Location (Negative), Location (Negative), Location (Negative)

For the first time in the current housing bust, every reporting zip code in Sacramento County showed a price decline in January from year ago levels. The following graph shows the percentage of zip codes registering price drops based on the median price per sq. ft. of resale single-family detached homes. Click to enlarge.



Agent Bubble has been kind enough to provide average price per sq./ft. data for all residential MLS listings in Sacramento County (for January):

• Change in price since last year: -9.9%
• Change in price since 2005 peak: -12.0%
  

Meanwhile, the California Association of Realtors released their price and sales data for January 2007. The data is based on MLS single-family homes sales in the Sacramento region.

• Change in median price since last January: -3.4%
  
• 7th month of year-over-year (YoY) price declines
  
• Change in median since price peak: -8.6% (down $34,110)
  
• Change in homes sold since last January: -20.9%
• 22nd month of YoY sales declines, 17th month of YoY double-digit declines

DataQuick's dqnews.com also has January's city/county numbers for combined sales (resale single family residences and condos as well as new homes). Yolo County continues to lead California in year-over-year price declines.

• El Dorado: -6.81%
  
• Placer: -9.01%
  
• Sacramento: -6.25%
  
• Yolo: -22.50%
  

January's DQ stats are archived here.

Folsom Mortgage Lender Goes Belly-Up

From News 10:

Folsom-based Central Pacific Mortgage has abruptly shut down operations, telling employees it can't afford to pay them.

A memo to the staff from the president and CEO John Courson on Monday said the company would cease operations immediately.

"We do not have sufficient cash to fund the February 28th payroll. Employees should remove their personal items from the office at the end of the day," Courson wrote.
...
A recent staff directory indicated there were more than 80 people working in Folsom.

Hat tip: Max.

From their website:

Central Pacific Mortgage (CPM), founded in 1977, is headquartered in Folsom, California. As a mortgage banker, we engage in the business of originating, closing and selling residential mortgage loans. Today, we have over 100 retail and wholesale origination offices across the country. When you join the CPM family, you align yourself with a company that cares about the well-being of you and your staff.

'Running Right Into the Wall'

From KCRA:

With interest rates on the rise and the real estate market in a slump, adjustable mortgage rates are skyrocketing. After five years of an adjustable rate mortgage, one couple sold their home and wound up owing $15,000 after they sold.

Their real estate agent Mike Toste said they were paying the lowest option every month but they were adding money to their principal balance every month."
...
They get into these loans and they end up falling delinquent because they just can't afford them anymore. They're not going up $200 to $300 but $800 to $900 sometimes $1,000 a month," said Toste.

Real estate records in Sacramento County show more than 7,000 foreclosures in 2006 alone. "Out of about 310 active homes for sale in Antelope there are 57 homeowners that have their properties listed as short sales," said Toste.
...
"The unfortunate thing about that is people are borrowing from retirement accounts and exhausting every last penny they have to try and keep this mortgage current. They're just running right into the wall because eventually they're going to get to that result where they have no money. And then they're forced to sell their home."

Central "Subprime" Valley

From the Wall Street Journal:

Fears about defaults are slowing the gusher of investor funds going to riskier segments of the mortgage market. That means less money available for "subprime" loans to riskier borrowers, forcing lenders to focus more on borrowers who can afford down payments and have well documented finances. With fewer lower-income Americans able to buy homes, downward pressure on prices will probably increase.
...
In a recent report, Keefe, Bruyette & Woods analyst Frederick Cannon said "constraints on lending to first-time home buyers are likely to prolong the housing downturn" by limiting sales of entry-level homes, making it tougher for the owners of those homes to trade up.

Nationwide, 16 percent of the home-purchase loans issued in the first half of 2006 were subprime, the Mortgage Bankers Association says. The impact of the tightening likely will be bigger in markets that were more dependent on subprime loans. Such mortgages accounted for more than one-third of such loans in some California markets, including Stockton-Lodi, Modesto and Merced; in Richmond-Petersburg, Va.; and in Miami, according to First American LoanPerformance.

Nearly two dozen subprime lenders have been acquired or shut down in the past year, "with another dozen on the ailing' list," a recent Credit Suisse Group report says. Cumulative losses on subprime loans could exceed $10 billion over the next two years, the report says.

Reporting a loss for the most recent quarter, subprime lender NovaStar Financial Inc., said last week that it had raised the minimum credit score needed for loans with low down payments, among other tightening steps.

"We're probably reverting back to guidelines that were in place" four years ago, NovaStar President Lance Anderson says. The new guidelines wouldn't have allowed as many as 25 percent of last year's loans without more documentation or bigger down payments, he adds.

From the Merced Sun-Star:

Merced's median home price fell to $325,000, down from $363,000 during the same period in 2005. The median price peaked at $376,000 in the second quarter of 2006, according to NAHB statistics.

Merced County Association of Realtors President Scott Oliver called the price drop a sign that sellers of older houses are becoming more realistic about the competition they face from new housing inventory.

"The sellers have gotten the message now that they have prices a little high," Oliver said. "(They) fought reducing their prices for about four to six months."

As new subdivisions remain flooded with empty inventory, builders are offering more and more incentives to sell houses, Oliver said...In response, sellers of "resale units" -- houses that have been on the market before -- are finally lowering their asking prices, he said.

'A Market Way Worse Than Anyone Expects'

From the Sacramento Business Journal:

Residential mortgage lenders are tightening underwriting criteria for people with blemished credit as thousands of homeowners are defaulting on their mortgages. And homeowners who will soon have unmanageable monthly mortgage payments might not find a lender willing to handle their refinancing.

