Tuesday, April 29, 2008

Forbes Ranks Sacramento Worst City For Homeowner Debt, #2 For Projected Price Decline

From Forbes (hat tip Patient Renter):

It's no secret that homeowners with subprime mortgages have taken a beating. Next up: those who have combined their mortgages with home equity loans, second loans or both. These combinations spell especially bad news for homeowners in Sacramento, Calif., San Diego, Washington, D.C., and Colorado Springs, Colo., markets with some of the nation's highest concentrations of homeowner debt. In these spots, prices are dropping, making it very difficult for homeowners to refinance as lenders are reluctant to take on risk.
1. Sacramento, Calif.
Percent change [in median price] from 2007: -18.5%
Total outstanding mortgages: 480,881
Second mortgage or home equity loan: 129,736 (27%)
Both second mortgage and home equity loan: 7,288 (1.5%)
Compare to other cities here.

From Forbes:
[M]any of the markets that experienced steep 2007 price drops are still a long way from recovery. That's based on a Moody's Economy.com report prepared for Forbes.com. It predicts that 2008 isn't going to be any gentler than last year on slumping markets like Los Angeles, Sacramento, Calif., Las Vegas and Tampa, Fla., where market weakness is expected to cause 10% to 25% drops over the next year.
2. Sacramento
Expected year-end median home price: $261,590
Percent drop: 23%
From the Modesto Bee:
Even during the boom years, when the housing industry was roaring and employment was growing, Northern San Joaquin Valley incomes were falling further behind the rest of California...That's surprising considering that the valley's economy appeared to soar during those years. For example, Stanislaus County's unemployment rate fell from 10.6 percent in 1999 to 8 percent in 2006. The population grew by more than 225,000 and more than 83,000 new homes were built in the three counties during those eight years.

But high-paying jobs apparently didn't follow...The income statistics demonstrate that creating more jobs doesn't necessarily generate wealth, said Carol Whiteside, president emeritus of the Great Valley Center. She said many of the valley's new jobs were low-paying, entry-level or service positions, rather than a healthy mix of jobs from diverse employment sectors.
[E]nrollment at CSU, Stanislaus, is growing, especially in its master's in business administration programs for executives. "People come here when they can't find jobs out there," [professor Edward] Hernandez said. "The job market is so bad for many people right now that they're going to college or moving someplace better." The region's economy started declining in late 2006 when the housing market turned..."The income (statistics) are going to look a lot worse the next time they release them," Hernandez predicted. "The boom has turned into a bust for many."
From the Central Valley Business Times:
The Central Valley city of Stockton had the highest foreclosure rate in the nation in the first quarter, according to figures compiled by RealtyTrac Inc., an Irvine-based foreclosure information company. One in every 30 Stockton households received a foreclosure filing during the quarter -- 6.6 times the national average, RealtyTrac says. Riverside-San Bernardino in Southern California ranks second with one in 38 homes going into foreclosure. Other California metro areas in the top 20 include Bakersfield at No. 4, Sacramento at No. 5, San Diego at No. 9, Oakland at No. 10, Fresno at No. 12, Los Angeles at No. 17 and Orange County at No. 19.
From the Associated Press (via KCRA):
Banks and mortgage companies face fines of $1,000 a day if they allow foreclosed homes to become run down and a source of neighborhood blight under a bill that passed the state Senate on Monday...Many communities, particularly in the Central Valley, are riddled with homes that have been abandoned by buyers who could not afford their mortgage payments when they reset to higher rates.
"Certainly we've seen the number of these calls (about neglected homes) come up, but we've so far been able to deal with it effectively," said Stockton Police Officer Pete Smith, a department spokesman. "But the feeling here is we need to have something more in place." Stockton is one of the hardest-hit communities and is developing an ordinance that would require property owners to provide a local contact and pay a minimal fee for each vacant home.
From the California Progress Report:
Before the Senate floor vote, [Senate President pro Tem Don] Perata opened the debate, saying: “California now leads the nation in foreclosures. It started in the Central Valley and Inland Empire. It’s now spread almost evenly, although some areas are being hit harder than others."


Patient Renter said...

Regarding the Senate bill two questions:

Senate leader Perata points out we "have to" stop forclosures, people need help, crisis, desparate, blah blah. It's completely unclear to me though how this bill intends to stop forclosures. Am I missing something?

Also, will this bill be the catalyst that sees banks slashing prices to get rid of the REO inventory ASAP, to avoid the $1,000 per day fine for "neglected" forclosure properties, or maintenance costs?

Regarding the

Perfect Storm said...

Los Angeles, Sacramento, Calif., Las Vegas and Tampa, Fla., where market weakness is expected to cause 10% to 25% drops over the next year.

But Greg Paquin said there would only be another 5% drop and were near the bottom.

Could Greg be lying?

Were right on track for a 50% decline by 2009.

Patient Renter said...

Could Greg be lying?

Either that, or he'll soon join the indistinguished ranks of all the bottom calling idiots who came before him. Either way, it's not a fate I'd be proud of.

Kip said...

The 'Bottom', as we are calling it, is sort of a subjective term. Everybody is tracking the decline in average price, but that doesn't take into account the fact that certain price segments will reach bottom and stop dropping before other price segments. I think the lowest home values can possibly go is the point when the average monthly mortgage payment is comparable to the rent one could receive on that property. We are already there in some places in some price points.

bubblemachine said...

Either that, or he'll soon join the indistinguished ranks of all the bottom calling idiots who came before him.

Greg Paquin is the king of bottom callers. In fact, Lander even did a summary of Paquin's numerous bottom calls. Paquin has ZERO credibility and apparently no SHAME after being wrong so many times.

sf jack said...

Kip -

Let's not forget that when most markets correct, they end up going below the trend line or long term mean.

So that means the monthly mortgages of which you speak could go BELOW what the monthly rent will be.

Given this, the "bottom" is still a long ways off in almost all areas.