Tuesday, June 10, 2008

"New But Blighted Fields of Dreams"

From the Modesto Bee:

The signs are painted over. The models are empty. All building has stopped at the three Falling Leaf subdivisions in Modesto's Village I. With less than half of the planned 314 homes complete, developer William Lyon Homes has quit construction. Empty lots growing weeds remain. Falling Leaf apparently is the latest victim of the housing market downturn plaguing the Northern San Joaquin Valley.
Falling Leaf repeatedly cut prices. Example: Its smallest house, a 1,620-square-foot plan, was priced at $379,000 in August 2006, then dropped to $329,990 by February 2007 and dropped again to $269,900 in April 2007. By last month, the development drastically sliced prices on its remaining inventory to about $100 per square foot.
From the Modesto Bee:
Modesto home builder Harinder Singh Toor hadn't planned on being a landlord, but he's become one because he hasn't been able to sell what he's built. Now he rents out eight custom homes, some as large as 5,400 square feet. "I built this house to sell, but I haven't gotten a single bite on it in a year," Toor said about the empty five-bedroom, four-bath house on North Canyon Drive. He had hoped to sell it for $1.2 million, but he'll settle for $3,000 a month in rent, even though that will cover only about half of his carrying costs.
From the McCook Daily Gazette:
The sign proclaimed "House for Sale (bank owned)." The construction looked recent and maybe a little ticky tacky but the place was obviously abandoned, with lawn, landscaping shrubs and trees dying from drought. A house, or three, down the block was not even completed but abandoned mid-construction. The current housing financial crisis is vividly on display in and around Merced, California. It was enlightening to drive through the new but blighted fields of dreams in the town that used to be our home some 35 years ago.
I asked my host, Jim Glidden, what happened to the people that purchased and then abandoned all the new housing...The speculators from San Jose and other affluent areas simply abandoned their investments. The poor souls who purchased a home to live in are emotionally as well as financially strapped and either leave to rent if their job is still available or just hang on by the skin of their teeth.
From the LA Times:
[Sean] O'Toole, 40, founded the website ForeclosureRadar.com last year. The site, he said, lists every default, auction and foreclosure in California...Rather than join the rush of those mining for gold in distressed real estate, O'Toole has set himself up as Levi Strauss once did. Instead of selling jeans to prospectors, though, he is selling foreclosure data to would-be buyers.
[In 2002] rather than compete with thousands of speculators flipping new homes, he scoured property records to find distressed houses. Over the next few years he bought and sold 152 such properties...He's stopped buying foreclosed houses because his time and money are tied up in the website, O'Toole said. But he also said he "doesn't want to catch a falling knife" as house prices plummet. Although the foreclosure explosion is fueling his business, foreclosure sales have turned into a speculator's market, O'Toole said.
From the Daily Democrat:
Yolo County officials released their 2008-09 recommended budget Friday, which included layoffs, hiring freezes and other hard-line cost-saving elements to keep even during the lean years predicted to come. "This is probably the most difficult budget for Yolo County in more than a decade," County Administrator Sharon Jensen stated in her budget letter to the Board of Supervisors. "The economy in California is still reeling from the massive shockwaves of the sub-prime mortgage crisis and its effects on housing values, the bond market and the consumer economy." As a result, the report stated the county will have to use $8.3 million of its reserve funds to keep afloat, leaving only $8 million left for a rainy day. In addition, the county's recommended budget proposed the elimination of 118 positions or six percent of the county's total workforce.
From the Sacramento Bee:
The collapsing housing market is squeezing all local governments, but Sacramento County is feeling a special pinch. Today, county supervisors will begin deliberating on a budget that could affect almost every resident in this county. Supervisors face a $123.7 million shortfall, and so they are considering cuts to medical clinics, senior centers, youth programs (to keep kids out of gangs), domestic violence counseling, probation services and many other programs.
From News10:
Cali Krystal of Sacramento said she came to EDD to discuss her efforts to seek work...The former state office technician moved from Santa Barbara to Sacramento in December. "The cost of living was really high in Santa Barbara," said Krystal. "I thought I'd relocate back to Sacramento where a lot of state jobs are here." But her job search has fallen victim to California's tough economic times. "I've been looking for work with the state since January," she explained. "Before they did the state budget cuts, I was being called for interviews back to back. Then once the [budget reduction] bill got signed, it all just stopped."
From the Modesto Bee:
United Way of Stanislaus County warned its partner agencies that a downturn in charitable donations will result in funding delays of up to six months. Overall giving, said Tom Ciccarelli, United Way president and chief executive officer, is down about 9 percent.
"I've been a CEO for a long time," Ciccarelli said, "and I've never seen an economy like this. What scares me is (the) 'perfect storm' of factors." With food and gas prices climbing, and the bottom falling out of the housing market, Ciccarelli said, more people are worried about hanging on to their jobs and paying their bills.
At the same time, Ciccarelli said, more people are turning to United Way and its partner agencies for help. "In this economy," he said, "we're seeing, and will continue to see, an increased demand for services. "All my life, I've pretty much been a 'half-full glass' kind of guy. But this is different. We really need to get out front and plan to weather this perfect storm."
From the Chico ER:
A government agency that tracks the price of housing and has flagged Butte County repeatedly for high appreciation again indicates falling prices in this market. The Office of Federal Housing Enterprise Oversight listed declines in Butte County house prices for the first quarter of 2008 in a study released last week...The service showed that comparing the first quarters of 2007 and 2008, Butte County's housing prices were down a little more than 7 percent this year...Long-time appraiser Tom Fiscus of Chico has confirmed that his business is down. "I've seen this (slump) three or four times, but never this bad. I've seen the requests (for appraisals) dwindle."
From Bloomberg:
The California Public Employees' Retirement System, the largest U.S. public pension fund, may sell part of its $2 billion in residential land holdings after the investments lost 31 percent last year amid falling home prices and forecasts of further declines. Sacramento-based Calpers hired Morgan Stanley to review seven land deals it made with joint-venture partners and real-estate advisers, said fund spokeswoman Pat Macht.
U.S. home prices will fall another 10 percent through the end of next year, with even steeper declines expected in "bubble areas'' in parts of California, Nevada and Arizona where there's already an "overhang of supply,'' Michelle Meyer, economist for Lehman Brothers Holding Inc. in New York, said in an interview.
From the Daily Breeze:
The real estate broker who bought Rep. Laura Richardson's house at a foreclosure sale last month is accusing her of receiving preferential treatment because her lender has issued a notice to rescind the sale. James York, owner of Red Rock Mortgage, said he would file a lawsuit against Richardson and her lender, Washington Mutual, by the end of the week, and has every intention of keeping the house. "I'm just amazed they've done this," York said. "They never would have done this for anybody else."
From The Hill:
The Congressional watchdog group Citizens for Responsibility and Ethics in Washington (CREW) on Tuesday fired a shot at Rep. Laura Richardson (D-Calif.), describing her financial problems as “appalling” and calling her a “deadbeat congresswoman.”...“Rep. Laura Richardson’s appalling financial dealings raise serious questions about her ethics,” Sloan said in a statement. “What kind of responsible adult — much less elected public official — only pays her bills when she’s called out by journalists?
From KCRA:


smf said...

Although the foreclosure explosion is fueling his business, foreclosure sales have turned into a speculator's market, O'Toole said.

Another person confirming my long held opinion...

Yes, even the current sales and #s are misleading.

Speculators are STILL IN THIS MARKET. Way too many of them.

When that # gets reduced, then recovery begins.

Right now, nothing has improved at all.

After all, a rental is not profitable when it is not rented.

Patient Renter said...

I agree with O'Toole as well. The get rich quick/investor mindset that has exploded onto Real Estate with flipper TV shows and all the rest is now perpetuating itself in the forclosure market, and unfortunately for them, a market bottom will not occur until they've all capitulated.

Anonymous said...

Haven't we already seen a foreclosure frenzy of knife catching in areas like Inland Empire? Too many investors focus on the post-bubble drop (looks like future profit) rather than analyzing the fundamentals (what can people afford to pay for housing or home ownership). There is no reason to think the bubble will reinflate short term, so bubble prices should be ignored when deciding whether to invest.

luca said...

Hello everyone- I am looking for opinions on what this 2800 sq. ft. home in lincoln is worth now in your opinions- and how much you believe it will be worth in 5 yrs, 10 yrs and 15yrs

Here is the link below to the home:


Look forward to everyones thoughts and opinions.


luca said...

