Saturday, July 19, 2008

Sacramento Job Losses Mount as Home Prices Hit 2002 Levels

From the Sacramento Bee:

Government jobs declined during the month, particularly in Sacramento. Though the number of state jobs often dips in the summer, the loss of 1,900 state jobs in June helped drive Sacramento-area unemployment to 6.8 percent, an increase of four-tenths of a point. Unemployment in the region...is at its highest since March 1996.

Other sectors continued to struggle in June, but the decline in state jobs was particularly troubling for the capital. For the past year or so, state hiring had been one of Sacramento's most reliable job sources, acting as an economic cushion while the private sector faltered. "Government was holding us up there," said Howard Roth, chief economist at the state Department of Finance.
...
In the Sacramento area, payrolls shrank by 100 during the month and have dropped 7,100, or 0.8 percent, since last year.
From the Sacramento Business Journal:
Personal bankruptcies increased 88 percent in the Sacramento region in the first half of the year, and few debtors are showing up in court to plead for their houses. Most owe more than their home is worth and have nothing to argue about. This means large numbers of uncontested bankruptcies are packing court calendars. Business bankruptcies are up 50 percent from a year ago; total bankruptcies are up 68.5 percent.
...
[Attorney] David Meegan has had to turn down most of the referrals that come his way. "I’ve been doing this for more than 20 years, and I’ve never had as many phone calls as I’ve had since the first of the year," Meegan said.
From the SF Chronicle:
Apartment rents in the western United States are barely climbing — good news for renters but actually a sign of a weakening economy, according to a new report released Thursday..."Basically the rental market is reflecting the economy," [Caroline] Latham [CEO of RealFacts] said. "For many people, there's a misperception that as home foreclosures go up, there is increased demand for rentals and a rise in apartment costs. We don't see that correlation. It's all the housing market and when there's a weak economy, all of it suffers."...Often, people who lose their houses to foreclosures do not end up renting an apartment; rather, they move in with relatives, Latham said.
From the Sacramento Bee:
Sacramento remains one of the state's best markets for renters, with average apartment rents up just 1.7 percent the past year, a new national survey shows. The region's secret? It still has an excess of housing after overbuilding during the boom, analysts said Friday.
...
Apartment owners face new competition from investors snapping up more foreclosed homes and renting them out, said Cory Koehler, deputy director of the Rental Housing Association of the Sacramento Valley.
From the Sacramento Bee:
Times have changed – definitely, for the worse – for more than half the lenders who dominated the Sacramento-area mortgage market during the excesses of the housing boom. Some are gone, ruined by loans made here and elsewhere that turned bad. Some are on the ropes.
...
The entire U.S. mortgage market seemed to be sliding off a cliff with the troubles of government-backed mortgage giants Freddie Mac and Fannie Mae. Local mortgage brokers admitted to being scared. They warned that if either collapsed, the housing economy would follow.
From the Sacramento Bee:
Anything might happen. But this is starting to look real. For the third straight month, capital-area home sales climbed above figures for the same time last year, a welcome indicator in a region searching for the bottom of its long housing slump. But median prices continued to slide...June's median price of $214,000 for resale homes in Sacramento County is the lowest since $210,000 in February 2003. Median prices for new and existing homes combined slipped to $220,000 in the county. That level was last seen in August 2002.
...
Though the sales uptick is encouraging, any rebound so far remains fragile, said DataQuick analyst Andrew LePage. He said much depends on the economy, rising foreclosure rates and conditions in credit markets.
June 2008 homes sales by county
June 2008 home sales by zip [xls] via Home Front

