From Market Watch:
In the OFHEO index [pdf], prices fell in seven states from the fourth quarter to the first, including California, Nevada and Florida, three states that saw the largest price gains in 2004 through 2006...The cities with the biggest [yearly] price declines were Punta Gorda, Fla.; Sacramento, Calif.; and Modesto, Calif.
From sacbee.com:
Home loan lenders, stuck with rising numbers of repossessed homes, will auction 242 houses next month to bidders in Sacramento, Modesto and San Mateo.Updated story from the Sacramento Bee:
It's the biggest home auction in Northern California in the wake of a five-year housing boom...Irvine-based Real Estate Disposition Corp. will auction 107 Sacramento-area bank-owned houses on June 23 at Cal Expo. Auctioneers will sell 88 repossessed Bay Area homes the next day in San Mateo and 47 San Joaquin Valley houses in Modesto on June 25.
First it was individual homeowners who turned to the auction block to sell fast at a discounted price. Then home builders. Now come the banks...The auction especially signals a new sales rival to home builders, investors and individual sellers: the banks.
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Robert Friedman, chairman of REDC, said the homes belong to a handful of financial institutions. "I can't give names," he said. "We have confidentiality agreements. But I can tell you they are very large lenders."..."It's just a business decision. You sell them quickly and take your hit," Friedman said. "In the long run they do it better by taking this route."
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Keith McLane, who runs a separate Carmichael-based home auction firm, said the sheer number of houses being auctioned next month "illustrates the quantity of foreclosures that are out there."
Foreclosures.com reports that banks owned 661 homes in April in Amador, El Dorado, Nevada, Placer, Sacramento, Sutter, Yolo and Yuba counties. That's up from 92 in April 2006.
Housing Bust Consequence #439: Suburban Squatting
From KCRA (video here):
Squatter Causes Anxiety For NeighborsHat tip Max.
Residents of Voltaire Drive in west Roseville said a man is "squatting" in his former home that is now owned by the bank.
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Neighbors say the woman who did own it left suddenly. County records also show she filed for divorce and took her two children with her, aged 9 and 18 months. Neighbors said the woman's husband has been living in the home, even though it's in foreclosure.
The city of Roseville confirms the power to the house has been shut off. Neighbors worry the man could be cooking with propane, and could spark a fire or even an explosion.
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The city and the police department say the matter is out of their hands because Washington Mutual, which owns the home, has not evicted the resident.
From the Sacramento Bee:
Prized species spotted locally -- homebuyers
Now that it's done, Joi Bess couldn't be happier about selling her Rancho Cordova house and buying a bigger one in Folsom...Bess says she still wishes she had made more off the house in Rancho Cordova. But she takes comfort in knowing she got a house in Folsom for $100,000 less than those like it cost two years ago..."Our consensus was if you're going to do something, you better do something now," she says.
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In what's proving to be a second straight year of slowed sales and falling prices in many neighborhoods, that closing makes Bess a hero to the Sacramento region's real estate trade. She is a buyer.
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"I wish all the other people luck," she says from the calm of her new house. "I still see a lot of other properties for sale. I remember that feeling: 'Is it going to sell?' It's really a tough game."
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[Michael] Alexander recently stopped looking -- for now. He cites the sudden crackdown on 100 percent financing due to rising numbers of loan defaults..."It was starting to look feasible," Alexander says. "It was really looking feasible. We talked to a Realtor a few weeks ago, and that's when all the credit issues hit."
Alexander's departure from the buyer pool puts him among an estimated 30 percent of potential buyers who have vanished from area model homes and open houses as the real estate season reaches its busiest months...Alexander says, wherever he looks he sees prices going down. Or he sees that prices are too high and the houses aren't selling.
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The Wahlstroms, a couple in their 50s, recently toured an Elk Grove condominium complex. Its builder had contracted with an auction company to unload a handful of unsold units. The opening bid for a 1,200-square-foot condo previously valued at $259,900: $149,000.
John and Celeste Wahlstrom looked one over for their 22-year-old daughter, who saw it advertised on television..."But we're not in a hurry," John says.
Part of the reason is uncertainty about where this market is heading. In 2001, the couple bought a house in Elk Grove and more than doubled their investment before selling it. They're not having the same luck with the value of their new house, bought in 2005. "I don't know about the values," says Celeste. "Right now everything is going down."
With that sentiment, the Wahlstroms take their place among thousands of potential buyers whom sales reps for home builders sometimes describe as "confused." Many would-be buyers who have seen prices fall for months are waiting for them to fall more.
Even as agents clamor that "now is the time to buy," they remain on the fence. They're waiting for the bottom of a market that began to weaken in late summer 2005.
From the Sacramento Bee:
Downtown high-rise developer John Saca missed a Friday deadline to buy out his estranged partner, the California Public Employees' Retirement System, throwing the future of his twin condominium towers into jeopardy.
The giant state pension fund now has a week or two to decide whether it wants to take over the stalled, debt-ridden project at the entrance to Capitol Mall and move forward without Saca, CalPERS confirmed Tuesday.
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CalPERS has brought in the CIM Group, a Los Angeles -based developer, to decide whether it would make financial sense to pursue a significantly scaled-down version of Saca's 53-story condominium and hotel towers. CIM's idea for the site also would include some office, said CalPERS spokeswoman Pat Macht. CIM also has approached the city about a possible subsidy for the project, Macht said.
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"It can't get much worse," Saca said Tuesday. "There's a stigma on the property now, and it's hard to overcome that."
From lendingclarity.com:
What will it take to shock the Sacramento real estate market back to life?
Behind the mask of false bravado and feeble optimism worn by industry insiders who think wishing can make things true, there is an undercurrent of worry. Let’s face it. The patient is ill. What will turn things around? In a word, affordability.
It’s pretty clear that we chucked the idea of affordability in the early 2000’s as home prices and incomes parted company. People bought homes they couldn’t afford with loans that offered low initial payment but blew up after a couple of years. The speculative fever that ensued was supported by low interest rates, easy-qualifying loans and 100% financing. Builders responded by flooding the market with new homes geared to the move-up market, at prices affordable mostly to those who had previously experienced windfall profits. Then the music stopped, and all the chairs were gone.
So here we lie. Too much inventory, too few buyers. Sales are slow at every level, though Sacramento real estate prices have retreated to mid 2004 levels. Despite sellers’ attempts to get in front of the decline, buyers pitch low-ball offers on everything. I attended a recent auction featuring the last 6 homes in a 220 unit Elk Grove subdivision. The seller, a national home builder, was able to unload only 3 of those 6 homes even at steeply discounted prices. What’s the problem? Again, affordability.
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So the market will return to normal when the fundamentals or income and price once again realign. I’m guessing that happens when prices reach mid-2003 levels. With first-time buyers having to qualify on real income—no more liar loans—prices have a little further to fall for that to happen. Just my opinion of course.
Some recent additions to SL's blogroll:
L.A. Land - Peter Viles on the rapidly changing landscape of the Los Angeles real estate market and beyond.
Texas Housing Bubble - Analyzing the Texas housing bubble and its effect on the economy.
Northern Virginia Housing Bubble Fallout - Let's examine the particles as they fall and hold a lively discussion of the Greater Northern Virginia Real Estate market. You'll also find same-house sales comparisons here.
Baltimore Housing Bubble - A Blog on the Baltimore Housing Bubble.
New York City Housing Bubble - 'The BIG Picture' - A North Williamsburg Brooklyn Bubble ? Fuggetaboutit!