Also extension to previous question - what do you believe is a fair current rental value.

Deflationary Jane said...

Luca, offer 560k and make it cash

James said...

People are still making money flipping though. A coworker has now made almost $300,000 in capital gains this year flipping foreclosures.

Check out his last one at 5831 Pebble Creek Dr, Rocklin 95765.

$100,000 profit in less than a month. On this particular house the bank took a $250,000 loss, selling in a BK trustee sale for $260,000. This is way below market value. He listed it for sale at $360,000 and had an offer the next day. A twenty something first time home buyer purchased it with 20% down and can't be happier.

I do not see how those taking advantage of distress and disruptions in the market are aggravating the market downturn. If anything they are facilitating the expeditious liquidation of inventory by purchasing repos, rehabbing when necessary, and selling at market value. Until the banks start holding out for reasonable prices, the smart investors will be around making nice profits. These types of investors are generally the smart ones, not the uninformed Joe off the street with a zero down neg am loan hoping to get rich. To play this market you must have lots of liquidity and resources. No bank will loan on investor prop in Sac Metro without at least 25% down.

LUCA, you link does not show any particular house, what is the address?

Diggin Deeper said...

That's what makes a market...there is a difference between speculators and investors as well as informed and uninformed buyers. To call the entire market speculator driven lacks a true picture of risk assessment and how it plays into individual investing decisions. Sure market prices may move lower from here, but if you buy a 15-20%cushion, you make a business decision that at least accounts for that portion of the next leg down. Plus if you plan to live in the home, you might get in while rates are still well below the historical norm...and it looks like those rates are beginning to change and move a little higher week by week.

Deflationary Jane said...

Honestly, the spectulatards are a large part of why we left. Tired of being dicked around with so we're voting with our feet.

And in case anyone missed it, I have nothing but contempt for RE flippers of any stripe.

James said...

Jane, do you invest in anything? Do you have a 403b, pension, investment account?
What is wrong with buying something with expectation of future gains?
I have not been around long enough to know you background or reasoning for disliking real estate investors. I just do not see anything wrong with investing in assets of any class.

Deflationary Jane said...

How do you feel about hedgie becoming involved in oil speculation and running up the prices? Same thing in my book.

James said...

I see nothing wrong with hedge funds investing in oil or any other asset. I have made most of my gains on oil in the last several years. If you can't beat 'em join 'em. This bubble too will burst and those greedy ones late to the party will suffer. Warren Buffet just made a million dollar bet that the S&P will out preform hedge funds over the next decade. Also, CalPers is quite the investor in hedge funds and real estate speculation as well. If I remember correctly you are a UCD faculty member as well, so you too are benefiting from these hedge funds.

I totally hear where you are coming from, but I would rather take these speculators than not having free markets.

luca said...

Deflationary Jane - you should change her name to ' Disgruntled postal worker'

You complain about all your missed moves on this blog, and everyone's right moves seem to agitate you.

Patient Renter said...

You complain about all your missed moves on this blog, and everyone's right moves seem to agitate you.

In defense of Jane -

Missed moves? Oh, you mean that move where we buy a bunch of overpriced homes at the peak of the bubble along with everyone else and lose our shirts? I think we're all glad to have "missed" that move.

As for the "right" moves, these don't agitate us, it's the wrong moves that do, and these constitute the majority (as the forclosure stats show).

Whether or not you specifically lose your shirt doesn't change the fact that most "investors" will, and to the extent that their speculation is proliferating the bubble and delaying the inevitable correction, not to mention that these fools helped create the bubble that will send us into recession, wreck our economy, and drive up our debt and unemployment, we have every reason to be annoyed.

Patient Renter said...

I should add one more comment just to clarify -

There's nothing wrong with clean, honest, helpful investment/investors, the problem is that most investors are none of those things, and are simply inexperienced greedy fools (like the Congresswoman) that either helped creat or are prolonging the problem - and again, we have every right to be annoyed because of them.

Deflationary Jane said...

Thanks PR but honestly, when was the last time we had a free market? If we actually had one, RE would have a lot more by now.

And Luca, I'm quite happy with my 3% and 5.25% annual gains while RE circles the toilet bowl. Better then loosing 1% a month and