From the Stockton Record:
Sales of existing homes - primarily foreclosures still - continued to climb in June in San Joaquin County for the fifth consecutive month while the median sales price slipped to the lowest level since spring 2002...The median sales price countywide fell from $235,000 in May to $220,000 last month....
...
Jerry Abbott, president and co-owner of Coldwell Banker Grupe in Stockton, said that because of foreclosures, prices have declined 41 percent in the previous year after a 36 percent drop the 12 months before that, and that's good news for many people who couldn't afford to buy a home before the downturn. "We needed a correction in the market," he said. "The foreclosures - even as painful as they are - are part of a correction that has to occur."
From the Modesto Bee:
Stanislaus County's median fell to $201,000 last month, down 6.5 percent from May and 41.4 percent from June 2007, DataQuick Information Systems reported Friday. The last time the figure was around $200,000 was in mid-2002, three years into a steep run-up that would peak in 2005...In Merced County, the median price slipped to $160,000 last month, 44.8 percent less than a year earlier...San Joaquin County's median was at $227,000 last month, down 42.8 percent from June 2007.
From the Modesto Bee:
Indalex Inc., which makes aluminum parts for windows, doors and storefronts, laid off 154 workers in the past year. Just a year after announcing plans to expand its plant and make Modesto the center of its operation for Northern California, company officials blamed the closure on a weak construction market.

31 comments:

luca said...

Rents in the bay are are going up. Vacancy is coming- down.,.,., Sacramento could be next.

County 2nd quarter, 2007 2nd quarter 2008 Year-over-

year change
Vacancy rate
Alameda $1,337 $1,409 5.4% 4.7%
Contra Costa $1,250 $1,328 6.2 5.1
Marin $1,528 $1,591 4.1 2.8
Napa $1,264 $1,307 3.4 3.7
San Francisco $1,757 $1,926 9.6 4.0
San Mateo $1,654 $1,786 8.0 4.1
Santa Clara $1,569 $1,679 7.0 2.7
Solano $1,137 $1,164 2.4 5.0
Sonoma $1,140 $1,212 6.3 5.5

Jacob said...

Well maybe we are at the bottom again. I think we have been there about 36 months in a row lol.

I am not sure how vacancy will decline any time soon. But who knows.

Sacramento <> Bay Area

Bay Area has real jobs and lots of people makeing big $$, Sacramento has unused farmland with vacant homes on them instead of crops. And Starbux is closing stores.

I'm waiting until after the Alt-A time bomb explodes. Once the dust settles I will evaluate if it is a good time to buy.

Cow_tipping said...

2002 is very very high. Remember 2002 was when there were some real jobs left in the town. You know, before the good jobs all went to India and china.
Cool.
Cow_tipping.

James said...
This comment has been removed by the author.
Evin said...

What I'm seeing in the area's im trying to buy in, is that 75% of the inventory is short sale. What do you guys think about this? These sit on the market for a stupid long time and never seem to go anywhere, basically just artificially inflating the inventory numbers... while REO's are getting bought within the first week they hit the market. I don't see why prices would continue to fall much further when every viable property that's REALLY for sale, is gone within a week.

Only thing that I see that could potentially rip us down further would be if inventory from these Alt-a's and short sales (when they do finnaly foreclose) is greater than demand. Or, if the lending standards ass out all the investors...

Either way... my lease is up at the end of September, and I want to buy a house.

Jacob said...

Didnt the experts say something like this:

RE always goes up, buy now or be priced out forever.

Now is a great time to buy or sell a house.

There is no bubble, prices will level off and appreciate at a lower rate of 8-10% annually.

There "may" have been a bubble in some areas, but RE is local, contact a realtor in your area to see your options.

Ok, fine, there was a bubble, but it is due to subprime and subprime is contained. We may see a 5% to 10% decline in some areas.

We are at the bottom, maybe just 5% more to go (repeat this for 2 years).

Dont worry about Alt-A, everyone already has been foreclosed on that would be.

All I can say is whatever...

It is a fact that there are a lot of Alt-A loans resetting, that amount eclipses Subprime.

If you are in a home with an artificially low rate, why would you leave before you had to? Who know what can happen, especially with all the bailout talk.

Moving jobs overseas helps nobody except for the companies, board members, and CEOs. American companies want Americans as customers, but not as employees.