Maine Bubble Blog - A look at the Maine housing market, economy and quality of life issues that impact real estate.
Portland Housing Blog
From the Lodi News-Sentinel:
The housing market in Lodi isn't spectacular — in fact, it's sluggish. But compared with nearly every other city in the area, sluggish looks pretty good.
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Few think Lodi has cracked the housing slump yet and that may actually take some time. Kevin Fritz, who buys and sells houses as a hobby, said he's had to lower the price on most of his houses. "It was easy (to flip homes) three years ago — now it's a challenge. But I still see that there's buyers out there," said Fritz, who works from his Lodi home as a regional manager for a fire hydrant manufacturing company.
Fritz has battled the housing slump by posting numerous "for sale" signs, hosting lots of open houses and keeping his yards in top shape. Being flexible on price has also helped, he said. "The houses are still selling," said Fritz. "You've just got to listen to all offers."
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Currently there are 485 homes on the market between Lodi and Woodbridge, said Paul Mertz, a past president of the Lodi Association of Realtors. That's about a nine or 10 month supply of inventory, but quite a bit less than in Stockton where many existing and new homes are still on the market.
...
Arturo and Reyna Leyva don't have enough money to buy a house quite yet. But even if they did, the Lodi couple said they'd probably keep renting. "We'd probably wait," said Reyna, who along with her husband is studying to gain her teaching credential from California State University, Stanislaus.
Paying $900 a month for their Lakeshore Meadows Apartment is probably the best bet for now, Arturo Leyva said. "Having your own house has its advantages, but (the prices) are too high," he said Friday in south Lodi.
While the area's housing market is still lethargic, apartment complexes and rental agencies are seeing an uptick in business — many benefiting from the housing slump.
"We're seeing a lot of people coming in and renting because they can't afford their homes anymore — that's the big thing right now," said Joanna Vasquez, a receptionist at Homefinders in Stockton, which provides rental listings for homes and apartments in the region.
Julie Stearns, co-owner of Colonial North Property Management in North Stockton, said many homeowners have given up on selling their homes for now. "They're opting just to rent it out and wait out this (housing) slump," said Stearn....
Here's a silver lining most of us may not have considered: If the thought of paying $3.35 a gallon keeps you from traveling this weekend, why not just stay home and shop for a house?
That's at least a fervent hope of Sacramento-area real estate agents and home builders as the Memorial Day holiday weekend begins. With many open houses scheduled across a region that has 14,000 existing homes for sale, they have their fingers crossed for local "traffic."
"Who knows? With gas prices, they might be out looking instead of camping," says Faye Roediger of Coldwell Banker in Elk Grove. She has three open houses in the works for this weekend.
No doubt it's been tough out there for agents, sellers and builders with would-be homebuyers weighing their options and sitting on the fence. And Memorial Day weekend has never been the traditional big summer kickoff for home shopping, says the California Association of Realtors.
Post off-topic links, observations, and stories here. Please read the comment policy before posting.
A follow-up to the Meadowview foreclosure story. From a News10 online chat session:
[Kim, News10] 11:03 am: George, is there an estimated time that these foreclosures will stop?
[George Warren, News10] 11:04 am: DataQuick believes foreclosures have peaked, but there's more bad news on the way before the picture improves dramatically, I believe.
[murphysdad] 11:04 am: is there a foreclosure "bubble"?
[George Warren, News10] 11:05 am: Re: Bubble. Looks like there is a foreclosure bubble. It's coming in waves that are somewhat predictable based on when the ARM (adjustable) loans were originated. Looks like ARM's peaked in May 2005.
[Coop] 11:05 am: Are these f/c's through one particular lender?
[George Warren, News10] 11:06 am: Lenders are all over the place. We searched property records looking for a smoking gun but saw lots of different lenders, not all of them sub-prime.
[Sharon Ito, News10] 11:06 am: George, were these houses over-priced to begin with?
[George Warren, News10] 11:07 am: That's a subjective question. I drove by that community on I-5 and saw the signs advertising new homes for $XXX,XXX and wondered who would pay that? But obviously there were willing buyers and cooperative appraisers.
[George Warren, News10] 11:12 am: Sacramento County has 3 percent of California's population, but 7 percent of the mortgage defaults in Q1 2007
[George Warren, News10] 11:14 am: Home prices down? Yes yes yes. Sales have declined year-over-year for the past 19 months. I think we haven't seen the bottom yet.
[George Warren, News10] 11:16 am: Personal observation: When my wife and I with stable, good-paying jobs go to get a loan, we get the third degree. I always wonder who are these people getting 100% financing on $526,000 homes?
[Robin] 11:21 am: As a first-time homebuyer with a responsible FIXED loan, I'm still paying an unfair price because the predatory, slimy lenders are now foreclosing on the people who've taken out these irresponsible loans and have flooded the market by quick-selling homes at bargain basement prices. The sale-price of my condo in zip code 95835 has literally dropped $100,000 in the past year because the predatory lenders put 9 condos just like mine on the market at ridiculously low prices during foreclosure.
From the Sacramento Bee:
The El Dorado County Board of Supervisors on Tuesday rejected an increase in building permit fees and instead directed staff members to cut $1.6 million from the Building Services Department budget through layoffs or by transferring employees to jobs in other county departments...The board held out hope that creative solutions would be forthcoming in the next two months that would minimize or avoid layoffs.
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[Development Services Director Greg] Fuz had proposed a 35 percent increase in building permit fees to compensate for declining revenues caused by a slowdown in housing construction. The demand for building inspection services remains high, he said, but the decline in single-family home construction, the department's largest revenue generator, has created a funding gap.
In 2006-07, $1.6 million from the county's general fund was required to supplement the department's budget, and that figure would increase to $2.2 million in the coming fiscal year without cost cutting or fee increases, Fuz said.
Noting that the demand for services remains high and citing difficulties in recruiting employees in recent years, Fuz said he sought the fee increase to avoid disruption of current services and to be ready to handle an upturn in the housing market.
But representatives of area building industry associations urged the board to reject the fee increase, saying their members are laying off employees and struggling to stay in business.
From News10 (hat tip Jeff):
Foreclosure activity in the first quarter of 2007 set a record in Sacramento County. And one Sacramento zip code may be the hardest hit in the entire state.From the El Dorado Hills Telegraph:
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A News10 analysis of statistics and property records provided by DataQuick Information Systems and ForeclosureS.com shows that in the first three months of 2007, more than two percent of the homeowners in zip code 95832 defaulted on their mortgages...At 22 defaults per 1,000 homes, 95832 may lead the state in foreclosure activity for the first quarter of 2007.
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95832 is commonly known as Meadowview, a predominantly lower-income community. But many of the homes in the process of foreclosure sold for up to a half-million dollars or more less than two years ago.
One third of the 57 homes in default in the first quarter of 2007 are in a subdivision called "The Meadows." Developer JTS communities marketed the project as a relatively affordable alternative to new home subdivisions in Elk Grove and Natomas. But many of the buyers clearly were still reaching beyond their means. And when their loans adjusted above the initial "teaser" rates, there was no equity to fall back on.
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It's hard to find a block on a street in the Meadows without a foreclosure. Real estate signs litter the neighborhoods. A casual inspection shows many of the homeowners in default walked away from their homes well before the auction date.
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Richfield Way...may be the hardest hit street in the hardest hit zip code. Of 23 houses on Richfield Way, five went into default in just the first three months of this year. "It seems like I post (an auction listing) every other day on Richfield," said Bryan Moulton, an auctioneer with RSVP Auction Company.