The problems surfaced in the fall with a sharp rise in foreclosures after years of almost none. Lenders in the four-county area took possession of 814 homes in fourth-quarter 2006, a 1,300 percent increase from the same three-month period in 2005.
...
Now, the easy lenders have disappeared from the market in some sudden and spectacular bankruptcies as borrowers face the end of their teaser rate period...Several large national lenders to people with blemished credit were forced to seek bankruptcy protection in the past month, including ResMAE of Irvine and Mortgage Lenders Network USA of Connecticut. Some of the big players, such as HSBC Holdings PLC and New Century Financial Inc., recently have warned of major problems.
...
"It is not unusual for someone who makes $4,500 a month to have a mortgage payment now of $1,700, and when that loan adjusts, it will go to $3,200 a month," said Scott Thompson, owner of Short Sale Resolution Services in Carmichael. Thompson for 15 years was co-owner of Thompson & Brown, a real estate brokerage company.

"A year ago, I was uncomfortable with the market, so I started my own business for short sales. I think we are about to see a market way worse than anyone expects. This is going to be bad," he said. "In past declines, borrowers were $200 or $300 a month away from making ends meet. Now, when these option ARM loans adjust, people are not even close to making ends meet."
...
"It doesn't matter if the fault is with the people who sold these loans or if it was with the borrowers who exaggerated their income to get the loan," Thompson said. "Everyone was caught up in the real estate hype. And that is now coming home to roost."
...
Faced with a new, higher mortgage payment, people are looking for new loans. Many are not finding them. "In some markets, over 90 percent of the people who come to us for help are in properties they shouldn't be in," said Ed Shanks, executive vice president of national retail lending for U.S. Bank in Minneapolis. "That, combined with the decreasing appraisal value of their home, is turning into a perfect storm."

Wells Fargo Bank this month tightened its underwriting standards. It reduced by 5 percent the maximum loan-to-value ratio it will lend to subprime borrowers in declining markets. A declining market is one in which house values are either going down or staying flat, said Wells Fargo spokeswoman Julie Campbell. All four counties in Greater Sacramento are included under that definition.

"Clearly, across the board, we are seeing tightening in underwriting," [Jeff] Tarbell, [owner of ATM Mortgage in Sacramento] said.

The loose underwriting tended to be done by mortgage companies, but the heat is being put on all financial providers. Banks are being told by regulators to underwrite even their nontraditional loans -- such as option adjustable rate mortgages (ARMs) -- as if they were traditional, fully amortizing loans. The criteria will take many lenders out of the subprime loan market and could even remove some of the investment money from the secondary market that funds such loans.

"We are just beginning to see the tip of the iceberg on this," CoreLogic's [Anthony] Romano said.

From the Sacramento Bee:

The economy is bearing up well, in Sacramento and across the country, despite the weakened housing market, a Federal Reserve economist said Friday.
...
Sacramento, even though it's faced some of the worst of the nation's housing slump, continues to generate decent job growth, she [Janet Yellen] said.

The "overall health of the local economy," including renewed hiring by state government, should help Sacramento avoid a repeat of the significant recession that engulfed the area in the early 1990s, Yellen said during a speech at California State University, Sacramento.

"While the pace of employment growth slowed last year in the Sacramento area, as it did in the rest of the state, the state government's fiscal situation has improved over the past few years, and that's helped create new jobs locally and keep the area economy on a stable expansion path," Yellen said.

She added that "there are signs of stabilization" in the Sacramento housing market. DataQuick Information Systems, which tracks the housing industry, reported recently that while sales activity in Sacramento is still in a slump, the decline in prices has slowed.

From the Sacramento Business Journal:

Less than one in 10 families, or 9.2 percent, earning the annual median income of $65,400 could afford a home in the Sacramento region during the past quarter, but that was better than the 7.9 percent rate in third-quarter 2006, according to a California Building Industry Association report released Thursday. Despite the increase, the affordability rate, which also includes the area's median-price of $370,000 for the just-completed quarter, makes the region the 18th-toughest market for home shoppers.

"The Day of Reckoning Has Arrived"

From the Sacramento Bee:

The dive in new-home construction around Lincoln has created a monster for a small school district, as developers' fees slow to a trickle and the interest mounts daily on $189 million that the district borrowed to build new schools. The result of the downturn is a "staggering" amount of debt for Western Placer Unified School District -- and the day of reckoning has arrived, according to a report presented to the school board Tuesday night.

For years, the district has struggled to keep up with Lincoln's mushrooming population. Its enrollment, now 5,500 pupils, has grown 45 percent since 2002-03. All that is changing. New home construction dipped precipitously in the past year. Just 1,060 units were completed in 2006, compared with 2,900 the year before, according to Lincoln city officials.

That translates directly into diminishing dollars for the school district, which has a 2006-07 general fund budget of $37 million. So far this year, only $370,000 in developers' fees have materialized of the $2 million anticipated. "Something that popped out and hit me right between the eyes is the huge debt," said private consultant Curt Pollock, the report's author and an expert on school facility financing.
...
"The projections were that we were going to continue with this nice growth, and our projections were wrong," he said..." Had the housing market not dropped off so fast and so dramatically, I don't think we'd be in the situation we're in," [former Superintendent Roger] Yohe said.

From the Auburn Journal:

With a slump in the housing market slowing property tax revenue growth and worker costs rising, Placer County supervisors were warned Tuesday to expect some tough budget decisions in the coming months. Projections are that tax revenue next fiscal year will grow by $7.1 million -- which won't offset the $28 million county budget forecasters say will be needed to sustain operations at current levels.
...
[Therese] Leonard [County Executive Office principal management analyst] also outlined to supervisors that building-related revenues are proving to be the biggest drags on the budget. Real-estate transfer taxes are down this year by $953,000, supplemental property taxes declined $997,000 in the first six months of the fiscal year, and construction permit revenues dropped $507,000.

