Thursday, April 24, 2008

The Porta-Potty Index

From the Sacramento News & Review:

I was searching for signs of the coming economic apocalypse along the stressed seams of Sacramento’s suburban neighborhoods, and honey buckets [aka porta-potties] seemed like a perfectly reasonable place to start...It seems reasonable to expect, given rising unemployment in the construction industry, to find stacks of honey buckets piling up all over the country. We might point to this excess as an indicator of reduced economic activity, a honey-bucket index, if you will.
...
After the real-estate bubble popped 18 months ago, the porta-potties began stacking up at the rental place [my Dad] drives by on the way into town [Redding]. Nowadays, so many honey buckets have been returned, they’re stacking them outside the fence. Surely, my father speculated, the same phenomenon must exist in Sacramento.

Indeed it does. At J & J Sanitation in south Sacramento, the excess toilets were stacked four-deep next to an adjacent vacant warehouse. The sweet stink of what seemed like 1,000 honey buckets wafted over the razor wire at Waste Management’s compound off Elder Creek Road. At United Site Services in north Sacramento, the porta-loos, hundreds of them, were stacked high and deep behind the security fence.
From the Chicago Tribune:
Rolling Meadows-based homebuilder Kimball Hill Homes, citing the "challenges faced by the homebuilding industry" in the housing sector's meltdown, said it filed for Chapter 11 bankruptcy protection but will maintain normal operations while it restructures. "Our issues are financial, not operational," said President and Chief Executive Ken Love.
Kimball Hill has developments in Sacramento, Rancho Cordova, Galt, Stockton, Ceres, and Merced.

From the Sacramento Bee:
After months of wrangling with lenders over huge debts accumulated during the housing boom, prominent Sacramento-area home builder John D. Reynen filed Wednesday for personal bankruptcy protection. Reynen, co-founder of Reynen & Bardis Communities, took the action to prevent San Francisco-based Bank of the West from seizing his house and other personal assets for a $26 million debt owed by his company, said Michele McCormick, spokeswoman for the builder. She said the filing will not affect the operations of Reynen & Bardis Communities.
...
Kathryn Boyce, a Sacramento-based Hanley Wood analyst, said the firm's massive land holdings are still a source of strength. "There's still land they're sitting on they haven't done anything with," she said. "They're going to be OK."
From the Stockton Record:
Real estate was bubbling in 2004 when Regent announced its [Stockton Sheraton Hotel] plans. That year, you practically couldn't build residential developments - including condos - fast enough. Condos atop a pristine downtown development overlooking the city's redeveloped waterfront core seemed like a sure winner. In hindsight, 42 high-end condos seems a bit aggressive for the still-coming-back-from-the-dead downtown market. But back then, four whole years ago, the lines on the chart seemed to run only one direction: upward.
...
Then along came 2005. The hotel was two years from being finished, and there were disturbing signs the housing bubble had expanded about as far as it could. Nobody expected a burst, at least not of the explosive magnitude that occurred.
From the Stockton Record:
[T]he prices being charged for those new homes have been way overpriced relative to the incomes of most county residents, [director of Pacific's Business Forecasting Center Jeff] Michael said. "Despite a dramatic drop of house prices (40 percent in the past 30 months), it's still expensive to live here. It's still 4.5 times the median family income compared to the U.S. average of 3.25 times median family income," Michael said.

He went so far as to say that San Joaquin County has been in its own recession since last fall, triggered by the housing meltdown and confirmed by unemployment figures that have topped 10 percent in two of the past three months. While the housing boom that started in the early part of the decade added 7,000 jobs in construction in the county, 3,000 jobs have already been lost in the downturn.

25 comments:

luca said...

inventory on housing tracker looks to be bottoming..,.,.,., prices seem to be not declining as much

Jacob said...

Did you see this:

http://bp2.blogger.com/_oqQI_LytgCE/SA2Ma3Zwd6I/AAAAAAAAAs4/bh4i2j2n0-4/s1600-h/SacSQFT-Peak-Mar2008.JPG

Maybe we have reached a bottom, but there is no evidence to support that just yet.

Until foreclosures start slowing down, there will continue to be downward pressure on prices. The banks are driving the market down and taking back homes faster then they can sell them.

alba said...

you're kidding, right? you can see a bottom? Maybe its time for you to buy!

alba said...

