Sabbaticals for Sacramento Homebuilders

From the Sacramento Bee:

When times get tough, the tough ... take a sabbatical. That's the philosophy of developer Martin Tuttle, who is temporarily leaving his VP post with Sacramento builder New Faze Development.
...
Tuttle says his wife's job offer came at the right time – just as the tough housing market forced New Faze to reduce its staff by about one-third, through layoffs and attrition.
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"I don't really think we have much choice," he [New Faze boss Allen Warren] says of the firm's decision to downsize and wait out the current downturn...And what if there's no quick turnaround? "Maybe when Marty comes back, I'll take a sabbatical," Warren says.

From Reuters:

The fires that scorched California may be out, but a bigger man-made disaster, the housing market, burns away, threatening the U.S. economy and holders of billions of dollars of debt backed by homes...[W]ith some analysts predicting top to bottom falls in prices of as much as 40 percent, California looks headed for a recession.
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"We are heading into a state recession and that will take an already horrendous mortgage problem and take it over the top," said Christopher Thornberg, of Beacon Economics in Los Angeles. "Prime loans will be in trouble too. We've got a giant mess on our hands."
...
Market rates have gone up, lending criteria have gotten tighter and a bunch of borrowers have handed the keys back to the lenders, who then try and sell into a plunging market. In Sacramento County in September, 27 percent of all sales were by lenders who had repossessed homes, according to DataQuick.

From the Stockton Record [updated]:

When Consuelo Magat bought a Mossdale Landing home in Lathrop three years ago, she had no idea she was buying into an area that would emerge as one of the hotbeds of foreclosure activity in California. Magat, who now lives in Vallejo, said she bought the Lathrop house for $636,000 as a residence but then had to buy a home in another area when it turned out that a daughter was unable to get into a nearby Catholic school.

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

Here's what the Stockton Record reported back on April 1, 2007:

The market is showing signs of picking up, said David DiDio, mortgage broker and real-estate agent at Greene Dream Homes and Loans in Stockton. If buyers indeed are moving into the market, foreclosure homes could be bought up by fall.

"The Numbers Are The Numbers"

From Business Week:

Houston, you have a problem—with housing inventory. And as the number of homes for sale in the country continues to creep upward thanks to waning demand, many other major U.S. cities are dealing with the same issue...The housing supply is particularly bloated in Los Angeles, Chicago, and Miami—the top three on our list of the cities with the biggest housing inventories based on data from San Francisco brokerage ZipRealty (ZIPR). Tampa, Phoenix, Washington, Dallas, Boston, Sacramento, and Houston form the rest of the top 10.

From the Sacramento Bee:

Upon buying a house in the Sacramento area recently, [first-year coach Reggie] Theus told Kings co-owners Joe and Gavin Maloof that they'd better not ponder the idea of making a third coaching change in four years. In this real estate market, especially, it's just not the time to sell.

From the Modesto Bee:

Many borrowers believed the people they were dealing with had their best interests at heart. If that single-income family of four couldn't really afford that 3,000-square-foot house, one of those professionals would warn them off. But that's not really how it works. Business is business; it's not personal. People are in business to make money, and consumers have to look out for themselves.

Bob Endsley, founder of Coldwell Banker Endsley and Associates of Turlock, believes people were taken advantage of. "They were talked into low teaser rates and told they can't go wrong. If those loans had not been available, the demand for houses wouldn't have taken off like it did, and we probably wouldn't be in this mess."

So where do we go from here? Clearly the market is in turmoil. One of the things driving the downward spiral these days is people's attitudes. But don't blame the messenger, that's just an easy out -- the numbers are the numbers. Being better informed just makes for better consumers who make better choices. Everyone wants that, right?

"People need to make more prudent decisions," Endsley said. And the best way to do that is to learn as much as you can about the marketplace, understand your own financial situation so you don't overextend and take your time making such a major decision.

From the Modesto Bee

When the market was at its peak, Kimiko Horiuchi avoided buying because prices were too high. Now, she and her husband are buying a 2,700-square-foot house in Patterson for $329,000. She said her real estate agent told her that a few years ago the home was worth $600,000, because it's a former model home with several upgrades. "We're definitely getting a home for a good price," said Horiuchi, 28, who will move from Tracy into the new house in early November. "You're going from renting to paying on the mortgage, and if the economy comes back, then I'll have a house that I bought for less than it's worth."

Buying the house comes with some tradeoffs. She'll have to add about 25 miles to her commute to her job as a patent legal assistant in Sunnyvale and still will take her sons to school in Tracy.

Horiuchi said she knows she may be taking advantage of someone else's misfortune or bad loan. "I just feel bad that I'm taking someone's house," she said.
...
Although many trends point to prices sliding more before they rise again, experts said it's not necessarily a good idea for a buyer to wait. Too many homes at cut-rate prices will spur the return of lots of buyers, including investors who were partly responsible for making prices soar in the most recent boom. And interest rates aren't likely to drop much more.

Northern San Joaquin Valley: Change in Median Prices From Peak [pdf]

"Housing Crisis Has Hit Sacramento's Economy Like a Sledgehammer"

From the Sacramento Bee:

The nation's housing crisis has hit Sacramento's economy like a sledgehammer, prompting a city government hiring freeze this month and an urgent examination into how millions can be trimmed from the budget. A report that will be presented to the City Council on Tuesday spells out the grim news: By the 2008-09 fiscal year, a city deficit could grow to between $45 million and $55 million. The city's 2007-08 budget is about $960 million.

"We were hoping for a soft landing from the housing market problems, but it didn't turn out that way," Russell Fehr, the city's finance director, said on Sunday. "We have a widening gap that will grow and grow if we don't do something about it."
...
Sacramento's financial picture has worsened rapidly, to the extent that city officials said they had not foreseen. Fueled by risky adjustable-rate mortgages and falling property values, home foreclosures have escalated at an astonishing pace in Sacramento. There have been far fewer sales of both new and existing residences than were anticipated in the city's budget, according to the report.

From the Modesto Bee:

Title companies were dealt a serious blow when the market turned, said Terry Harwell, division president of Alliance Title Co. in Stanislaus County. Transactions at the firm have plummeted 40 percent a year for the past two years, forcing the company to lay off employees and scale back operations...The downturn forced the company to reduce its staff by about 65 percent and shut three branch offices. The remaining 50 employees have taken a 10 percent pay cut.
....
For real estate agents in particular, he said, times are extremely tough. "A lot are going hungry," Harwell said...The number of people with active real estate licenses in Stanislaus, San Joaquin and Merced counties nearly doubled from 2004 to 2006, jumping from 5,800 to 11,500. They are leaving almost as quickly as they got in. This year, there are about 2,000 fewer agents with active licenses in the region than last.
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"We are starting to see quite a few mortgage companies and a few construction firms that have folded," said Darlene Smith, the coordinator of the rapid response team for the Stanislaus Economic Development and Workforce Alliance...The changes in the housing market happened so quickly that, in many cases, the rapid response team wouldn't hear about the closures until it was too late. "So many are closing and as a team, we are not always able to find out," Smith said.
~~~
Traditional upright pianos have seen slower sales nationwide, Kyle Barker [owner of Barker's Music in Modesto] said, but the situation seems particularly dire in this region. He noted that a piano store in Sacramento recently closed, and another store in Tracy has reduced its size. He believes it's all tied to real estate. "You can't pull back fast enough," he said. This downturn is worse than in the early 1990s or early 1980s, when two other real estate downturns hit California."
~~~
Fewer people are calling the region's Handyman Connection for home repairs. Boats are not selling as quickly at Bob's Marine in Modesto. And the demand for real estate appraisals has fallen off. For these businesses and many others, the dramatic real estate decline is cutting into their bottom line as people cut back on discretionary spending and companies slash expenses. "It's affecting every type of business, across the board," said Sky Ucci, owner of Modesto Handyman Connection, the region's outlet for a nationwide chain of handyman service franchises. Ucci said retail business owners of all kinds have told him they're hurting, and many attribute it to the Northern San Joaquin Valley's real estate slump.
~~~
With so many homes on the market, one might think it's a good time to be in the business of shooting homes for virtual tours online. Think again, says Marla Giddings, 49. The business she works for, CirclePix, has seen a marked drop-off since the height of the real estate boom two years ago.
~~~
Shirley Cordero adored her job as a "variant configurator" -- in plain English, she would track upgrades that buyers wanted for their new houses. Her employer, Morrison Homes in Salida, held 11 grand openings in 2006 and "business was excellent." The downturn hit later that year and after about three slow months, she walked in and was handed her final paycheck...Cordero, 57, recently had to sell her boat to pay her monthly mortgage payment and she's had to cut spending on food, electricity and certain extras, such as tae kwon do lessons for her grandson.

