Friday, February 01, 2008

The Central Valley's 'Deep Recession'

From News10's Dana Howard:

Last September, I was driving through the newer neighborhoods in the northern section of Stockton, looking for people who were facing foreclosure. It was one of many stories about the rampant number of foreclosures in the Sacramento area.

My strategy was to knock on the doors of homes that had "For Sale" signs posted out front. Surely, I thought, many who would be selling their homes in what was then a climate of depreciating home values must be selling out of financial necessity, possibly to avoid foreclosure. We must have knocked on 50 doors. The overwhelming majority of the doors were unanswered. It wasn't because the owners weren't home, but because the owners would never be home. The houses were vacant.

People had plain given up, abandoned their homes. It was less than a month later that I did a similar story in the North Natomas community of Sacramento. Again, the same result. That said to me we are in for huge economic trouble that would go beyond the real estate and banking industries.
From homesforworkingfamilies.org [pdf report]:
Sacramento Metro Homeowner Vacancy Rates
2005Q1: 0.6%
2006Q1: 2.0%
2007Q1: 3.3%
2007Q3: 4.8% (4th highest rate out of 37 metros)
From Bloomberg:
"Conditions vary widely across the country, from a deep recession in the Central Valley of California to still boom-like conditions in parts of the Farm Belt,'' said Mark Zandi, chief economist of Moody's Economy.com in West Chester, Pennsylvania.
From the Associated Press (via CBS 13):
The house was ravaged -- its floors ripped, walls busted and lights smashed by owners who trashed their home before a bank foreclosed on it. Hidden in the wreckage was an abandoned member of the family: a starving pit bull. The dog found by workers was too far gone to save -- another example of how pets are becoming the newest victims of the nation's mortgage crisis as homeowners leave animals behind when they can no longer afford their property.

Pets "are getting dumped all over," said Traci Jennings, president of the Humane Society of Stanislaus County in northern California. "Farmers are finding dogs dumped on their grazing grounds, while house cats are showing up in wild cat colonies."
...
The situation has become so widespread that the Humane Society urged home owners faced with foreclosure to take their animals to a shelter. Shelters are trying to keep up, but the spike in abandoned pets comes at a time when fewer people are adopting animals. Home sales are plunging to their lowest level in decades, and new homeowners are often the most likely to seek a pet.

Even people who are buying homes are not adopting pets. "People are not bringing home puppies because times are tough, and animals cost money," said Sharon Silbert, president of Animal Rescue of Tracy, a community near Stockton.
...
Bloggers are furious with the "foreclosure pet" phenomenon, especially after seeing photos of emaciated animals on the Internet. Some critics say the pet owners have already proved they are irresponsible by buying houses they could not afford or mortgages they did not bother to understand. "They see a pet as property, no different than a worn sofa tossed into the alley when the springs pop," says a posting about foreclosure pets on About.com.
From the Stockton Record:
Amid all the anguish arising from the swelling volume of home foreclosures, there has been much talk about real estate fraud. But most of the complaints can't be criminally prosecuted, representatives of the San Joaquin County Office of the District Attorney said Thursday.

Most allegations won't mean charges either because the borrowers didn't tell the truth about income when applying for a loan or the buyers chose to believe they would be able to make the purchase work later with a refinance - but the market tanked and what amounted to speculation didn't pan out, said Robert Buchwalter, criminal investigator with the district attorney's office.

James F. Lewis, deputy district attorney in charge of the real estate fraud unit, told those attending a Northern California Housing Counseling Network quarterly meeting Thursday: "Some of these (filing complaints) are legitimately naïve and uneducated, and we have to try to figure out whether they are truly victims."
From News 10:
Facing a $55 million budget deficit, the City of Sacramento may be forced to cut funding for the city police and fire departments...Every department in the city, including the police and fire departments, has been ordered to submit proposals for 10 to 20 percent cuts.
From the Sacramento Bee:
City officials believe the involuntary layoffs are perhaps the first for Sacramento. "To my knowledge, we've never before laid off anyone," said Assistant City Manager Marty Hanneman. In the 1990s there were voluntary layoffs, he said.
From the Sacramento Bee:
More troubled housing talk: One of the biggest bank-owned home auctions yet is set for Feb. 16-17 at Cal Expo. Real Estate Disposition Corp., an Irvine auction firm, aims to unload more than 300 houses located in area counties during the two-day event. That's about one-third of the nearly 1,000 homes going on the auction block during seven days in Stockton, Sacramento, Modesto, Fresno and San Mateo.
From the Sacramento Bee:
The decline in new home construction means less money to build roads in El Dorado County. But some members the county Board of Supervisors expressed dismay that the El Dorado Hills area, long the county's fastest-growing community, appeared to be taking the biggest hit in terms of proposed road projects. "El Dorado Hills is a huge economic generator for us," said Supervisor Helen Baumann, whose district covers part of the community. "This is a huge statement to anyone wanting to come into the county."

