"The Good Ship Sacramento" Takes on Water

From the Sacramento Bee:

Up until 2007, the good ship Sacramento appeared to be sailing along smoothly, propelled by a pair of seemingly steady winds – state government spending and real estate appreciation.

Yet it was only a matter of time the winds changed. The subprime storm has now arrived. The regional housing market is sinking, dragging down the budgets of state and local governments. Crime is on the rise in some areas. For the first time since the 1990s, the capital region finds itself pressured to cut costs for social services and community policing at a time when people need those programs most.

From the San Diego Union Tribune:

In regions where lots are in good supply, such as Riverside, San Bernardino, the San Joaquin Valley, and the Sacramento area, “there will be a major change in the home building mentality,” [California Building Industry Association's chief economist Alan] Nevin said. “Lots, for the most part, have declined substantially in value. They will be written down to more practical value levels.” That means home builders will be able to build substantially smaller homes and sell them for substantially lower prices, he said.

From CBS 13 (video):

The foreclosure crisis is bad enough for people, but homeowners' pets are suffering as well. A growing number of pets are being left behind in the foreclosed houses they once lived in when their owners move out.

From Sacramento News & Review:

Anyway, if you feel a little un-trendy every now and again, console yourself with the thought that there’s one current trend on which Sacramento has been way out in front: the current housing bust. In that, according to a November article in Forbes magazine, we lead the nation, with prices that have fallen 10.5 percent—outpacing any other city. Be proud, Sacramento, be proud. Or, if that doesn’t seem like a matter of pride, let’s all at least admit that being trendy isn’t everything. Maybe you can’t sell your house, but at least you can console yourself with wine and cupcakes.

From the Modesto Bee:

John Diaz, independent real estate broker in Modesto: Diaz said the market likely will drop further in 2008, as foreclosed homes continue to hit the market. Rising fuel prices have reduced the appeal of Northern San Joaquin Valley homes to Bay Area commuters, he said, and city and county leaders have failed to attract the employers that would keep workers here.

People in real estate differ on when the market will rebound. Some say the sales numbers could rebound in 2008, as reduced prices draw in people who were priced out during the recent boom. Some say 2009 or 2010 is more likely. Diaz said it could take even longer.

From oftwominds.com:

The housing market won't turn around in 2008--or 2009, 2010, 2011, either. The really smart folks will be saving their money for 2012 or maybe 2013, when years of grinding losses will have stripped the assets of everyone who bought real estate with the idea of retiring on the proceeds. At that bottom, everyone will be disgusted with real estate, both residential and commercial, and no one will be dumb enough to sink dead money into an asset class which continues to decline in value year after year. At that point, say Q1 2013, then housing will again become a buy.
...
Exurban burnout and job losses will take a toll. Take two hideously long commutes to distant jobs, a centerless, lifeless suburb in the middle of nowhere, take away one job and presto, you get an empty subdivision of essentially worthless McMansions nobody wants at any price. Add a dash of decay which acts as a catalyst, and you speed up the abandonment of the exurb.
...
Houses built where they should not have been built will be abandoned. Large swaths of known floodplains are now covered with subdivisions in the Sacramento Delta region...Back in the good old days of say, 2007, governments might have reckoned they had the funds to rebuild dikes and other engineering wonders to protect a few thousand new homes. But as the economy sours, governments are suddenly short of funds. And as people leave those distant suburbs, then the stark reality will become apparent: it isn't worth tens of millions of dollars to protect a few thousand homes (many standing empty) which should not have been permitted in the first place.

From The Times:

A small 1950s bungalow in Stockton, California, is up for sale for $169,950. Sitting off a quiet road dotted with American flags, the Funston Avenue home has two bedrooms, one bathroom and a covered porch. It was built as part of President Truman’s Fair Deal, a federal promise to guarantee economic opportunity and housing for America’s servicemen returning from the war.

Sixty years on, however, the American Dream has turned into a nightmare. The bungalow’s value has fallen by $110,000 in two years and the family who live in it have fallen so far behind with their rising mortgage repayments that they have been foreclosed by the bank. This family’s story is a common one in the neighbourhood, which houses the bank workers and civil servants who zoom up Highway 205 to commute for two hours each day to and from the pricier city of San Francisco.

According to David Sousa, the real estate broker who is selling the house, the number of properties up for sale in the area has risen from around 1,800 two years ago to about 8,000 now. Most of those properties are in the process of being repossessed by mortgage lenders. Moreover, there is no sign that the residents of Stockton are past the worst. Their lot seems a far cry from the town’s sunny motto: “Stockton’s Great, Take a Look!”
...
“One of the biggest challenges we face is that the number of foreclosures have left the market saturated with unsold property,” Mr Sousa said. He estimated that prices were falling at “between half and 1 per cent a month” and said that that local mortgage lenders had been so overwhelmed by the number of repossessed homes on their books that they are trying to sell, that real estate brokers – estate agents to you and me – cannot get a decision from them for at least 30 days over whether they will accept an offer price.