From the Sacramento Bee:

Born during the Great Depression, the 20 percent down payment traditionally used to buy a house has now joined $1.50 gasoline as ancient history. More than 1 in 5 California homebuyers now finance every cent of their home purchase, says the California Association of Realtors. Seven years ago it was 4.5 percent.
...
In the past, mortgage lenders wanted collateral in the form of 20 percent down. But the housing boom and its spectacular rise in home values largely erased lending risks. That pushed the industry to flood the market with easy money.

The trend raises questions about whether a looser lending standard will affect the market during a downturn. Some fear owners with none of their own money to lose may have fewer qualms about walking away from homes if they get behind on payments. That could aggravate rising foreclosure rates in regions like Sacramento where the housing market has slumped.

From News 10:

There is an ugly secret working its way to the surface in many of the Sacramento region’s most stable and sought-after neighborhoods, where homes are new and the prices high. People living in these communities won’t even utter the "G" word for fear it will drive home values down. That's the result of having the stigma attached of ‘Oh, they have gangs.' But gangs in middle class neighborhoods are more than just a fact -- they are on the rise. It is a perplexing and growing problem that police are finding has little to do with income or race.
...
Another huge contribution to the problem is parents who work long hours to pay for their high-priced new homes, leaving their teenaged children unsupervised for long periods of time every day, [Dr. Charles] Scott [a U.C. Davis child psychiatrist] said.

Sacramento Housing Market Underwater: 1 in 5 Homes is a Short Sale

From USA Today:

Here's an alarming fact about Sacramento's housing market: About one of every five existing homes on the market is a "short sale." That means the home is worth less than the value of the mortgage, and the lender is willing to accept less than full repayment of the loan to avoid foreclosure, says Tracey Saizan, president of the Sacramento Association of Realtors.

That, in turn, puts pressure on the remaining 80% of sellers, who have equity in their homes, to cut prices. The median price in the state capital, one of the most overheated metro areas during the real estate boom, fell 4.3% in December compared with December 2005.
...
"There is a sense that we are going through the tunnel, and the light at the other end is sunshine, not another train heading at us," says Greg Paquin of The Gregory Group.

From the Auburn Journal:

Citing shifting economic factors, Auburn Harley-Davidson owner Bob Holmes has scrapped plans to move his North Auburn dealership to a Bowman parcel. The plan would have seen construction of a 30,000-square-foot store and service facility at the corner of Luther and Bowman roads.
...
Holmes withdrew his application last month but stated that once the project makes economic sense again, he would re-apply...Citing the recent financial difficulties on a 55-story condominium and commercial project in downtown Sacramento as an example, Holmes said that it's a difficult time for a development to move forward because of the slowing housing market and economic conditions in northern California.

Businesses like boat, auto and motorcycle dealerships depend on discretionary income to remain high and with the housing market continuing to soften, the Auburn Harley-Davidson focus will be on the Locksley Lane location.

From the Sacramento Bee:

Holding back: The builder of one of two planned downtown condo towers hasn't sold a single unit in months. But that's strictly by design, says Craig Nassi, the Denver developer behind the long-awaited Aura project at 601 Capitol Mall.

He says he reached the sales threshold he needed for a construction loan last fall. Since then, he's held off sales in the expectation he can get higher prices for the remaining units after construction begins. "We do that on every project," Nassi says. "You get a lot more money (for condo units) later in the game."

Nearly 200 of the project's 268 units have been sold, according to Hanley Wood Market Intelligence....Nassi says he expects to finalize his main construction loan from Corus Bank of Chicago by mid-March. When will construction start? "The next day" after the loan is finalized, he says.

From the Sacramento Business Journal:

Centex, the region's eighth-largest builder last year, is one of at least 10 homebuilders in Sacramento that have had a change at the top ranks, a turnover rate that's been pushed by the market.

"The builders are shuffling," said Angel Ahumada, founder of Integrity Recruiting of Roseville, which specializes in placing executives and mid-level managers in construction industry positions nationwide.
...
Most of the turnover occurred during a stretch that saw new-home sales in the region drop from 14,095 in 2005 to 9,588 last year...New division presidents have taken the helm in the past year at KB Home, Meritage Corp., Morrison Homes and Pardee Homes.
...
Some of the first moves by the new leaders have been to trim the work force. Construction-related jobs fell by 1,500 between December 2005 and December 2006.
...
Richmond American Homes reduced its Sacramento staff, including division president Jim Gillette, who was hired in December 2005 and then departed about nine months later, said Mark Butler, Northern California president at Richmond American. Gillette is now working as a real estate consultant.

Butler, based in Richmond American's Pleasanton office, said the company hasn't pulled up stakes in Sacramento but has reduced its land holdings. "Our goal is to keep buying land," Butler said, adding that the company has not closed a deal since early 2006. "(But) the next deal we do has to reflect today's sale price and incentives."

From the Stockton Record:

The coming layoffs of about 100 Stockton-based workers at Washington Mutual should surprise nobody. A good number of those people work in WaMu's sub-prime lending arm, Long Beach Mortgage, one of the nation's biggest sub-prime mortgage lenders.

Sub-prime loans are not your traditional 30-year, fixed-rate mortgages. Anything but. They are loans aimed at higher risk borrowers, people with little to put down, and people who, to be honest, might be buying more home than they can afford.
...
But funny-money loans? It probably will be a while before we see what we saw at the height of the boom. In the first quarter of 2005, 42 percent of all mortgages in San Joaquin County were interest-only loans.

The heady times started heading south by the end of that year. Regulators have become more and more outspoken about the dangers of the sub-prime, put-'em-in-a-house-at-any-cost industry. Financial institutions loan money. They should not be in the real estate business and that's what might happen if a bucket of mortgages go south, regulators warn. And they might. Foreclosures are climbing. In the fourth quarter of 2006, foreclosure notices in San Joaquin County reached their highest level in at least 10 years.