From the Sacramento Business Journal:

After spiraling up for several years, the cost to build major real estate developments has stabilized, and in some cases has begun to fall. The most significant savings have been for the shorter, largely residential projects made out of wood, which along with certain types of labor has come down in cost amid the housing crunch.
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Signature Properties...President Mike Ghielmetti said construction costs have fallen approximately 10 percent to 15 percent for wood-based single-family homes, townhomes and smaller midrise buildings. The company has even seen concrete and steel costs for taller buildings soften within the past month, though it is too soon to tell if that will last.

From the Modesto Bee:

Don't blame real estate agents for the financial mess many homeowners are in. It's not their fault prices soared so high or crashed so fast. Housing is still a good long-term investment, and this is a great time to buy a house. That's the consensus of the region's largest real estate companies -- Century 21 M&M and Associates, PMZ Real Estate and Prudential California Realty.
...
"Did the real estate agents do anything wrong? No. Did the builders do anything wrong? No," said [Larry] Matos [of Century 21], whose company has 600 agents. "I don't think there was a lot of bad advice out there. I just think a lot of people got caught up in the market conditions."
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"Real estate agents can't promise people their homes are going to go up and up in value. Neither can we predict they're going to go down in value," said [Mike] Zagaris [of PMZ], who has 500 agents.
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[B]uyers should beware whom they get advice from, according to [Craig] Lewis [of Prudential] . "We have people that are doing loans and they are selling real estate," Lewis said. "Quite frankly, there is a real conflict of interest. What are they really doing? Are they really trying to serve the client? Or are they really just trying to make money for themselves?"

Sacramento Foreclosures Almost Triple 1990s' Record

HOPE:

[California Association of Realtors Chief Economist Leslie] Appleton-Young agreed that foreclosures will continue to rise. But she predicted foreclosure rates will not reach the high levels of the early 1980s or mid-1990s when slumping economies and job losses roiled the state.

-Sonoma Press Democrat, Feb 2, 2007

REALITY:

Sacramento County Foreclosures:

2007 Q3: 2,065 (+502% YoY)
1997 Q2: 703 (90s' Record)

Sacramento County Default Notices:

2007 Q3: 4,947 (+181% YoY)
1997 Q1: 2,441 (90s' Record)

From the Sacramento Bee:

Beth Flure thought last week was overwhelming when some East Coast banks sent her 11 new foreclosed houses to sell. Tuesday a Denver mortgage servicer handed her 42 houses to unload. Then came four more. "That's just astronomical," said Flure, a Sacramento real estate agent who markets bank repossessions. "There's tons, and we're going to see far more. It's not going to stop for a while."
...
The [6,638 regional] default notices are gaining on sales. DataQuick said 7,791 new and existing homes closed escrow during the same period in those counties.

Foreclosure chart

Sacramento Real Estate Market - October 2007 Water Cooler

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

Condo "Scrapheap" Grows

From the Sacramento Bee:

Billboards featuring the bemused face of star architect Daniel Libeskind have disappeared from downtown street corners, and so have plans by Denver developer Craig Nassi to build two Libeskind buildings here. First, Nassi's Aura condominium project on the Capitol Mall ran into trouble. Now the head of BCN Development says he can't find financing for the 50-story Epic condo and hotel tower he planned for 12th and I streets, either.

Last week, a lawyer representing Libeskind and the local office of architecture firm Stantec Inc. sent a letter to Nassi terminating their relationship for nonpayment. "Design professionals do not have the ability to continue working for free," said the letter from lawyer John Condrey, a copy of which was provided to the city. In an e-mail Thursday, Nassi characterized the letter as a "routine" part of shutting down the city approval process for Epic for lack of funding.
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"Sacramento's economy is so depressed at the moment, we can't get lenders to consider any projects at this time," he said.
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The scrapheap of high-rises planned for Sacramento before the real estate market collapsed is starting to pile up. Libeskind's creations join the twin 53-story hotel and condominium towers formerly planned for the Capitol Mall by local developer John Saca.

From DQNews.com:

Lenders started formal foreclosure proceedings on a record number of California homeowners last quarter, the result of declining home prices, sluggish sales and subprime mortgage distress, a real estate information service reported. A total of 72,571 Notices of Default (NoDs) were filed during the July-to-September period, up 34.5 percent from 53,943 during the previous quarter, and up 166.6 percent from 27,218 in third-quarter 2006, according to DataQuick Information Systems of La Jolla. Last quarter's default level passed the previous peak of 61,541 reached in first-quarter 1996. A low of 12,417 was reached in third-quarter 2004. An average of 34,781 NoDs have been filed quarterly since 1992, when DataQuick's NoD statistics begin.
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Trustees Deeds recorded, or the actual loss of a home to foreclosure, totaled 24,209 during the third quarter. That is the highest number in DataQuick's statistics, which go back to 1988. Last quarter was up 38.7 percent from 17,458 for the previous quarter, and up 604.8 percent from 3,435 for last year's third quarter. The peak of the prior foreclosure cycle was 15,418 in third-quarter 1996....
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Half the state's default activity is concentrated in 293 zip codes, almost all of which are in the Inland Empire and Central Valley...While numbers at the zip code level can fluctuate severely, among the zips with the biggest foreclosure problem are 95330 Lathrop in San Joaquin County, 92571 Perris in Riverside County and 95832 Sacramento.

From the Sacramento Bee:

At least 6,638 homeowners in El Dorado, Placer, Sacramento, Sutter, Yolo and Yuba received formal notices of default -- the first step in the foreclosure process -- from their lenders during the three-month period....That's up 27.6 percent from April, May and June defaults in the six counties...Sacramento County's defaults were up 180 percent from July, August and September 2006.
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In the six-county region, 2,731 home owners lost their houses to banks during July, August and September. That's up from 2,203 foreclosures in those counties in April, May and June.
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DataQuick says about 46 percent of homeowners who go into default are able to work out financial arrangements to either keep their houses or sell them and pay off their debts.

From the Sacramento Bee:

We know. We know. The real estate news these days is always about home sales hitting a new low and values falling. As 2007 nears an end, everyone who owns a house is longing for something better – a recovery or at least some stability for the Sacramento region. Most local experts counsel it's still a little early to be talking about either.

But for the sake of all anxious homeowners standing around the wishing well, let's look at local history. If it has anything to tell us, it's that real estate recoveries – and that dependable upward trajectory for California home values over the long run – usually come pretty fast once they start.

Consider 1997 across much of the Sacramento region. After several lean years of recession, job losses and military base closings, homeowners in El Dorado, Placer, Sacramento and Yolo counties saw their values start to climb again. Here's a look at [DataQuick] September median sales prices for new and existing homes combined in the region after recovery began and until the next boom took off.
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Sacramento County: September 1997 delivered a $119,000 median price – still below the $138,000 median from September 1991. But the median climbed to $140,000 in 1999 and $154,000 in 2000. In September 2001 it hit $180,000 and then soared away. The September 2007 median: $307,000.

From the Sacramento Business Journal:

Bank of America Corp. will exit its consumer wholesale-mortgage business, a move that will eliminate 700 jobs, including "less than 100" in Rancho Cordova...The Rancho Cordova operation has a centralized processing operation for wholesale mortgages, and that will be ended.

From the Modesto Bee:

Condo conversions were all the rage a couple of years ago, as seven Modesto apartment complexes decided to sell about 500 rentals as owner-occupied units. The first couple of projects sold like hotcakes, filling a niche for lower- priced housing. Then the real estate market cooled, and sales slowed dramatically. Now after two years of trying, one of those multifamily projects is giving up on traditional sales methods. Instead, the Villas at Creekside is going to auction off its final 29 units Nov. 18, with bids starting at $100,000 to $130,000. That's less than half what those town houses sold for in 2005.
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At first, only those who planned to live there were allowed to buy. Now investors are being invited to bid, and the auction is being promoted in the Bay Area....

WSJ: Gentle Landing Hopes Dead

From the California Association of Realtors:

Home sales decreased 38.9 percent in September in California compared with the same period a year ago, while the median price of an existing home fell 4.7 percent, the CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.) reported today...The September 2007 median price fell 9.9 percent compared with August’s $588,970 median price
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"While it is typical for the median price to dip seasonally as we move from August to September, this decline -- which was both the largest month-to-month percentage decline on record and the first year-to-year decline in more than 10 years -- was mainly the result of the credit or liquidity crunch, which also drove sales below the 300,000 mark,” said C.A.R. President Colleen Badagliacco.

From the Sacramento Business Journal:

In Sacramento, the median price dropped more than 11 percent to $325,550 compared to $369,400 September 2006. The number of sales matched the statewide decline of 38.9 percent.

The CAR median for Sacramento has declined 17.5% since peaking in August 2005.

DQNews data for California counties and cities is available here and archived here. Compare to other price measurements here.