Most of the jobs here are either government or construction/banking related. Aside from that what do we have? Wal-Mart? What jobs do we have that would allow people to actually buy a home?

Foreclosures are being snapped up because they are priced below market and the market simply decides the price it would sell. Simple as that. The banks are taking a 50% or more haircut on each sale but they are moving the homes.

SS are too much of a hassle for everyone involved. Plus the banks want to control the flow of inventory as much as possible.

Maybe we are at the bottom. Have the number of new foreclosures peaked yet? Are sales > new foreclosures? Is inventory going down (real inventory, i.e. homes on the market and homes held by lenders that are not on the market)?

Banks are continuing the write down billions. Fanny and Freddy are insolvent or on the verge of the abyss, and that is $5T.

Lower end homes may have come down as much as they will. Once you get prices in line with rents, there will be investors to buy them. But there are still higher end homes that have not come down as much. And likely will.

But this is just my oppinion. No need to take everything so personal and start name calling. You must be trying really hard to convince yourself...

Perfect Storm said...

Apartment rents in the western United States are barely climbing — good news for renters but actually a sign of a weakening economy, according to a new report released Thursday..."Basically the rental market is reflecting the economy," [Caroline] Latham [CEO of RealFacts] said.

Rents will keep falling and unemployment will keep rising, which will put more downward pressure on home prices. This situiation will not stop in the next ten years.

Were right on track for a 50% decline by 2009.

anon1137 said...

Lander, I think you better enforce your posting rules and try to rein in Mr. Smithfield. He doesn't seem to know how to have a polite discussion. As soon as I saw the bearish stories you posted about rents, I knew many of the posters here would be hot under the collar. Sometimes I think you should change the name of this blog to Sacramento Landing Real Estate Investors Blog.

Patient Renter said...

Wow, a lot of name calling.

It reminds me of how bitter people were right as the bubble started to burst. As Jacob rightly pointed out, these people were wrong, about all of it. Real estate does NOT always go up, there WAS a bubble, job loss IS a problem, real wages ARE declining, etc.

Attacking the realists doesn't change reality.

I don't see why prices would continue to fall much further when every viable property that's REALLY for sale, is gone within a week.

Because inventory is not hte only factor that drives prices.

James said...

Wow, some heated "discussion" happening!

Seriously though, I do not want to get flamed for this, but how come anyone posting positive information gets hammered? Luca is just looking to the future and what positives there are and his opinion seems to get thrown out. Unless you are extremely pessimistic about housing, economy, United States, ect. ect., you are treated adversely. I thought this board was to talk about all aspects of Sacramento Real estate from a consumer prospective.
I do believe when we find a bottom, this board will still be pounding the table saying prices have got to go lower or will go nowhere for the next generation. Kind of like NAR spouting lies at the top of the market. Do no underestimate the resiliency of the United States.

James said...

Oh and I am not saying we are at a bottom currently or that prices are going to shoot back up to 2005 levels tomorrow. This seems to be the normal response to any positive posts.

Patient Renter said...
This comment has been removed by the author.
Patient Renter said...

I thought this board was to talk about all aspects of Sacramento Real estate from a consumer prospective

Back in the day, the NAR and most economists universally agreed that the aftermath of the housing bubble would be a "soft landing", where prices would either be flat or barely decline at all. Thus, the name of this blog provoked discussion about what kind of landing we'd have.

Unless you are extremely pessimistic about housing, economy, United States, ect. ect., you are treated adversely.

Keeping in mind that it was once universally agreed that we'd have a "soft landing", anyone who said otherwise back then was ridiculed, ignored, name-called, and generally outcast. So most of us know a thing or two about being treated adversely.

That said, I think that the posters here generally use criticism appropriately. I don't see it as flaming, I see it as keeping things in a factual, relevant context. And keeping things in context often means pointing out that those who want to see a bottom (NAR, RE investors, homeowners, Wall Street, the banks, the Feds) will, even when there isn't one to be seen.

James said...