Also from The Record:

The rising number of foreclosures in San Joaquin County isn't helping home sellers, because that pumps up the competition, makes it tougher to sell and depresses prices. Still, builders, brokers and industry experts said that even with defaults climbing, the impact may not be significant because homes-for-sale numbers have plummeted in recent months anyway.
...
David DiDio, mortgage broker with Greene Dream Homes and Loans in Stockton, said the foreclosures downturn should end soon, adding that the last foreclosures upswing a decade ago lasted about a year and a half. The housing market has picked up noticeably recently, he said, "so by spring, we'll be out of this, because most of these homes will be able to sell."

SL's Water Cooler - February 2007 (part 3)

Post off-topic links, observations, and stories here. Please read the comment policy before posting.

'When I Give Them the Price, They Get Really Quiet'

From the Modesto Bee:

Record numbers of homes are sitting vacant awaiting buyers in the United States. An estimated 2.1 million empty houses were listed for sale during October, November and December. That's about 62 percent more than usual, according to U.S. Census Bureau statistics.

The glut of vacant houses is readily apparent throughout the Northern San Joaquin Valley, as bank foreclosures and former rental homes flood the for-sale market. Empty houses cause hardship for owners, who often struggle to pay mortgages and upkeep costs on property they can't sell.

For 10 months, Harold and Donna Suender have tried to sell their empty Salida house. When they put the 2,305-square-foot home on the market in April, they priced it at $515,000. But the slumping real estate market has forced them to repeatedly lower their price. This week, they dropped it again to $399,996.

"I've never seen anything like this," said Harold Suender, who bought a new home in Riverbank before the market turned. "That (near 20 percent price reduction) is a lot of money, but we have to get it sold. We can't cover two house payments forever."

The Suenders had hoped their Salida house would help fund their retirement. They bought it in 1994, then moved out in 2003. They rented out the four-bedroom house for three years, getting as much $1,650 a month.

But their renter moved out shortly after the home went up for sale. So no money is coming in, and the Suenders are paying for landscape and cleaning services to keep the house in top condition to attract buyers.

"Probably the smartest thing to do is try to rent it again, at least until the market comes back up," Suender said. "But I don't know how the rental market is now."

The answer to that is: Not good.

"The rental market is very soft and very tough right now ... and it's deteriorating," said Paula Leffler Zagaris, who leads Liberty Property Management, which handles about 1,500 rental homes in the Northern San Joaquin Valley.

Zagaris estimated that a home in Salida such as Suender's now would rent for about $1,250 a month. She said that's because so many homes that have lingered on the sales market have started flooding the rental market.

Conversely, since the oversupply of rental property has pushed down rents, many former rental-home owners are trying to sell instead. "I get at least five or six calls a week from investors who want to know how much their rental home is worth. Then, when I give them the price, they get really quiet," said Mary Prieto, a Prudential California Realty agent who sold 80 homes in Stanislaus County last year.

Prieto said nine of her current 28 listings are vacant homes. Some are former rentals, but most are houses owned by people who bought elsewhere and since have been unable to sell.

Another reason behind the surge in empty homes, Prieto said, is the region's rapidly increasing foreclosure rate. "I would say more than half the vacant homes on the market are owned by banks that have repossessed them," Prieto said.

Also from the Modesto Bee:

A developer that had hoped to build a 3,000-home community on more than 850 acres northwest of Riverbank no longer is interested. Grupe, a Stockton-based developer, had agreements to buy the acreage to build an upscale community called The Bridges....Grupe also is no longer interested in paying for the city's general plan update. It already was paying toward a promised $400,000; the entire plan was expected to cost $500,000.

"Whoa. Whoa. Whoa. I thought Grupe was going to pay for it whether they built or not," Mayor Chris Crifasi said at a City Council meeting this week.

That was the plan, but Grupe could terminate payments anytime, company Chief Executive Officer Kevin Huber said by phone Wednesday..."That's why I like the city to rely on itself for things like this," Councilwoman Virginia Madueño said.
...
Grupe pulled out last week, citing concerns about a slowdown in the housing market, said Riverbank Community Development Director J.D. Hightower.

Hope in Sacramento? Sales, Prices, Pendings Down; Inventory, Foreclosures Up

From the Sacramento Bee:

How does the capital region's housing market look so far this year? Not unlike last year -- but with a bit more hope that the free-fall in prices and sales may be ending.

The new year opened last month with the fewest escrow closings for a January since 1998, according to property researcher DataQuick Information Systems. The firm reported similar slides to 1990s levels in the Bay Area and Southern California.
...
DataQuick reported 2,522 buyers of new and existing homes picked up the keys last month in Amador, El Dorado, Nevada, Placer, Sacramento, Sutter, Yolo and Yuba counties -- down from 2,999 the same time a year ago.
...
Median sales prices, meanwhile, continued a months-long trend of falling below the same month a year earlier in seven of eight capital-area counties. Only Nevada County saw higher sales prices than in January 2006.
...
Sacramento County reported a median January sales price of $345,500 for all new and existing homes, down 6.6 percent from the same time last year. In December the year-over-year decline was 9.1 percent. Likewise, Placer County's median $423,500 median sales price was down 10.8 percent from January 2006. In December prices were down 18.2 percent from a year earlier.
...
January also ended with 10,971 existing homes for sale in El Dorado, Placer, Sacramento and Yolo counties, according to Sacramento-based real estate researcher TrendGraphix. That's nearly triple the number of homes for sale in January 2005 and a major contributor to falling prices, analysts say.
...
Many in the real estate industry predict that a housing recovery could take hold during the year's second half. But others worry that too many homes for sale and growing foreclosure activity could prolong or worsen the region's housing slump.

