"Inevitably, the boom turned to bust"

From the Sacramento Bee:

In the Sacramento region last year, about one of every six homeowners spent more than half his or her gross income on housing, according to a Bee analysis of new census data. That's 30 percent higher than the 2005 rate, and almost double the 2000 rate.
...
Shortly after they bought their Orangevale home, in 2001, increasing housing prices presented that opportunity to use equity in their home to supplement their income. It worked well for several years. The family refinanced their house at least twice, David Cavaness said, as its value increased. Their cycle became build equity, cash out, repeat. "We paid off two cars," Christina Cavaness said. "We paid off some credit cards. We were just trying to survive."
...
Then the housing market started to tank. The Cavanesses' home value dropped and their cycle of refinancing ended. Meanwhile, the rate on their loans, including a small second mortgage, crept upward. Last year, for instance, as their monthly loan payments grew, their income remained stagnant or worse as David Cavaness switched jobs a few times. Recently, Countrywide sent a letter telling them their rate would adjust again -- property taxes and insurance included -- to almost $3,000, Christina Cavaness said. That's almost all their monthly gross income.

From the Stockton:

Seven years ago, the Stockton area's population was growing, city officials were making big plans and property values were on the rise...It seemed like only better times were ahead in San Joaquin County, California and the country. Heavily impacted by Bay Area earning power and the migration across the Altamont Pass, home values became artificially inflated. Inevitably, the boom turned to bust.

Housing became overbuilt and over-leveraged. Too many homes were financed with risky lending and mortgage practices, often at the expense of gullible individuals who either were misled or were unable to understand the process. Too many sellers wanted too much for property. Some real-estate agents were all too willing to share that wealth. Predatory lenders moved in to exploit the demand that traditional lending practices couldn't support...The situation was compounded by speculators and investors who purchased property because it was cheaper, could be resold for a quick profit, used for rental or even nefarious purposes (marijuana growing).
...
Some politicians are recommending a federal bailout of deceptive, predatory lenders. Just as in the disastrous savings-and-loan bailout of the 1990s, they don't deserve it. Taxpayers, most of whom had nothing to do with creating this mess, shouldn't have to pay to clean it up. A bailout only encourages this kind of bad business behavior.

From the Stockton Record:

If there's a constant drumbeat of bad, heavily reported news, does that news begin to take on a life of its own, become a self-fulfilling prophecy?

It's a reasonable question, this time coming from a reasonable guy, Carl Isaacs, who's been selling real estate in Stockton for decades. He complains about what obviously has been article after article - doom and gloom, he calls it - about the real estate market here. The relentless coverage undermines confidence and makes consumers question whether they should even own a home, he worries. (Of course, few, save a few naysayers and often-ridiculed economists, fretted about the relentless coverage as the market zoomed skyward.)
...
[The] market plunge that began in early 2006 and seems to accelerate with the release of every new sale/price report seems to have no bottom. CNBC, CNN, USAToday, "60 Minutes" and The New York Times are among the major American news outlets that have parachuted into this area in recent weeks to record the squirming population at ground zero of the nation's market collapse.

Bonfire of the Flippers

From the Sun Post:

Speculators partly fuel housing bubble

Housing speculators share the blame for a growing portion of the foreclosures in Manteca, according to new data from a California real estate tracker. In August, 41 percent of the Manteca homes sold at courthouse foreclosure auctions were owned by people who never lived in them, according to an estimate by ForeclosureRadar, an online foreclosure tracking service based in Discovery Bay.

According to the service, the foreclosures on investor-owned properties have skyrocketed since four months ago, when just 5 percent of the houses sold at auction were owned by people who did not apply for a tax break available only to those who live in their houses.

The data points to a new segment of homebuyers — speculators — who signed risky loans to buy houses and then sell them quickly at a profit. That stands in stark contrast to the foreclosure crisis image that has grabbed public attention — one of families who took out risky, oversized loans and then lost their homes.

From the Sun Post:

Besides the real estate agents and mortgage companies that have been stung by the rising foreclosures and falling home sales, sellers of big-ticket items — such as furniture stores and car dealerships — are also seeing a downturn. The problem, according to local retailers, is that buyers relied on rising home prices and easy access to borrow cash from home equity lines of credit to make big purchases. Forced to operate on a smaller budget, those people are sticking to the necessities.

Sam Guedoir, owner of Century Furniture...says his sales have been down significantly during 2007...“We’ve started selling more small-sized furniture because people are moving back into apartments.” In a city where housing has been the dominant economic force for the past decade, any downturn in the housing market is likely to put a damper on most other businesses. “We have left most of our eggs in one basket,” Guedoir said.
...
Car dealers face similar problems, even though their business is not directly related to having a place to live. Mike Naranjo, who runs a used-car dealership, Manteca Mike’s Auto Outlet, said his business has performed “just like the housing market.” His sales are down 30 percent, he said, the worst sales clip he has seen during his seven years operating the dealership.

No Crystal Balls in Manteca

From the Manteca Bulletin:

"I don't have a crystal ball, but prices appear not to be dropping as much any more," [Tom] Wilson [of Wilson Group Realtors] said. In fact, Wilson has had clients who have been "fence sitting" while trying to gauge the bottom of the market take as position that this is as close to the best prices they'll get and are starting to make serious offers. It's a view shared by Allison Chinchiolo of PMZ Real Estate. She believes the Federal Reserve's rate move coupled with Manteca's appeal as a high growth area is what is responsible for her office seeing an increase in buyer interest in the past three weeks.
...
"People have been waiting for the bottom," said Chinchiolo who also emphasized she doesn't have a crystal ball, but added there are a lot of buyers who have been looking have expressed the belief prices probably aren't going to go much lower. "That's what makes this a great time to buy especially if you are going to stay put four to five years," said Chinchiolo. "You'll be amazed in what equity you're build up then compared to if you just rented."
...
Manteca currently has a 21.7-month supply of available resale homes based on the current rate of existing homes closing escrow...The current supply of homes [in Lathrop] is large enough to last 51.5 months at the current absorption rate...A six-month supply is when most economists - and Realtors - believe that buyers and sellers are on an equal footing with neither having an advantage.

Chinchiolo noted properly priced homes that reflect the market are selling in four to six months. "That isn't what people have become used to in the past six to eight years so they don't think it's normal but it is," she said.
...
A quick read of the Manteca economy based strictly on the housing slowdown that was severely compounded by the wacko lending practices that obviously benefited only those making commissions off loans that ultimately could never have been viable might tempt you to abandon ship.

But the funny thing is the only people who view this economy as Titanic are those who signed loan documents betting - or blindly hoping - equity growth would allow them to refinance in time to stave off an uptick in payments after two years that actually include a part of the principal. Some deserve empathy. Others were reckless. But one thing is for sure - the world isn't coming to an end.
...
This is not 1989. People aren't losing their jobs in wholesale fashion. The economy isn't in a dump even though the housing construction slowdown has hurt that sector. But even so, the number of new home sales are on pace to sell more this year than in 1990, 1991 and 1992 combined. The Manteca economy is different. Even though major retail and other non-residential construction activity has already taken place, Manteca is literally just on the cusp of a significant economic growth era. It is reflected in retail and office projects that are actually moving to construction.
...
No one is dismissing the sub-prime debacle - which is more accurately described as loans made to people who weren't credit worthy enough to ultimately pay them - as no big deal. But in the overall scheme of things it is a mere bump in the overall economics of the Northern San Joaquin Valley that is expected to be the fastest growing region in California for the next 20 years...The foreclosure mess is exactly that - a mess. It would be devastating if the Manteca economy wasn't as strong as it is. Keep that in mind if you're tempted to run around crying "the sky is falling down."

From the Stockton Record:

Homeowners in the upscale Paseo West development in Manteca are getting organized to see whether they can convince Lodi-based Anderson Homes to change plans to auction off 34 homes next month. Owners of 26 homes there think the home builder is treated them unfairly and in bad faith by planning to auction off vacant or under-construction homes at prices that could be more than $200,000 less than what current residents paid for their homes within the past year, said Dave Cantrell, one of the first to buy a home in the subdivision.
...
It is unlikely Anderson Homes will drop the auction, he said, and purchase contracts state that the builder might sell other properties there via auction. But homeowners would like to see at least from $20,000 to $30,000 each in cash compensation for the property-value drops that would result in the neighborhood, Cantrell said.

From the Manteca Bulletin:

"Doing something like what Steve Jobs did with iPhone when they slashed the prices seems fair," Cantrell said. In that case, Jobs cut the price of the iPhone by $200 just two months after Apple rolled at a suggested sale price of $599. Jobs made a $100 rebate offer available to earlier iPhone buyers good toward certain Apple products.