At a recent courthouse auction, a five-bedroom, four-bathroom 3,500 square foot house on Richfield Way that sold in July 2005 for $526,000 was offered by the bank for $295,000. There were no takers.
Dear Miki:
My daughter is going through foreclosure right now because of one of those damned sub-prime loans she took out. The house isn't even worth what she bought it for a couple of years ago.
I told "Melanie" she couldn't afford the house before she signed her name, but why would she believe a mother who loves her when there's a fast-talking broker with a sharpened pencil?
Mom
Dear Mom:
It was easy for those considered by lenders to be risky borrowers to hop on the smorgasbord of sub-prime loans.
A flourishing real estate market promised quick home appreciation, and who knew that just about the time an adjustable rate mortgage was ready to re-adjust; it would do so in a Grapes of Wrath market...
April inventory growth for the Sacramento region per the Sacramento Bee/TrendGraphix:
From the Sacramento Business Journal:
The North State Building Industry Association typically frowns on escalating building fees, but the organization didn't object to a 30 percent fee increase in Sacramento County.Is the use of the phrase "housing bust" a first for this publication?
Those one-time increases to building permit and plan check fees are estimated to add about $875 to the cost of building a 2,200-square-foot home. Supervisors on Tuesday approved the fee increase, effective July 1, to replace reduced fee revenue stemming from the decline in new-home construction.
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Similar fee increases of 35 percent have been proposed in El Dorado County to deal with falling revenue from the housing bust.
Unlike cities, many county building departments are self-sustaining, meaning they don't draw general fund revenue, said Harold Bixler, Sacramento County building chief. This fiscal year, the county expects building-permit revenue to decline 15 percent to less than $2 million, which is significantly less than during the boom years. "We're in quite a bit of a budget crunch," Bixler said. "What I take in fees is what I have to run this office."
Sacramento Land(ing), April 25, 2006:
This condo complex in Elk Grove wants to reward reluctant buyers "big time."Sacramento Land(ing), May 30, 2006:Jasmine, a community of attached homes in Elk Grove, will hold a special spring celebration with as much as $50,000 off some homes, as well as special financing and other incentives. "When we say this is a special celebration, we really mean it," said Scott Bolli, director of sales for Pacific West Cos., a residential development company. "We've never offered so much. If you've been waiting, it's paid off, big time."Wow! I wonder what the payoff will be if one waits even longer!
At Jasmine:Today, seven Jasmine condos went on the auction block. A reader sent in this ad:
May 13, 2006: "Prices start in the high $200,000s"
May 20, 2006: "Home prices start in the mid-$200,000s"
Seven Luxury Condos in Elk Grove
Reduced! Opening Bids Now From $149,000!
Sacramento housing market statistics from the Sacramento Association of Realtors (SAR):
From the Sacramento Business Journal:
Sal Guevara burned through $50,000 in savings to keep current on his adjustable-rate mortgage, but with a monthly bill hundreds of dollars more than his $2,500 in workers' compensation income, he expects this month to miss a payment for the first time on his Elk Grove home.From About.com:
Guevara, 37, is out of work with a back injury, going through a divorce and praying he can escape foreclosure by working out a "short sale" deal with his lender.
But if the lender rejects a short sale, he will become one of hundreds whose homes have been foreclosed upon in Elk Grove, a Greater Sacramento city that has among the highest concentrations of foreclosure proceedings.
"I have just my faith to keep me going," said Guevara, who owes $400,000 on the four-bedroom house he bought in 2003, likely more than buyers are willing to pay. "I feel like I'm starting from scratch."
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Guevara, a custom flooring installer...was working seven days a week and pulling in more than $100,000 a year during the construction boom. He knew what he was doing when he cashed in equity on his Elk Grove home to buy other property, fix it up and sell it. It worked when the market was strong. That was until his last purchase, a three-bedroom home in the Meadowview neighborhood he bought for $289,000 at the market's peak in 2005.
Then, he was hit with a perfect storm: a work-related injury, divorce and two mortgages, one with a rate that will float above 9 percent in October.
Both homes have been on the market since January, and neither has drawn much attention from buyers.
He had planned to use the proceeds from the fixer-upper as a college fund for his boys, aged 13 and 7. "Now, I'm telling my boy he's got to get straight A's," Guevara said of his eldest son. "It's putting a lot of pressure on him."
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Foreclosure proceedings initiated during the first three months of the year -- default notices, auction notices and properties reverting to bank ownership -- are more than triple what they were during the same period in 2006. But in Natomas, Elk Grove and south Sacramento, those proceedings have multiplied even more, up by 400 percent to 700 percent, according to RealtyTrac.
"It's hard to find the positive spin," said Karen Berkovitz, an agent with Lyon Real Estate with 14 years of experience who's trying to sell Guevara's home..."It's really a shame," she said. "These people are walking away with zero."
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"If you look at the listings, half of them are short sales," Berkovitz said as she scrolled through a screen showing listings in the Elk Grove area. "That's scary."
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Brokers don't know how long it will be before the tide of foreclosures recedes...Across the Sacramento area, the inventory of homes set for foreclosure sale stands at 2,175, with another 5,274 homes owned by banks or mortgage companies. Another 7,000 homeowners are at least 60 days late with their mortgage payments.
"It's going to be a rough year and a half," said Michael Lyon, chief executive officer of Lyon Real Estate. He predicted the effects might reach into 2009. [2012 anyone?]
A client asked me to do a comparative market analysis of her home. There have been no sales in that subdivision over the past six months except for a foreclosure, which makes that sale the only comparable sale. Now, appraisers can pull comps outside of that subdivision and adjust for value, but the likelihood is that foreclosure is going to affect this client's market value. Throw into the mix that nine out of 10 homes are not selling in any given month, and it's not a pretty picture.
From the Sacramento Bee:
[M]ost big public firms are now facing Wall Street pressure to scale back their operations and abandon plans to buy new land. More may also end up selling land if the downturn continues through the rest of this year, [Roseville-based land broker James S.] Radler said. "I think time will tell as we go through this adjustment. The publics have a lot of assets around town they will end up dumping," he said. "The privates, they can't hold on forever, either."From the Sacramento Business Journal:
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Radler said builders believe about 30 percent of their buyers are gone because of tighter credit rules in the wake of rising mortgage defaults and a meltdown in the subprime lending business. And that shakeout is hitting both public and private companies. "Subprime is similar to a cold," [Hanley Wood analyst Kathryn] Boyce said. "It doesn't pick and choose." "We're all in the same boat," added [Sid] Dunmore.
Other brokers, including Greg Ocasek of Irvine-based O'Donnell Atkins, said private builders now have an advantage in long-term land buying. Public builders have stopped bidding up prices and created an opening for private firms to make bigger land buys.
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So far that isn't by buying new-home lots from their publicly traded competitors, Ocasek said. Like the mass of homeowners across metropolitan Sacramento, the public firms are sticking to the highest possible price as long as they can, he said. "The publics are saying, 'We don't have to sell right now,' " said Ocasek. That could change, added Radler. "Call me at the end of the year," he said.
City of Sacramento officials are preparing to ask the City Council on Tuesday to approve another 60-day extension on a $10 million market-rate loan to BCN Development, the developer of the $175 million Aura condominium project downtown. The deadline on the loan has been extended several times to allow BCN founder Craig Nassi to secure financing.From the Manteca Bulletin:
Foreclosures - which are sinking the housing market just across the San Joaquin River in Mossdale Landing - are having just a small ripple effect on River Islands at Lathrop.From the Merced Sun-Star
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Three years ago they envisioned building 500 homes the first year...A little over a year ago that was scaled back to 350 homes. Now they expect to only allow 200 homes to be built in 2008 - the first year of actually pouring foundations.