More Layoffs for Stockton WaMu

From the Stockton Record:

One hundred employees of Washington Mutual Bank's downtown administrative center were notified Tuesday their jobs will be eliminated by the end of the year.

The Seattle-based bank's Stockton center on East Main Street is downtown's largest private employer, with 703 administrative workers and another 50 working in bank branches throughout Stockton. The layoff will leave the center with about 600 employees by year's end.

It's Washington Mutual's second 100-person layoff announcement in a year. It wasn't good news to those who promote the downtown economy.
...
Fifty of the affected employees work for Washington Mutual subsidiary Long Beach Mortgage. Their back-office, loan-fulfillment jobs will end on a staggered schedule until the office is shut down sometime in April.

"Our decision is a reflection of the weakening overall of the subprime mortgage market," corporate spokesman Tim McGarry said, noting that the bank remains committed to the subprime market and will transfer operations to existing offices in Dublin and Anaheim.
...
McGarry said another 50 Washington Mutual employees working in custodial operations within the loan servicing department were informed Tuesday their jobs will end this year, with half ceasing July 31 and the remainder at the end of the year.

Saca Defaults on Loan

From the Sacramento Bee:

Developer John Saca Wednesday said he has defaulted on a $22 million loan he used to buy the downtown land where he broke ground last year for two 53-story condominium and hotel towers.

The default -- the first step in a foreclosure -- doesn't necessarily mean the development is dead. Rather, it's a public exposure of the months-long private struggle between Saca and his equity partner in the Towers, the giant California Public Employees' Retirement System -- CalPERS.

Construction on the prominent site at Third Street and Capitol Mall stopped in January, leaving a hole in the ground, studded with piles, a few blocks down from the Capitol.
...
"This predicament is out of my control," Saca said. "If it were my choice, all the outstanding invoices would be paid immediately. I have proposed several alternatives to my partner on how we can pay these bills; however, none have been accepted."

Saca went on to say that he's "not sure (CalPERS is) the right partner for this project."
...
"Projects of this magnitude have their ups and downs," Saca said. "I am very confident that this project is going to succeed consistent with the vision that has rightfully excited this community."

Also, the city of Sacramento is suing Saca over his K Street development project, which includes plans for 30-story housing towers.

Sacramento Association of Realtors - January 2007 Report

The Sacramento Association of Realtors (SAR) has released their MLS data [pdf] for January 2007. Figures are for single-family home sales in Sacramento County and West Sacramento.

• Sales (YoY): -16.1%
  
• 20th month of YoY sales declines, 17th month of double-digit declines
• Median price (YoY): -3.6%
• 7th month of YoY price declines
• Median price (from peak): -9.6% (down $37,750)

More January reports:

• Placer County Association of Realtors - pdf file
  
• El Dorado County Association of Realtors - pdf file

Sacramento County Foreclosure Activity Rises Nearly 400% in January

From News 10:

California continues to lead the nation in foreclosure activity with a nearly 300 percent rise last month from January 2006. In Sacramento County, the increase is nearly 400 percent. The report comes from Fair Oaks-based foreclosures.com, which has been tracking the housing market since 1992.

Hat tip: SCREBC blog

UPDATE: Max has graphed the data here.

DataQuick Revises Figures Back to 1988

From the OCRegister:

Most noteworthy in this month's DataQuick report is the fact that the market tracker has revamped its home-sales math....The changes include a broader definition of a home sale and a new way to calculate the median price. Figures back to 1988 were revamped.

From DQNews:

The change, the first since DataQuick began publishing statistics in 1989, takes advantage of significant data enhancements the past 18 years.

These changes...will take effect starting with our published January 2007 sales statistics.

Sales counts: Changes in our methodology to determine the number of sales transactions have resulted in a roughly 10 percent increase, on average, in our historical monthly sales totals. In most cases this has little if any impact on the year-over-year increase or decline in sales.

Median sale prices: The main change here is a switch from a so-called weighted median price to a straight median for our "all homes" category, which combines resale houses, resale condos and all new homes. On average, this change results in a roughly 1 percent difference in the all-home median sale price historically.

In addition, some of our other medians (for resale houses and new homes) have changed slightly because of various database enhancements. Again, these changes are mostly minor and do not alter historical trends.

House of Dreams or Nightmares?

From the Auburn Journal:

There you are, living in the house of your dreams. It cost you $500,000, but you're only paying $1,100 a month after you 100-percent financed your home with an interest-only pay-option adjustable rate mortgage, known as an ARM. Then the market changes. Your completely financed home, after the market has cooled, is now going to cost you almost $4,000 a month for your mortgage. Welcome to the world of some of Placer County's residents.

According to DataQuick Information Systems' latest report, default notices, the first step in the foreclosure process, have risen 262.4 percent in the fourth quarter of 2006 in the county, exploding from 149 notices in the fourth quarter of 2005 to 540 in 2006. Placer's rise is the second highest increase in the state, according to the La Jolla-based real estate statistics research firm.

To combine with the default notices, median home prices in the region continued a downward trend according to the latest figures released at the end of the year by the Placer County Association of Realtors. The median home price for the county in December 2006 was $439,700 with 302 homes sold in the month. The median sales dropped 9.3 percent from 2005 when the median price was $485,000 with 315 homes sold for the same month.

"I see a decline for Placer County. One of the things lenders are doing, because Placer County was one of the fastest-growing markets appreciation wise, is they put a review on the appraisals," said Mark Champlin, owner of MAC Real Estate Services in Auburn. "Almost every lender is putting a second review on the appraisals because Placer County went up so fast and it's subject to change fast."
...
"Mortgage defaults have definitely increased. I used to look at the paper and see one every once in a while, now I look in the Journal and I see three or four," said Kathy King, a mortgage broker with California Mortgage Advisors Inc. in Auburn. "It's kind of scary because Auburn hasn't historically been a big area for foreclosures."