Paseo West residents concede house prices are down and many - including one owner who put $70,000 down - understand that they have lost value. But if the homes sell for the minimum bid - which is 40 percent of the last discounted prices that Anderson Homes offered - many who bought their home in the past year will see their investment drop by almost 45 percent from the original price.
...
The Paseo West homeowner paid Anderson Homes $629,000 for the same model that the builder plans to sell at auction on Oct. 13 for a minimum bid of $345,000...Cantrell understands he bought at the top of the market.

From News10 (and video):

"They didn't treat us very good as far as I'm concerned at all," said Amy Sturdevant who in August 2006 paid $585,000 for her family's four-bedroom, two-bathroom home. Now, a nearly identical home with the same floor plan right across the street from Sturdevant is set to be auctioned at a starting bid of $295,000. "I saw myself losing potentially a quarter million dollars," declared Dave Cantrell, a neighbor of Sturdevant who is rallying other neighbors to protest the move by Anderson Homes.

Not only do residents who live there feel their homes are being devalued, they are worried that investors will gobble up the houses at bargain basement prices. "The concern is that we bought into what was advertised as luxury homes in an upscale neighborhood for the area," said Cantrell. "We feel strongly at this point an investor potentially could buy and we'll become a rental neighborhood."
...
"I was talking to my wife just an hour or so ago and I told her, you know, I think we made a very serious mistake by buying this home," Cantrell said.

From the Tracy Press:

The number of houses on the market in Tracy, 946, is closing in on the total number of houses built in town at the peak of the housing boom in 2004, the last year the city added more than 1,000 houses. At the same time, RealtyTrac, an Irvine company that tracks foreclosures across the U.S., reported this month that 1,138 Tracy homeowners had received notices of default.

As a result, homeowners have slashed their asking prices to 2004 levels. “Actually, I’d have to say it’s a little lower than that,” said local broker Dave Konesky, a director with the California Association of Realtors. Konesky said one of his clients bought a Tracy house in 2004 for $430,000 and now is asking $419,000, “with no bites, and it’s a beautiful home,” Konesky said. He said that’s about as low as the homeowners want to go. “They said they’ll sell it for less than they paid for it,” he said, “but they won’t give it away.”

From the Sacramento Bee:

Granite Bay's Dunmore Homes, which raised eyebrows Wednesday with a sale to Comstock Mortgage senior loan consultant Michael A. Kane, has been slow to pay its bills, according to a report by Costa Mesa-based credit tracker Experian. Experian says that, as of Sept. 10, Dunmore Homes was an average of 52 days overdue on bills. The home-building industry average is six days. Under the category of payment trend, Experian says simply: Increasingly Late.

Dunmore officials did not return calls seeking comment. On Wednesday, Dunmore Homes said its sale will provide capital to restructure the company, which owes money to lenders and to area subcontractors. Negotiations are under way to make everyone whole, the company says.

Central Valley Cities: Where Even Vultures Fear to Peck?

From CNN Money (hat tip spacebar):

Real estate investor Matthew Martinez is the point man for a private equity group that plans to invest $200 million in Florida condo developments. But recent forecasts show many housing markets in the Sunshine State are looking at double-digit drops in home prices. What is he thinking? "The smart money is thinking about buying there right now," says Martinez. "It may be six to 12 months early, but it's a good time to be searching for deals."

Local housing markets that have fallen far, yet have the potential to recover soon, are ripe targets for "vulture investors," who buy cheap in the hope that prices will rebound.
...
[Jonas] Lee [of Redbrick Partners, a private equity firm that invests in real estate] is also is interested in Florida, and the Boston and D.C. areas as well.

Some of the down markets he's not considering include the Central Valley cities of California, where prices in places like Stockton soared for several years. Moody's projects prices there will fall 25 percent. Lee doesn't like Stockton's prospects because, "It was so overpriced there and there are few constraints on building." If prices start to recover, developers can quickly build again, putting a damper on price growth.

From the Fresno Bee:

Stockton is the foreclosure capital of the nation for one key reason: Families had to stretch financially to buy a house. Families that fled the high-cost Bay Area to buy a house now are losing them at record rates, according to samplings by RealtyTrac, which monitors default activity. Other regions close to high-cost urban centers -- Modesto, Merced and Riverside/San Bernardino -- are also high up the foreclosure list.
...
About 25% of home buyers in Stockton used risky, or subprime, loans -- some featuring payments that start small but rise sharply within three years -- to finance purchases. Many of those transactions occurred between 2003 and 2006 when prices were tripling in some areas. And today, with home values falling and strapped owners unable to sell their properties, a quarter of those who took out such loans are in default at least 60 days, according to LoanPerformance, a Bay Area company that tracks mortgages.

From the Lodi News Sentinel (UPDATE: follow-up article here):

Ralph Bilbrey had finally had enough. Grass on his neighbor's lawn had grown several inches high, but there isn't a homeowner to mow it. Yet there is a "for sale" sign with the name of Prudential California Realty on the lawn. The neighbor's Park West home is in foreclosure. Residents estimate that no one has lived at the Tejon Street residence for a year or more. And nobody is mowing the lawn. Until Wednesday, that is.

Despite reportedly being told by a Prudential representatives to stay off the property, Bilbrey took his lawn mower, saw and pruning shears and did about three hours of work Wednesday morning.

Bilbrey and a neighbor, Rob Rodriguez, have brought the matter to the attention of Lodi City Hall and Prudential during the past two weeks. They feel they haven't received a satisfactory answer. "Why do you let this home go so bad when you're trying to sell the property?" asked Rodriguez. "The lawn was so high you could deer hunt on the property."

The situation in Park West is just another example of how the downturn in the real estate market and the mortgage crisis have left homes unoccupied in Lodi, San Joaquin County and throughout the nation.

From the Appeal Democrat:

If misery loves company, area residents trying to sell a home should be feeling plenty of love...The Yuba-Sutter market’s 35 percent drop in housing sales between August 2006 and August 2007 puts local homesellers in the same lousy neighborhood as nearly everyone else, according to numbers compiled by the Sutter Yuba Association of Realtors.
...
Comparing August to August sales, Yuba-Sutter weighed in with a relatively steep median sale price drop of 8.1 percent – $290,000 to $260,000, according to the SYAR numbers. Yuba City Realtor Lloyd Leighton noted that in December 2005, when the area’s house prices peaked, the median sale price was $315,000 – 17.5 percent higher than in August 2007. “That’s been a pretty dramatic decrease over less than two years,” Leighton said.
...
Leighton’s glass-half-full message for area home sellers: The current trend is much like that of the early ’90s. “So the good news for those who bought homes (during the latest price peak),” he said, “is that people have gone through all this before, recovered, and are now doing well.” Realtors’ long-term predictions for the future are not so bad, he said, “but the short-term stuff looks pretty ugly.”

Hey, Hey, Ho, Ho. That auction has got to go!

Dun

UPDATE: More stories about Dunmore Homes. From Builder's Online:

Faced with declining sales in a sputtering Sacramento, Calif., market, venerable home builder Dunmore Homes was sold today to Michael Kane, well known in the local real estate industry.
...
John Slaughter, vice president of construction and operations, said the company cut its staff from 134 employees to 45 from 2006 to 2007, and anticipated closing slightly more than 200 homes this year - roughly 25 percent of its 2003 peak. Slaughter said the company expected no further layoffs and planned to move forward under the Dunmore Homes name with Sid Dunmore acting as an advisor.

From the News10 (and video):

Contractors have filed millions of dollars in liens against Dunmore Homes, and in some cases against people who bought the houses. Lukas Allred, who bought a home in Monterey Village in May, discovered the company that built his fence has filed a lien against him. "We purchased our homes with free and clear title, and now we're finding out there are liens on our homes that aren't our responsibility," complained Allred.

From the Sacramento Business Journal:

Dunmore Homes, a fixture on the Sacramento residential construction market since 1953, has been acquired by a Sacramento businessman who is pursuing a restructuring of the company, Dunmore Homes announced Wednesday. The transaction involved transfer of assets and assumption of liabilities to a successor company owned by Michael Kane, a Sacramento native.
...
"The recent decline of sales in today's homebuilding industry has had a devastating effect on most private and public homebuilders," ["bouncing around the bottom" Sid] Dunmore said in a prepared statement.

From the Sacramento Bee:

Housing decline forces Dunmore to sell company

Granite-Bay Dunmore Homes, a local family owned builder since 1954, has become the first major home builder casualty of the slumping Sacramento-area housing market...The news highlights the growing difficulties of home builders in a market that is mired in a massive oversupply of for-sale inventory. Many buyers are also reluctant to commit while prices are falling.

Photos of Dunmore's Monterey Village development in Elk Grove here.

