Thursday, December 13, 2007

"The Deep Pockets...Are Suddenly Empty"

From the Sacramento Bee:

There's a grinch in town this year, emptying the Christmas stockings of poor children and taking the food off family tables. But the culprit isn't a green fellow whose heart is two sizes too small – Sacramento's villain has no heart at all. It's the weak economy, Virginia, and it has the people who run holiday toy and food drives panicky as needs grow and donations dwindle.
...
It's a common refrain, said Steve Heath, president of United Way/California Capital Region. "I'm hearing the same thing everywhere – it's a tough year for getting food and for getting toys," Heath said. "Part of it is the local economy. Anyone who works in the housing industry is struggling....

In the Sacramento region, the deep pockets of some philanthropic developers are suddenly empty. "Developers are going through very challenging times," said David Hosley, general manager of public television station KVIE. "Some that were very generous to us in the past can't be this year. This is what I said to one of them last week: 'Listen. We remember what you've done. We know where your heart is. And this year we understand that you can't do it.' "
From the LA Times (hat tip LA Land):
[N]obody doubts that Stockton and the rest of the Central Valley have been severely jolted. By October, foreclosures in Stockton's San Joaquin County were more than eight times last year's levels, outpacing the state's increase by 41%, according to DataQuick, a La Jolla-based information service...[S]peculators -- an estimated 40% of the home buyers in Stockton -- were buying houses in order to flip them quickly at a nice profit.
...
Pete Ponce de Leon, a 50-year-old machinist, said he and his wife were barely keeping up with their monthly mortgage payments, which shot up from $1,700 a year ago to $2,500 now. He said he cashed in two IRAs, sold his tools, sold a truck and was bracing for another rate increase this month. Along the way, he lost his job, and his lender refused to cut him a break. "Why don't they just screw us all at once instead of a little at a time?" said Ponce de Leon, who has found another job and hopes to renegotiate his mortgage.

Asked whether the higher payments took them by surprise, Ponce de Leon struck the same note as many other homeowners in trouble. "We just thought we'd be OK," he said, explaining that he and his wife had planned to use what they'd expected to be the rising equity in their home to refinance the adjustable loan at a lower rate.
...
Monaliza Botello, a 25-year-old nurse, said she was surprised when her father, who brings in $4,500 a month, last year secured a loan requiring a $4,000 monthly payment. The idea was that Monaliza's father would own the new $495,000 four-bedroom for a year or two, at which point she and her husband, Isaac, could afford to buy it from him with a refinanced loan. But the three of them, who were all living there, fell behind in their payments, and Monaliza lost her dream home...As home prices plunged, Botello's cousin around the corner also went into foreclosure, as did her godmother -- a real estate agent nearby. "Everyone was going, 'We can't refi? How can we afford this?' " she said. "Everyone was just shocked."
From CNBC's Realty Check:
I’m hearing some disconcerting rumblings from some builders, anecdotally speaking of course. One mid-sized private builder told a friend of mine that potential customers coming through their model-home doors are openly hostile. They’re not just looking for good deals; they’re looking for payback.

Apparently some of today’s new homebuyers blame the builders outright for the current housing predicament. They are telling unwitting sales reps that they are to blame for running up prices and foisting untenable loans on clients during the latest housing boom. Buyers are telling the sales people stories of how rudely they were treated during the boom, how they were told that if they didn’t want to take the deal they could stick it, because there was a line of buyers right behind them.
From the San Diego Union-Tribune:
Joseph Anfuso, a USD alumnus who served as chief financial officer for Shea Homes in San Diego before becoming president of Florsheim Homes in the Central Valley, said that when prospective buyers come window shopping at a development, “treat them like a rich grandfather, as if you're in the will.”
From the North County Times:
"The one thing I can tell about you Realtors is that you're all liars," said Joseph Anfuso, president of Florsheim Homes, a builder in California's Central Valley. Anfuso told agents during a Wednesday real estate conference at the University of San Diego that they need to stop inflating or hiding sales numbers and swallow a hard dose of reality on their cash flow if they expect to remain in business as sales continue to plummet.

11 comments:

Lander said...

[S]peculators -- an estimated 40% of the home buyers in Stockton -- were buying houses in order to flip them quickly at a nice profit.

And that 40% doesn't include all the "I'll be able to refinance" speculators who believed real estate prices only go up.

Max said...