Partying like it's 2005 ... Merced's once blazing hot housing market is now colder than a bowl of icicle soup, but that doesn't mean that Ranchwood Homes president Greg Hostetler is feeling the chill.
Loose Lips has learned that Hostetler -- the self-made Los Banos native who builds subdivisions with swanky names like Tuscany and La Paloma -- has been laying low for the past couple of months, but burst back onto the jet-set scene recently when he attended the title fight between Oscar De La Hoya and Floyd Mayweather, Jr. at Las Vegas' MGM Grand hotel.
Hostetler joined celebrities including Eva Longoria, Jennifer Lopez, Tobey Maguire, Jack Nicholson, Snoop Dogg, and Denzel Washington to watch Mayweather defeat De La Hoya in 12 rounds.
Lips wonders why Hostetler seems untouched by the recent "correction" (read: screeching halt) in the housing market. Maybe it's all those almond trees he has up his sleeve ...
Some Centex Homes buyers can get a $125,000 price break...[Jack] Pautsch [Sacramento division manager for Centex] said the deals reflect an oversupplied market and are likely to recede within weeks as builders slow construction.Current Sacramento Centex ad:
You'll love savings a minimum of $30,000 and up to $175,000 on the home of your dreams - and choosing Centex is a great way to assure it's a lasting love affair. Come see how easy we're making it to live "Happily Ever After" this weekend at your favorite Centex neighborhood. Hurry for best selection and maximum savings!Hurry folks, just a few days left! You just never know when these deals will disappear!
From the Sacramento Bee:
Lengthy housing slump expectedDataQuick Sales/Price Data by County [pdf]
Here's the forecast from two more experts on the housing market: The slump is likely to continue through the rest of this year and most of 2008.
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"I think we're going to be dealing with this all the way through 2008," Countrywide Home Loans Executive Vice President Jack Haynes told Sacramento home-building industry representatives Wednesday.
"We think it's going to take until mid to late 2008," Timothy Sullivan, president of San Diego-based Sullivan Group Real Estate Advisors, told the gathering. The two spoke at a downtown Sacramento seminar about the economy and the housing market, and how home builders can weather it.
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Year-over-year declines [for existing homes] were 2.1 percent in Sacramento County and 6.5 percent in Placer County, the two biggest segments of the area's housing market. Yolo County posted a 4.2 percent gain in sales prices, the region's only year-over-year increase...New homes, though, continue to show double-digit annual declines of 22.3 percent in Sacramento County and 12.5 percent in Yolo County. [Median price for all sales was -7.0% in Sacramento County].
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Many in the real estate business have said the loss of 100 percent financing and some riskier subprime loans for people with spotty credit histories has eliminated up to 30 percent of would-be buyers.
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Sullivan of Sullivan Group Real Estate Advisors blamed the market slowdown on tighter lending rules as well as the lack of urgency among other buyers. "Right now there is fear about housing," he said. "There is fear you can't win at housing."
From sacbee.com:
Sacramento-area escrow closings dipped in April to their lowest levels since 1995 and fell below March sales counts for the second straight year, La Jolla based DataQuick Information Systems reported Wednesday.
It means a much-hoped-for spring rebound in home sales has again failed to materialize this year. Last year, sales of new and existing homes peaked in March before leveling off for the remainder of the year.
DataQuick reported 2,875 new and existing homes changed hands during April in Amador, El Dorado, Nevada, Placer, Sacramento, Sutter, Yolo and Yuba counties. That compared to 3,222 closings in March -- and 3,762 in April 2006. DataQuick figures show April's closings were the fewest since 2,166 in April 1995.
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The slower sales numbers arrived alongside reports that another 1,500 existing homes went up for sale in El Dorado, Placer, Sacramento and Yolo counties in April. Sacramento-based TrendGraphix reported 14,026 homes for sale in the four counties as May began - about 1,500 shy of the region's all-time inventory high last July.
From the Manteca Bulletin:
The courthouse steps in Stockton are about to become the busiest sales location for South County homes. In a 17-day period starting Monday, 69 homes in Tracy, Manteca, Lathrop, and Mountain House are going on the auction block.
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Brad Young of PMZ Real Estate who has created a niche in the market by learning the pitfalls of buying a short-sale from a lender and helping buyers and the seller negotiate them, noted that it isn't rare for those who go belly-up to strip homes of light fixtures, stoves, microwaves, light switches and even light bulbs.
“It's not that unusual,” [Tom] Wilson [of Wilson Group Realtors] said. “The homeowner going into default often gets angry and blames everyone else for their situation.”
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[Real estate broker Bev] Marlow said she wasn't surprised but was “dismayed” at the foreclosures. “A lot of people put their heads into the sand,” she said.
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The biggest impact of the foreclosures won't hit until the lenders repossess the homes officially on the courthouse steps since there will be few, if any bargains for even the most seasoned bankruptcy buyer.
That means in the coming weeks the lenders will be putting those homes back on the market. Unlike the buyers being foreclosed on who were desperate trying to put a short sale together - selling the home for less than is owed which also means they are taxed on the difference by the IRS - the lenders will price the homes to move to reduce their losses.
That explains why one lender who foreclosed on property on Victoria Trail in Lathrop's Mossdale Landing listed the home built in 2005 that sold over a year ago for $620,000 for $377,950 even though it passes inspections with flying colors and is in excellent shape.
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Wilson expects lenders to price those homes fairly aggressively which would put a damper on the sellers of other previously owned homes.
Compounding the market is the fact there are almost 570 resale homes for sale within Manteca's city limits as of Monday. That doesn't count new homes or homes being sold by the owner without an agent. “That kind of market conditions with an existing 10-month inventory means price is what is going to sell a home,” said Wilson...[W]ith the glut of homes on the resale market home sales are sluggish even for short sales where the owner sells for less than is owed of the home.
Wilson said it is also unfair to use subprime loans as the whipping boy for the rash of foreclosures. “The idea that subprime loans are entirely behind all of this is a fallacy,” Wilson said. “People let themselves get lulled into the idea they could afford more house than they could. They bit a lot more off than they could chew with escalating interest payments.”
...
Sales activity in Lathrop has dropped almost 70 percent in the first four months of this year compared to the same period last year. Sales in Manteca are just a bit better being off about 60 percent.
UPDATE: From a Sacramento Bee editorial:
The drop in the housing market that is hurting many homeowners, and causing an overall drop in consumer spending, is hurting the wallets of local governments, too...[S]imple restraint alone won't be enough to deal with the red ink that is likely ahead.From the Sacramento Bee (hat tip Gwynster):
In a recent survey of local government finances by The Bee's Loretta Kalb, the findings were similar to a tide that is beginning to turn. The coming budget year will have some pain, but nothing like what could loom in 2008-2009...In Sacramento County, revenues for the general fund may decrease by $35 million (from a 2006-2007 base of $655 million) this coming fiscal year...
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What is happening? The big change is the housing market...[W]hen the market is hot and a lot of homes are selling, property tax revenues flow in well beyond the basic inflation rate. That is what has been happening in recent years. But as the housing market has slowed, prices have dropped and sales activity has declined. The changing market is affecting consumers' spending behavior as well. Less spending means less sales taxes and less money for government.