From the Wall Street Journal:

Some forecasters now warn that home prices are unlikely to start rising in most of the country before 2009 or 2010. A year ago, many home builders and lenders still thought that the housing boom -- which more than doubled prices in some areas during the first half of this decade -- would end with a gentle landing. Now those hopes are dead.
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In Orlando, the supply of single-family homes and condos is enough to last 28 months. That compares with about 24 months in the Detroit metro area; 20 months in Tampa, Fla.; 15 in Sacramento, Calif.; 13 in the Northern Virginia suburbs of Washington, D.C.; and 11 in the Atlanta area, according to Realtors and consultants. Even in some of the nation's strongest markets, such as Seattle and Portland, Ore., supply is rising fast. In the Portland area, for instance, the supply is enough to last 8.6 months, up from 4.5 months a year ago.

Chart: Where Housing is Headed

Phoenix Flippers in Trouble & More

Looks like Max is starting a franchise: Phoenix Flippers In Trouble


Some more recent additions to the blogroll:

Developments - WSJ.com makes sense of the housing slowdown with news, tips and analysis

Santa Barbara Housing Bubble Blog - Home price trends in southern Santa Barbara County (Goleta, Santa Barbara, Carpinteria, Santa Ynez Valley) and related topics and issues

Housing Kaboom - Watching the Inland Empire real estate market explode

Santa Monica Distress Monitor - Monitoring current real estate market conditions in Santa Monica and testing the hypothesis that Santa Monica's real estate values are subject to the forces of a currently deflating bubble.

San Diego Market Monitor - Market analysis, news and reviews of specific properties that are for sale or have sold at a loss.

Housing Bubble Hall of Shame - Who is responsible for the Housing Bubble? Policy makers, press, investors, wallstreet, mortgage lenders, builders, realtors, appraisors, buyers, flippers, sellers, ... ? They all had a hand in it, but lets pay tribute to some of the more notable or public displays of bubble mania. *All inductees are innocent of a crime until proven guilty in a court of law. *

NoBailout.org

May 5th & Everything After (San Fernando Valley)

South OC Real Estate Tracker

Another Price Milestone: Price Per Square Foot Breeches the -20% Threshold

According to TrendGraphix's latest report [pdf], the average price paid per square foot in Sacramento County dropped to $203 in September, a 20.1% decrease from its peak in September 2005.



Here's a look at MLS inventory in the Sacramento (4-county) region. Inventory continues to expand on a year-over-year basis, according to TrendGraphix figures provided by the Sacramento Bee.

Anderson Auction Sets Minimum Price in Manteca?

From the Tri-Valley Herald:

THE BAR has been set for new home prices here, real estate experts suggest. When Anderson Homes decided to put 34 brand-new homes in the Paseo West subdivision up for auction to clear out inventory, some were worried the results would negatively affect Manteca's already inert housing market.
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Now, real estate agents and developers are saying the auction's strong turnout, coupled with the successful sale of all 34 homes, is encouraging. "It sets the market pricing," said Cindy Foster of Re/Max Executive, adding that the auction made buyers realize $380,000 to $390,000 is the range where housing should be. "There should be a positive affect, because we kind of know where the price point is now," she said. "At the very least, it established a range for those buyers that may have been nervous."

"Since Anderson Homes sold all the homes, it shows that there are buyers out there," said Tom Wilson of Wilson Group Realtors, adding the sales set a "de facto bottom of the market." "Now we can see where the bottom of the prices are and what buyers are willing to pay," he said.

Many prospective consumers have had a "misconception" that the struggling housing market would "drop to $100,000," Foster said. "A lot of people have been sitting on the fence, but this shows that prices aren't going to continue dropping," she said.
~~~
There are somewhere between 1,000 and 1,200 empty homes or a three-year cumulative inventory of foreclosures, resale homes and brand-new homes, said Mike Hakeem, an attorney who addressed the [Manteca city] council on behalf of the developers.

Builders 'Getting Body-Slammed Right Now'

From the Sacramento Business Journal:

First things first: Sacramento's economy won't rebound to greatness next year. It should grow a little, economic forecasters say, but it will take until 2009 for the housing market to revive and fuel other sectors such as retail and construction. In the meantime, they say, there's no reason to panic.
...
"The main thing that will determine how fast Sacramento recovers is how fast the housing sales recover," said Stephen Levy, director of the Center for Continuing Study of the California Economy in Palo Alto. "I don't see any reason that the volume of housing activity needs to go down any further. It's already well below the equilibrium levels for long-term demand," he said. But while sales volume might have bottomed out, prices most likely haven't.
...
Sacramento was hit particularly hard this year, with the median price of a resale home falling 15.7 percent in the two years from its August 2005 peak to August 2007. That's the second-biggest drop of 15 regions across the state, and it was driven in part by rapid new-home construction that caused a supply glut when demand softened, the association said.

Sacramento had a steeper fall because it had a steeper climb. Even though the market remained cheaper than the Bay Area, the gap got too narrow, said Levy, and Sacramento doesn't pay the wages needed to sustain the prices Sacramento houses were fetching. His forecast calls for prices bottoming out in 2008, which should make sales volume pick up by the end of that year.
...
A lot depends on the public's perceptions next year. "The only danger to the overall economy is if consumers get spooked by what they see in housing prices and start cutting back on consumption," said Levy. "If people agree with me that the volume activity levels are about at the bottom, we've taken that hit."
~~~
Scott Anderson [vice president and senior economist, Wells Fargo]: The housing market declines have been a little more severe than we expected, given generally neutral mortgage rates. All this has been driven by overvalued housing and tighter lending restrictions. It's a significant adjustment for no real increase in mortgage rates.
...
People think of Sacramento as being a fairly affordable place to live, at least by California standards. I'm not sure that's anymore the case. From a national viewpoint, it's no longer a low-cost place of doing business.

Stephen Levy: The Sacramento region needs to provide for housing that's affordable to a broad range of people. That's an economic issue, not just a housing issue. The threat to the Sacramento economy right now is in unaffordable housing.

From the Sacramento Business Journal:

The Sacramento region remained mired in ninth place -- unchanged from a year ago -- in a comparison with its chief economic competitors in the West. The six-county region ranked low in a matchup with 10 communities plus the United States as a whole, according to the latest Prosperity Index report released today by the Sacramento Regional Research Institute..."In fact, the region received the lowest score among competitive regions in both the job growth and unemployment rate indicators," the report said.

From the Sacramento Bee:

The [Sacramento] region added 1,700 jobs in September, following two straight months of job losses. The region's unemployment rate was 5.4 percent, the same as the month before. But it was well above the 4.3 percent of a year ago because of job losses in construction and other housing-related industries. The region's construction and finance sectors lost 1,300 jobs in September.
...
[A]nalysts agree that retailing is a key industry to watch for signs of where the economy is heading. California retailers did minimal hiring in September; there were no net gains in retail jobs in Sacramento. September is usually a month when retailers expand their payrolls, to handle back-to-school sales and get a jump on the December holidays. "Retail is kind of flat," Lyons said. "Retailers are holding back."

From the Sacramento Bee:

Growing consumer debt, the subprime credit crunch and the housing market's steep slowdown have spurred real concerns that shoppers may curtail holiday spending this year. The housing slowdown and credit worries have whittled away at local retail leasing, a pillar of commercial real estate during the housing boom. According to broker CB Richard Ellis, retail vacancies jumped to 7.1 percent for the third quarter, up from 5.9 percent a year ago.

From the Sacramento Business Journal:

Bank deposits grew in the Sacramento area less than 1 percent in the past year, a far cry from the double-digit growth in deposits common earlier this decade...For the first five years of this decade, the region's fast deposit growth prompted banks from all over the country to open offices here. Now that the branches are here, the deposit growth is slowing overall.
...
The decline in growth could mean people have less money, that they are saving less or that they are shifting money from insured accounts to other investments such as stocks, bonds, real estate, or Treasury bills or municipal bonds. It could also point to more money going into credit union accounts.

From the Stockton Record:

Months have passed since the days when dozens of homes at a time were going up in any given subdivision in San Joaquin County. But these days, the typical new-home development looks as if it's nearly in hibernation as the housing market steps into the third straight year of decline.
...
Greg Paquin, president of the Gregory Group, said builders have responded to a very slow market not only by cutting prices further but also by either delaying or stopping projects or in a few cases by selling standing homes at auction. "They're getting body-slammed right now, frankly," he said.
...
"Valley new-home construction sites are ghost towns," said Shane Hart, vice president in charge of acquisitions, development planning and marketing for Stockton-based Grupe Co...Grupe has offered as much as $150,000 in incentives per home, yet sales have become so slow that construction was halted at three developments in Stockton, Waterford and Tulare.
...
Paquin said there's more bad news on the horizon for new-home builders, who in recent months offered such low prices and incentives that they even drew buyers from the existing-home market. The flood of foreclosures is attracting the attention of bargain hunters and forcing existing-home prices down so much that those homes are getting more attention from potential buyers, he said.