Buyers are telling the sales people stories of how rudely they were treated during the boom,

I, like a lot of people, remember how bad they were treated by sales staff at the developments. What comes around, goes around. :)

smf said...

"We just thought we'd be OK," he said, explaining that he and his wife had planned to use what they'd expected to be the rising equity in their home to refinance the adjustable loan at a lower rate."

Refi into what? I mean, you can't really afford your house, but you expected that by some miracle a loan product would make your house affordable?

How??

Can someone explain that one to me?

As I said before, foreclosure was the only result expected once these people signed their papers.

Patient Renter said...

smf, the worst part is that many people think those folks should be bailed out. Their home purchase was doomed from the start. Why would you bail out something that was never possibly going to succeed?

Gwynster said...

"They’re not just looking for good deals; they’re looking for payback."

**In my best Ron White-like Missouri drawl**

Ya caught me. Ya caught the Gwynster.

Lander said...

Ya caught me. Ya caught the Gwynster.

Busted. LOL! When I posted that bit, I was thinking what "mid-sized private builder" in Woodland did the Gwynster tick off this time?

Bakersfield Bubble said...

Alliance Title shutdown in Bakersifeld and Sacramento. They might want to get their PR straight.

From Bakersfield:

The local office of Alliance Title, a large title company, is shutting down as of 5 p.m. Thursday along with all of Alliance's California operations, an official said Wednesday.

In Kern County, 36 people will likely lose their jobs, said Brynn Powers, vice president/general manager of Bakersfield operations.

The closure is not due to local economic conditions, he said. He said the local branch is financially healthy.

He said he couldn’t speak to the company’s finances at a larger level.

___________________
From Sacramento:


Sources told News10 Alliance Title Company is shutting down operations in the Sacramento area effective immediately.

At one time, Alliance was the number one title company in Sacramento based on market share according to one longtime employee.

According to the company's Web site, Alliance Title was founded in 1996 and at its peak operated nearly 200 branches in 34 California counties with 2,000 employees.

It's unclear what other Alliance offices in the state, if any, are also affected.

One employee who was laid off Monday said she was told there's not enough work to continue supporting office operations.

"I've never seen it this bad," she said.

A receptionist at the company's headquarters in Campbell said no one was available to offer additional information.

"They're all out in the field right now," she said.

Alliance Title had already closed its office in Elk Grove and employees in the Galt office had been put on notice they would soon be transferred to another office and their office would be closed.


http://www.news10.net/display_story.aspx?storyid=36145

http://www.bakersfield.com/hourly_news/story/309337.html

smf said...

Why would you bail out something that was never possibly going to succeed?

I don't know.

But a lot of these people could not afford the house in the first place, but they all repeated the same line about a later refi with the bigger equity.

My question always was 'refi into what'?

I mean, did they expect to get MORE money but pay LESS? Under what utopia does that happen?

Jacob said...

I think the fantasy worked something like...

Buy a home for $400k (10k income, who cares). After 2 years the home will be work at least $550k, so refi and take out $50k to supplement you income.

Repeat again ang again, gain $150k equity and take out like $50-$100k. Then when you retire you will owe 5 million but the home will be worth 12, so just sell...

Cmyst said...

A co-worker who I believe lives in Roseville was mentioning how she and her husband would like to move, even though they like their home and they bought it years ago and paid less than 200K for it. She says the neighborhood is deteriorating due to all the foreclosesures. (I should have asked where she lived, exactly, but I was low on caffeine and high on hollandaise at the office Christmas party.) She blames most of it on flippers, but she does know two families who are being foreclosed on that actually live there and she points out that they are the same socioeconomic class as she and her husband, and probably did not have subprime loans, but just over-reached to buy a house that would have been well within their means had they bought when my co-worker did.
And that is why people are angry. I wanted to buy in 2006, and I had two choices: either believe the mortgage and Realtor guys that told me that I could afford 500K, or stick to what I knew I could afford and buy in Oak Park.
The people who borrowed 500K are going under and the middle-class people who bought in Oak Park are living in an area that WILL suffer from budget cutbacks to services just about the time the crime rate will go up due to the Recession.

Perfect Storm said...

"The one thing I can tell about you Realtors is that you're all liars,"

Who would have thunk it, a realtor being called a liar. One thing a realtor has to do is make a sell without that they have no income. An honest financial planner can always suggest low risk investments, but a realtor will always say it is good time to buy.