Tuesday, January 15, 2008

Sacramento Real Estate "A Little Too Rock n' Roll"

From the Central Valley Business Times:

Central Valley cities are among the most likely places in the nation to see home prices decline in the next two years, according to a report Tuesday from the PMI Group Inc. (NYSE: PMI), a Walnut Creek-based writer of mortgage insurance. The most likely place in the country is Naples, Fla., in PMI’s opinion, but Stockton and Merced are tied as the fifth most likely locations for price declines. PMI says the two Valley cities have a 91 percent chance of price declines...[#8] Sacramento was given a risk score of 73, up from 49, by PMI.
From the Central Valley Business Times:
The pace of home foreclosures in the Central Valley and across most of California is quickening, a foreclosure information company says Tuesday. There was a “gargantuan jump” in Notice of Default filings in December and “we’re already observing a record pace of auction sales in January,” says ForeclosureRadar of Discovery Bay...“Many analysts fail to understand the delays inherent in the foreclosure process, and I believe we have yet to see the real impact from the ARM resets that began in earnest last October.”
For the Central Valley, ForeclosureRadar’s figures for December’s NODs and sales are:
• Merced County: 373 NODs; 215 sales
• Stanislaus County: 1,033 NODs; 381 sales
• San Joaquin County: 1,402 NODs; 542 sales
• Sacramento County: 2,145 NODs; 972 sales
• Yolo County: 130 NODs; 59 sales
From the Sacramento Bee:
Eight U.S. financial institutions and two California foundations have contributed $4.6 million to help mortgage counseling agencies beef up California staffs increasingly overwhelmed by borrowers trying to avoid foreclosure, a statewide housing group announced Monday.
The positions will be spread across California's 80 federally certified nonprofit counseling agencies. Many new staffers are likely to land in Sacramento, said Alan Fisher, the coalition's executive director. "Sacramento is one of the places that has been hit hardest, and we think they could come up large in our effort," said Fisher.
From KCRA:
Kylee Roe bought this Sacramento duplex when the market was red hot...And after years in rock radio, Kylee started working in real estate. Lately, that's been a little too rock n' roll! "My salary's down 40% for the year. So, I've already been behind, and that's enough. So they say I don't qualify.

Kylee says she's now catching up with the help of a chapter 13 bankruptcy agreement. But she's worried about the next jump in her adjustable rate mortgage...due in June. "It's gonna up my payment by about $600 a month, and there's no way I can keep my house."

So Kylee says she tried to talk to her lender, countrywide, about fixing or freezing her interest rate. She says she knew her previous financial problems techically disqualified her, but....
From the Bakersfield Californian:
A developer's bankruptcy case -- one with ties to three projects in Bakersfield -- will be moved to a Sacramento courtroom from New York state, a federal judge ordered Monday. The change of venue is considered good news for a roster of construction companies owed money by subsidiaries of Dunmore Homes Inc., a once-prominent homebuilder from the Sacramento area. A group of construction firms requested the change, saying they had a hard time accessing court proceedings across the country. All of Dunmore's projects are in California.
From the Sacramento Bee:
A building moratorium is likely for Sacramento's fast-growing Natomas basin after federal flood-control officials said Tuesday they will designate the area as having a high risk of devastating flood damage because of inadequate river levees.


Jacob said...

Wait, did I read that right? A flood plain that floods all the time has a high risk of flood damage? No way.

Interestingly enough I went to google and just typed in "Flood Plain" and guess what the top link was lol.

No money to fix the levees, so all those homes are worth $0 now and insurance will skyrocket. Idiots.

Max said...

Good to see the Dunmore debacle is moving back to Sac. That NY ploy was shameful.

rocklin renter said...

Floodtomas is prone to flooding?

You don't say?

Does a fat kid eat cake?

Patient Renter said...

"Eight U.S. financial institutions and two California foundations have contributed $4.6 million to help mortgage counseling agencies beef up California staffs increasingly overwhelmed by borrowers trying to avoid foreclosure, a statewide housing group announced Monday."

More wasted money IMO. They should have just hired me. It would go something like this:

"Your joint income is $2500/month and your mortgage is $2400 a month? Here's what you do. Walk away.


"A building moratorium is likely for Sacramento's fast-growing Natomas
basin after federal flood-control officials said Tuesday they will
designate the area as having a high risk of devastating flood damage
because of inadequate river levees."

It's no more or less safe now than it was over the last few years when thousands of homes were popping up and the cash was flowing. What changed? No more cash? State funding crisis? Sorry, but folks should have known better than to buy in a designated flood zone.

javathehut said...

Dear Pat. Renter,

That was some of the funniest s@$! I have read so far on this blog!

Love it!!

I have one question for all of the longtime bloggers on here. I notice that there is not as much total postcounts for the blogs thus far in 08' - and it would make me feel better if all of the alumni would do a sign in, and report their feelings on the market. Are some people starting to get their feet wet at the actions???

