"The housing optimists have systematically misjudged the market"

From the Sacramento Bee:

The carpet was filthy, and the walls needed paint. The backyard was a mass of dead grass. And that was before vandals threw a rock through a back window, climbed inside and wrecked the kitchen cabinets. That happened two days before the close of escrow. For banks, this is what making home loans has come to. Such scenes of destruction are commonplace. Lenders have dealt with the chaotic wake of an estimated 20,000 or more foreclosures in the Sacramento region over the past 18 months.
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But there is a plus to this abundance of damage. It's proving a mini-boom for a niche sector of the construction trade known as "repo contractors."

From the Sacramento Bee:

The price of the two-story, 3,800-square-foot house for sale on Aspen Grove Lane in Elk Grove stands out even in a down market. The five-bedroom, three-bath home in a gated community is listed at $387,000 "as-is" or $437,000 with repairs. The low price – and the need for repairs – stems from the house's use as an indoor marijuana farm. Last fall, police hauled out 865 plants.

From the Sacramento Business Journal:

The economy is slowing and credit is tight. This should be prime time for Small Business Administration lending. Instead, the SBA is reporting declines in lending in the region and nationwide.
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Some banks that pushed hard in SBA locally last year have also slowed down. Bank of America made 130 loans in the district by May of federal fiscal year 2007. So far in this fiscal year, the bank’s SBA loans have declined by two-thirds, to 43 loans...Other active lenders include Capital One Bank and Washington Mutual Bank. Through May of fiscal 2007, Capital One Bank made 84 loans. This fiscal year, the bank has only made 29 loans, down 65 percent. Washington Mutual is down 68 percent over the same period last year, making 62 loans last year through May and 20 loans so far in fiscal 2008.

From the Long Beach Press-Telegram:

When she arrived in Congress last fall, Rep. Laura Richardson sought out a vehicle that would match her newfound status. She settled on a 2007 Lincoln Town Car - the choice of many representatives who lease their vehicles at taxpayers' expense. But hers was distinct: At $1,300 a month, it was the most expensive car in the House of Representives.

Richardson, a Democrat who represents Carson, has since become known for defaulting on two home loans and losing a third house in an upscale neighborhood in Sacramento at a foreclosure auction.

From BusinessWeek:

[T]he housing optimists have systematically misjudged the market. Some became convinced that the huge runup was justified by fundamentals such as population growth, rising incomes, and land scarcity. And because sharp national housing price declines are so rare in U.S. history, analysts assumed that prices would, at worst, flatten out for a few years.

What they forgot was that markets can overshoot on the downside just as easily as on the upside, with both financial and psychological forces feeding the decline. On the financial side, adjustable-rate mortgages are continuing to reset upward from their cheap introductory rates, making it more difficult for homeowners to afford their loans. What's more, each month of price declines pushes more homeowners underwater on their mortgages, making it impossible for them to refinance into more affordable loans. It doesn't help, either, that as the economy weakens, larger numbers of homeowners are finding themselves out of work.