From the Sacramento Bee:

Tough times in the national housing market led to a company record loss of $513.9 million for Lennar Corp. in the third quarter, with drops in sales prices and home deliveries compounded by heavy charges to write down land values. Its shares fell almost 4 percent. Lennar, one of the nation's largest home builders, said Tuesday it had cut its work force by 35 percent this year and that it expects to pare more employees soon.
...
Lennar is the Sacramento region's third largest home builder so far this year with 420 sales reported from January through July, according to Costa Mesa-based Hanley Wood Market Intelligence. That's down sharply from 747 sales at the same time last year. Lennar, which also operates in the region as U.S. Homes and Winncrest Homes, has projects in Rancho Cordova, Roseville, Natomas and El Dorado Hills. Its biggest is at Rancho Cordova's Anatolia community, where it is a partner with Sacramento-based AKT Development.

From the Sacramento Bee:

It's no secret that Sacramento and many other California cities grew dependent on the booming housing market to drive economic growth. Statistics released Wednesday show just how true that was. Construction and finance accounted for 40 percent of metropolitan Sacramento's economic growth in 2005, the most recent figures available, according to a report by the U.S. Bureau of Economic Analysis. The national average was 27 percent.

From the Tri-Valley Herald:

Anderson Homes is auctioning off 34 homes in the Paseo West subdivision in Manteca far below asking price as a way to stir up interest among homebuyers and move homesquickly...Neighbors in the Paseo West subdivision have voiced their frustration to local newspapers about the prospects of an auction — including that they paid more for the homes when the market was booming and that housing speculators would bring in renters or the potential for foreclosure.

"It's certainly something we've thought about, but also we looked at what we paid for land and the continued downward trend in the market," Barton said. "We feel the auction could give the buyers out there a shot in the arm." "We wanted to make sure those empty houses next door were filled with families," Anderson said, noting the problem San Joaquin County and Manteca has had with foreclosures and abandoned properties.
...
The case of Anderson Homes is similar to situations throughout the Bay Area and San Joaquin Valley, said Daryl Franks, director of franchise sales for Pacific Auction Exchange. "It's a question of what's worse, do you want to slowly die of a thousand cuts or do you cut the arm off," he told a group of local real estate experts Tuesday with regards to the current housing climate.

From the Stockton Record:

...[S]ales prices dropped off in this region, falling 11.5 percent in the Central Valley, to $309,740, and 12.1 percent in Sacramento, to $332,510, the report said....Central Valley sales were down nearly 34 percent year-to-year, the state association's report said...Leslie Appleton-Young, chief economist for the Realtors association, said the sales market was already challenged by low affordability, tighter credit standards and expectations of lower prices, but the sales decline accelerated in August because of the credit or liquidity crunch that began in July.
...
Real estate agents and brokers in San Joaquin County complain that the increase in foreclosures is the top reason the sales market is so slow...Foreclosures have clogged the market, and until they clear out, there's little hope for a normal sales scene, said Mike Collins of Collins Realty in Stockton.

From KCRA:

Four men accused of being involved in a mortgage fraud scheme will face charges in federal court, U.S. Attorney McGregor W. Scott said Tuesday. In an indictment unsealed Tuesday, a federal grand jury charged James Roy Martin, 36, Mario Fellini III, 38, Gabriel Richard Viramontes, 44, and Joseph Salvatore Gallo, 34, with bank fraud and conspiracy to launder money, Scott said. Martin, Fellini and Gallo were also indicted on charges of making false statements in loan applications, and Martin, Fellini and Viramontes were indicted on mail fraud charges, Scott said.

From the Sacramento Bee:

If convicted, the defendants face up to 30 years in prison and fines up to $1 million each for bank fraud. Mail fraud carries penalties up to 20 years in prison, while money laundering can draw sentences up to 10 years, federal authorities said...Assistant U.S. Attorney Matt Stegman said the case is one of several area mortgage fraud cases being investigated by federal authorities in the wake of a housing boom that saw a major relaxation of lending standards and a rise in allegations of loan fraud.

'I Just Thought Things Would Work Out'

From the Sacramento Bee:

Driving around Sacramento's urban core, you'd never guess there was a housing market slump. New lofts, three-story row houses and condominiums conceived during the housing boom are nearing completion in neighborhoods ringing downtown...At least eight housing developments with about 500 units are either under construction or just completed in the central city. Across the Tower Bridge on the West Sacramento waterfront, another roughly 250 units either have hit the market or soon will.
...
For years, city leaders pushed unsuccessfully for more homeownership downtown. But the finances didn't make sense for developers until the housing market boom pushed prices high enough to cover the extra expense of building on small, inner-city lots. When sales prices topped $300 a square foot a few years ago, developers rushed to get into the urban housing business. Projects started in those heady days are now ready to open.

The builders hope that their products -- and locations -- are interesting enough to sell in tough times. "It's a scary market," said developer Mark Friedman, a partner in Loftworks, which is building 32 brownstone-style row houses in midtown at N and 26th streets.

From CNBC (videos here and here):

These days people here are losing money, as Stockton has become infamous as "The Foreclosure Capital."...Over the weekend several foreclosed properties held open houses. We were there. And so were the flippers! After all that's happened, a new wave of speculators has descended, hoping to take advantage of the 10%-15% below market values these homes are selling for. Their plans? Fix 'em up and sell 'em at a profit! To whom, I haven't a clue.
...
[T]hen there's the dental assistant, a single mother of three, who doesn't want us to reveal her name, but who has to be out of her repossessed home in 14 days. She has nowhere to go and no creditworthiness to qualify as a renter. What happened? Her $2,000 mortgage payment (which she had to work two jobs to cover) reset after two years, and it shot up to $3,800. I asked her how she thought she could take on the loan, knowing the rate would rise. "I just thought things would work out."...Her three kids want to know why notices keep getting posted on the door.

Should we feel sorry for her? I sure did. Should she be bailed out? Not if it keeps her in a house she can't possibly afford over the long run. That's not fair to the people who did stay within their budgets, people who have seen their home values plummet as their neighbors go into foreclosure.

From the Stockton Record:

The sea of foreclosed homes in San Joaquin County and its flotsam of tall weeds, partying teens and green pools are testing neighbors' patience and code enforcers' limits..."It's a real sticky situation in making sure our code enforcers aren't overworked. It's very difficult for our staff to track down the folks who are taking off," Tracy Spokesman Matt Robinson said. "They're just walking away from their homes."
...
One burning question these days is: Why have foreclosures sledgehammered the Stockton metro area more heavily than about any place in the country?
...
Locals and many Bay Area people began to get priced out of the market. In order to buy, households often went after low introductory teaser rates on loans for which lenders asked little or no employment/income documentation, said Leslie Appleton-Young, chief economist for the California Association of Realtors. Lenders routinely reported that for the first time, adjustable-rate mortgages and exotic loans were more common than fixed-rate loans.

Meanwhile, investors added to the price spiral by competing for homes, sometimes buying sight unseen via the Internet and looking to "flip" them for tidy profits within a year or two. Real-estate agents and brokers reported that up to 30 percent of home buyers were investors. "And then when prices quit going up, it was like musical chairs, and there was no place to sit down," said John Knight, professor of finance and real estate at UOP's Eberhardt School of Business.

"The Heart of Darkness" Real Estate Market

From the Sacramento Business Journal:

The developer that's been sued the most by contractors over unpaid bills in Sacramento County over the past year isn't a giant company with hundreds of home sites or the backer of a high-profile washout such as The Towers on Capitol Mall. It's relatively small Sixells LLC, which specializes in urban infill projects throughout the region.
...
Owner David Lonich of Redding said the slumping housing market is to blame. He admitted the company owes some money it can't pay until it generates more sales, but he also said some of the claims aren't legitimate and some contractors are overbilling the company. "The No. 1 overall event was not getting the sales to generate the cash flow to cover all the bills," he said, adding that the company is not going to walk away from its projects.

From the Modesto Bee:

These are tough times for Northern San Joaquin Valley home builders. They've got too many homes to sell and too few buyers who want them. That's causing some builders to auction off houses at bargain prices and others to indefinitely postpone construction. A couple of developers are in jeopardy of defaulting on construction loans, which has put their partly finished subdivisions in limbo.
...
"We're going to be lucky to weather this. It's hit us hard," said Bernie Heyne, vice president of Pacific Pride Communities. The builder has halted construction at its Thomas Terrace development in Modesto while it renegotiates with lenders, leaving nine finished-but-empty homes. It's laid off two-thirds of its staff and put its Modesto headquarters up for sale. "We are pulling back," Heyne said.
...
Owner Rick Lafferty [of Lafferty Homes] said this is the toughest sales market he's experienced in his 24 years in the business: "I don't think builders can give much more."

But some builders are offering even bigger potential discounts. Anderson Homes has agreed to auction off 59 houses in Manteca and Los Banos to the highest bidders next month...To lure back buyers, the opening bids for Anderson Homes will start about 40 percent below previous asking prices.