In places such as El Dorado County that were accustomed to lots of construction, the initial response for this coming fiscal year is to suggest a 35 percent increase in building permit fees to pay for the staff of building inspectors that don't have as much work as before. That's not exactly a winning long-term strategy. Neither is a proposal by Sacramento County to consider selling "surplus" land and using the money for an operating shortfall.
Sacramento's real estate slump has led to a projected $4.5 million shortfall in the city's 2007-08 budget. Property transfer taxes and supplemental taxes are down from 2005 levels, and so are sales and utility user taxes, budget officials said Monday. "Things have slowed down, no question," said Assistant City Manager Gus Vina.From the Stockton Record:
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To deal with the expected funding gap, budget officials are suggesting using $4.5 million of Sacramento's $30 million reserve...Vina said the city can't look to its reserves on an ongoing basis. If the tax decline continues, the city might consider not filling vacant positions, he said.
Declining tax revenues have darkened the city's five-year financial forecast. According to the city's budget report, the cost of providing services will continue to outpace revenues.
This year's episode of the Capitol's annual budgetary soap opera opened Monday in familiar fashion: Gov. Arnold Schwarzenegger proposed a slightly larger state spending plan than last year that doesn't raise taxes but relies on some accounting gymnastics to balance.From the Sacramento Bee:
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Schwarzenegger also had to retreat from his earlier spending plan, which had eliminated the structural gap between what California spends and what it collects in taxes for the first time in a decade. His new budget leaves a $1.4billion gap while it increases spending by $1.5billion.
"There were some unforeseen things, as in every budget," Schwarzenegger said. "That's why you have a January budget; that's why you then have a May revise." Most of the missing revenue can be attributed to the slump in the housing market, while most of the extra expenses went for public education.
The housing market is "pulling our numbers down slightly," said Michael Genest, the governor's finance director. He said forecasters have been taking the housing slump into account since last spring. The new projections reflect that the downturn "is just getting a little deeper and lasting a little longer than we thought," he said.From the Stockton Record:
Yet Chris Thornberg of Beacon Economics, a private consulting firm in Los Angeles, said the revision didn't go far enough. He said the effects of the housing slump are just beginning to ripple through the rest of the economy, noting, for example, the sharp decline in U.S. automobile sales last month. "In the midst of what's clearly a cooling economy, this isn't realistic -- this is not a realistic budget," he said.
Others disagreed. Chief economist Alan Nevin of the California Building Industry Association said the governor's projections are actually pessimistic when it comes to the housing market. The governor predicts 132,800 housing starts in calendar 2007, a 19 percent drop. Nevin predicts 150,000 to 155,000 starts. At the peak of the housing boom in 2004, housing starts in the state totaled 213,000.
However, Nevin acknowledged the market has been weaker than he originally believed, and "it would not be wrong for the governor to use a lower number."
Air-pollution fee program sputters
Funds collected far less than anticipated
A unique rule that charges developers in the San Joaquin Valley for air pollution emitted by vehicles netted $13 million in its first year - far less than air-quality experts had expected.
The money is used to offset pollution from the increased traffic that results from new neighborhoods, shopping centers and other developments.
The San Joaquin Valley Air Pollution Control District had expected to collect about $200 million over the program's first three years. The quiet start may be due to a slowdown in development around the Valley, officials said.
From the Central Valley Business Times:
Central Valley cities lead the nation in foreclosures
The Central Valley city of Stockton has the nation’s highest foreclosure rate -- one foreclosure filing for every 131 households, nearly six times the national average -- according to figures compiled by RealtyTrac Inc., an Irvine-based publisher of a national database of pre-foreclosure, foreclosure, For Sale By Owner, resale and new homes.
Other California cities with foreclosure rates in the top 10 include Vallejo-Fairfield at No. 2, Riverside-San Bernardino at No. 4, Modesto at No. 6, Sacramento at No. 7, and Merced at No. 8.
From the Sacramento Bee:
Thousands of unsold and empty houses in the Sacramento region are fast becoming breeding grounds for mosquitoes. As the region's housing slump creates more vacant houses and a growing excess of homes in transition between buyers and sellers, Culex mosquitoes that can spread the West Nile virus to birds, other animals and humans are thriving in uncared-for swimming pools, garden ponds and yards flooded by broken sprinklers, said David Brown, manager of the Sacramento-Yolo Mosquito and Vector Control District.From 60 Minutes (also video):
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Sacramento Association of Realtors spokesman Greg Vlasek said there are 9,672 houses for sale in the mosquito district's Sacramento and Yolo counties coverage area alone. Nearly 1,400 have swimming pools.
The district is calling in a new cavalry in its war on mosquitoes: real estate agents. "As you show homes for sale or visit unoccupied properties, please assist us by reporting unmaintained swimming pools, ponds, fountains etc. to the district," states a letter being e-mailed to 6,500 agents today by the district and the Sacramento Association of Realtors.
Brown said the plea -- a first for the district -- follows growing numbers of complaints from Sacramento and Yolo county residents about algae-filled swimming pools, small kiddie pools, spas and ponds in their neighborhoods.
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The glut of houses that are empty or for sale is aggravating what's already expected to be an earlier West Nile virus season than last year.
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As real estate agents add mosquito patrol to their duties, there are more than 14,000 homes for sale in El Dorado, Placer, Sacramento and Yolo counties...The rising number of foreclosures is also emptying out more houses in the capital region...Add to that a large but unknown number of empty houses owned by investors.
For realtors, the six percent commission is sacrosanct. It's remained in place, even as the price of homes has quadrupled over the past 25 years. But as correspondent Lesley Stahl reports, things are beginning to change. What happened to travel agents, stock brokers and book sellers – the encroachment of the Internet – is beginning to affect real estate agents. And the sacred six percent is under assault from online discounters.From freeerisa.net:
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Glenn Kelman may look like a bike messenger, but he’s an Internet entrepreneur, the president and CEO of Redfin. "Real estate, by far, is the most screwed up industry in America," he says. "And we feel like things that Amazon or eBay or Yahoo have done of other industries, we can do for the real estate industry."
The portal to this information is a network of blogs created by individuals who are not trained economists but are passionate about housing. These bloggers have growing conviction that a historic bubble in U.S. housing has just begun to deflate. With the help of thousands of readers who add content daily, they report real estate transactions and trends straight from their local markets – from the bottom up. A myriad of observations and contributions, continuously filtered through the Bubble Blogosphere, form a mosaic that may become a model for a new school of populist economic research.
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The Bubble Blogosphere is attracting a growing audience of people who share values that are mainstream, not extreme. Bloggers and their fans believe the housing bubble was created by excessive speculation, easy credit, greedy mortgage companies, and many gullible or careless buyers. In their view, people should not buy houses they can’t afford, debts eventually must be repaid, governments should not bail out borrowers, and flippers get what they deserve.
From the Sacramento Bee:
So far, consumers and businesses have borne the brunt of suffering tied to the economy. But now local jurisdictions from El Dorado County to Elk Grove are starting to cope with a revenue squeeze brought on by falling home construction, lower home values and softer retail sales.From the Sacramento Business Journal:
In Sacramento County, supervisors on Wednesday will face a $33 million shortfall in the new preliminary budget tied to a softening in property and sales taxes, county Chief Financial Officer Geoff Davey said Thursday.
In Elk Grove and Citrus Heights, sales tax revenues are virtually flat, with more of the same expected in the fiscal year that starts July 1. In Roseville, the rate of sales tax growth is about half what it was a year ago.