From the Sun Post:

Complaints from two developers that rising foreclosures and a large housing inventory have crippled sales led the [Manteca] City Council this week to postpone the fees developers owe for homebuilding reservations under the city’s growth cap. The council’s 3-2 vote to postpone millions of dollars in fee payments for two years was opposed by councilmen Jack Snyder and Steve DeBrum, who worried that it could damage the city’s budget.
...
Stockton attorney Mike Hakeem — lobbying on behalf of developers Raymus Homes and FCB Homes — countered that no one else would be willing to pay for the reservations this year because the housing market was so bad.
...
During their discussion, councilmen both for and against the extension focused on the need to keep home prices up. “These are significant factors when it comes to how we need to proceed as a local city government to protect the values of our homes,” said councilman Vince Hernandez, after alluding to an auction of 34 new homes at highly discounted prices last weekend.

From the Modesto Bee:

Unemployment rates in Stanislaus, San Joaquin and Merced counties swelled above last year's averages, the result of a shaky economy and deepening housing crisis. The three counties each gained at least a percentage point from the previous year, with Stanislaus County recording the biggest jump. The county went from an unemployment rate of 6.6 percent in September 2006 to 8 percent last month, according to state Employment Development figures released Friday.
...
The housing slowdown has taken an even larger toll on San Joaquin County. Its unemployment rate was 7.8 percent last month, up from 6.5 percent the previous year. The county saw huge declines in manufacturing, construction, professional business services and financial activities. Combined, those industries lost about 2,100 jobs. "All are definitely related to the housing crisis and mortgage credit issues," Baker said.

September Massacre: Sacramento New Homes Median Plunges 22% YOY

September DataQuick statistics for the Sacramento real estate market are now availabe via the Sacramento Bee.

By County
By Zip Code

Some highlights for Sacramento County:
YoY = year-over-year

New Homes

• Change in median price: -22.3% (YoY)
• Change in sales: -31.2% (YoY)

At $303,000, the new homes median is now less than the median for existing homes.

Existing Condos

• Change in median price: -26.0% (YoY)
• Change in sales: -60.7% (YoY)

Existing Detached Homes

• Change in median price: -11.4% (YoY)
• Change in median price: -17.1 (Peak)
• Change in sales: -43.3% (YoY)

All Homes

• Change in median price: -13.5% (YoY)
• Change in median price: -20.7% (Peak)
• Change in sales: -40.7% (YoY)

From the Sacramento Bee:

Prices have fallen across the region as the supply of homes for sale continues to exceed the number of willing buyers. At September's end, there were 16,081 existing houses for sale in El Dorado, Placer, Sacramento and Yolo counties, according to Sacramento-based researcher TrendGraphix. That's more than triple the for-sale inventory in September 2004.
...
Lena Abello, her brother and two friends stood poised to buy their first home together last month – a $303,000 single-family house in Natomas. But the shake-up in the nation's mortgage industry abruptly shuttered their dream. "The day before we were to open escrow, my lender called and said the program we were about to qualify through was no longer available," said Abello, an asset planner at a local insurance firm. "She said we were no longer approved for a loan."
...
They had hoped to buy together what they couldn't afford separately. That turned out to be a four-bedroom, 1,800-square-foot house in Natomas owned by a San Francisco real estate agent. They negotiated a $303,000 sales price and planned a fast two-week escrow. The long-range plan was to get their feet in the door as homeowners and "use real estate to build and create wealth."

From the Modesto Bee:

Welcome to 2004. It's back to the future in the Northern San Joaquin Valley as median home prices have plummeted to 2004 levels...In the last 12 months alone, Stanislaus' prices have dropped nearly 19 percent. Merced County is even worse. Prices there plunged nearly 26 percent to $260,000 in September compared with a year earlier. That's the biggest decline in California, according to DataQuick....While the housing market is bad across the nation, most statistics show that things are worse in the Northern San Joaquin Valley than almost anyplace else.
~~~
Here's some good news about housing: Northern San Joaquin Valley apartment rents have been flat for a year. That's great for renters. Of course landlords and real estate investors may not think so.
~~~
Traditional methods of selling aren't working very well for Northern San Joaquin Valley home builders, so they're trying new things. The latest marketing method by Florsheim Homes is to sell homes to whoever makes the highest offer -- no matter how low it is.
...
One is a 1,250-square-foot former Valley Rose model with many upgraded features that had been priced at $259,900. "We've tried to sell it at that price, but we haven't had any real interest," [Joe] Anfuso [Florsheim's chief executive] said.
...
"There will be people out there who want these homes," Anfuso said. "They're not going to end up going for $150,000, believe me."
~~~
A 133-unit condominium project across the street from California State University, Stanislaus, is in danger of falling through, leaving investors in the lurch....The landowner, Modesto attorney Ralph Ogden III, said low-income apartments are one of five or six options being discussed. Plans have been approved for the condominiums, but unless construction starts in the next 10 months, those plans will expire. With the amount of work still needed to break ground, that is almost guaranteed, said Planning Commission Chairman Amos Reyes. "I think that's right," Ogden said earlier this month. "In the end, (condos) aren't economically viable."

That leaves investor Michael Chadd of Milpitas very, very unhappy. Chadd bought a $100,000 stake in the condo plan. For the last nine months, he's watched his money slowly drain away. Members of Strategic Investment Group, a Danville-based real estate investment firm, had a strong pitch when Chadd met them last year at a wealth expo in San Jose. What Chadd didn't see and Strategic Investments didn't mention was the sour state of the residential building market. "We were all pretty stupid," Chadd said.
...
As the market slumped, Strategic Investment sent out rosy newsletters such as this from December 2006: "Does all the news about the declining housing market concern you? Maybe it scares you? ... We have a strong job market, healthy stock market, and a lot of opportunity. I believe that the media tends to make things seem worse then they really are. I am not delusional."

From the Stockton Record:

The 17-year-old duck-themed restaurant in the heart of Stockton's upscale Brookside development shut down suddenly after Sunday's busy brunch service, leaving a host of problems in its wake, including employees without paychecks, bounced checks, unpaid back rent and tax bills, and questions about prepaid deposits for upcoming holiday parties. "We were all shocked. We saw the sign on the door Monday morning," said Cecilia Turnage, a cashier at the Morgan Stanley financial services office a short walk from the restaurant at 3409 Brookside Road, just off March Lane.

For years, businesspeople from throughout Stockton would take clients to lunch at the restaurant, but Turnage said in recent months she'd noticed a drop in traffic in the shared parking lot. Mallard's owners admitted business was falling and attributed it to current poor economic conditions, including the housing slump. They pointed out that other area restaurants - notably Tony Roma's across Interstate 5 - had also closed without notice.

Sacramento Real Estate Market Charts - September 2007

Data source: Sacramento Association of Realtors

Sacramento Home Sales At Record Low

Record inventory: check. Record foreclosures: check. Record price drop: check. Now record low home sales. From the Sacramento Bee:

The summer seizure that gripped the nation's mortgage markets and made it harder for buyers to find home loans delivered a nasty blow to Sacramento-area home sales during September....The 1,234 escrow closings for new and existing homes in Sacramento County were the lowest since DataQuick began keeping records in 1989.
...
Sacramento County's median price for existing homes was $310,000 in September, down 17 percent from an Aug. 2005 high of $374,000.
...
If you're a renter, there's no better place to be than in metropolitan Sacramento....Rents in July, August and September were up only about 1.4 percent over last year.
...
"People would like to raise their rents, but I see a lot of people playing these concession wars," says Joe Treat, who has long watched the region's apartment market at For Rent magazine. Treat's prediction: Renters are likely to have it good for the foreseeable future.

'Negative press is a major factor keeping inexperienced buyers at bay'

From the Sacramento Association of Realtors:

“An influx of homes on the market, along with the subprime mortgage situation, has slowed activity, but homes are still being sold,” says 2007 Association President and REALTOR® President Tracey Saizan...If you have good credit and want a lifetime investment, now is an excellent time to buy. The credit crunch is contributing to the notable inventory and negative press is a major factor keeping inexperienced buyers at bay,” continues Saizan, “but REALTORS® who have experienced these market fluctuations are patient and will endure the softness in this market.”

MLS Statistics for September 2007, Sacramento County and West Sacramento

Change in Median Price

• Since Sep 2006: -11.8%
• Since 2005 peak: -18.5%
• Consecutive months of YoY declines: 15
• Consecutive months of double-digit YoY declines: 2
  

Change in Sales

• Since Sep 2006: -36.1%
  
• Since 2004 peak: -69.6%
• Consecutive months of YoY declines: 28
• Consecutive months of double-digit declines: 25

"The Housing Market is Weakening by the Minute"

From Globe and Mail:

Mark Zandi of Moody's Economy.com in West Chester, Penn., predicted that “well over” a million Americans will eventually lose their homes after defaulting on their mortgages next year. “The housing market is choking on unsold inventory that continues to rise as homes sales plunge and foreclosures surge,” he said.
...
There are 2.5 million homes sitting vacant across the United States. The only way to work off the inventory is for prices to come down enough to make homes affordable again, Mr. Zandi said. He said the worst-hit parts of the country are the markets where home prices rose most in recent years – California's central valley, South Florida, the industrial Midwest, New York and Boston.

From the Visalia-Times Delta:

Central Valley residents have the most pessimistic outlook in the state about current economic conditions, according to a survey released Tuesday. Central Valley residents posted a rating of 80.0 on an index created and tracked by the Survey and Policy Research Institute at San Jose State University.

From TheStreet.com:

The bad news for the housing market just keeps piling up. About 44% of the U.S. population lives in metropolitan areas where home prices are falling, according to the latest report on the dismal state of the real estate market...by the structured finance group at DBRS, an independent credit agency. DBRS based the report on figures from the Office of Federal Housing Enterprise Oversight that track housing price data through June of this year, the latest period available.

The region of Sacramento, which saw the first innings of the housing boom, will see an 8% drop in prices this year, the report says. San Diego, home to the condo boom, will see prices drop about 6%, while Oakland is expected to record a 5% decline. Parts of the central valley region of the state -- cities like Stockton and Modesto -- will see declines greater than 10%, according to the report.

From Inman News:

A forecast compiled by Santa Ana, Calif.-based Veros Real Estate Solutions...applies more than 50 metrics in the calculations, including interest rates, current inventory, unemployment rates, inflation, population and buildable land, among other metrics.

The markets expected to see the most rapid depreciation in home values through...[the second quarter of 2008] are: Palm Bay-Melbourne-Titusville, Fla., with a 9 percent expected decline in values; Sacramento-Arden-Arcade-Roseville, Calif., with an 8 percent expected drop; Sarasota-Bradenton-Venice, Fla., with a 7 percent decline; Cape Coral-Fort Myers, Fla., down 7 percent; and Riverside-San Bernardino-Ontario, Calif., down 7 percent.

KCRA: Bank Refuses Buyers Bids On Town Homes

From the Tri-Valley Herald:

While the housing market is weakening by the minute, city leaders are strengthening the tools they have to secure homes abandoned by foreclosure. The Manteca City Council unanimously decided Monday night in favor of a series of ordinances that would secure vacant properties, primarily at the expense of the owner. Slumping housing prices and bad lending practices have turned Stanislaus and San Joaquin counties into one of the nation's leading areas for foreclosures. Manteca, a city that coins itself the "Heart of California" because of its location, is in the center of the crisis.

"This is a nationwide problem," Councilman John Harris said. "I think we are just entering the tunnel and I don't see any light at the end of it. We have to take some action; this gives us some teeth as far as prevention." "We haven't seen the tip of the iceberg yet," added Councilman Steve DeBrum in reference to the number of foreclosure properties.

From the Manteca Bulletin:

New home builders over the past few months have indicated they believe the ultimate market adjustment will be from 20 to 28 percent of what the peak selling prices were 18 months ago. The Anderson Homes auction prices generally fall in line with such market assessments.

Although several other new home builders declined to comment on the Anderson Homes auction, at least one was interested in information on what homes had the most bids and subsequently commanded the highest price in terms of percentage of the original selling price. McMansions: The real big losers? The implications for the Manteca market for the next two or so years is simple. It verifies that the 3,000-square-foot homes dubbed McMansions are losing favor either because of size or affordability.

From the Manteca Bulletin:

Right now we are faced with the bear of all bears in our current situation. I have heard over and over how this is the worst it has ever been and how this is going to run all of us Realtors out of town. CBS did us a mis-service by reporting how bad they think it is here. I disagree.

As you know, unless you have been hiding under a rock lately, the market in our city as far as real estate is concerned, is what I call "unbelievable!" It is so unbelievable for that matter that CBS News came here recently and did a story for their news program. They were reporting an abnormally high number of foreclosures here. This is just part of the cycle of real estate that happens about every 10 years. Oh yes, this one seems worse than others, but just like the downturn of 1989, this too shall pass. When the bottom of the market starts to rise and the home values start to increase again (and trust me, they will) the market will turn. I think we are starting to see that turn. The average price of pending sales in Manteca is starting to level off at around $350,000 ($352,637) and the average sold and closed price is approaching that price then stability will occur. We are at $377,340 right now.

With this happening already that is why I say the market is "unbelievable!" I didn't look to see that until first quarter next year.

I will probably get plenty of arguments from the naysayers on this but I am tracking it weekly and I do see a slowdown in the falling prices and the gap between listing price and sold price is narrowing. Too bad CBS didn't contact me. I could have shown them the figures for the last 10 years as I keep them. I predict that when the average listing price gets near $360,000 we will see a big surge in sales. That is quickly approaching. Right now our average listing price in Manteca is around $410,000. That's down from $501,276 on 9-11-06. How's that for the market self-adjusting?