From the Stockton Record:

Stockton is the heart of darkness, at least in the real-estate business these days. The national and international media have homed in on the Stockton metro area - meaning San Joaquin County - as one of the top foreclosure hot spots in the nation. It's the bust part of the cycle that followed an unparalleled six-year boom.
...
The median sales price in Stockton fell to $295,000 in August, down from a high of $385,000 in January 2006 - a 23 percent fall over 19 months, according to figures from the latest Coldwell Banker Grupe-TrendGraphix monthly sales report, based on Multiple Listing Service data.
...
Edmundo de la Cruz's Spanos Park West home up for sale, but the Stockton sales market, with 3,000 listings that include hundreds of foreclosure properties, is rugged. He and his wife, who are living on pensions, are facing mortgage adjustments that they absolutely won't be able to cover, he said...He said he and his wife have considered turning over their house to the lender in foreclosure and moving out of the area to live near one of their children.
...
[Jill Rios] and her husband would just like to move out of state to somewhere else where this isn't happening, Rios said, but they feel trapped because they believe they would have almost no chance of selling their extensively remodeled home in this molasses-slow market...."I'd like to move out of California," she said. "I'm done."

Sacramento Real Estate Market - September 2007 Water Cooler

Post off-topic links, observations, and stories about the Sacramento real estate market here. Please read the comment policy before posting.

Dunless

UPDATE: Another article on Dunmore Homes. From KCRA:

Last May, Jason and Gina Rossow fulfilled their dream of buying their first home in a brand-new subdivision under construction in Elk Grove. "Yeah, we were super excited," said Gina Rossow.

But now across the street are weeds. An entire field is empty with just debris. And around the corner there are unfinished homes. The Rossows' dream is slowly creeping toward nightmare. "We're just confused," Jason Rossow said.

What's causing confusion, concern, and unwelcome news is a closed sign that's on the Dunmore Homes sales office door. All construction was halted last month, and contractors filed roughly $5 million in liens against Dunmore Homes.

"That tells ya it's not a great sign for new home sales," Mike Show of the Sacramento Business Journal said..."People were predicting we'd be out this in a year," he said. "Obviously that's not the case. We're now saying it could be another year to 18 months."

From the Sacramento Business Journal:

After halting construction in August, Dunmore Homes closed the sales office last week at its Monterey Village development in Elk Grove, posting signs saying the move was temporary but leaving no indication when it will reopen. The closures follow the filing of mechanics' liens totaling more than $5 million by contractors working on that project and another in Rocklin.
...
Dunmore officials did not return phone calls seeking comment about the latest events. The company halted all construction in August, but owner Sid Dunmore said in an interview at the time that the company was breaking even. Dunmore Homes sold 66 homes in the Sacramento region during the first seven months of the year, according to Hanley Wood Market Intelligence. That compares with 321 home sales for 2005, according to new-home analyst The Gregory Group.
...
The effects of flagging new-home sales are showing elsewhere as some homebuilders are pulling up stakes or significantly paring down operations. Costa Mesa-based Warmington Homes, which is selling condos in Natomas and single-family homes in Galt, is folding its Sacramento division into the San Ramon office...."As we all know, it's a very difficult time in the market," [Chris] Hanson [vice president of sales and marketing] said. "I don't think you can name a builder that hasn't had layoffs."

Christopherson Homes plans to move from its 8,500-square foot Roseville office, but it's not closing the Sacramento division, said marketing manager Vicki Doyle. Instead, the company is looking for smaller space in Roseville to better fit its pared-down staff. A series of layoffs, including some last week, have cut the division to about half its size of a year ago, she said.

From the Sacramento Bee:

Sacramento-area unemployment was unchanged last month at 5.4 percent but has risen eight-tenths of a point since last year. "The numbers are starting to mount a little bit and look a little more ominous," said David Lyons, labor market consultant at EDD.
...
Greater Sacramento lost 2,000 jobs in August, the second straight monthly decline. About half the cutbacks were in construction and finance. The downsizing in construction was noteworthy because usually the summer building season lasts into September or October. "The house builders definitely made a bit of a call to cut back," Lyons said.

From the Central Valley Business Times:

Doom, gloom, and what happened to our boom?

A dark mood is settling over the golden state as pessimism about California's economic conditions hits its highest point since 2003, according to a survey by the nonpartisan Public Policy Institute of California...A strong majority of residents (59 percent) expect bad economic times in the coming year — a 10-point increase since June (49 percent) and a 20-point increase since January (39 percent).
...
There has been a significant shift in attitude this year —and it is very likely being driven by bad news about the stock and housing markets," says PPIC president and CEO Mark Baldassare. "For so many people, the feeling of overall financial well-being is tied to the value of their homes — something that seems increasingly threatened as they see sales slow, prices dip, and foreclosures rise."

From Reuters:

A record 26 percent of U.S. homeowners say the value of their homes has fallen during the past year, above the previous peak of 24 percent seen in 1992, a survey released on Friday showed. Reflecting the extent of the prolonged housing slump, 21 percent of homeowners polled in September expect the value of their home to decline in the year ahead, up from 18 percent in August, according to the data from Reuters/University of Michigan Surveys of Consumers.
...
Homeowners in the western United States, where some of the most dramatic home appreciation had occurred, have been especially hard hit by the real estate downturn. In the third quarter, 33 percent of homeowners surveyed in the West said their home value fell during the past year, up from 23 percent in the second quarter. Nearly a quarter expect home prices to fall further in the coming year, up from 17 percent in the second quarter, said Reuters/University of Michigan.

From the Wall Street Journal:

When Susan McDonald began seeing an influx of renters in Elk Grove, Calif., just outside of Sacramento, she cofounded a community group, the Franklin Reserve Neighborhood Association. The group writes "good neighbor" letters to problematic tenants and landlords, organizes forums to discuss a variety of issues and holds block parties to encourage residents, both owners and renters, to get to know one another. Local high school students have even cut the grass on unkempt properties. For the most part, the steps have helped, Ms. McDonald adds, and when they haven't, community members have been willing to be even more aggressive.

Elk Grove resident Tim Chan, a Sacramento police officer, called the local police repeatedly to complain about loud parties, piled-up garbage and to report what he suspected was gang activity involving the renters next door. When that didn't work, he wrote a two-page letter, also signed by 21 of his neighbors, to the out-of-town landlord. "All of these items disturb the peace and quiet of our neighborhood and cause discomfort and annoyance to all that live on this street, as well as reducing the quality of life and safety of our children," Mr. Chan wrote. The letter, which was sent to city officials and also threatened legal action, got results: The tenants are gone, and the house is being fixed up.

Ms. McDonald and Mr. Chan both blame the majority of the Elk Grove's problems on absentee landlords, not the tenants. "You don't just rent a property and assume that it's going to be taken care of," Ms. McDonald says. "Come and see if the lawn is being taken care of. Come and talk to the neighbors."

'We're Seeing it More and More Every Day'

From KCRA:

The alleged mortgage fraud exposed by KCRA 3 is having a direct effect on property values in Elk Grove. All of the homes at the center of our investigation are now in foreclosure, and property values are plummeting.
...
[Jim] Martin said he wasn't trying to hurt the investors in any way, and he admits there was illegal activity...By lying on the loan applications and inflating the values of every house involved, Martin admits he and his partners made tens of thousands of dollars in just a matter of months. According to the KCRA 3 investigation, that money was made off commissions alone. Martin also admits he was receiving tens of thousands of dollars in kickbacks from every transaction involved.
...
Despite a cease-and-desist order issued by the state, it appears two of the targets of our investigation are now operating through a loophole in the law that's allowing them to continue processing loans.
...
Lawmakers said the investigation uncovered a serious flaw -- one that shows the system isn't working. State Sen. Mike Machado said he's ready to introduce legislation as a direct result of our investigation.

From News10 (and video):

An Elk Grove real estate agent who owns two of the 21 pot houses raided by police on Wednesday sold eight of the others during a whirlwind selling spree last year. Vivian Hoang, 34, is being held without bail after Elk Grove police discovered 505 marijuana plants growing in her house on Wyland Drive. Police also seized 329 plants at a house Hoang owns on Hite Circle...Hoang is a licensed real estate salesperson, and records show she sold eight of the other pot houses during a four-month period last year.
...
"A total surprise," said Gus Chaveste, an agent at Elite Realty Services in Elk Grove where Hoang worked. Chaveste told News10 Hoang left the real estate brokerage a few months ago to take a job as a loan officer at Wells Fargo Bank.

From the Modesto Bee:

Three Modesto real estate agents were arraigned in Stanislaus County Superior Court on Thursday afternoon on a host of criminal charges stemming from an alleged mortgage lending scheme that may have netted more than $2 million. A 68-count criminal complaint filed by the district attorney's office alleges that Eric Braun, Noah Adam Yates, Douglas Eugene Wallick and seven accomplices created false documents indicating that loans to three properties had been paid so "straw buyers" could get new loans and pocket the proceeds.

Deputy District Attorney Marlisa Ferreira said authorities made arrests in the past three days at the close of a yearlong investigation. She said such schemes take place nationwide and are increasingly common in today's troubled real estate market. "We're seeing it more and more every day," she said.