14 comments:

Jacob said...

Everyone who abandons animals should be rounded up and we can allow people to throw rocks at them for a cost of $1/minute.

With the $billions that we make we can use to help fund state projects like fixing the levees in floodtomas.

The government should also have every no doc loan audited and if the buyer lied they should be blacklisted from any government aid.

Gwynster said...

SMF,

See those vacancy numbers? wow. Even higher then I expected.

SacramentoCrash said...
This comment has been removed by a blog administrator.
PeonInChief said...

The folks who suffer foreclosure may have limited housing options, as many landlords won't take people with bad credit. It makes one long for countries like Denmark, where the tenants in a building can vote to change their leases to allow pets.

Sippn said...

Read the report.

When you consider those vacancies are concentrated in Natomas, EG, West Sac, Anatolia, parts of Rsvl and Lincoln, Plumas, WOW. (Stockton did not rate to be counted as a "metro area")


THe problem must be affordability because Sac did not rate very affordable..... but wait. Detroit was the 2nd most affordable market in the country..... and almost just as high of vacancy rate.


Maybe, its not really the price. Why didn't the vacancy rate go away when the prices are so low?

Just fishin' Gyn

smf said...

SMF,

See those vacancy numbers? wow. Even higher then I expected.


Not surprised. We almost forgot that when the bubble was in full force, there were some that built for:

1. Small places for first time buyers that were still expensive.
2. Rental dwellings for those who were 'priced out'.

Every single housing category was covered many times over in the rush to make a quick buck, including rentals.

"Maybe, its not really the price."

Perhaps is the excess inventory, you think?

Again, to repeat, there are not enough people alive to fill the houses that are built now.

Sippn said...

Bingo.

So we need to find a way to increase population (likely through jobs) where there are excess homes, no matter what the price is.

RMB said...

With a net out-migration from the state. The only way you are going to increase housing demand is to wait 18-25 years for the children that are being born to grow up. I expect the out-migration to continue to grow in the coming years as the illegal move to greener pastures and the children continue to leave the state for jobs. I have never understood where all the people in Sac work. Yes there is the state, but for a city this size there is no Major private employer. The govt is a suck on society, Keynes be damned, so watch people leave the socialist republic of California in the coming years as the jobs go elsewhere. Anyone care to disagree?

Jennifer said...

Sippin,

People don't buy houses in Detroit because they must have bullet-proof windows, 4 pitt bulls, AK47s mounted at the doors, and rocket launchers on the roof to protect it!!! Even the price tag of $18K-32K for a huge old house is not too tempting.

Michigan probably has more migration out than Calif, I being one of them. I am keeping up with the market there as well--crashing, of course.

siflsockpuppet said...

My question is, with all these vacant homes, where are the foreclosed folks living? If there's enough space for them to rent and yet we still have thousands of vacant houses, doesn't that say something about oversupply in the market? Is it possible there simply aren't enough buyers for the houses regardless of price?

PeonInChief said...

First, many of the foreclosed houses were never lived in. If you remember the news reports from a couple of years back, about 20% of the sales were to speculators. When the market crashed, they just walked away. (And many of the speculators never rented the houses out either.)

Second those who, shall we say, planned well for the foreclosure moved to other states. Texas seems to be very popular, as it protects your house from almost all collections. You will recall that many of the Enron defendants put all their money into their houses. Now you know why.

Third, and this is particularly important for people who were foreclosed but who spent all their credit trying to keep the house, it's very difficult to find a landlord willing to rent to them. So they may be living with relatives or friends, since they can't find a rental at all. (That's also why so many pets are abandoned; wherever they go, they can't take the pets with them.)

sacramentia said...

rmb, I'm going to disagree on the long term prospects. There are some large private sector employers here in Sac - just roam around near Mather Field for a while and you'll see the names. And I think the outmigration will eventually change.

California is still a wonderful place to live and many people want to live here. As the cost of living comes in line with the jobs, people will start moving here again.

norcaljeff said...

It's really pointless to have an intelligent conversation about RE with Sippin, just ignore him. He's grasping at straws now. The news is so bad no one in their right mind can say things look good. And besides, I saw a post at the end of 2006 by him which said he bought a house. I bet he lost a ton on it but would never tell the truth anyway. He pushed people to buy for over 18 months as the market tanked. People who bought should be able to throw rocks at him as well.
We're still headed lower folks. Do not buy!

Jacob said...

If I go to McDonals I expect workers to try and sell me food. If you go to a realtor expect them to try and sell you a home, that's their job.

If the only thing that happens after this mess is over is that people realize that realtors are not out to help them, they are out to sell a home, just like a car saleman is out to sell cars and drug dealers are out to sell drugs then that will be a good thing.