Finally: Analyst Predicts 50%+ Decline For Sacramento Housing

From CNNMoney (hat tip Average Buyer):

With home prices plunging by more than 30% in some markets, bargain-hunters are ready to pounce. But it may pay for buyers to wait. Many housing experts say that the worst-hit metro areas have even farther to fall, and could see total drops of as much as 50%.
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Many erstwhile bubble cities have sustained particularly brutal hits. The median-price of a home in Sacramento, Calif. was down 35% during the three months ended May 31 compared to the same period last year, according to the real estate web site Trulia.com...Smaller cities in California's Central Valley, such as Stockton (-39%), Modesto (-37%) and Bakersfield (-29%), also recorded steep declines.
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"The housing boom was unprecedented in U.S. history," said Michael Youngblood, a portfolio analyst with FBR Investment Management, "and the correction will be as well."...Youngblood expects that these markets will likely endure total price drops of 50% or more.

Currently, several Sacramento home price measures have crossed the 40% off peak threshold. Compare that with some other famous housing busts:

[P]rices are falling faster and further than in any other post-war housing bust. [Prices are also falling faster than during the Great Depression.] During the bust in Austin, Tex., which started in 1986 and is one of the worst on record, prices fell 25%, according to Local Market Monitor, a financial data provider. And that cycle took four years to bottom out. In other major downturns, prices in Los Angeles fell by 21% during a six-year period in the 1990s, and Honolulu home prices saw a decline of 16% in the five years starting in 1994.

Given the lack of American precedent, it might be a good time to brush up on the history of the housing bubble in Japan (where home prices in the largest six cities fell by 64% over a 13-year period and Tokyo fell by more than 80%).

From Bloomberg:

Almost $70 million of tax-exempt bonds were sold in June 2007 to build roads and sewers for thousands of new homes planned for Elk Grove, California, once the fastest growing city in the U.S. A year later, the lots are largely vacant and the bonds lost 41 percent of their value.

The debt plummeted as construction all but ceased after the biggest developer on the Laguna Ridge project fell behind on the property taxes used to pay interest. Scattered homes sit among tracts overgrown with weeds as housing sales wilt. "It's stopped completely,'' said Onkar Singh, 76, who lives in an adjacent development in the 129,000-person town outside Sacramento. "Everything's vacant."

From the Appeal Democrat:

Nearly 50 employees at the Kbi Norcal Truss plant in Olivehurst will be without jobs next month, victims of the slumping housing market. Mark Kailor, vice president and treasurer of San Francisco-based Building Materials Holding Corp., which owns the Olivehurst plant, said the decision to close the plant was made because of market conditions.
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"What we have in terms of manufacturing is based on the housing industry; hopefully they will come back when the market turns," [John] Fleming [Yuba County's economic development coordinator] said.

From the Modesto Bee:

Finally there's some good news on the foreclosure front: Northern San Joaquin Valley mortgage default rates seem to be stabilizing. After nearly two years of staggering increases, the number of homes issued notices of default, the first step toward foreclosure, was lower in May than in April or March.
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"The region definitely is stabilizing. It's stabilizing at a pretty high level, however," said Sean O'Toole, who founded and runs ForeclosureRadar...."The banks still are taking back more inventory than they're able to resell," O'Toole said...He said the three counties were among the first in California to enter the foreclosure crisis. "Now I think you're leading the way out."

From the National Review:

Until this week, that predatory-lending narrative dominated the housing conversation. But in the past few days, three poster children for irresponsible lending and borrowing have taken center stage in the debate over the housing bailout...The first is Rep. Laura Richardson, a California Democrat...The second poster child is Michelle Augustine, another Sacramento homeowner (what’s going on down there?) who was featured Wednesday in a Wall Street Journal article about a phenomenon called "buy and bail."
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Nowhere in the Journal story does Augustine claim to be a victim of predatory lending. She presumably understood the terms of her mortgage, and she knew her payments would go up. Like many Americans, she probably just assumed that house prices would continue to rise and that she could refinance into a more affordable mortgage once that happened.

Assuming Augustine’s lender had accurate information about her income, it made the same mistaken assumptions about house prices and her ability to pay that she did. Congress wants us to bail these people out. Instead, they deserve each other — and whatever consequences befall them.

More discussion of the legality of "buy and bail" over at the Volokh Conspiracy blog.