'I Think the Market Is Showing Life Toward the Bottom'

From the Sacramento Bee:

Sacramento's 2-year-old real estate downturn has a good chance of hitting bottom in 2008, banking and building industry analysts told struggling area builders gathered Wednesday in the capital...[N]ew home builders were told to expect months more of the slowed sales and heavy discounting that have marked 2007.
...
Last year at the same session, builders heard that analysts were monitoring Sacramento for signs it would begin leading the nation out of the housing slump. This year more sober assessments prevailed in a market hit hard by too many houses for sale, lack of buyer urgency and, lately, a credit crunch that dried up financing for an estimated 30 percent of would-be buyers.
...
Overall, Sacramento's journey to recovery has "been a longer road that I thought," said Steve Smiley, a managing director for Hanley Wood. Smiley, who watches Bay Area and Central Valley housing markets, said that despite builders' current troubles buyers probably shouldn't expect new home prices to fall a lot lower. "I think the market is showing life toward the bottom," he said.
...
Hanley Wood's Smiley predicted Wednesday that builders are likely to end this year with about 9,000 new home sales in El Dorado, Placer, Sacramento, Sutter, Yolo and Yuba counties. That's down considerably from his prediction a year ago that 2007 would end with up to 11,500 sales. Through July, builders sold 5,068 homes in the six-county region, Hanley Wood reported, compared with 6,175 the first seven months of last year. "We expect sales next year to push 10,000," he said. "The incentives will continue."

From The Union:

A developer of a south county subdivision is downsizing his original housing project to meet the demands of a changing real estate market.The one-time luxury housing development is now being repackaged as a subdivision for smaller, lower-priced homes and senior apartment complexes. “We’re kind of revisiting the demographic, because the market is going through transitions,” said Dave Snow, president of DAS Homes.
...
Snow first brought his ideas to Nevada County three years ago, when home sales were booming. Since then, the housing market has declined sharply, leading to defaults on subprime loans and foreclosures — in Nevada County and nationally.
...
Snow is bypassing his original plan of two-story custom homes with pricey doors and granite countertops priced between $495,000 to $860,000 for smaller single-story homes with tile countertops priced at $450,000 to $600,000. "There’s a lot of people just as happy with tile countertops if it can save them money," Simmons said.
...
Snow said he will keep a watchful eye on the market, and if it continues to show stagnant signs, he would have to re-evaluate his plans for the site. "Ultimately it’s my responsibility to be open-minded and meet the demands of buyers. If the community needs housing, that’s our goal. I’m not going to build a project out if there’s no buyers," Snow said.

Moody's Home Price Forecast: Stockton -25%, Sacramento -19%

From the CNN Money:

Over the next few years, more than three-quarters of the nation's housing markets will suffer a decline in home prices. Many will experience double-digit hits in a forecast that has worsened considerably in recent months. According to an analysis conducted by Moody's Economy.com, price declines will exceed 10 percent in 86 of the 379 largest housing markets. And 290 of the cities will experience price drops of 1 percent or more.
...
The Stockton, Calif., metro area, where Moody's predicts a 25 percent price drop, will be the hardest hit among the 100 most populated cities surveyed. Prices in Stockton - in California's Central Valley - rose quickly through 2005 as many would-be Bay Area buyers, frozen out of the expensive San Francisco area housing market, moved in. That influx drove up the median, single-family home price to about $375,000. Stockton prices peaked during the first quarter of 2006 and have gone downhill since. Prices likely won't turn around until the end of next year.
...
100 largest metro areas by population that are forecast to witness a decline in the median existing single-family house price [peak - bottom]:

#1 Stockton: -25.0% [06Q1 - 08Q4]
#5 Modesto: -22.3% [06Q2 - 08Q3]
#7 Fresno: -20.0% [06Q2 - 09Q1]
#9 Sacramento: -19.1% [06Q1 - 08Q4]
#15 Visalia-Porterville: -16.1% [06Q2 - 08Q4]
#19 Bakersfield: -15.6% [06Q2 - 09Q1]

Flashback to Moody's October 2006 predictions:

• Stockton: -15.7% [05Q4 - 08Q4]
• Sacramento: -9.9% [05Q4 - 08Q2]

According to DataQuick, the median price of an existing single-family home in Sacramento County has already declined 17.1% from peak.

From the Wall Street Journal:

To make an American mortgage executive wince, just say "Stockton." Last month, RealtyTrac.com, an online property marketplace, cited the central California city as the nation's foreclosure capital....A 26-month backlog of Stockton homes is for sale. Buyers are scarce; prices are skidding.

That's bad news for the mortgage industry, which could use some pointers on coping with adversity. Some shakeout in the housing market was inevitable. But as defaults and foreclosures mount nationwide, there are signs home lenders are responding in ways that aren't making the rout any easier on themselves....[T]he industry has largely neglected the "back end," the grim but vital task of salvaging loans that go sour.

Jerry Abbott sees the consequences of that neglect every day. His Stockton real-estate brokerage seeks buyers for foreclosed homes. Many of his sales are at a 10% to 15% discount to already-weak market prices...To Mr. Abbott's chagrin, many lenders don't grasp the futility of holding out for boom-time prices in a collapsing market. Lenders trying to sell a foreclosed home for $250,000 often don't react pragmatically by cutting a deal when a bidder offers $230,000; instead they might counter with a token -- and potentially insulting -- price reduction of $1,000. In such situations, Mr. Abbott says, homes don't sell for ages, and when they do, they fetch far lower prices.

From Sacramento Bee:

Desperate times call for desperate measures. So over the weekend Richard and Dana Carrigan shoveled out a piece of their Fair Oaks yard, then buried a 3 1/2-inch statue of St. Joseph that Richard had bought a couple of days earlier. The couple are looking for any extra help they can get as their home goes up for sale alongside the 16,000 other area residences already on the market. "We'll try anything," says Richard Carrigan, an English teacher at Jesuit High School in Carmichael.
...
Catholic retailers say the little statues are flying off their shelves as the once-robust Sacramento-area housing market has slowed....Easter's Catholic Books and Gifts on Palm Avenue in Sacramento says customers have bought 350 St. Joseph kits in recent months. "We have a lot of real estate agents who come in and buy them in bulk," says co-owner Denise Easter-Kramer. Another Sacramento retailer, the Catholic Store on Broadway, claims more than 500 sales in two years. Owner Marilia Perez said sales spiked this summer as real estate listings increased across the region...Even the Sacramento Association of Realtors store on Howe Avenue sells St. Joseph.

From News10:

Homeowners on the brink of foreclosure are refusing to let the banks take away their homes, at least not without a fight. Two sisters from Sacramento are organizing town hall meetings to let other homeowners in on their strategy for holding onto their homes.
...
"I feel like I have to get a night job to keep my house or something," said Tony Ramirez from Sacramento. Ramirez and his fiancé Clarissa are not in foreclosure but have received notice from their lender that their loan is adjusting up $300 per month. "I'm pretty upset that when they sent us a letter saying that your house is going to go up, they didn't offer help. Like if you have hardship, we have a department that can modify your loan. I didn't even know that," Ramirez said. But he and others at Tuesday night's meeting know it now and are hungry for more solutions to avoid foreclosure.

From the Sacramento Bee:

Would you pay more in taxes to put additional cops on the street? That's the question Sheriff John McGinness wants to ask voters in unincorporated Sacramento County...The county is considering its options, but the most likely route is adding a special charge to property tax bills, a move that would require approval by two-thirds of the voters. County officials would try to get the question on the 2008 ballot.
...
The cop tax is one of several ideas the cash-strapped county has floated to improve services during gloomy economic times...Last week, the supervisors were forced to trim requests for additional sheriff's deputies and probation officers, as they approved a $2.1 billion general fund budget. Even as the spending plan was being approved, officials worried that a slumping housing market may force deeper cuts next year.

From the Sacramento Bee:

After weeks of troubling news on the real estate front, Sacramento-area housing and financial experts called Tuesday's interest rate cuts by the Federal Reserve a "good first step" in helping the housing market regain stability. But how much it will help and how fast remain an open question, say home builders, real estate agents, bankers and homebuyers. Some said the government should do more to help ease credit restrictions that make it harder to qualify for California's more expensive housing.
...
But Tuesday's action will bring little relief to thousands of Sacramento-area homeowners who owe more than their houses are worth, experts say. Most say today's tightened lending standards will continue to block them from refinancing their way out of trouble. That means more of the defaults that in August caused one foreclosure for every two home sales locally.
...
Ron Leis, a real estate broker in Carmichael, said the region's home prices are still too high for many first-timers -- even with interest rate cuts. "The rate cuts will help," Leis said. But they don't dent the affordability problem, he said.