The reason for the increase is because interest rates were low for a long period of time and consumers were getting loans that normally would be out of their reach, King said. Consumers who got 100 percent financing on negative amortization loans and other adjustable-rate mortgages are starting to feel some discomfort, and more could be on the way.

"1.5 trillion in loans will be adjusting this year (nationwide). They're going to adjust a lot, some will adjust two percent," King said. "It's going to be an interesting year to see what happens with foreclosures, that's for sure."
...
"I feel sorry for those people who got into a house that was priced high and got interest-only loans and are now upside down on the mortgage," [former Auburn mayor and city councilwoman Cheryl] Maki said. "Because they're first-time buyers, a lot of them, and they're trying to buy a home and it's a fortune."
...
"Anybody who bought a home in the last two years cannot refinance, they have to ride that storm out," said Champlin, a licensed real estate and mortgage broker since 1979. "I can't refinance anybody, I get calls all the time. They are coming out of a 4.75 (interest rate), it had a three-year window on it, and the reality is they're looking at a 6.5 (rate)."

Sacramento's Zindex

From Zillow Blog:

Overall, across the U.S. areas Zillow covers, home values showed their first year-over-year (YoY) decline since the start of the data series in 1997, with the Zindex recording a slight decrease of 0.48% from its Q4 2005 level (see the figure below). This is substantially down from the year-over-year increase of 5.0% in Q3 and the quarter-over-quarter (QoQ) change of -4.8% for Q4 is significantly off the 2.4% QoQ increase in the prior quarter.

Performance varies widely by metropolitan area as seen in figure below showing year-over-year appreciation rates for the top 25 largest metro areas. Seattle, Portland and Charlotte appear to be booming with YoY increases above 11%. Greenville, Sacramento and Boston are lagging with YoY decreases greater than 5%.

You can download the Sacramento spreadsheet here [xls]. Some highlights:

YoY Zindex Change

• El Dorado: -4.81%
  
• Placer: -5.97%
  
• Sacramento: -6.74%
  
• Yolo: -8.64%
  
• Sacramento (city): -6.75%

The spreadsheet also contains information by city and neighborhood.

• Cities in the region with a negative Zindex: 84%
  
• Neighborhoods in Sacramento (city) with a negative Zindex: 90%
  

What is a Zindex?

The Zindex home valuation index is the median Zestimate valuation for a given geographic area on a given day.

How does it differ from the median sales price statistic?

One popular method is using the median sale price of homes over a certain period of time, such as a month. While interesting, this measure is problematic because it is influenced by the mix of housing sold in the period of time associated with the metric.

For example, if high-end homes were not selling very well, but mid-range homes were, then the median sale price will be lower than it should be. It will not be an accurate reflection of the "general" level of home values because the median is taken from the set of mid-range home sales that happened in the period, ignoring the high-end homes that didn't sell. The median sale price would be a perfectly accurate reflection of home values in an area if every home were bought and sold in the particular time period. Since this is highly unlikely, the median sale price is biased to the extent that the homes sold in a given period are not completely representative of all the homes in the area.

SL's Water Cooler - February 2007 (part 2)

Post off-topic links, observations, and stories here. Please read the comment policy before posting.

"Dominos Are Beginning To Fall"

The Bay Area's CBS station covers the Elk Grove auction:

The ripple from a slow housing market consumes a different victim almost daily. In the Belavida subdivision in Elk Grove, brand new homes sit for months. Desperate to avoid still more losses, home builder Standard Pacific sent upgraded model homes to auction last Saturday with a bargain price tag...[A] 4 bedroom home went for $440,000, a good $150,000 less than it sold for 18 months ago.
...
With so many homes on the market, it's almost impossible to sell your way out of a crisis like that. Consequently a record number of homeowners are going into foreclosure.

Appraiser Amy Perkins says that ripple has left major banks and mortgage lenders with staggering losses. "There weren't any short sales, very few for the last 3 years in a row," Perkins said. "And within a 20 mile radius I've been seeing 300 or more."
...
Mortgage broker Jennifer Miller of Green Valley Mortgage says the banks bear some of the responsibility; they made getting a home loan too easy. "They have started tightening the reigns a little bit and aren't just saying: just sign on the dotted line and we'll give you a couple hundred thousand dollar home," Miller said. "It's not that simple anymore."

Real Estate Advertising, Taxes, and Pot

From the Sacramento Bee:

The difficult times are far from over. The Bee's owner still faces an advertising and circulation slump that hurt the latest financial results and is expected to continue at least through June.
...
"The overall advertising climate grew more difficult in the fourth quarter," Chairman and Chief Executive Gary Pruitt said in a conference call with investors and analysts.
...
One big trouble point is classified advertising. McClatchy's classified sales fell 5.5 percent in the quarter and were down in every region of the country except the Pacific Northwest. Things will remain tough as the depressed housing market in California and Florida hurts real estate advertising in the coming months, Pruitt said.

Also from the Bee:

California's troubled real estate and construction sectors are likely culprits for state income taxes falling $1.3 billion below projections in January, state Controller John Chiang said Tuesday.

Chiang noted the revenue shortfall at a news conference highlighting changes that will affect state residents as the tax preparation season gets under way.
...
The reasons for the sudden decline in income tax payments aren't yet clear, Chiang said. But the controller cited continued weakness in the state's housing sector, as well as fewer California companies going public.

"Obviously, we've known for a while that the real estate sector is slowing down," Chiang said at the news conference at the Franchise Tax Board Processing Facility on Butterfield Way. "Associated employment in the construction activity over the year is down.
...
The statewide downturn has triggered earning losses and layoffs throughout the real estate, financial services and construction sectors.