Here is my question, and it is simple. I thank you all for replying beforehand.

Can everyone please chime in with a call for the bottom (month, quarter, whatever). I would much apprecitate this.

What is scaring me now more than the housing market is the real state of the economy, and our position in the global community. I know many people right now who are jobless, on both the east and west coast, and they report going to mass job fairs, and here is what happens without fail:

400 people show up, and it is 5 or 6 companies with a total of 20 jobs available, but they lead everyone on with a selection process that takes three weeks and leaves 380 people in the dust. Really, really tough times if you are jobless right now. I thank god I have a job right now.

Second thing, as was mentioned by blogs and articles on calc. risk - is the withdraw of interest of China, Japan, and foreign entities in investing in Citi, U.S. financial inst. , and U.S. T-notes.

Also- at what point will the interest rates go back up in a hurry. We need to pay a slight tab in a country named Iraq. I personally think we ar f@@#$@ed.

Patient renter, here are my advice to struggling homeowners, and basically everyone in America:

Learn Chinese.
Buy M-1 rifles with 20 round clips.
Learn how to defend your property.
Buy Pitchfork, Shovel, and Torch Futures.

This is getting really scary.

waiting_for_the_fall said...

I went through a tough time job-wise in 2001 during the tech bust.
Now it's the home and finance related jobs bust.
It's all a cycle. I guess there will be a tech bust in another 7 years, while finance and housing related jobs sky rocket.

The housing bottom will probably be 2011 and stay flat until 2015.

Cmyst said...


My main focus has gravitated away from the housing bubble and towards the recession/credit bubble.
This past week was the first week in probably 5 years that I did not sift through MLS. Buying a house isn't that important to me right now. There are bigger issues coming to the fore.

My prediction: lay-offs sparked by a marked decrease in discretionary spending by consumers, an escalation of defaulting option ARMs and overwhelmed debters unable to pay their credit card bills. These are already happening, but it will become the next "who could have foreseen this?/No one saw this coming" bit in the financial press.
The Fed will continue to drop interest rates, but it won't help much. There will be migrations of families from high-cost states to lower cost states. Housing prices will continue to drop, and rental prices won't increase much due to stagnant wages and ample supply of available rentals. I think 2011 to 2015 will see the bottom of real estate, but to be fair I also think that sometime in 2009 will probably be a good time to review the market in order to maximize your chances of finding the exact house you want, if possible. I wouldn't buy at all if I wasn't planning on staying in that house for at least 10 years, even then.
The more I read, the more I believe that The Powers That Be have kept our economy from a major recession only by constantly inflating asset bubbles which keep getting bigger and nastier, and that they skim massive amounts of money as they do so. But it appears they have run out of air on this one, because the US consumer is unable to shoulder any more debt and is in fact collapsing from the load. Very few countries, most especially China, want to see the US economy stumble -much less fail. When we go down, we take a lot of others with us.
I don't think it will come to pitchforks and torches, although it would be nice to think the Britney -obsessed public could rouse themselves. I do think there will be an emphasis on a return to personal fiscal sanity, comparison shopping, energy conservation, etc.

Professor Shays said...

I agree with the prior posters indicating, "The housing bottom will probably be 2011 and stay flat until 2015." This isn't all that tough a call, given a view of past history and the two previous downturns. Only doubt I have is the 2011 date and that it might be 2010 simply because of the impact of the Internet and the fact that information about the housing market, all of which is bad, is reaching the consumer faster.

Diggin Deeper said...

Cmyst is right on with her thoughts...It's the end of one cycle and the beginning of another. Low interest rates give way to higher interest rates. Low inflation moves to higher inflation. High debt loads become lower debt loads. Spending becomes saving again. It all starts and stops with the American consumer and what the American dollar will buy.

I don't believe we'll see a bottom in this real estate market until we flush out most of the consumer debt that's now holding it back. Without the consumer, this country cannot function, collect sufficient taxes, fund growing liablities, and fully support obligations. I've read that nearly half the people in this country are on government payrolls whether they be direct employees or recipients of government subsidies or assistance programs. If true that would mean that just over half the people working in our economy are responsible for nearly all our GDP. That's great productivity, imho, but a huge burden given the additional liabilities our govt faces in the near future.

It's ironic that the answer to our problems appears to be lower interest rates when in fact it was lower interest rates that got us to this point in the first place. If the results acheived, by the actions employed, create an unfavorable outcome, why would anyone think those same actions would create a different result?

No prediction here on a real estate bottom...Show me a fairly clean consumer balance sheet and the bottom will be found.

sacramentia said...

Since you asked for a guess, and it is nothing more than that ... I think we're within about 15% of the bottom and I think we're going to get there within the next 3-4 quarters. I'll buy in this market at a 15-20% discount to the averages.

I don't think the prices will start climbing again for several years, but I do think 18 months from now, the selection will not be as good as it is today.

Nobody can predict the future, but it sure is fun to be right sometimes.

