Monday, March 24, 2008

'The home-building industry is not in a recession. It's in a depression.'

From the Sacramento Bee:

Rancho Cordova-based home builder Reynen & Bardis Communities Inc. and a dozen related entities owe more than $1.9 million in late property taxes and penalties, Sacramento County property tax records show. The taxes, which were due in December, are the latest fallout from the real estate downturn and one that has sent a ripple through the city of Elk Grove, where the unpaid taxes and penalties exceed $1.3 million.
...
Observers blamed the economy for the plight of the cash-strapped company, as well as that of other builders in similar fiscal straits. "People are talking about whether we're in a recession," said John Hodgson, project manager for Elk Grove's 1,900-acre Laguna Ridge planning area, where Reynen & Bardis entities have large holdings. "The home-building industry is not in a recession. It's in a depression."
...
"It's a perfect storm of very unfortunate economic events that no one could have possibly predicted," she [Michele McCormick, spokeswoman for Reynen & Bardis Communities] said.
From the Sacramento Bee:
For thousands of people shut out of the housing market as prices doubled between 2001 and 2006, bank-owned homes are real estate's new gold rush. With more than 10,000 foreclosures last year in the eight-county capital region, the plentiful inventory of bank-owned homes has fueled a mini-boom in buying...In the last two months, buyers in the Sacramento region have scooped up more than 2,000 foreclosed homes, a 10-fold increase from the same period a year ago, according to DataQuick Information Systems in La Jolla.
From USA Today (hat tip TMTGM):
Taking shelter with parents isn't uncommon for young people in their 20s, especially when the job market is poor. But now the slumping economy and the credit crunch are forcing some children to do so later in life — even in middle age.
...
Kim Foss Erickson, a financial planner in Roseville, Calif., north of Sacramento, said she has never seen older children, even those in their 50s, depending so much on their parents as in the last six months. "This is not like, 'OK, my son just graduated from college and needs to move back in' type of thing," she said. "These are 40- and 50-year-old children of my clients that they're helping out."
From the Stockton Record:
San Joaquin County is taking a breather. The county's dizzying population growth, much of it fueled by Bay Area transplants looking for more-affordable housing, has slowed considerably in the past two years.

New census figures show that in the first seven years of the decade, the county population ballooned by just over 19 percent, adding more than 107,000 residents. But interestingly, most of that growth occurred from 2000 to 2005. In the past two years, the net increase was only about 13,300 people.

22 comments:

Patient Renter said...

"It's a perfect storm of very unfortunate economic events that no one could have possibly predicted"

Yes, nobody could have possibly predicted it... except for a bunch of lowly bloggers and economists who happened to not have a personal stake in perpetuating the bubble.

David said...
This comment has been removed by the author.
David said...

"These are 40- and 50-year-old children of my clients that they're helping out."

Well when the 60 to 70 year old generation screws the economy over by their actions and votes in these knuckle-heads we have in office what do you expect. The 60 to 70 gang are doing okay because their parents didn't screw them over.

Just a few pointed thoughts from one of the "younger" people dealing with the stupid crap my parents' generation did.

sacramentia said...

that is just classic...blame someone else. If you are 40-50 and living off your parents your are a selfish loser.

Jacob said...

It's a perfect storm of very unfortunate economic events that no one could have possibly predicted

Its funny cause I heard bloggers and some analysts use the exact words "perfect storm" to describe what was happening.

But, the storm was still a few years away and the few voices of reason were drowned out by everyone else yelling "PARTY".

Does anyone watch Property Ladder? Basically one of the 100s of flipping shows. But every episode I see is a flop not a flip.

Either one person or a group of friends that have no idea what they are doing try to rehab a home and royally **** it up. either by causing more problems or doing so much that they overshot the price of the neighborhood.

So all these "sales" for REOs are mainly still going to investors and they will be back on the market in a few months...

norcaljeff said...

Those 50-year old kids were also the ones who scammed mom and dad out of their money to pay for these over priced homes. It was about the only way homes were selling in the last few years of the bubble.

Perfect Storm said...

"It's a perfect storm of very unfortunate economic events that no one could have possibly predicted"

I would have to disagree.

Rich Johnson said...

My daily dose of Eeyore to bring me back to ground.

Tyrone said...

Operation Homewrecker
SACRAMENTO (Reuters) - U.S. officials said on Monday that they had charged 19 people with targeting desperate homeowners facing foreclosure and stealing at least $12.6 million through illegal mortgage and loan activities.

The ring allegedly operated out of Southern California led by 33-year-old La Habra resident Charles Head, 33, owner of Head Financial Services, who was arrested on Friday.

Diggin Deeper said...

"So all these "sales" for REOs are mainly still going to investors and they will be back on the market in a few months..."