From USA Today:

Rick Estrada didn't think it particularly odd that he never saw his next-door neighbor or that curtains were always drawn. On his block of new homes, everyone was a recent arrival. In fact, some homes still sit empty, owned by investors hoping to "flip" them at a profit.

Never in his darkest dreams did Estrada think the two-story house a few feet from his contained an indoor marijuana-growing operation that authorities believe is the latest wrinkle in drug traffickers' efforts to hide their illegal business.

"We came from San Jose to get away from that stuff," says Estrada, 42, a medical clinic supervisor with a wife and three young children. "Now here we are and it's right next-door."

Estrada watched on Jan. 12 as federal drug agents busted into the unoccupied, stucco-clad house, hauling out enough marijuana plants to fill a truck, along with high-intensity lights, fans and other indoor hydroponic growing equipment.

Agents that day raided five other houses nearby in Lathrop and one in Tracy, both suburban cities full of commuters to San Francisco Bay Area jobs. In August and September, 41 houses were busted in Elk Grove, Sacramento and Stockton.
...
"They're purchasing homes and plunking down marijuana factories smack dab in the middle of our residential neighborhoods," Taylor says...Growers paid up to $750,000 for houses in new subdivisions, usually obtaining 100% financing and putting no money down.
...
Samantha Malone says she's moving."I have babies. I don't want to be around that," she says. "Who's to say it's all taken care of anyway, or it's not going to happen next month."

'You're Screwed'

So what happens when, for the first time during the current housing bust, a homebuilder puts their homes on the auction block? A CBS 13 video looks at how the Standard Pacific homes fared at the West Coast Home Auctions sale in Elk Grove.

An excerpt from the video:

Reporter: He showed up out of curiosity because he already owns a home in the development and he's not happy about the auction.

Homeowner: You're buying it at $600,000 or $580,000, and all of the sudden they sell it for $430,000.

Reporter: Actually, they sold it for an even lower price: $410,000.
...
Homeowner: It hurts because if you bought it for $580,000, what are you going to do in 2 years, if you have a 2-year fixed on your house and you go to refinance and you don't have value in the house? You're screwed.

Previous story here.

Hat tip to a Sacramento Real Estate Statistics blog reader. Read more at SacRealStats.

The Disappearing First-Time Home Buyer

From the Central Valley Business Times:

The bloom was certainly off the rose in 2006 for California home sales, according to figures in a report Tuesday from the California Association of Realtors.

Affordability concerns continued to impact the residential real estate market in California last year, with the share of first-time buyers declining to their second lowest level -- from 30.5 percent in 2005 to 27.1 percent in 2006, according to the report.
...
The Realtors’ survey also found that the share of buyers who used a second mortgage climbed from 38 percent in 2005 to 43 percent in 2006, more than triple the percentage since 2001 and the highest percentage since 1982.

The use of alternative loan products also registered a sharp increase. "Home buyers with zero-down payments increased significantly from 4.5 percent in 2000 to 21.1 percent in 2006," says Leslie Appleton-Young, the chief economist for the Los Angeles-based association. "Two out of five first-time buyers made a zero-down payment on their home purchase, while just one in 10 repeat buyers purchased their home with no down payment," she says.
...
The median down payment declined 8.8 percent from $80,000 in 2005 to $73,000 in 2006, despite an increase in the median home price. This was the first time since 1995 that the median down payment dropped. The median down payment for first-time buyers decreased from $25,000 in 2005 to $10,000 in 2006, while the median down payment for repeat buyers decreased from $119,000 to $100,000.

Comment Policy

Comments are welcome. However, please keep your comments civil and avoid personal insults, profanity or other inappropriate language. Comments may be deleted for any reason.

Posting Comments

I've turned off the anonymous comments for now. If you'd like to post a comment, you'll need a Google account.

A Little History

If you haven't already, take a look at these news headlines from the last housing boom/bust. Anything sound familiar?

• Orange County (and here)
• Los Angeles (and here)
• New York
• Vancouver
  

More from Housing Bubble 101:

• Wikipedia: U.S. Housing Bubble
• Japan's Housing Bubble
• The Shiller Graph

Housing Downturn Slows Sacramento Job Growth; Bay Area Migration Cools Off

From SRRI.net:

Housing-related slowdowns took their toll on the Sacramento Region’s economy in 2006, generating declining job growth and causing the Region to fall to the middle of the list of major and neighboring regions in the state.

The six-county Sacramento Region ended 2006 with 1.4 percent job growth, a 2 percentage point decline from the 2006 peak in February of 3.4 percent. The December 2006 rate reflects a year-over-year gain of 13,300 jobs. Over the last quarter of 2006, job growth continued to decline, posting rates lower than the Region has seen since mid-2004 and falling toward the national average. The declining job growth throughout most of 2006 is primarily the result of slowdowns in housing-related sectors (Construction and Financial Activities) coupled with decreasing growth rates in other large sectors (such as Manufacturing; Professional & Business Services; and Trade, Transportation & Utilities).
...
The Region’s employment losses were concentrated in the housing-related sectors (Construction and Financial Activities) along with Information and Manufacturing. While Manufacturing; Financial Activities; and Construction were showing year-over-year job gains in previous quarters, acting as strong contributors to the Region’s job growth, all three posted losses in the fourth quarter of 2006.