Jacob said...

2008 will be very painful for banks and home owners. IF we can get all the foreclosures and bad loan products dealt with in 2008 then we still have the high inventory.

And the problem is there are not enough people in Sac to buy / rent all the homes in Sac. And with gas prices going up and up all the people commuting are feeling the pinch as well.

Massive layoffs coming. Now if by some miracle all that is absorbed then maybe at the end of 09 we see some levelling off.

If not and this continues into 2010-2012 then you also have another problem since a lot of boomers start retiring around then. And they will sell and move out of state.

I think we will see a bottom in 2010, then level off and stay flat for at least 5 years.

I can buy now but 2 main things holding me back. 1) Prices are likely to come down more, 2) The neighborhood I buy in may change significantly (for the worst) in the next couple years, and then I would be stuck.

Mike said...

Interest Rate for 30 Yr Fixed is at 5.5% right now. With Fed likely to cut rates again, it might head down to low 5% range.

With this in mind, I am predicting a small bounce in the housing market in spring as good priced bank repos will be snapped up using the low interest rates.

When I owned my home 4 years ago, I had a 30 year fixed 5.25% and I thought to myself I would never see that kind of rate again in my lifetime. But here we are again with 30 year mortgage at 5% range again.

If I was looking for home in Elk Grove/Natomas/Lincoln/Anatolia, I would buy now with the interest rate being so favorable again and prices in those area having been decimated. Unfortunately, those areas are off my shopping list.

siflsockpuppet said...

I am thinking of making a low-ball bid on a foreclosure. I am leery about price declines over the next year or two - or longer. I figure a low-ball offer today might be a full-priced offer in two years, which wouldn't make me feel too bad.

It is funny to talk with lenders, who say that a 100% loan requires 5% down due to a declining market. Loan options really have changed.

Gwynster said...

Yep All loans done here that are to be sold to Fannie or Freddie have to have 5% down premium attached.

The major reason I'm not buying is because I want to see how the neighborhoods change as a result of all this. What we once thought of as desirebale low-crime areas could change significantly, especially if they butt up against high crime areas.

Patient Renter said...

javathehut, since you asked:

Not getting my feet wet for a while. If I dared to call a bottom, I'd say 2012 at the soonest (as I've said before, this is due to the mass of ARM resets pending through 2011), but the bottom could certainly come later.

As for learning how to defend my property, I'm all on board. Hopefully we can maintain enough Constitutional rights that I'm still allowed to defend my property if things get nasty in the future. I'm sure many would prefer to have the government take care of us and defend our property for us. No thanks.

"Also- at what point will the interest rates go back up in a hurry."

It's not beyond the realm of possibility that the US could enter a severe deflationary period, similar to what happened in Japan in the 90s. Under such a period, incredibly low interest rates could remain for a long time, and still wouldn't be enough to stimulate the economy. We'll see pretty soon here whether or not that looks to be the case. I think it might be... that the economy is "over-stimulated".

smf said...

My predictions:

1. Full end of bubble by Sep. 2008. This means that those who bought foreclosures for 'investment' purposes will see the errors in their ways. After all, while there are some properties starting to pencil out as rentals, finding renters with the glut will be hard.

2. The world is still very dependant on the US economy. Lower demand in the US will hit other economies as well. Where would China be if the US cuts their exports from China?

3. Deflation of other asset bubbles in the world, including housing, gold, oil, etc.

4. Soon, the housing problem will finally be seen as affecting everyone, rich and poor.

5. After the complete capitulation of the bubble, a flood of inventory will come as those who now realize they are holding a depreciating asset run for the exits.

smf said...

"What we once thought of as desirebale low-crime areas could change significantly"

Indeed, this is my main concern. Before the standards got so lax, you could pay a premium for an area and be asssured that most in the area were like you.

With the lower standards, anyone could buy wherever they wanted, diluting the 'specialness' in certain neighborhoods.

For example, what if you bought a high end home in a very nice location. And your new neighbor did the same, but now they find themselves in financial trouble and get roommates. Or they are young enough that loud weekend parties become the norm?

siflsockpuppet said...

My rental home in Elk Grove, built in 2003, is surrounded by foreclosures. One went to the last REDC auction. The house next door is a vacant foreclosure. There are foreclosed houses on neighboring streets that I watch in MLS as the asking price sinks lower and lower. And the owner of the vacant house across the street is holding out hope that his home will sell for more than the larger foreclosure home down the street even though it hasn't sold, either.

But one thing keeping me here is that the new neighbors who are better than the renters who lived there previously. I had to call the police - numerous times - when the house diagonal from mine had rowdy, loud parties that spilled out into the street, some women screaming that they don't want to go home, or for someone to leave them alone. Other times people drove by with loud music or peeled out at 2:00am, doing donuts in the intersection, apparently to impress those still at the party. My how things have changed since that house traded hands. So I for one welcome all foreclosure activity on my street. Empty houses are pretty quiet at night.