From the Stockton Record:

Congress appears poised to throw beleaguered homeowners a lifeline and help potential buyers qualify for federally backed mortgages as a way to combat the flood of foreclosures hitting the nation...Tuesday the House passed legislation 348-72 to overhaul the Federal Housing Administration, which backs mortgages for moderately priced homes...The House also passed an amendment to the legislation sponsored by Rep. Dennis Cardoza, D-Merced, that would raise the loan limit to the lower of either 125 percent of an area's median home price or 175 percent of the national loan limit...The Cardoza amendment would allow loans for as much as $430,000 in San Joaquin County and $368,000 in Stockton to qualify for FHA assistance.
...
Most of the San Joaquin Valley delegation voted for the bill; Rep. George Radanovich, R-Mariposa, was the lone holdout. Rep. Jerry McNerney, D-Pleasanton, who represents a large portion of San Joaquin County, was an "aye" vote. "The number of home foreclosures in San Joaquin County and throughout California is startling, forcing many families out of their homes and into financial ruin," McNerney said. "Many of those families took out interest-only or adjustable-rate mortgages because there was no other option. This bill takes major steps to address this and ensure that the American dream is within reach of all Americans."

Central Valley Slaughterhouse

From the Central Valley Business Times:

A total of 243,947 foreclosure filings -- default notices, auction sale notices and bank repossessions – were reported in August, up 36 percent from July and up 115 percent from August 2006, according to RealtyTrac Inc., an Irvine-based foreclosure information company.
...
Modesto has the nation's highest metro foreclosure rate -- one foreclosure filing for every 79 households -- followed by Stockton and Merced. Other California cities in the top 10 included Vallejo-Fairfield at No. 5, Riverside-San Bernardino at No. 6 and Sacramento at No. 7.

From the Modesto Bee:

The housing market news just keeps getting worse for the Northern San Joaquin Valley. Stanislaus, San Joaquin and Merced counties had the highest foreclosure rates in the country during August. Statistics released today by RealtyTrac showed the valley's homeowners were six times more likely to be in mortgage default last month than the national average.
...
"It's amazing to me how those foreclosure numbers continue to go up in your region," said Daren Blomquist, a spokesman for RealtyTrac, which publishes a national database of foreclosure and bank-owned properties. "Your notices of default (the first step in the foreclosure process) don't seem to be decreasing, which indicates you've still got some more pain to go through, unfortunately."
...
[H]ome values have plunged. August statistics show home prices fell about 15 percent in Stanislaus and San Joaquin counties and nearly 20 percent in Merced County compared with a year ago, according to DataQuick Information Systems...[In] Patterson...median home sales prices have plunged nearly 33 percent during the past year, according to DataQuick records. Waterford and Atwater prices dropped 24 percent, Lathrop fell 23 percent and Newman declined 22 percent. Prices in central, western and southern Modesto decreased more than 20 percent.

From the Modesto Bee:

Modesto planning commissioners Monday didn't try to hide their enthusiasm for a project that could bring the first new housing to the city's downtown in decades. They unanimously signed off on a zoning change that would allow Huff Construction of Modesto to build an eight-story office and condominium tower at 14th and J streets...Huff Construction's plans call for 45 residences in the tower's upper five floors.
...
Evan Porges, 38, told the commission the proposal would fill a need in the city's housing market..."It's time for Modesto to take the next leap in becoming a great city," Porges said.
...
Matt Oliver, a San Mateo development consultant working with Mayol and Barringer...Oliver told the commission the builders plan to move quickly on the project, but they could be delayed by an uncertain financial market.

From MarketWatch:

The NAHB/Wells Fargo housing market index fell two points in September to 20, matching the all-time low for the index set in January 1991. The index, which gauges builder sentiment, dates back to 1985.
...
There was nothing hopeful in the September report. All three components of the home builders' index were at cyclical lows, with two of them at all-time lows. Confidence fell to cyclical lows in all four regions of the country, with the biggest decline coming in the West.

The most-forward looking part of the index -- expected sales of single-family homes -- fell by five points to 26, obliterating the all-time low of 31 set in August. The index for current sales of single-family homes fell from 22 in August to 20 in September, the lowest since 19 in January 1991. The index for traffic of prospective buyers was steady at 16 in September, matching the all-time low set in December 1990 and August 2007.

'Filtering Throughout the Economy'

From The Union:

Hardware stores, plumbers, carpenters, electricians, masons and others in the construction trade are feeling uncertainty in the air since the real estate market took a nose dive. New home construction is down in western Nevada County, and the development of four major subdivisions is still years away from gaining approval, said Kevin Casey, owner of Caseywood Corporation, a major lumber supplier to area contractors. In two years, Casey’s deliveries have fallen by 20 percent, he said.
...
Some out-of-work laborers are seeking employment outside of California, said Eric Fullmer of an employment agency called Rush. Carpenters from the Morgan Ranch crew have varied plans. One plans to open a hot dog stand, another plans to get his contractors license and do his “own thing,” while another wants to collect unemployment and snowboard all winter.
...
The impacts of the slowdown are far reaching and even service oriented agencies such as plumbers are feeling the crunch. ABT Plumbing’s revenue has dropped 20 percent in the past two months, and it had to cut its workforce from 8 to 5 people in the past year because the company isn’t getting as many calls as it used to, said owner Andrew B. Twidwell. “It’s filtering throughout the economy,” said Twidwell, who has tightened his company’s budget, sold a truck and heavy equipment in order to pay his bills.

"On the Verge of a Landslide"

From the Sacramento Business Journal:

Sacramento could be on the verge of a landslide -- that is, a dive in the once-soaring price developers paid for land -- if indebted landholders are forced to sell or are foreclosed upon. Brokers and appraisers agree that land has lost much of its value from the days when prices topped $600,000 an acre for unimproved land within approved growth areas. But "value" has little meaning when buyers and sellers can't come to terms on price, which has largely been the situation in Sacramento since home prices started falling. Sellers are waiting for a market rebound and many homebuilders are abandoning land deals, just hoping to survive.

That has left experts guessing at the magnitude of the impact on land prices. But the standoff between buyers and sellers can't last, some say. Park Place Partners Inc., the Irvine-based land brokerage, is tracking several owners who have debt on their property. "These guys carrying the debt will have issues," said Jim Radler, of Park Place's Roseville office. "In some cases, these issues will be magnified by a long slump. If they aren't able to renegotiate a deal, they will have to walk. ... We anticipate the banks will get a hold of some property."

That would put land in a similar state as housing -- foreclosures that drive down prices, resetting the value. Radler stressed that such a scenario is only a prediction, but he feels it's reasonable under today's conditions. He expected foreclosures on land holdings, including lots owned by homebuilders, to happen within the next six months.

From the Stockton Record:

As the housing market sinks deeper into the biggest slowdown that local real-estate brokers can remember, the few agents who specialize in foreclosures are hopping busy. Kevin Moran, an agent with Coldwell Banker Grupe of Stockton, was involved in some foreclosure deals in the mid-'90s real-estate downturn brought on by a statewide recession, but he's in it exclusively this round because he sees much bigger opportunities. "It's the tip of the iceberg," he said of the growing mass of foreclosures in San Joaquin County.
...
Moran's boss, Jerry Abbott, said five of his 80 agents currently are handling some foreclosure homes, representing about one-third of the approximately 350 current listings for Coldwell Banker Grupe, one of Stockton's biggest real-estate firms. "I expect it to jump up to 50 percent by the end of the year," he said. A year ago, the firm didn't have any agents handling foreclosures, which started to surge last fall.

Greenspan: Price Declines Will Be 'Larger Than Most People Expect'

From the Financial Times:

US house prices are likely to fall significantly from their present levels, Alan Greenspan has told the Financial Times, admitting that there was a bubble in the US housing market. In an interview...the former chairman of the Federal Reserve said the decline in house prices "is going to be larger than most people expect".
...
Mr Greenspan said he would expect "as a minimum, large single-digit" percentage declines in US house prices from peak to trough and added that he would not be surprised if the fall was "in double digits".

"A Very Cold Month"

From the Stockton Record:

August was a very cold month, at least in the home-sales market. The last time the median sales price of an existing Stockton home crossed the $300,000 mark - in November 2004 - it was a major landmark in a long-running boom market. Last month, the sales price crossed $300,000 again, but this time, on the way down. And sales - 118 in August - dropped to the lowest level not seen since the last real-estate downturn in the mid-1990s.
...
"It's slamming the psyche of the market for sure," said Mike Collins, of Collins Realty. "All people are seeing are foreclosures, lender layoffs and title company layoffs - all this bad news in the real-estate industry. That makes them want to wait to buy."

From the Stockton Record:

There is much talk about Lodi residents fearing the loss of their aging and dilapidated Grape Bowl stadium, home to young footballers and high school graduations. But persuading those residents to open their checkbooks to save the 67-year-old structure is proving difficult.
...
[Jack] Fiori said the fundraising group has few resources. The group doesn't have the manpower to canvass neighborhoods or visit every local business, he said. He also blames the drop in the housing market: Deep-pocket real estate developers are more reluctant to contribute their cash than perhaps they would have been years ago.
...
The housing market slowdown has had other negative impacts. Developers have had to re-evaluate auxiliary projects in San Joaquin County. In Lodi, FCB Homes has delayed its $8 million design-and-construction project at DeBenedetti Park on Century Boulevard at Lower Sacramento Road. The 49-acre site eventually will become Lodi's largest municipal park.
...
Things don't always work out as planned. Builders need buyers to create cash flow and they need cash flow to fulfill their promises of development extras.