Some say that the civic side of the pain has just begun. "Really the slowdown in property tax has just started to hit the tax rolls and the budgets of our municipalities and statewide," Davey said. "A year from now, that is when you're really going to see budgetary impacts."
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In Elk Grove, sales tax proceeds are flat after years of double-digit growth, said city Budget Manager Michael McGrane. For the budget year that starts July 1, he projects sales tax revenues -- the city's largest revenue source -- will grow by only 1 percent. That is far from the 16 percent to 21 percent yearly increases Elk Grove saw from 2003 through fiscal 2006.
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In Sacramento County, proceeds from property taxes are expected to grow 10 percent in the fiscal year that starts July 1. That's down from 15 percent for the fiscal year now ending. "It's the largest year-to-year decline I can find in the last 25 years," Davey said. Every percentage point of growth equals $2.7 million in general fund money, he said.
Banks struggled with another quarter of flat growth, squeaking some earnings out of increasing deposit costs and low loan rates.
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The Sacramento region's hot economy for the previous 12 years attracted banks to the area. Now that regional growth has slowed, many banks are searching for loan customers.
"A lot of banks have divided up the pie," said Gary Wright, chief executive of Stockmans Bank in Elk Grove. The bank was the most profitable in the market despite a 19 percent decline in the first quarter from a year ago.
"Things are flat. We're working real hard, and we're getting new customers, but it's tough," Wright said. "We're in it for the long term. This happens from time to time. I don't know if we will see much relief from this squeeze this year."
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The mortgage problems related to subprime lending haven't been an issue for any of the local banks, but the general slowdown in the real estate market is putting a damper on some banking business.
From Forbes:
No matter the locale, its denizens almost always gripe about the stiff cost of living, housing and doing business. But in some places the financial pain is clearly more acute than others.
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Using the 40 largest metro areas, we started by estimating a "price-to-earnings" ratio for each market. (Like the P/E of a stock, this value attempts to measure the price a homeowner would pay for one dollar of return.) Using data from the National Association of Realtors (NAR), the U.S. Census Bureau and the Office of Federal Housing Enterprise Oversight, we took each market's median home price and divided it by annual rents minus taxes and insurance for those properties.
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We incorporated a second metric: an affordability index. Calculated from National Home Builder Association and Wells Fargo data, the affordability score is the percent of the population who can afford to buy the median-priced home, assuming a 6% mortgage rate.
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So which markets are in bubble territory? Look for a high P/E ratio, low affordability, low income growth and a high cost of living.
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The usual suspects littered our list: [San Diego was first and] Miami came in second, followed in order by: Sacramento, Calif.; San Francisco; Washington, D.C.; Honolulu; New York; Los Angeles; and Boston. San Jose, Calif., rounded out the top 10.
From the Sacramento Bee (hat tip Gwynster):
First it was houses. Now it's cars. Motor vehicle sales fell a resounding 7.6 percent in the United States last month, and analysts said the troubled housing market was a chief culprit. That could be worrisome for an economy already showing signs of cooling off. The sales decline was particularly bad in California and Florida, two states feeling the worst of the housing downturn. That was no coincidence.Also from The Bee (hat tip Cmyst):
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First, consumers who had been tapping their home equity to buy cars during the housing boom are less apt to do so when the real estate market is soft. The shaky housing market also is having a psychological effect.
"There's consumer uncertainty. Housing is really having a big impact," said Jesse Toprak, executive director for industry analysis at the Edmunds.com car-buying Web site.
Second, building contractors are buying fewer pickups, vans and other vehicles -- a major part of the market -- for their fleets. "Suddenly your homes aren't selling -- the last thing you're going to do is go out and buy another truck," said Ron Pinelli, president of Autodata Corp., a market research firm based in New Jersey.
Beutler Corp., a big Sacramento-based heating and cooling contractor, normally buys 20 or 30 pickups and other vehicles a year. But this year, Beutler might not buy any -- not after having trimmed its payroll in half, to about 900 workers, since 2005. "You don't need new trucks for expansion," said Rick Wylie, the contracting firm's president. "We've got some trucks parked."
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"So many car sales in California are home equity-based," [auto analyst Art] Spinella said. "Less equity, less money."
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Geoff Pleau of Future Automotive Group, which runs a string of foreign and domestic dealerships in the Central Valley, said the health of the housing market is crucial. "We always follow what home sales are doing compared to automobile sales, and they kind of go hand in hand," Pleau said.
An Auburn man pleaded guilty Thursday to defrauding a bank of more than $1 million, according to federal court records. Christopher M. Craig, 35, is in custody without bail in the Sacramento County jail awaiting sentencing July 19 before United States District Judge Morrison C. England, Jr. Craig faces 30 years in prison. Although most of the federal records in the case remain under seal, Craig admitted Thursday to promising loans to people on the verge of losing their homes to foreclosure, prosecutors said in a news release. In the process, he would provide documents that deeded away people's homes to co-defendants, who then applied for home loans from Washington Mutual Bank.From the Stockton Record:
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The bank gave Craig $1.2 million, but Craig paid back some of the loan, ultimately defrauding the bank of $974,452, prosecutors said. The homes were in Auburn, Lincoln, Stockton, Elk Grove, Sacramento and Manteca.
After some hope that existing-home sales were on the rise, the market slowed again last month, leaving some brokers and agents expecting a long downturn. Sales of existing homes in San Joaquin County had jumped from 265 in February to 363 in March but sagged again to 273 last month, according to figures from the latest Coldwell Banker Grupe-TrendGraphix monthly sales report, based on Multiple Listing Service data.
The median sales price also slipped for the third consecutive month, sliding from $385,000 in March to $380,000 in April [and down 9.5% yoy per chart].
"Dead" was how Mike Collins, of Century 21 Collins, Stockton, described to market these days. "It's just not coming back. This might be as bad as I've seen it." He said his agents reported maybe six lookers stopping by to check out any of the dozen open houses over the weekend.
Collins said he's puzzled by the continued slowness of the market, with the economy doing OK, employment solid and mortgage interest rates still traditionally low. He suspects that many would-be buyers still believe home prices, which have slid by single-digit percentages in the past year, are still sinking.
For some background, read Fraud Grove & Fraud Grove (continued).
From KCRA (also video):
The California Association of Mortgage Brokers is condemning a local real estate scheme that has left several investors nearly broke and many Elk Grove homes in foreclosure.
Jim Martin and his business partners Mario Fellini and Gabe Varimones are being accused of duping individual investors into buying more than 20 homes.
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Many industry insiders have been sounding off about Martin and his partners and are calling for a federal investigation. Mike McGee, past president of the California Association of Mortgage Brokers, said Martin and others deserve to be prosecuted.
Since KCRA 3's investigation, Martin and his partners have switched business names. They are now operating at Esnian Mortgage and Realty Network [cached; site now defunct]. Online, they have been working to attract investors in Miami, Colorado Springs, Colo., and other places. [Most of the Craigslist ads have been deleted by the author or flagged.]
The firm's MySpace.com page [cached; site now defunct] lists Martin as the boss.
KCRA 3 attempted to reach Martin for comment, but he did not return calls.
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Investor Walter Bakos, who earlier did business with Martin, said he fears that Martin and his partners are seeking to profit off a fresh group of unknowing investors. He urges investors to be careful before getting involved with Martin.
From the Sacramento Bee:
Gov. Arnold Schwarzenegger is likely to call for state spending cuts beyond those he proposed in January when he presents a revised budget to the Legislature next week, administration officials said Tuesday.
