Stop the Presses! Million Dollar Condos in Stockton Not Selling

I linked to this Stockton Record article back in January 2007.

Peggy Massey director of economic development for the Downtown Stockton Alliance...points to a good start for the Sheraton Hotel project, with its condos on the top floors. Jeroen Gerrese, vice president of the Sheraton Stockton at Regent Pointe, said that since marketing began in October, there have been purchase deposits put down on 28 out of the 42 condos that will occupy the top three floors of the seven-story hotel.

Prices range from about $250,000 for a 663-square-foot, one-bedroom condo to $1.2 million for a 2,275-square-foot, three-bedroom condo.

Here's an update from the Stockton Record:

At a Dec. 13 gala to celebrate the opening of downtown's Sheraton Hotel, a crowd sipped scotch and applauded the largest private investment downtown since American Savings Bank built its Main Street headquarters in 1989. Yet even in December there was trouble at the hotel. San Joaquin County's housing market - as elsewhere - was collapsing, and hotel owner Regent Hotel LLC had failed to sell any of 42 condominiums atop the hotel.
...
Regent obtained financing for the hotel's construction, based in part on its expectation of an infusion of revenue from the sale of condominiums at the hotel. And then the housing market fell. "The condos, that's what's killing us," [Sacramento's Regent Development Inc. CEO Rick] Oshinski said. "The condo market has gone totally into the toilet."...The number of people who have committed to buy one has fluctuated between eight and 14, he said. None has sold yet.

From Home Front:

Reality kind of surprised us. I expected that 15,000 foreclosures since Jan. 2007 would have to tighten supply and thus push rents up. Instead largely the opposite has proved true. Rents have remained flat and supply remains ample, even expanded.

From the Sacramento Bee:

Unlike much of California, which has generally seen a steady increase in monthly rents, the Sacramento area is an exception, with rents barely rising much over the past four years. There are several reasons. Because the region dramatically overbuilt during the housing boom, there are plenty of apartments – about 111,000, according to some estimates – to go around. And a curious "shadow market" of new dwellings for rent – units that have come on the market principally because of foreclosure and the housing downturn – has kept monthly payments flat, they say. Such a market is also discouraging investment activity....

Only a year or two ago analysts were predicting that Sacramento's traditionally dependable job and population growth would soon trim supply and create an atmosphere to raise rents. But the housing bust has proved unexpectedly severe and led to reassessments...Robert Machado, who manages 2,000 area home rentals as president of Sacramento-based HomePointe Property Management, says he believes a recovery might not come until 2010. "If that's the case, it means people cannot sell their properties. That means they'll rent them out. Supply will stay up, and that means rents won't go up," he said.

From the Modesto Bee:

"Sales activities have exploded. We're seeing it all the way from Lodi to Los Banos," said Mike Zagaris, president of PMZ Real Estate, based in Modesto. "Home prices have dropped substantially. As a result, there's a flood of buying interest by families and investors." Zagaris estimated that 70 percent of buyers are people who plan to live in the homes, with the rest going to investors snapping up rental property.
...
Tom Nelson of Modesto...has been busy buying bargain-priced property in Modesto and Oakdale. He and a partner bought houses in October, February and again last week. Those three homes will be rentals for at least several years until the market recovers..."We'll probably end up buying 10 rental homes before it's over."
...
Some rental property investors are from outside the region, [broker Cindy] Yoder said, "and they'll buy without ever seeing the property."

From the Sacramento Bee:

Their debts are substantial and their reputations have been dinged. Their main business is gone. They are caught up in an intergenerational soap opera that threatens the family legacy. But Sidney B. Dunmore and his sons Jeremy and Sidney D. Dunmore, heirs to a Sacramento-area home-building dynasty that has unraveled in the past year, insist they aren't finished.
...
Dunmore said he, like others, got blindsided. "I expanded the business because things were doing fabulous," he said. "We borrowed to do that and all of a sudden the market turned down, and it turned down in a way that nobody foresaw."
...
Dunmore could lose his $11 million home in Granite Bay and a $4 million home in Palm Desert to Travelers Casualty and Surety Co. of America, which issued bonds guaranteeing completion of Dunmore projects. Travelers, facing millions in claims from Dunmore subcontractors, is exercising its right to go after Sid for reimbursement. The insurer obtained writs of attachment on his homes, which means it could seize the properties if it wins in court.

More on Jim Wasserman's Home Front blog.