From News10:

More than 70,000 families call North Natomas home and many are sounding the alarm. They want a new fire station to help cover the 7,388-acre community.
...
Sacramento City Fire Chief Forrest Adams is aware of the problem. He told News10 the emergency call volume in the area is on the rise and response times are taking a hit. "It's frustrating," said Adams. "Yes, I'd like to have station there, but it's all tied to funding." The funding to build the station comes from developer fees which apparently have been slow to come in due to the housing market slump.

'Sales are Slower Than a Tortoise on NyQuil'

From the Sacramento Bee:

It's come to this: For roughly every two homes sold in August in the capital region, one house went into foreclosure, according to the newest sales statistics released Thursday. Last month, 2,978 new owners picked up keys to homes they purchased in Amador, El Dorado, Nevada, Placer, Sacramento, Sutter, Yolo and Yuba counties, La Jolla-based DataQuick Information Systems reported Thursday. But in those same counties during August, 1,367 homeowners in foreclosure handed their keys back to the bank, according to Fair Oaks-based Foreclosures.com, a Web site for real estate investors.

That grim ratio may worsen as fall and winter sales traditionally slow and foreclosures keep rising, analysts say. Already, in Sacramento County in August, there were more defaults -- the first indicator of payment problems that can trigger foreclosure -- than sales, DataQuick reported...The county...tallied more defaults during the month -- 1,869 -- than sales, statistics show..."Sacramento (County) was positioned almost perfectly to take the brunt of this housing storm," said DataQuick analyst Andrew LePage.
...
The number of sales, meanwhile, fell to a 12-year August low in Sacramento County and an 11-year low in Placer County...Clearly, such numbers are fuel for still more for-sale signs -- now at a record 16,262 in El Dorado, Placer, Sacramento and Yolo counties -- and further declines in sales prices...The county's $332,000 median sales price for new homes alone is the lowest since October 2003, the firm reported.

Prices by zip
Prices by county

Also from The Bee:

In a tough market of hesitant homebuyers, builders are trying every incentive and attention-grabbing idea they can to encourage a purchase. This weekend, New Jersey-based Hovnanian Enterprises Inc. is launching a national three-day sales blitz, which includes its nine projects in the Sacramento region.

In a local market where Dallas-based Centex Homes is running radio ads promising free swimming pools, and Texas-based D.R. Horton just held a multimillion-dollar "giveaway," K. Hovnanian Homes is throwing in free furniture for every house it sells from Sacramento to Suisun City on Friday, Saturday and Sunday. The company's model home designers have furnished six new houses -- in Galt, Natomas and Suisun City -- to show buyers what they'll get.

"The idea behind it was to come out with a big blast. The economic data is still fairly strong, jobs and incomes are still good, home prices are low, and interest rates are still low," said the builder's Sacramento spokesman Ian Cornell. "Anybody who's been considering it ought to be hopping off the fence. This is one of those mechanisms, to get them to take advantage of it."

From The Union:

Median house prices in Nevada County fell nearly 12 percent for August to $417,000, compared to $472,500 a year earlier, a real-estate tracking firm said Thursday.

"It's a fabulous time for buyers to buy," said Diane DiLeo of Network Real Estate in Grass Valley.

From the Stockton Record:

Dismal home sales have thrown Gorilla Glue into downtown Stockton's comeback, forcing postponement of a key plan to build waterfront homes. To root for a city center's redevelopment, it seems, is to wish for the 969-year life span of Methuselah. And that still may not assure you'll be there at the ribbon-cutting.

Still, you cannot blame The Grupe Co. for delaying construction of 150 condominiums on the south bank. There have been 8,000 foreclosures this year in Stockton. About 3,000 homes are for sale. In this lame market, sales are slower than a tortoise on NyQuil...Rate increases on 80 percent of adjustable-rate mortgages nationwide have not kicked in. The housing carnage is going to get worse.

"Renting is Still the Better Short-Term Deal"

From Time:

With the number of homes on the market up 19% from a year ago, buyers (finally) hold the best cards. To play them, start entertaining all the offers homebuilders and real estate agents are hurling your way.
...
Just keep in mind that the housing market hasn't hit bottom. Looking at the gap between how much it costs to rent a place or to buy one, Deutsche Bank research analyst Lou Taylor concludes that in the bubbliest markets, renting is still the better short-term deal. Consider Sacramento, Calif., where rent runs about 40% of the monthly cost of buying, half of what it did a decade ago.

From AFP (hat tip Jeff):

Stockton's Weston Ranch neighborhood, a 15-year-old subdivision of modest tract homes, has the worst foreclosure rate in the area, according to ACORN, a national advocacy group for low and moderate-income families.
...
Sign-after-sign beckon to potential buyers on the Weston Ranch streets. "American Dream Realty -- Reduced Price!" reads one placard spiked into a brown lawn. "People are just walking away," said [Geri] Taylor [a broker at Weston Ranch Realty]. "We've seen houses with food still on the table from when the sheriffs have come knocking."
...
"There are just are no buyers out there right now," said Taylor..."We've got 350 homes for sale in this neighborhood right now and at this rate, that is five years of inventory," said Taylor. "Nobody has a crystal ball, but I don't expect to see an improvement until 2010."

DataQuick: Largest Price Drop on Record

From the Sacramento Bee:

Median prices for August in Sacramento County were down 13.3 percent from the same month last year. DataQuick called it the county's biggest year-over-year decline since it began gathering statistics in 1988...La Jolla-based DataQuick Information Systems reported Thursday that median sales prices are now nearly 20 percent below their 2005 highs in Placer and Sacramento counties...DataQuick reported that the Sacramento County median sales price for new and existing homes combined was $312,250, the lowest since June 2004.

Aura or Parking Lot?

From CBS 13:

...[T]here's been some action around the Aura. That's right, from the look of things here, they are putting in a parking lot right where the Aura was supposed to stand. The Aura hasn't officially announced it's doomed, but take it from me - it's in the tank, at least for the time being.

Central Valley Mortgage Slaves

UPDATE

From the NY Times:

Homeowners whose loan rates are soaring may want to head for the exits. Many of them, though, will find no way out. If they sell their home or refinance, they will face a penalty of thousands of dollars for paying off their loans early...Waiting out the expiration of a penalty, especially a short one, does not sound so bad — until home prices turn south.

In 2005 [Dorinda Weisman, a social worker in Elk Grove, Calif.] borrowed $353,000 from Pacific American Mortgage to buy a home in Sacramento with a small down payment. The prepayment penalty, of $9,000, expired in just a year. “One of the things I always wanted was to own a house,” Ms. Weisman said in a telephone interview. “I was a single parent, and my son is a hemophiliac. I had been living in a middle-class African-American neighborhood that went downhill after the drugs came in.”

By the time the penalty expired, her house had declined in value. Refinancing was no longer possible. Her interest rate had shot up to 9.8 percent from 4.75 percent. She says about 85 percent of what she brings home — her salary is $60,000 as a social service consultant with the state government — now goes to the mortgage.

She is trying to negotiate a new loan with the help of the Neighborhood Assistance Corporation of America, a nonprofit home ownership organization based in Jamaica Plain, Mass. “Like a lot of people, the adjustable ate up her equity,“ said her mortgage broker, Antonio Cook of Toneco Financial. “She’s got to ride it out and sacrifice. I tell people, ‘I don’t care if you eat bologna sandwiches, just pay your bills on time.’ If she can ride it out, things start coming up good.”

From USA Today:

Thirty-seven percent of U.S. homeowners with mortgages are spending 30% or more of their before-tax income on housing — the threshold where the government says a home becomes unaffordable — according to 2006 Census data being released Wednesday. This compares with 27% in 2000, before the real estate boom drove the nation's median home price up more than 50%.