Growing expenses and the housing market's drag on the economy are putting pressure on California's finances, said Department of Finance spokesman H.D. Palmer. The governor and his staff are meeting this week to make tough choices on how to curtail the budget for the fiscal year that begins July 1, Palmer said.
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[S]tatewide home sales in March were down 31 percent compared to the same month a year ago, according to La Jolla-based DataQuick Information Systems. The median price was up only 3 percent statewide. And in some counties, such as Sacramento, prices have dropped to December 2004 levels.
The housing downturn could increase the amount the state must pay from general revenues to fund education, administration officials say. The state may be obligated under Proposition 98, the law guaranteeing a minimum level of funding to schools, to make up for a decline in county property-tax revenues that pay for schools.
Economist Christopher Thornberg delivered this lecture at Humboldt State back in November. Note the little blurb about Sacramento at the very end of part 3 ("Sacramento saw the real estate bubble pop first....").
Part 1
Part 2
Part 3
Hat tip: Matrix
From BusinessWire:
The nation’s Southwest faces a long road to foreclosure recovery as the region yet again far surpassed the rest of the nation across the board in numbers of foreclosure filings in April.From the Sacramento Bee:
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"Because the Southwest is home to some of the nation’s highest average housing costs, many people in the past have relied heavily on creative adjustable-rate mortgages and financing to afford the American Dream of homeownership," says [president of ForeclosureS.com] Alexis McGee. "Now they’re paying the ultimate price of overextended credit—foreclosure. The region likely won’t see a serious drop in foreclosures for many months."
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San Joaquin County, California led the nation with a 1,056 percent increase in number of REO filings year-to-date 2007 vs. 2006 (659 filings).
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Among the western region's counties hit hardest by foreclosures year-to-date include:...Sacramento (pre-foreclosures up 197 percent; auctions up 383 percent, and REOs up a whopping 989 percent).
Alexis McGee talks about as fast as anyone you'll ever meet. She has to, for this is her time.
"The stars are aligned, guys," she tells a national audience of foreclosure investors, each paying $19.95 to hear her 90-minute conference call from Kauai's Poipu Beach, where she is on a working vacation. "The time has never been like it is right now. We have more chances to buy than we've ever had before."
In the world of home foreclosure there are legions of get-rich-now gurus, opportunists and house buyers who live with the label of "vultures." And then there is Alexis McGee, 46, of Fair Oaks, who tells people they can profit from other people's financial crises without selling their soul, without lying, cheating or stealing or "crossing the gray line of integrity and ethics just to make the deal."
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Though her privately owned firm doesn't release financial information, McGee says she is doing well on the downslope of the housing boom. She makes no apologies for the wealth her peculiar real estate niche has delivered.
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McGee, who came to California via New York and Arizona, has reason to beam: This month the company that began in 1992 as the Daily Default, a sheet faxed to investors, is doubling its space and moving its staff of 12 to a 5,000-square-foot building.
Jimmy Castro - Sacramento real estate agent, Realty Times, April 26, 2007:
Right now, the housing market in Sacramento offers buyers a real window of opportunity. Not only have prices stabilized at attractive levels, but there's generally a wider selection of well-priced homes to choose from. In addition, there is an unprecedented array of low-rate mortgages available to finance a home purchase, including loan programs that require no down payment. The market climate for finding and affording that dream home may never again be this favorable.Here's what Castro had to say in February 2006:
If you are thinking about making a move:
- Anticipate what is happening in the market right now. We are at the bottom of this market cycle and rates are low...It's a perfect time to buy!
If you are planning to buy a home or invest in Sacramento in the near future, I highly recommend taking advantage of the "stall" in the market right now. Get into a home now while sellers are willing to negotiate and interest rates are still reasonably low.
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I highly encourage investors to hold on to their properties! The market is going to rebound and you are going to wish that you didn't dump your investment at a fraction of what it is going to be worth in the next year or two.
Post off-topic links, observations, and stories here. Please read the comment policy before posting.
From the Sacramento Bee:
Next to the US Bank Tower, Denver developer Craig Nassi hopes to build Aura, a 39-story luxury condominium tower designed by renowned architect Daniel Libeskind that will cost about $177 million.
But Nassi has yet to break ground at 601 Capitol Mall because he hasn't purchased the land from Taylor. Last month, Nassi's deadline passed to line up financing. He has asked for more time, but Taylor said Thursday he won't formally grant an extension without talking directly with Nassi's lenders and equity partners.
Nassi, who has maintained all along that Aura will be built, did not respond to requests seeking comment.
Three blocks west, all is quiet where John Saca's $550 million Towers project is planned between Third and Fourth streets. The foundation work on the ambitious 53-story, twin tower, hotel-retail-condo complex abruptly stopped last fall.
Last month Saca said he reached an agreement to buy out the California Public Employees' Retirement System, his largest investment partner. To close the deal, he must come up with about $25 million by May 25 to reimburse the state pension fund for what has been spent.
The Sacramento-based developer also needs more money from other investors and lenders to restart the project. He has taken deposits on about half of the 800 condos up for sale.
Saca did not return a telephone call seeking comment. Mark Cordano of Sacramento-based Cordano Co. said his company has put its Towers retail marketing efforts "on hold" for now.
The investigation exposed how Jim Martin and his business partners at VFM Investment Group falsified loan applications and listed investors as employees of the company in an attempt to defraud lenders out of millions of dollars.And this response in the comments of the prior post:
KCRA has learned that all 20 of the Elk Grove homes at the center of the investigation are now for sale. They're hitting the market for tens of thousands of dollars less than the investors paid.
The problem of loan defaults is widespread, said Tracey Saizan, president of the Sacramento Association of Realtors. In Sacramento County, more than 7,000 people have defaulted on their loans, leaving thousands of homes in foreclosure.
With many houses hitting the market under value, homeowners such as Jared Cronroth say their property values are dropping dramatically. His four-bedroom, two-bath house is listed at $419,000. Yet, just two blocks away, a larger home for sale because of foreclosure is listed for $50,000 less. Because so many of the houses in the area are on short sale, Cronroth said he is having to take a loss.
The president of the Sacramento Association of Realtors on Wednesday called for a criminal investigation after a KCRA 3 series earlier this week uncovered allegations of fraud in the local mortgage industry. Tracey Saizan, head of the association, said she feels bad for those investors who appeared to have been duped. She also said she hopes law enforcement officials prosecute those responsible.
Jim here.
These properties were called 100% financing the sellers aded 3% for the purchase price to cover the buyers closing cost.The bank approved the purchase contract These investors came to us and wanted houses and wanted money and they even wanted more houses and we said no. We did the loans and the market turned bad and now the blame game comes into play. We did not falsify anything on loan documents. These people signed the loan documents and some even made money from there loans and got credit cards paid off. I am so mad that KCRA 3 has made them out to be victims. I have witnesses that know the truth. We did all we could and we did not give up we wanted to help but the blame game started. I know all of you will post your opinion and bad or good I would love to here.
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I am visiting with my lawyer today at 1pm. I will be writing a comment in the afternoon. I have contected the sacbee to tell our side of the story. Hopefully this will come out soon.
From the Sacramento Bee:
District officials say fewer school-age children than expected are living in North Natomas, and additional elementary schools can't be justified.
"The rate of growth has slowed dramatically, so we're in a very stabilized enrollment situation right now," said district Superintendent Steve Farrar. "You may have a very large development, but if it only produces 100 kids, you can't build a school for them."