Do you really think that dumb money is playing in this market right now?...that investment dollars are just in for the next flip? All the spec dollars were left on the table in early 2006. Smart money comes in once the late speculators have lost it all and have become victims of their own stupidity. Are they early in? Maybe, but they're carefully picking through the rubble, and they are buying. Whether its land, REO's, or a half built property development, if the deal is right, investors will enter the market before the public starts buying again. It's typical of a market that's been shattered like this one has.

paranoid renter said...

Inventory down, prices up on Housing Tracker 2? Wow...housing must be recovering!

Jacob said...

Well there are tours taking the dumb money around on busses. Real investors can find the deals without that kind of gimmick.

Gwynster said...

I still see more fall out of escrow then close, so if investors are jumping in, they aren't the smart or credit worthy ones. The number of listings in my search criteria are still going up, just a little slower then last year. The big change is in the quality of the listings with $/sqft taking a nice drive.

Most is still overpriced but the trend is your friend >; )

smf said...

"Real investors can find the deals without that kind of gimmick."

Real investors are also looking at volume instead of one big payoff.

A lot of these amateur investors believe that sometime in the near future, the house they purchased will have the same value as 2005.

Real investors will get about $20K profit per house, but can do a house every month.

Jacob said...

Well I still remember hearing on the news about some auction and they interviewed some "investor" who literally said that he thought he might double, tripple, or quadrupal his money in 2 years.

So buy at 250k and sell for a million in a couple of years? Sure, whatever, that might have happened in 2000-2005 but not now and not again in our lifetimes likely.

And you still have people buying homes and renting them at a loss, that is not an investor, that is a speculator and there are still too many of them in the game.

Diggin Deeper said...

I'm not talking about Mr.Fixit with tool belt sitting on a tour bus, or some would be homeowner that attends an auction. That's retail money.

Commercial investment money arrives well in advance of any main street buyer. They're in near the bottom, they're out near the top...they buy assets on the cheap and wait...usually with cash...

It will be interesting to see who buys the assets of Reynen & Bardis...

Goldman sees $1.2 trillion global credit loss

http://news.yahoo.com/s/nm/20080325/bs_nm/usa_credit_goldman_dc_1

Yup Gwyn...credit is an issue...and it looks to get a bit worse if GS is close on this article...Once we get over a $Trillion, we can start calling it real money....

smf said...

"I'm not talking about Mr.Fixit with tool belt sitting on a tour bus, or some would be homeowner that attends an auction. That's retail money."

Good call. Though the problem is that these retail people will soon send their investments back into the MLS again. I highly doubt many of them are buying to hold in the long term.

David said...

"that is just classic...blame someone else. If you are 40-50 and living off your parents your are a selfish loser."

But the older generation did get a lot of help from there parents, which the younger generation didn't get from what I and many of my cohorts experienced. This doesn't absolve the younger generations from working hard and doing there part. But I am sick of hearing these older 60 somethings moaning and groaning about the younger generations when they can't see that they were spoiled and haven't done anything to help the situation. Many of these older types also gave extremely bad advise to their children that have put the children in bad shape financially. So there is blame to go around, I just don't buy that it is all the fault of the younger crowd. My cousin is a good example, she and her husband on the advice of there "wise" older parents (60's and 70's)bought at the peak of the market into a really stupid investment. The thing is they were first time home buyers and the supposedly wise older crowd only told them one thing, buy, buy, buy. Not everyone is informed enough to be able to say "you know dad you don't now crap and I'm not going to buy". Most people would say "really dad I'm scarred to buy, but since you say it is a good thing to do and you've done this many times I guess I should think about it."

Diggin Deeper said...

smf...

There will always be a good example of a bad investment no matter what condition the market is in. And vice versa. That's what sells the news. But what really matters is what goes on behind the scenes, outside the grasp of the press, and usually opposite in the direction the public is moving.

This market is moving to the beat of public opinon... moving in the same direction, with the same conviction, using the same arguments. There's absolutely no doubt that this market is only going in one direction.

Richard said...

Finally, a presidential candidate talking some sense:

Drawing a sharp distinction with the Democratic presidential candidates, Senator John McCain, warned Tuesday against hasty government action to solve the mortgage crisis, saying “it is not the duty of government to bail out and reward those who act irresponsibly, whether they are big banks or small borrowers.”

http://www.nytimes.com/2008/03/25/us/politics/25cnd-mccain.html

And I'm about as far from Republican as you can get...

Diggin Deeper said...

Generation blame equals victimization with perfect vision. Just another example of not taking responsibility for your own decisions and actions.

Patient Renter said...

Eh, I despise McCain and he's proven himself to be as ignorant about economic matters as anyone can be, but yea, at least he *seems* to be anti-bailout.... which is good.