Up, Up, and Away: Sacramento County Hits 15 Months of Inventory

Erin Attardi, a real estate agent and blogger, reports that the supply of existing homes for sale hit 15 months in September. Based on TrendGraphix data, she graphed the supply figures back to 2002.

Stockton's Repo Bus

From the Stockton Record:

It's not a magic bus, just a vividly marked one - REPO HOME TOUR.COM - that real estate agent Cesar Dias hopes will work some magic for him in a bleak home-sales market. Dias, an agent and loan officer at Approved Financial & Real Estate Center, 1140 N. El Dorado St., has launched a weekly Saturday bus tour to try to get buyers interested in looking at some of the area's growing number of foreclosure properties.

The bus absolutely is just a marketing ploy, he said, because anybody can go look at foreclosures with any agent. But between a dozen and 20 people a week have taken the tour of 10 to 12 bank-repossessed homes the past few weeks, Dias said, and a few deals have been made. Not bad in a market where home sales in September dipped to the lowest level so far this decade.
...
[T]he latest Coldwell Banker Grupe-TrendGraphix monthly sales report, based on Multiple Listing Service data,...indicates that sales and selling prices of existing homes in San Joaquin County have continued to drop as the market moves into its third consecutive year of decline. The 228 sales countywide in September were the fewest this decade, as were the 289 pending sales last month. That compares with 796 sales and 716 pending sales in September 2005, just before the downturn hit. And median selling prices have fallen sharply, from $370,000 in July to $325,000 last month, a 12.2 percent drop in two months.

From CBS 13 (video):

A sleek-looking high rise in downtown Sacramento, called Epic Tower looks similar to the proposed Aura Project. It's an aggressive proposal considering the real estate market's current downturn. High rise condos like the Towers on Capitol Mall prove investors can get in over their heads. The Aura proposal is another example...Craig Nassi's BCN Development is behind both Epic Tower and Aura projects. Nassi hopes to break ground next year probably after city planners make a decision in January.

From the Sacramento Bee:

Jose Olagues knew the bad news. Like so many area residents, he's seen his Tahoe Park home decline in value. The good news: He's among 50,000 Sacramento County property owners who can expect to receive a shrinking tax bill. "That is sweet," said Olagues, who may be in line for a rebate from his mortgage company, which rolls his taxes into his monthly bill. "If they want to give me money back, that is cool."

Most property owners – in Sacramento County and elsewhere – will still see an increase in their property tax bills, which started arriving last week. Sacramento County taxes 446,000 properties. But the county's move to reduce the taxes on 50,000 properties – just over 10 percent of county properties – is perhaps the most sweeping in the state.
...
The silver lining for some recent Sacramento County homebuyers is nothing but bad news for schools, the seven cities within the county, the county government and special districts that rely on property taxes. The Sacramento County assessor's recalculation of property taxes wipes away $15 million in tax revenue.

From the Associated Press:

Wells Fargo & Co.'s earnings grew at its slowest pace in more than six years during the third quarter, dragged down by deteriorating home loans likely to cause more trouble in the months ahead.
...
Like many other lenders, Wells Fargo is being hurt by a combination of crumbling home values and overextended borrowers who can't afford to make their monthly mortgage payments as their once-low adjustable interest rates reset to higher levels. "The housing sector is weak and we are not immune to that," Atkins said.
...
Atkins said the bank is having the toughest time collecting from homeowners in parts of the Midwest and California's Central Valley, where many borrowers now owe more money than their properties are worth.

From the MarketWatch:

U.S. home builders grew even more pessimistic in October, hit by a triple whammy of tight credit, abundant supply of homes for sale and falling prices. The seasonally adjusted housing market index fell to a record low of 18 in October from 20 in September, the National Association of Home Builders reported Tuesday. It's the lowest reading in the index since its inception in 1985. "The market for new homes is dead for all practical purposes," wrote Patrick McPherron, an economist for Moody's Economy.com.
...
All three components of the home builders' index notched record lows in October. Sentiment fell in three of four regions, with builders in the West the least optimistic.

"Artificially Cold" Real Estate Market

From the Sacramento Business Journal:

The area's first developer-driven auction of new homes attracted a lot of attention and bids -- but none high enough to close a deal. Twenty bidders left the auction late last month thinking they'd landed a steep discount from the asking price for a piece of an award-winning housing development near the river in West Sacramento.

But the deals never closed escrow. Two weeks after the auction, the bank that holds title to the homes canceled the sales, citing auction rules that the bids didn't meet minimum prices. Other than sore feelings from some of the bidders, it's as if the auction never happened.
...
Even though the auction saw some lively bidding, the homes failed to get anywhere near the reserve prices, let alone the list prices. For River's Side, the final bids were an average of $88,000 less than the reserve prices, [John] Leonard said...Leonard said a confidentiality agreement with the lender prevents him from discussing details, but that the bank didn't think the auction environment correctly tested the value of the homes.

From the Redding Record Searchlight:

Here's another sign of a stagnant real estate market: Some developers in town are taking their homes off the market and turning them into rentals. Two weeks ago, East Oak Estates in south Redding announced this would be the last weekend some of its homes would be for sale. They were going to start leasing them out.

But East Oak developer Karen Margrave said buyers waiting for some colossal closeout sale will be sorely disappointed. She has no plans to sell her homes at below what she paid -- nor she says will other builders. So they're getting into the rental business while waiting it out..."We know prices are going to go back up, and we believe they will start rising again next spring," Margrave said in an e-mail.
...
Brad Garbutt, who's been selling real estate in Shasta County for years, said it's unusual for developers to rent back their homes. "I don't recall any developer on a large scale doing something like that," Garbutt of Real Estate Professionals GMAC said. "Developers usually can't do that. They can't stop everything because the bills keep coming." Glen Jones of Greater Shasta Homeplaces in Redding agreed that it's strange to see a builder get into the rental business. "I have never seen it before, but we have never had this situation," Jones said.

From the Tri-Valley Herald:

In light of the lethargic housing market, local home builders are asking city leaders to alter the structure of existing development agreements to give developers more time to build. During Mondays Manteca City Council meeting, developers of some of the newer subdivisions plan to ask for an across-the-board extension in the amount of time they have to build homes once theyve obtained building permits. If approved the deadline would be extended from three to five years. The builders believe that an extension would offset some of the problems caused by an overabundance of houses and a downturn in the housing market
...
The proposed increase was spread out over the period of time real estate experts predict the market will reach bottom and turn around. The market was artificially hot a couple years ago and is artificially cold now. People are worried, but the market is resilient, [George] Gibson [of Stockton-based FCB Homes] said.

From the Modesto Bee:

[Sarah] Huff and her husband, John, say their contractor, Viking Pools Mid-Valley Inc., has closed its doors without finishing their pool, and she doubts she'll ever get her money back or a finished pool out of the defunct business.
...
[Viking western regional sales manager Aaron] Stahl and other pool industry officials said the housing market bust has hurt many pool contractors, which prospered when it was easier to buy a home or refinance a home loan. As a result, some business owners may be more likely to cut corners to stay afloat, industry officials and consumer experts said.

That may have been the case with Mid-Valley. [Tina] Hill, who worked there for 2 years, said orders slowed dramatically over the past year, mirroring the free fall in home prices and sales. "I'm sure it's a direct result of that," she said. "There were a lot of problems, off and on, and the last three months there were just more of them." Don Burns, president and chief executive officer of the California Spa and Pool Industry Education Council, said many pool contractors are struggling because of the housing slump.

From the Stockton Record:

Countrywide Financial Corp., sharply paring its work force nationally in the midst of an on-going housing slump, has closed its Stockton loan-processing center. A company phone message and a notice posted on the front office door said the March Lane center has closed and has been consolidated with a Countrywide center in Elk Grove.
...
One Stockton resident, Susan Feighery, has been trying to get a Countrywide mortgage loan for a condo purchase, but she said she is frustrated because her loan application has been delayed as it has seemingly bounced from one person to another as staffing dwindled...[S]he was told several times that her loan application was being passed to someone else and that the previous handler no longer worked for Countrywide.

From the Sacramento Bee:

Speaking of office vacancies, the Sacramento region is holding its own for now. But look out for next quarter. "There are not enough tenants to go around," says [local Cornish & Carey exec John] Frisch, who reports that the region's vacancy rate is 15.22 percent, up a hair from the previous quarter.

The cause for concern: Nearly 3 million square feet of new office space is under construction in the multicounty region. But there's not nearly enough business growth to absorb it. "I expected a lot more red ink at the bottom of the (space absorption) tables," Frisch says of his company's third-quarter vacancy report. "I think there will be next quarter."

'I lost a quarter million dollars in value. I'm screwed.'

From the San Jose Mercury News:

When homeowner Dave Cantrell walked into the hotel ballroom Saturday where Anderson Homes was auctioning off one-third of the brand-new houses in his Manteca subdivision, he tried to be optimistic. He approached Anderson Homes executive Craig Barton, shook his hand and wished them both luck that the buyers would bid close to the latest asking prices of the 34 homes in the Paseo West subdivision that have been sitting empty since the real estate market soured.

But when the rapid-fire bidding was over 90 minutes later - and one winning bidder stood up like a prize fighter with his arms raised in triumph - Cantrell didn't even want to look at Barton, the man he invited into his home two weeks ago to calm the fears of his 26 neighbors who worried the auction would tank the value of their homes. "I'm feeling my worst fears right now," said Cantrell, who estimated that the auction devalued his neighbors' homes by roughly $200,000 each compared with what many of them paid a year ago. "I lost a quarter million dollars in value. I'm screwed."

Cantrell bought his home a year ago for $670,000 (not including the $90,000 he paid to install a pool and miniature golf course). The winning bidder Saturday of an identical home five doors down the street paid $391,000 - 38 percent less than what he paid.
...
When the auction was over, Cantrell walked outside and lit a cigarette to calm his nerves. He expected his neighbors to knock on his door when he got home to ask how things went. "I just hope," he said, "they don't kill the messenger."