Enrollment was rising by about 12 percent a year as recently as two years ago, Farrar said. Recently it has slowed to less than 3 percent. "The drop caught everybody by surprise," he said.
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[City Councilman Ray] Tretheway said he plans to attend the district's forum to find out more about enrollment numbers. "I'm a little surprised that the projected youth movement in Natomas is coming to a screeching halt," he said.
From the Sacramento Business Journal:
Median home values in the Sacramento area dropped 7.4 percent in the first quarter from a year ago [and down 9.2% from peak], the latest evidence the housing market slowdown continues in the region.Click here to compare to other price indexes.
Yolo County endured the region's largest decline in value, at 13.2 percent to $394,990, according to Zillow.com, an online real estate tracking company in Seattle.
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Sacramento County had the region's second-largest drop at 8.1 percent to $354,681. Existing home prices in El Dorado and Placer counties fell 6.4 percent and 3.5 percent, respectively.
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All 35 communities in the four-county region -- from Antelope to Woodland -- reported declines in price. [Also, all but one neighborhood in the city of Sacramento suffered price declines, according to Zillow.]
From the Sacramento Bee:
For a while, the pace of growth shot through the roof, but Lincoln, the little city that could, has lost some of its steam -- reflecting a downturn in the region's once-booming housing market.From the Stockton Record:
Lincoln, the state's fastest-growing city per capita last year, has been knocked from its perch atop the heap, tumbling to sixth on the list, according to population estimates released Tuesday by the state Department of Finance.
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With a population of 37,410, Lincoln posted a still-robust 11 percent increase -- the fastest growth rate of any city in the capital region -- but less than half the 22.6 percent growth from the previous year.
"It's a little bit indicative of the housing market, that's for sure," said Campbell.
Indeed, the softening housing market kept the region's growth at modest rates. Sacramento, the state's seventh most populous city, grew by 2 percent and now has a population of 467,343. Overall, Sacramento County grew by 1.4 percent to nearly 1.41 million.
Elk Grove grew by a healthy 4 percent -- but well below the 7.8 percent of the previous year...Elk Grove's 4 percent growth was a marked shift from the manic population surge of a few years ago. The city grew by 27 percent in 2003. More commuters clogged freeways, and housing construction soared. By the third quarter of 2005, new home prices in the city had jumped to $539,500.
New housing prices have moderated, sales have dropped sharply, and housing construction has slowed to a crawl.
For the first time this decade, Tracy has essentially stopped growing.
New population estimates released Tuesday by the state Department of Finance showed that Tracy's population gained only 32 people from 2006 to 2007 - marking the end of a run for what had been one of California's fastest-growing cities.
Overall, Tracy's population has increased by more than 41 percent since 2000, but a slump in the housing market combined with recent slow-growth policies within the city have halted that trend.
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As a whole, San Joaquin County added about 11,400 people last year, bringing the county's total to about 679,600. This is a markedly slower rate of growth than the county had been seeing in recent years; the last time San Joaquin's growth rate was slower was in 1998.
UPDATE: Part 2 from KCRA:
As part of a three-month investigation regarding the purchase of 20 Elk Grove homes, KCRA 3 shared details of the scheme with a retired FBI agent who said it appears laws were broken by organizers.Part 1:
The investors who said they were duped are accusing their loan officer and mortgage broker of lying on loan applications by inflating incomes.
Jim Wedick, a retired FBI agent, said the numbers may have been fudged to ensure banks would loan the money. In the end, those organizing the deal would be assured of receiving commissions.
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KCRA 3 also found that the value of every house involved in the scheme was also inflated. For example, a home on Otter Creek Way listed for slightly more than $400,000. But investor Walter Bakos ended up paying an additional $20,000. Another house on Borreal Way listed for $420,000, but Johnston, another investor, paid nearly $435,000. By inflating the values, Martin and his partners increased their commissions, KCRA 3 found.
Pat Romano said she was just trying to make a little extra money when she and a friend got lured into a real estate scam. In the end, both Romano and her friend ended up with their credit ruined.Read the complete story and watch the video at KCRA.
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Ramono purchased two of the homes. In a lawsuit on file at Sacramento Superior Court, Romano alleges James Martin and his business partners at VFM Investment conned her into buying the homes.
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Six other investors allege they were taken advantage of by Martin and his business partners as well. Walter Bakos, a contractor who makes less than $40,000 a year, alleges he was duped into buying six homes worth more than $2.6 million.
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Tim McDaniel purchased two of the homes. Jeffery Johnston brought three. Peter Correa purchased three as well. And, Reagan Olivares purchased five.
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A three-month-long KCRA 3 investigation has uncovered millions of dollars of fraud in the local real estate market...KCRA 3 found the overwhelming majority of fraud involves the sale of 20 homes in Elk Grove. All 20 homes are now in default, many of them are in foreclosure.
"housing slowdown" --> "housing downturn" --> "housing slump" --> "housing bust"
From the Sacramento Bee:
Housing bust leaves Valley in the lurch
Construction worker Kenneth Tate lives in a neighborhood so new there are houses going up on the next block, a potent symbol of the Central Valley housing boom. But the home in Merced's Summer Creek development isn't his. Tate, 32, lives with his mom while he looks for a permanent job. With building slowing to a trickle, there's little available at the temp agencies, he said. "Construction," he said, "was good to me."
Few places in America benefited from the housing boom more than the Central Valley. It brought prosperity to this impoverished agricultural slice of California on a scale not seen in decades, if ever. Unemployment in Merced and most other counties fell below 10 percent. Restaurants and shopping centers sprang up to cater to the newly arrived population from the Bay Area and Southern California, bringing new jobs.
Now, housing starts are down 20 percent to 50 percent, depending on the market, and construction work has tailed off. There are fears of widespread foreclosures. A January freeze devastated crops and reminded the Valley that its economy is still largely agricultural. As the housing market peters out, uncertainty abounds. Bankruptcies are up and construction has slowed," said former Modesto Mayor Carol Whiteside, head of the Great Valley Center think tank.
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"We're concerned because so much of the employment was due to construction," said Rollie Smith, head of a federal task force on economic development in the San Joaquin Valley. Because of low incomes, the Valley is especially vulnerable to the downturn.
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Aside from 900 or so UC employees, Merced hasn't yet developed a permanent base of high-wage jobs. Much of its job growth has been driven by population: construction, retailing, etc. With the boom over, employment in most industries has held up, but construction employment is down 5 percent from last year.
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It seemed everybody wanted to buy a home in Merced, even people who didn't want to live here; at the peak, nearly one in five homes sold went to investors, according to LoanPerformance.
Hai Nguyen was one of those investors. The former San Jose resident bought a $420,000 home last year in a new development near UC. But the rental market was weaker than he thought. Now living in Arizona, Nguyen has the home up for sale -- and is throwing in a $40,000 Cadillac Escalade as a sweetener. "I've learned a lesson," said Nguyen, 35, who holds a real estate license. "I'm stuck."
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The housing bust, too, could be short-lived. But a resurgence in home building won't be a cure-all, many agree.
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Some believe the Valley could follow the same path as Riverside-San Bernardino, whose decades-long housing boom eventually translated into a welter of good jobs. But [Southern California public policy expert Joel] Kotkin isn't convinced, now that Silicon Valley outsources work to the Midwest and India, not Stockton. "You have to have relatively high-end job growth to sustain those high housing prices over time," he said. "I believe long-distance commuting is not a viable basis for an economy."