For some, the financial burden is far worse: 14% of homeowners with mortgages — more than 7 million households — shell out at least half their gross monthly income to cover their home loan, property taxes, insurance and utilities, up from 10% in 2000.
...
What was most surprising to Rachel Drew, research analyst at the Joint Center for Housing Studies at Harvard University, was a sharp rise in the number of financially strained homeowners from 2005 to 2006. In that one year, more than 1.5 million additional homeowners with mortgages began spending 30% or more of their income on housing, including 680,000 who are spending more than half. Drew expects the number of financially squeezed homeowners to continue to rise, in part because millions of loans have adjustable rates that will rise this year and next, adding hundreds of dollars to monthly mortgage payments.
...
Among the largest 100 metro areas, these have the highest percentage of homeowners with mortgages who spent at least 30% of gross income on housing in 2006:

• #3 Stockton, Calif.: 54%
• #4 Modesto, Calif.: 54%
• #10 Sacramento/Arden/Arcade/Roseville, Calif.: 49%
  

At least 50% of gross income:

• #3 Modesto, Calif.: 24%
• #6 Stockton, Calif.: 23%
• #11 Sacramento/Arden/Arcade/Roseville, Calif.: 19%

'An Artificial Economy'

From the Central Valley Business Times:

A total of 9,477 properties – with a total loan value of $3.86 billion – were sold at auction in California last month....Speculator-owned properties (non-owner occupied properties) accounted for $1.71 billion of that total and represented 44.3 percent, or 4,199 of the properties sold at foreclosure auction.
...
The Central Valley holds half of the spots in ForeclosureRadar’s top ten counties for auction sales. San Joaquin County was ranked second in the state, the same position it held in July in ForeclsoureRadar’s figures. Stanislaus County was fourth, Sacramento County fifth, Yuba County sixth, and Merced County ninth. The rankings are based on population per foreclosure sale.

From the Stockton Record:

The California economy's soft landing is turning bumpy - with the housing slump, mortgage credit crunch, high-energy prices and dampened consumer spending providing the pot holes - but forecasters still predict no recession.
...
Sean Snaith, Business Forecasting Center consultant, said housing is the primary drag on the U.S. and state economies. "Housing is worse than I thought it would be and I think it's primarily due to the subprime issue," he said Tuesday, referring to risky mortgages made to borrowers whose credit ratings are less than perfect, or subprime. Hemmed in by rising loan payments, tighter credit and declining housing prices, such borrowers are increasingly falling into foreclosure...Snaith continues to predict an economic "soft landing, but a longer runway before we take off again. That's just the whole burden of the housing correction."
...
[T]here are potential pitfalls to what the Anderson Forecast calls a "near-recession experience." "No. 1 is if something other than real estate starts to turn south at the same time," [UCLA economist Ryan] Ratcliff said Monday. One potential problem would be if layoffs now associated with the mortgage-lending sector cut more deeply than currently expected.

From the Wall Street Journal:

"This recession in housing is more severe than the 1990 and 1991 downturn," Ms. Zelman said in an interview. "It could have a much broader impact on the economy than people realize, and it will be longer in duration." Ms. Zelman...[the former housing analyst at Credit Suisse who warned about trouble in the housing market months before the downturn] says proposals to bail out struggling homeowners might help, but "I don't think it will do enough to forestall the inevitable: that the consumer is going to roll over."

From the Associated Press:

Much of the nation is now in a housing slump, and an Associated Press analysis of new census data provides insight into the reason why: Since 1990, homeowners have faced a growing gap between their incomes and the price of their homes. The widening gap in all but a few of the nation’s 500 largest cities helped make the recent boom in housing prices unsustainable, analysts say. The rising prices were fueled largely by low interest rates and risky borrowing rather than increasing incomes.

“We had an artificial economy,” said Brad Geisen, founder of Foreclosure.com, a Web site that lists foreclosure properties. “There was all this wealth created in real estate, and it wasn’t really created.”
...
Nationally, the median household income grew by about 60 percent from 1990 to 2006, roughly matching inflation. At the same time, the median home value — the point at which half were more and half were less — more than doubled....

From the Stockton Record:

When Louise Wohl bought her one-bedroom, one-bath Lodi condo in August 2005 for $180,000, she was delighted with her first home purchase. She financed the entire purchase price at a 6.25 percent annual interest rate, leaving a monthly payment of less than $1,175 - not easy to make but doable, she said.

Then in July, she got a letter from the lender saying her adjustable-rate loan was jumping after the initial two-year set rate to the going rate of about 8.25 percent. This, she said, was news to her, and bad news at that, because she can't afford the $200 jump in the monthly payment. Plus, she faces another adjustable-rate mortgage boost in six months....

"I talked to three different people, and none of them could help me," she said...[One] said, well, just try to hang in there. "I was like, OK, I guess I could make the payments if I don't buy gas and eat." She isn't sure what will happen now. "I wish I had never bought," she said. "I would have been better off renting."

Current Sacramento Housing 'Recession is the Worst One Ever'

UPDATE - From Inman News:

Wendy Shapiro, a resident in Roseville, Calif., said she purchased multiple investment properties after selling her home in San Francisco and moving out to the Sacramento area. "I bought a fourplex in Red Bluff; I had $500,000 in the bank and a 700-plus credit score," she said. But her real estate investments have become a money pit. "Unfortunately, I put all my eggs in one basket. Now my daughter is going to college and I don't know if I'll be able to keep her there."

Shapiro, a nurse, said she had planned to gradually sell off the properties for a profit, but now she is faced with a decision on which properties to "walk away from," she said. "I am a single mom here working my butt off, and I thought I was doing the right thing."

Rental prices have dropped substantially in areas where she owns property, Shapiro said, as many investment properties are competing for rental income. "Rents have dropped everywhere because people who couldn't sell houses are now trying to rent them. I can't even sell one house," she said. Buyers are on the fence these days, she said, and the credit crunch isn't helping out with sales.

"It's just hell. Will I be able to sleep at night knowing I just walked away from $400,000 to $500,000 ... and all my time?" she said.

From the Sacramento Bee:

About a year ago, Susan McDonald began to see dead lawns, weeds and vacant houses in her new Elk Grove neighborhood built nearly overnight during the housing boom. The blighted scenes seemed an ominous indicator, a housing downturn tightening its grip on her suburban surroundings. Months later, as that downturn continues to deepen across the Sacramento region, thousands more empty homes and their unkempt lawns have become the ugly face of rising foreclosures and bank repossessions.
...
Many real estate agents estimate that about 40 percent of the 10,000 single-family houses for sale in Sacramento County are empty. In the short run, that poses aesthetic problems for many neighborhoods. In the long run, so many empty houses are also likely to prolong the housing recovery, analysts say.
...
Thousands more owners will face difficulty in coming months as their adjustable-rate loans reset to higher payments. At the same time, many investors, who represented one in every four sales in Sacramento County at the peak of the boom in 2004, are still trying to sell their empty properties..."There are so many new homes here and so many investors from the Bay Area," McDonald says. "When we pull up the owner's names, nine times out of 10 they live in the Bay Area..."From 2001 to 2005 we had just a flood of people from the Bay Area. That was when the market was really hot," she says. "Now everybody is losing their shirts and renting or walking away."

From the Sacramento Business Journal:

On the list of big-city status symbols that Sacramento can't quite seem to land, add the condominium tower. The most ambitious project to date, John Saca's 53-story twin Towers on Capitol Mall, died in June when the California Public Employees' Retirement System bought out Saca's interests...BCN Development's 38-story Aura project at 6th Street and Capitol Mall is technically still alive, but stalled.
...
Don't feel too bad, though. In cities where condo towers have been a hot trend, the condo markets are becoming glutted thanks to overbuilding. Sacramento may have dodged a bullet.

From the Stockton Record:

Soon after the City Council celebrated its adoption last month of a plan to build homes downtown - City Manager Gordon Palmer said it "set a vision" for the city core - it became clear even strident civic action could not match the force of the housing market's collapse.

Following the plan's adoption, Grupe Investment Co. Inc. President Kevin Huber confirmed the postponement of downtown's most-ballyhooed housing project, the construction of more than 150 condominiums and townhouses on the south bank of the Stockton Deep Water Channel.

It was a significant setback for City Hall. Since announcing the project last year and predicting that homes could be built this year or next - or, later, in 2009 - civic boosters have pointed to it as proof developers could build and people would live in the city core.

Not in this market, Huber said. "It's hard to say when we would start at this point," he said. Before the council adopted its housing plan, it came out last month that Stockton's foreclosure rate is among the highest in the nation. Houses sit vacant, and home sales have slumped. The market is "as difficult as I've seen it," Huber said. To start a housing project here at the moment would be unwise, he said.

From the Sacramento Business Journal:

Eva Garcia has been selling real estate in Sacramento for 44 years...."I think this recession is the worst one ever, worse than the one in the '90s, because of the fraud on the part of too many lenders. But we're OK. We have a steady flow of customers. Some of our customers are the children of people we sold homes to a generation ago. We advise people not to sell now unless they absolutely have to. "

From the Chico Enterprise Record:

People are asking "When is the housing market going to recover?" What they usually mean is, "When are prices going to start going up again?" This is the wrong way to look at the trend. The current period of stagnant sales and dropping prices is the recovery. It's the last few years that have been unhealthy. Things got so bad that the market contracted that dread malady, the bubble.

At the height of the bubble, ordinary, everyday Chico houses were selling for $300,000. That's just plain madness in a community where $50,000 a year incomes are the norm.
...
The deflating of the bubble ought to teach us that what goes up what must come down. But we will never learn. It won't be long before we've embarked on a mad dash after another supposed source of riches.