Porta-a-potty index...we should be leading indicators of new and growing opportunities/jobs. Since CA, and particularly the Sacto region, will continue to be hit hard by housing, financials/banking, and overall economic impact, leading to a severe downturn, we should be the beacons of new opportunities (investments and jobs). What are they?

The news is the same everyday. What does it lead to?

Sippn said...

That reminds me as Waste Mgmt buying up all their competitors in the last decade...

Hill had more comments in the article per the Bee about foreign money coming in "rushing in"

Jacob - ur link didn't work

Diggin Deeper said...

"Despite a dramatic drop of house prices (40 percent in the past 30 months), it's still expensive to live here. It's still 4.5 times the median family income compared to the U.S. average of 3.25 times median family income," Michael said."

Yup...4.5 times is too high...but 3.25 for California is probably too low, imho....Either incomes go up or the ratio comes down. Another 10% price decline from here would bring the ratio close to 4. Cola's should provide some offset. Somewhere between 3.5 and 4 works for me...that is if you can still pay for the food and energy costs that keep rising...

Wadin' In said...

Here is another index I have been tracking for the last 12 months:

Craigslist Rental Properties:

If you search Rental, using Elk Grove, today you will see 356 homes for rent.

In April 2007, it averaged 76 homes for rent.

Rental inventory is growing. Also, prices are dropping. In 2007about half the homes were listed for rent at $2,000 or above. Today, about 93% are below $2,000/mon.

Elk Grove has what, 10,000 new homes, so the rental vacancy is 3.56%? If you take 65% home ownership into the equation, only 3500 homes should be rentals. Thus the SFR vacancy is actually closer to 10%!!

All the new SFR landlords out there better refigure their vacancy factor and lower their asking rents.

We can't even see the bottom from here. The factors continue to favor the renter. It may be a buyers market today, but it will be a better buyers market tomorrow!

Deflationary Jane said...

Wadin,

I noticed something similar in Yolo. I used to watch Woodland, Dixon, and West Sacramento rentals, still do.

I used to be lucky to find 6 to 10 listings on CL for Woodland. Now there are 63.

At least 4 are investors who bought recently. One is asking $1600 mo for a tiny 1000 sqft place. Funny, they can't seem to find a renter. That's because he's competing against people skirting foreclosure in the Springlake area where they are asking 1800 for over 2000 sqft.

Diggin Deeper said...

As an unsuspecting renter, renting from someone who's "skirting" foreclosure is a nightmare in the making...unforseen eviction notices, moving costs, lawsuits, etc...

Let the poor renter beware...

Deflationary Jane said...

Amem DD.

Or another comparision, a 5/3 3000sqft palace in Bridgeway for under $1900 mo. This is through a pretty established property management co.

Diggin Deeper said...

Todays news includes the consumer sentiment reading falling to 62.6 for April, the lowest reading in 25 years...hmmmm that would be 1982/83 during the last inflationary boom...

"as Americans contended with rising energy and food prices. Consumers' flagging mood is worrisome for Wall Street because consumer spending accounts for about 70 percent of U.S. economic activity."

A report like this probably insures another round of Fed rate cuts...and maybe that will positively affect mortgage rates...I'm expecting the opposite to occur shortly but it's just a guess.

Everybody needs a boost in pay! Without it rentals against high supply will have no where to go but down....real estate prices, too...for awhile...

PeonInChief said...

What appears to be happening is that apartment rents (including former condo/condo attempts) are under serious downward pressure, as tenants upgrade to duplexes and houses. Well-priced houses and duplexes are going fast, while apartments languish. And then there are the investors who think the rents should pay the mortgage...

smf said...

What's going to happen to all the current purchasers that intend to become temporary landlords, at least till the market comes back up?

*snicker*

Deflationary Jane said...

Actually, I'm more concerned about the fallout of the Bell shooting acquittal. People should be outraged. This is so similar to lead up to RKR it's spooky.

I have long said there will not be a bottom until a city burns.

Patient Renter said...

I'm more concerned about the fallout of the Bell shooting acquittal.

Yea, something is not quite right there. I imagine these sorts of acuittals happen a lot though. They're just not all publicized.

Diggin Deeper said...

I'll hardly be worrying about the price of real estate should that occur.