...
Overall, the homes went for about 32 percent below the original asking price. The minimum bids had been set about 40 percent below asking price.

The "Collapsed" Housing Market

From Fox40:

Laguna Oaks Condo development is the latest to take the auction route...The two bedroom units will open at $145,000, the three bedrooms open at $165,000. That's about half the normal asking prices.

From the Elk Grove Citizen:

The city of Elk Grove’s staff has labeled the current times as the “first period of economic uncertainty” for the city. This is according to the city staff report for the Family Life and Fitness Center that was presented to the Elk Grove City Council on Oct. 10. The city’s General Fund Reserve felt a hit from these uncertain times, the report stated. The reserve balance is currently at $11.5 million, or 17 percent of operating revenues, 5 percent below the mandated-council 22 percent level. “I don’t think we are in a time that we could justifiably drain the reserves down,” City Council Member Pat Hume said.
...
City council members spoke to the Citizen to address why the reserve, which is meant to be used in times of disaster, is in its current state. “We are obviously in a downturn with the real estate market, which directly impacts the fund balances across the board for everybody,” City Council Member Mike Leary said.
...
[City Council Member Sohpia Scherman] said the housing market is one of the reasons why the economy is in the state it is in and why the General Fund Reserve has dipped to lower levels. “It’s not a big secret or surprise,” Scherman said.

From the Stockton Record:

A plan to build residential lofts in downtown's tallest building has been put off, delayed as other plans have been by the housing market's fall, officials said. "There's no market for that right now," Redevelopment Director Steve Pinkerton said this week.
...
This year, as the housing market has collapsed across the city, officials have increased plans for downtown housing, considering reduced fees and other rewards for those who build downtown. Once the market recovers, the city will be prepared for it, city officials said.

'I Don't Believe It's Getting Worse....'

From the Sacramento Bee:

Sacramento-area home builders are on track this year to sell the fewest number of new homes since 1997 following one of the toughest quarters yet in the ongoing housing slump. At the current pace, capital-area sales could dip below 8,000 this year, only slightly above the 7,455 registered 10 years ago, according to the Folsom-based Gregory Group, a home building industry tracker.
...
Home building giants and local family builders alike -- struggling with tightened credit standards for buyers, excess inventory and consumers waiting for still better deals -- sold 1,592 homes from July through September in the six-county region, the Gregory Group said in a report scheduled to be released today.
...
"It is tough. It's tough up and down the state," said Chris Hanson, a Sacramento-area executive for Costa Mesa-based Warmington Homes. The firm recently laid off 15 Sacramento staffers and folded its capital operation into an East Bay division.
...
Sacramento builder John Leonard encountered roadblocks, too, after auctioning 22 West Sacramento town homes last month. "The homes we sold at auction were too low and didn't meet the bank payoff requirement," Leonard said Thursday. Leonard said his lender rejected all bids because they were at least $88,000 below minimum for each unit. He said negotiations are proceeding for investors to take over the River's Side at Washington Square project.

Gregory Group data
Historical sales charts

From the Sacramento Business Journal:

Sacramento's new-home prices have rolled back to where they were in spring 2004, and they're predicted to keep dropping before there's any recovery. The average new home in the six-county area costs $429,678, and the median price has fallen to $389,990, according to the latest data from new-home analyst The Gregory Group.
...
"It's the same thing each week," [Dunmore Homes VP John] Slaughter said of the housing indicators. "The news doesn't change. I don't believe it's getting worse, but there's no indication that it's going the other way."
...
New-home communities are now selling property at an average rate of about one home every three weeks. Paquin said he's talked with builders who say they can hold out for the next six to nine months at that rate, but the slump is expected to last at least until the end of 2008.
...
According to the state's Employment Development Department, the Sacramento region lost 2,000 jobs in August, a downturn largely attributable to the housing slump, the agency said. The area has 4,800 fewer construction workers than it did at the same time last year. Financial jobs, which include those in the mortgage lending business, are down by 2,000 from a year ago.

From the Sacramento Bee:

Hail to real estate forecasters who stick out their necks in a volatile market and make predictions for 2008. Most of what they predicted this time last year for 2007 missed the mark by a mile. Most were simply too sunny.

Consider the California Association of Realtors. Last fall, looking at 2007, it predicted sales of existing homes in California would fall 7 percent from 2006. Actually, it's more than triple that -- a 23 percent drop from 2006 to the fewest sales in 12 years. ...
While sale prices statewide likely will fall 4 percent next year, [CAR deputy chief economist Robert] Kleinhenz said it will be worse for hard-hit Sacramento and the Central Valley. Watch for sales prices here to fall another 8 percent to 12 percent next year, he said.

From the Sacramento Bee:

During the recent housing boom, Oak Park attracted considerable interest among real estate investors and people looking for a more affordable alternative to other established neighborhoods near downtown...Since the housing market fell into its slump, foreclosures have produced boarded-up homes in some parts of Oak Park and other city neighborhoods.

[Architect/Developer Ron] Vrilakas isn't sure what to expect. He and Rosenbloom have sold two units so far and are working with two other buyers. "Unfortunately, we're hitting the housing market at the absolute wrong time," he said. "If we sell these in this market, it will be a really good sign for Oak Park."

From the Sacramento Bee:

The federal government has warned the city of Sacramento that it plans to slap growth restrictions on North Natomas because of its flood risk. In a letter dated Sept. 27 -- but which city officials say they didn't receive until Monday -- the Federal Emergency Management Agency informed Sacramento that it was denying the city's request to continue allowing unrestricted growth in North Natomas while the levees are improved.
...
Yet Mayor Heather Fargo said the hit from FEMA isn't as bad for the city as it would have been a few years ago, when the housing market was strong. "It does help us, in a perverse way, that the market is slower," she said. "We're not getting a big push to do a lot of new residential development right now."

From the Merced Sun-Star:

Merced finally ranks No. 1. Unfortunately, it's the nationwide foreclosure rate. Merced saw more foreclosure-related activity than any other metro area in the country in September....

Sharon Mogliotti, a mortgage planning specialist with CTX Mortgage, called the skyrocketing foreclosure rate a "history-setting" moment for Merced. "Our mortgage industry and the economy has never been through a market like this," she added. Mogliotti has worked in the mortgage industry for 40 years.

Take the Money and Run?

From KCRA (hat tip paperboy):

On Friday, the FBI and IRS arrested *****, a loan officer with First Liberty Financial in Sacramento. He was arrested while boarding a flight at Sacramento International Airport. Agents said at the time, he had thousands of dollars in cash and believe he was trying to flee the state...**** is a former employee of VFM Investment Group.

From the Sacramento Bee:

Sacramento-based Comstock Mortgage announced its second local merger in five months, adding ATM Mortgage of Sacramento to its home loan operation...As numerous wholesale mortgage lenders close amid the nation's housing slump, it's become harder for small mortgage brokerages, said [ATM's owner Jeff] Tarbell.

From the Wall Street Journal:

As America's mortgage markets began unraveling this year, economists seeking explanations pointed to "subprime" mortgages issued to low-income, minority and urban borrowers. But an analysis of more than 130 million home loans made over the past decade reveals that risky mortgages were made in nearly every corner of the nation, from small towns in the middle of nowhere to inner cities to affluent suburbs.
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To examine the surge in subprime lending, the Journal analyzed more than 250 million records on mortgage applications and originations filed by lenders under the federal Home Mortgage Disclosure Act. Subprime mortgages were initially aimed at lower-income consumers with spotty credit. But the data contradict the conventional wisdom that subprime borrowers are overwhelmingly low-income residents of inner cities. Although the concentration of high-rate loans is higher in poorer communities, the numbers show that high-rate lending also rose sharply in middle-class and wealthier communities.
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The Journal compared the fastest-growing high-rate loan markets to the rankings compiled by foreclosure-listing providers RealtyTrac Inc. and ForeclosureS.com. In Stockton, Calif., for example, high-rate loans accounted for 33% of total home-loan volume last year, up from 13% in 2004.

Subprime Tidal Wave Interactive Map

From the Modesto Bee:

It's a title no one wants, but counties in the Northern San Joaquin Valley keep passing around the undesirable honor of having the nation's highest home foreclosure rate. Merced County is the latest to get that title, pushing Stanislaus County into the No. 2 spot and San Joaquin County into No. 3...The three Northern San Joaquin Valley counties have been at or near the top of the dreaded foreclosure ranking every month for about a year.
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Home values in the valley have declined an estimated 15 percent to 30 percent since the 2005 housing market peak, and about half as many homes have sold this year compared with last year.
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RealtyTrac said lenders repossessed 921 homes last month in Stanislaus, San Joaquin and Merced counties. In September 2006, by comparison, 14 homes were taken back by lenders.

From CNN Money (hat tip J):

California claimed six cities among the top 10 metro areas for the number of filings. Merced topped the list with one of every 68 households, followed by Modesto, Stockton, Riverside-San Bernardino, Vallejo-Fairfield, and Sacramento.

From the Stockton Record:

Susan Dell'Osso thought she would be overseeing the building of luxury riverside homes by now. But with area home prices dropping, Dell'Osso, the perennial face behind the controversial, superlevee-reinforced River Islands development, announced this week it will be another year before model homes rise out of the Delta soil.
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"We're all ready to go. Our levees are certified, our sewer is on standby, but the market's just not there," Dell'Osso said....If home prices go up by April, River Islands will have models up by the end of 2008, Dell'Osso said.
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The dipping housing market caused the projected flow of builder fees to be the biggest revenue reduction in the city's most recent annual budget, according to Mayor Kristy Sayles...The city has cut back on the funds it will spend on improvements to Valverde Park and the construction of the new Lathrop teen center, in addition to leaving some staff positions vacant instead of hiring new employees, she said.
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In 2005, Lathrop approved 921 building permits for residential units. So far in 2007, there have been 197 permits, according to numbers from the Construction Industry Research Board, which tracks the California building industry.

From the Stockton Record:

Few areas are more vulnerable than new Lathrop neighborhoods west of Interstate 5 that are protected by a levee known as RD17...Speculation is that RD17 won't be certified, forcing property owners to pay more for insurance and Lathrop officials to work with builders in upgrading the levee.
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Like San Joaquin County and California, the housing market in Lathrop and areas of southwest Stockton has been slowed by the home-mortgage and foreclosure crisis. Suddenly imposing additional flood insurance costs could force more homeowners out of the market. Where would they go?

"Giving up on a fast-falling market"

From CBS Evening News:

In California, where developers have been racing to turn farmers' fields into subdivisions, they're now walking away, leaving houses partially built. Those who have already moved in wondering what will hit next. “I'm concerned that once the weather starts getting bad, there's tile piled on the roof that could just fly off,” homeowner Marius Gieske told CBS News correspondent John Blackstone.

Dunmore Homes had building projects in a dozen California communities from Bakersfield to Yuba City. Now it’s halted work everywhere, giving up on a fast-falling market. “We couldn't sell a moving target,” said John Slaughter, vice president of construction and operations for Dunmore Homes. “What we wanted to do is stop.”

"It's Hard To Be Optimistic"

From the Sacramento Business Journal:

Sales of existing homes in California will keep falling in 2008, but at a slower pace, while median home prices across the state will decline for the first time since 1996, the California Association of Realtors said in its 2008 forecast released Wednesday... The projected 2008 sales figure would be the state's lowest since 1985....
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Across California, the median home price is expected to creep up 3.5 percent to $576,000 in 2007, then turn down in 2008, losing a projected 4 percent to $553,000. That shift has already hit the Sacramento market, where the median price of $332,510 in August was down 15.7 percent from the peak price of $394,450 in August 2005.

The recent housing construction boom in affordable markets such as the Central Valley and high desert is contributing to softness in the resale market, exacerbated by fallout from tighter loan underwriting and defaults in the subprime mortgage market, the group said.

From the Central Valley Business Times:

Central Valley cities are among the most likely in the nation to see further home price drops within the next two years, according to figures compiled by PMI Mortgage Insurance Co., the Walnut Creek-based subsidiary of PMI Group Inc. There is a 62.3 percent chance of price declines in Stockton, says PMI. That’s the third highest in the nation, it says, exceeded only by Salinas at 63.9 percent and Naples, Fla., at 66.1 percent.
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PMI’s list of Central Valley cities’ likelihood of price declines by this time in 2009:

• Bakersfield: 56.4 percent
• Chico: 41.8 percent
• Fresno: 48.1 percent
• Hanford-Corcoran: 41.2 percent
• Madera: 42.1 percent
• Merced: 59.3 percent
• Modesto: 57.0 percent
• Sacramento: 52.2 percent
• Stockton: 62.3 percent
• Visalia-Porterville: 53.3 percent

PMI Report [pdf]

From TheSteet.com

Downey Financial dropped 4% in early trading after the savings and loan warned that rising loan losses will lead to a loss for the third quarter.
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"We are clearly disappointed with our third-quarter results," said Daniel Rosenthal, Downey's president and CEO. "The continued weakening and uncertainty relative to the housing market, coupled with third-quarter disruption in the secondary mortgage markets, unfavorably impacted our borrowers and the value of their loan collateral. This has been particularly true in certain geographic areas such as the greater Sacramento and Stockton areas of Northern California and San Diego county. As a result, single family loan delinquencies, as well as losses from foreclosures, rose significantly during the third quarter and led to this quarter's large increase to the allowance for losses."

From CBS News (hat tip spacebar):

What I witnessed on the steps of the County Courthouse in Stockton, California struck me as strange and sad and worrying…particularly if you think the worst is over in America’s mortgage meltdown.

An agent for lenders stood on the courthouse steps, his hands full of official documents. He was preparing to auction several houses with mortgages in default. He’s there almost every day at 10 AM. On this day, at least, he had a lonely job: there was nobody there but me…and I wasn’t there to buy. Still, the agent read aloud what he was legally required to read and declared the bidding open. The first house up had an opening bid set at $465,000. Less than two years earlier a buyer had paid $620,000 for the same house. But now, even with a $155,000 discount, nobody was interested.
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In one subdivision I drove through in Stockton, four houses in a row were all in foreclosure. The houses are easy to find. Often the lawns have turned brown. Plants in the garden have died. Mail is piled up at the door. There may still be a “For Sale” sign on the lawn but it may be broken or blown over and nobody has done anything about it. The lender that now owns the house seems to have given up on selling it anytime soon.
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If they can keep up their mortgage payments and the market turns around in the near future it may all turn out fine. But on a block with two or three houses with the brown lawns of foreclosure, it’s hard to be optimistic that the real estate boom is going to return anytime soon.

Empty Houses, Full Shelters

From CBS 5 (and video):

In the Central Valley community of Manteca, police have a new job: patrolling hundreds of foreclosed houses left empty and abandoned. They are half million dollar houses, often bought with nothing down, turned into suburban blight. To get a firsthand look, CBS News correspondent John Blackstone rode along on patrol with Manteca Police officer Rex Osborn, who explained, "you make one right-hand turn and immediately this is what we see - dead grass, bushes are dying, trees are dying. The next thing you know you have squatters in the house..."
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But for neighbors the problem that really bites is fast-falling house prices. ust-retired Corky Hine retired wanted to sell for $400,000. Now his home is worth $339,000 and his real-estate agent still can't get anybody to look. "I already dropped it $60,000 (from the original appraisal price,)" Hine said. "She said 'There's like 500 homes for sale within a two-mile radius of mine, and 150 of them are in foreclosure within a mile or something.'"
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"You can’t give these houses away," Osborn said. And neighborhoods are left with the wounds of a mortgage meltdown: the houses nobody wants.

From News 10 (also video) (hat tip Max):

Roughly 10,000 homes in the Sacramento region are in some stage of foreclosure. That means thousands of homeowners, often with their children, are in a fix to find some place to live. Shelters in the area are showing the first signs that some in search of a new roof over their heads will be luckier than others.
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St. John's is limited in what it can handle. It's already at capacity, and the shelter is now turning away 55 women and children each day. That's more than twice the 25 a day it had been turning away during the first half of the year. "Though you can't tie anything directly to the economy and the foreclosure rate, something has to be there because we've never seen an increase like this so rapidly and so dramatically," said [director Michelle] Steeb, who adds a third of the women have jobs.

From M&C:

Newlywed Sheila Haller had her doubts when she and her husband plunked down 425,000 dollars in early 2006 to buy a nice, three-bedroom home in the fast-growing California town of Folson in the arid foothills outside the state capital of Sacramento. 'It seemed too much like that TV show Pleasantville, cookie-cutter homes with no character,' Haller said.

From her small, tidy back garden, you can see what she means. Throughout the area, on hill after hill, earthmovers have cut ribbons of road that have been lined with thousands of new homes and apartments in recent years. 'It was the American dream,' Haller says. 'Everyone was (buying a house) and making money, so we went for it.'
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The housing crash is worst for those unable to afford to stay in their homes. But it has also come as a life-altering shock to those like the Hallers, who are still paying their mortgage but see other houses in their neighbourhood selling for significantly less than they paid. 'It's definitely wrenching,' she said. 'We worked so hard to get a downpayment on this house, but now the mortgage is greater than what the house is worth.'

From Realty Times, Market Conditions - Stockton:

The entire Central Valley of California (and, in fact, the entire State, with a very few exceptions) is in the worst real estate downturn in my 30+ year career.
THERE, I'VE SAID IT!
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First: This is not a time to play or test the market. If you don't HAVE to sell...absolutely...don't list it now and, if it is listed... get it off the market.
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Second: If you know you will have to sell in the next five years...SELL NOW..as in... TODAY! Everyday you wait your equity is melting away with the market. So, if you're retiring and moving in 3 years...SELL TODAY! If you're taking over your Dad's business in Iowa in 2009...SELL TODAY! If you have a new home being built due to be finished in six months...SELL TODAY! How serious am I? From 2005 to 2006 we lost 13% value. From August 2006 until now we've lost another 18%! Many of you have lost more than $100,000 and it's getting worse.
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Oh, and if you bought your home with 100% financing with an ARM with Neg/AM thinking you could refinance when the payment went up...think again. You now owe more than the home is worth, so no refi for you.

From Kiplinger's California Letter via the OC Register:

[California] median home prices should slip by 7% [in 2008], with new houses taking a hefty 10%-15% hit. Biggest declines will be in the Central Valley, the Inland Empire and the San Diego area.

From the Sacramento Bee:

Just weeks after lawmakers enacted a state budget amid partisan turmoil, finance officials say revenues are slipping below projections, making it likely that next year's problem will be worse than expected. Based on major tax receipts collected in the first two months of the new fiscal year, California could face a $8.6 billion operating deficit or more in 2008-09 if the state's economy and soft housing market continue at the current pace. That would be 40 percent higher than the $6.1 billion gap officials anticipated in August...State departments have been told to propose no new spending next year unless they cut a like amount from an existing program.
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[T]he soft housing market continues to have a ripple effect on the state treasury [said Stephen Levy, director of the Center for Continuing Study of the California Economy in Palo Alto]. While property tax goes directly to local governments, the money is counted against the state's share of school funding under a complex formula set by Proposition 98. If property taxes local government generates declines, the state shoulders a bigger burden to fund K-14 schools.

Property taxes aren't expected to be as robust this year, particularly in places like Sacramento, as homes stop appreciating and sales weaken. Forecasters recently predicted the housing market won't begin to recover until 2009, and a recession could quickly delay that recovery by more than a year.

There's even a possibility that homeowners in the Central Valley -- where home prices have dropped -- will seek reassessments on their homes in an effort to pay less property tax. "If a house down the block just sold for $100,000 less than yours, you'd want a reassessment," Levy said.