From the Sacramento Bee:

They brought the Bay with them: upscale shops, more government services, new restaurants. But also: More traffic, higher home prices, congestion. Almost 150,000 people moved from the Bay Area to the Sacramento metropolitan region from 2001 to 2005, a torrent of 80 newcomers a day, according to a Bee analysis of new federal IRS data.
...
[I]f you want to buy a house with a typical local income, the Bay Area transplants may have helped price you out of the market. "It's pretty hard to reach any other conclusion than that that influx had a significant impact on the run-up on housing prices in the region," said Mike McKeever, executive director of the Sacramento Area Council of Governments.
...
The wealthiest Bay Area transplants tended to head straight for the suburban counties, while Sacramento County has attracted those less well-off...[A] large number of the transplants to Sacramento County are struggling to get by, tax records show. The average household income of the 90,000 Bay Area residents who came to Sacramento County -- only 31,000 left for the Bay Area -- was 7 percent lower than the average annual income of those already here.
...
Because relative housing costs were a significant factor in the Bay Area influx, there is debate among experts over whether the trend will hold now that the housing price gap has closed a bit.

The 2005 migration figures show many more are still coming in from the Bay Area than heading in the opposite direction. But a slowdown in that migration has contributed to the cooling of the area's real estate market.

In 2000, a typical Bay Area home cost more than twice as much as a typical Sacramento area home, according to real estate tracking firm DataQuick Information Systems. In 2006, the Bay Area's median home price was about 63 percent higher.

"You have lost a bit of that competitive edge," said Stephen Levy, director of the Center for Continuing Study of the California Economy, based in Palo Alto. "Sacramento is still an attractive place, but my guess is that most of the people who would move there have moved already."

SL's Water Cooler - February 2007

Post off-topic links, observations, and stories here.
Please read the comment policy before posting.

Dust in the Wind

From CBS 13:

It's hard to believe a house that’s only three-years-old has a cracked wall makes it look like an ancient ruin. Damage to this nearby home is so widespread, the original owners left nearly everything behind to escape the sickness spreading here. And the owners of this home won't go inside with us, because of worries about their health. What could cause this kind of dread and damage?

"The wind!" said Bill Thomas. Bill Thomas is a construction consultant living in El Dorado County... He says he's seeing that damage across El Dorado County. "It affects thousands and thousands of homes," said Thomas..."Wind moves the house. Moves it--flexes it," said Thomas.
...
The Yeadon family moved out of their million-dollar home in the Serrano Country Club area on the advice of their doctors. "I think we had 23 doctor visits between the kids and my wife that month, in May of 2005,” said Yeadon.
...
When the family bought this home, brand new three and a half years ago, they paid just more than $800,000, and then put in $100,000 more in upgrades like this pool. They just sold this house. The highest bid they could get--$425,000.
...
Stonebriar, a development of nearly 200-homes at the bottom of the hill, and south of highway 50 from Serrano. People here say scaffolding and mold remediation equipment are depressingly common throughout the neighborhood.

Dave and Vickie Crozier paid more than $700,000 for their home on the edge of Stonebriar. They're now living with their two-kids in an apartment paid for by the builder.
...
The Crozier's two-year-old home is laced with cracks, like one running the entire length of the east-facing wall. And they have the loose windows, rust and mold similar to the Yeadon house. The wind has a long, clear shot at this home on at least three sides, but there're other problems, problems not related to the wind. The Crozier home has a, rippling roof line, and anchor bolts that aren't secure enough to stabilize the house.

"The builders call it 'value engineering'. Before they start building homes, they get all their engineers together, and say, hey, how can we save money on these houses? Where could we, cut corners--if you want to look at it that way,” said Crozier.

From the Sacramento Bee:

A state Senate hearing Wednesday convened by Sen. Mike Machado, D-Linden, touched on some issues surrounding these risky loans, particularly the lack of oversight, but there was no sense of urgency -- either on the part of senators, the three state agencies that regulate lending or the loan industry itself.

That needs to change.

One broker pleaded with senators not to do anything that might "take away the dream of home ownership." But as Paul Leonard of the Center for Responsible Lending testified, the issue is sustainable home ownership, not just the dream. If people can only afford initial low payments for a couple of years but then lose the home, how does that promote the dream of home ownership?
...
One key issue was not discussed at all at the hearing: the role of nontraditional mortgages in artificially driving up home prices, feeding the affordability crisis rather than abating it.

From Investors.com:

People who bought single-family homes hoping to soon sell them for a quick profit have given apartment owners perhaps the biggest competitive surprise of late: These now financially hamstrung speculators are putting the houses up for rent.

BRE Properties, (BRE) a real estate investment trust in San Francisco that owns and operates about 27,000 apartment units in the West, is facing such competition. A growing number of single-family homes are being rented in markets such as Phoenix and San Diego, BRE executives said on the firm's third-quarter conference call last fall.

The supply of single-family home rentals is increasing in Sacramento too. In the fourth quarter last year, apartment occupancies fell to 92.5% from 94.2% in the third quarter, says RealFacts, a Novato, Calif., firm that analyzes apartment data.

From the Sacramento Business Journal:

The California Supreme Court on Thursday struck down the approval of the Sunrise-Douglas community in Rancho Cordova, a move that could halt further construction on the giant development area.
...
Rancho Cordova City Manager Ted Gabler said that the city's attorney believes the ruling will not halt work within the Sunrise-Douglas area. The case will be remanded to a lower court, but the opinion does not say whether work can continue, he said.

The housing market has largely decided that issue anyway, Gabler said, as homebuilders have curtailed efforts within the development as sales have slowed.

"Another 'Red Ink' Month"

John, over at the Sacramento Real Estate blog, has some early numbers for January:

The numbers are in, and sure enough, it’s another “red ink” month for Sacramento County real estate, at least from a seller’s perspective. Prices were down slightly on paper, but my favorite indicator, price per square foot, was down more dramatically...9.3%.

Something other than ink is spilling gushing from the mortgage lending industry. Since about December, 18 lenders have "gone kaput" according to the Mortgage Lender Implode-O-Meter. Get the latest on which lender is croaking over at the I Smell Dead Lenders blog Bakersfield Bubble blog.

Finally, the excellent Southern California Real Estate Bubble Crash blog (say that quickly 10 times) reports that condoflip.com just flopped.