Cut off necessities in short supply..in our case, food staples, water, energy, etc. cities will burn...To think that supply shortages for these staples(ie rice, corn, wheat, soybeans) now showing on the world stage can't affect us here...think again. One way to alleviate the problem is to hoard resources...oil, grains, hard commodities, etc. like we're beginning to see in India, China, Russia...Think multiple cities, multiple countries.

Just too many damn people fighting for the right to eat, stay warm, exist

helloooo said...

I love these comments from the "experts" that the media finds:

Kathryn Boyce, a Sacramento-based Hanley Wood analyst, said the firm's massive land holdings are still a source of strength. "There's still land they're sitting on they haven't done anything with," she said. "They're going to be OK."

Uh Hello Kathryn... Did it ever occur to you that maybe the land they are sitting on is one of the causes of their current financial situation? These dummies way overpaid for land for building on in the future because "nobody saw this coming". Now they have been using their cash to make the interest payments on the loans they took out on the land. In his bankruptcy filing Reynen lists liabilities of between $500 million and $1 billion, yet assets between $50 million and $100 million. Kathryn, I'm afraid that these guys are NOT going to be OK. They are toast. The banks want to get their money back which they foolishly lent to these tools, so all of that land is going to be sold off to generate cash very shortly, at 10 cents on the dollar compared to what they paid for it. Don't be surprised to see the company file for bankruptcy within 60 days.

helloooo said...

Kimball Hill homes files for bankruptcy. John Reynen files for bankruptcy. Dunmore homes files for bankruptcy. WHO'S NEXT???

Diggin Deeper said...

Maybe one majors goes down next...Hovnanian doesn't seem to be so well in West Shore area. I heard recently that it took them an entire year to sell out 12 homes in the first phase of a one of their developments. Got to bleeding cash...

Deflationary Jane said...

Actually I like KHov because they don't pass on the cost of improving the land and dev fees as MR and other bonds, nor do they have huge HOAs (the model we looked at, the fees were $11).

Now they are still overpriced for the market but I do think they are more forthright then Centex or KB. Let me tell you the ways I loathe Centex >; )

Luis said...

DJ, whats up with Centex?

watchingthebubble said...

Gwynster,
Do tell your tale of Centex! I've been leaning toward buying a Centex home because of their quality ratings. I liked the homes they built in Denver.

I'm renting a Hovnanian crap house as we speak. Some of the walls are crooked. How the heck can you build a house with crooked walls? Perhaps it was built by Forecast Homes before it was acquired by Hovananian.

Deflationary Jane said...

I really don't understand why people like them.

1. I don't like their interior space planning (too many small rooms and few great big huge ones. They are made for some fantasy life that hasn't existed since the last 50's if it ever did.

2. I don't like what they offer as custom upgrades which are really just builder garbage with a stinking high price tag.

3. I really don't like their HOA and MR fees - which puts them beyond pluto for in the universe of afforablity when they could be just quietly circling the jupiter of hazardous DTI ratios.

4. I don't like their craftsmanpuedotuscanfauxspanishgargepail design. They are just this years version of McMansion Craptastic and reflect the all the design brillance of a AMC Gremlin.

5. I really don't like how they cater to investors while saying they don't. Go in some day and say you are an unvestor and another day as an investor and see the difference. If you are brave, do it a second time drunk but make sure you bring a close friend with you because you will need someone pin your arms when you get ready to swing.

6. I don't like how they lie - flat_out_no_joke_dowright lie. Maybe it's just the salesmen I've met but I've found them to be the schmarmiest and dishonest of the lot. But then they are trying to sell the most overvalued pigs out there on the market. I could write an entire Chanson de geste on my experiences with them.

That should get you started >; )

watchingthebubble said...

Thanks! It most certainly does. I will be on my guard should I decide to consider a Centex home. I agree with you about the investor line of bullcrap. I visited a Centex subdivision in Elk Grove in 2005 and they said they weren't selling to investors. Down the street was a guy trying to unload two of the Centex homes he had bought as investments. He said that when he bought them, he told the folks at Centex that he was buying one for himself and one for his daughter.

Tee said...

Rest assured that the porta potty rental industry is doing just fine...well at least companies that have transitioned to take advantage of the growing online demand for rentals nationwide...hey...people gotta s**t right?