeling, because I figure that by the time I buy again it will probably be an REO.
Several of my watch list houses fell off this month, and I suspect they are going into foreclosure, since most were vacant and on the market for close to a year (usually with 2 or 3 relistings).

wrong moves said...

Foreclosures bought up by fall?

Fall is here, so everybody get off of the streets to make room for 17000 investors coming in from oblivion (where they would have to be to not see any recent "news")

Sippn said...

My old fraternity house had a red door - is there beer?

HOUSE2008 said...

Let's see, there was that red door in Germany's red light district, DEFINATELY no beer there. The movie behind the red door or was it the green door?..Ah heck, getting my doors all mixed up....

Gwynster said...

The door thing reminds me of britian where everyone had red, blue, green- all sorts of colors for their front doors.

The Red door is very feng shui which is why you see it so often now.

Gwynster said...

I love HGTV but set up tivo so I never have to see all the realtor commercials and don't have to accidently subject myself to House Hunters, Design to Sell, or the ultimate crap-bragging show Designers Challenge. Half the line up is garbage but you can catch the good re-runs during the day.

They really need to bring back Room to Go because will all the rents that will be a hugely popular show again.

PeonInChief said...

Gwynster--

I'm sorry, but I loved House Hunters. Because I only have basic cable, I don't get to see it very often, but I could watch the coming housing downturn begin there. First there were the first-time homebuyers overpaying for dinky little spaces. Then they were buying townhomes. Then HH gave up on first-time buyers and went for the move-up market. I wonder what they're doing now.

Gwynster said...

They run a lot of reruns >; )

Sorry I just can't stand that show. They showed people making about 60k gross buying 350 to 500k homes like that was normal. It's like they were trying to condition the viewing public to overpaying anf financial hardship. I always wanted to jump through the screen and strangle the agents with a few hefty b!tch slaps for the buyers tossed in.

On the bright side, if I was a divorce attorney I'd use that show as a way to find new clients.

Patient Renter said...

"If buyers indeed are moving into the market, foreclosure homes could be bought up by fall."

Clearly he meant fall, 2012.

Gwynster said...

Interesting tidbit from Ben's blog for those who dismiss RealtyTrak's numbers:

From CNBC. “I know a lot of you don’t like the foreclosure reports offered by RealtyTrac because of the methodology involved. RealtyTrac counts ‘foreclosure filings,’ which include default notices, auction sale notices and bank repossessions, so one property could ostensibly get several hits.”

“But you all should know that in the 2007 mid-year report, RealtyTrac started a new data string, a count of ‘unique addresses in some stage of foreclosure. This new metric only counts a property once, even if there were multiple foreclosure actions filed against the property during the time period covered by the report.’”

smf said...

"I used to love red doors, back when they were unusual. But just like granite counters, when everyone has them they are no longer special."

That is one of the worse things about this bubble, the creation of so many 'avocado green' fashions for homes.

In the rush to build/remodel to suit all tastes, we created the new green for all these homes. Most follow the same template, making most houses not special at all.

Nothing bothered us more than going to an expensive for sale house and seeing the same granite we have in our kitchen in a 'mansion'.

Or the crap remodel jobs. Like the large home with the same dishwasher I had purchased (for $250) in my 1994 starter home.

norcaljeff said...

"We are heading into a state recession and that will take an already horrendous mortgage problem and take it over the top," said Christopher Thornberg, of Beacon Economics in Los Angeles.

"Prime loans will be in trouble too. We've got a giant mess on our hands."


Wow, that's insane. Not sure how many ppl read that article but even reporters in London know about these CA RE problems. That Chris Thornberg is a great economist and I like to listen to what he says. I believe Lander posted a lecture he gave at Humbolt State about a year ago where he was predicting this mess before it started. The RE bust back in 1990 was what sent CA in a recession before, then took the country with it. I have no doubt it will happen again. With tech stocks on fire and the stock market at record highs, I feel like playing Party Like It's 1999 by Prince.

SheWrestles said...
This comment has been removed by the author.
SheWrestles said...

I'm happy with my REO. It has one little (big) problem with the HVAC that Pulte has promised to correct. The only inconvenience is that we had to purchase and install our own blinds.

I have a question, though. D.R. Horton has a ton of empty plots in Twelve Bridges...I would say they've built maybe 1/3 of their planned total here. Is it normal to put a model home up for sale with so many homes left to build in this 'planned community'?

I've been in this home a couple of times and it's worth *maybe* $350,000.

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