"Keeping in mind that it was once universally agreed that we'd have a "soft landing", anyone who said otherwise back then was ridiculed, ignored, name-called, and generally outcast. So most of us know a thing or two about being treated adversely."

Oh, I know exactly what you mean. Try being in the banking industry during the run-up and having all your subordinates point fingers at you for being a renter and giving the usual rhetoric about prices never coming down.

"I see it as keeping things in a factual, relevant context."

But only when those facts align with your agenda of never ending housing slump. As time goes on, more and more data pointing to a bottom is going to emerge and you will have no choice but to take it into consideration without bias.

Luca, I think you are a positive bright guy and will do fine in your financial endeavors.

Jacob said...

Oh, I wasnt really picking on Luca at all. I wasnt even challenging the bay area data just the part about sac being next.

Back in 2004 you couldnt even mention that homes would stop appreciating at 10% or more per year without getting laughed out of the room.

Now here we are closing in on a 50% decline and homes are still not really affordable by any measure.

I would be very happy if housing bottomed out tomorrow. Then I would feel comfortable buying something.

I also would be fine with homes losing 80% of their value in a vaccuum.

But what worries me is that the housing market wont collapse in a vaccuum. And what will happen to the rest of the economy.

But anything thinking we are at the bottom is just wishing. There are too many problems with our whole economy and it will take some time to get back on track.

Tyrone said...

Rents in the bay are are going up.

So what's the big deal? I'm in Santa Clara; since the dot-com bust my rent has only gone up once--$50/month. But just after the dot-com bust, my rent went down $200/month.

My salary, on the other hand, has gone up many times that amount. $50/mo, $200/mo, $400/mo,... BFD.

lexi said...

Maybe all the Bay area people who
moved and bought houses in the Sacramento area and have since been
foreclosed upon are moving back
and renting in the bay area again.
With gas prices up it's cheaper to
rent in the bay area then to buy
and commute from Sacramento. Of course this would just make matters
worse for Sacramento... more empty homes with no demand.

Diggin Deeper said...

The picture isn't as clear today as it was two or three years ago. During this blog's beginnings we were dealing with the obvious. RE prices were too high and had to come down...it gathered supporters and opinions that were basically in line. The bubble popped and prices have fallen nearly 50% off their highs. So it's clear now that opinions as to where our market is going from here will be as spirited and widely divided as they should be. The days of singing in unison on this blog are over...and thankfully so because its necessary and helpful to those considering buying at current levels.

However, the bigger picture has really clouded the market. I don't question the resilience that James spoke of, I do question our buoyancy. As time goes on we're beginning to see that the financial problems plaguing our institutions are systemic and not a mere symtptom the RE bubble posed. Since this blogs beginning we've added in an inflation component, a recession (some would disagree), job losses, and a consumer that's on life support. Combined they don't add positive sentiment for buying anything...much less housing.

While I don't believe prices in some isolated hardhit areas will fall much further, I do believe that prices in areas that have not experienced an appreciable decline will do so. I've maintained this position once the foreclosure communities dropped as far as they have.

The caveat lies within the financial problems we're experiencing worldwide...If it gets much worse, it might be best to wait because we really don't know nor have we been told just how bad the situation is right now.

I don't have a burning desire to buy a home right now...so I'll wait and see how the game plays out.

Deflationary Jane said...

"Because inventory is not hte only factor that drives prices."

Ain't that the truth. A friend and her husband are looking to buy in Sac proper (despite my chart graphs etc). They went to get a new prequal. Last year, they were approved for 310k. In Feb, 245k. The new one came in at 105k. The lender refused to consider the husband's income as he had a 689 score. I kid you not. This is with great state jobs and 10% down. That means the only places they can look is del paso and oak park where they will have 20%. I guess that is the banks goal.

And despite her RE dementia, she did have one important point, if investing in RE becomes cheaper in the BA with it's better job market, wages etc., why would people continue to speculate in Sac?

On the phone with another friend in the BA last night, jobs are not doing well. Lots of people looking for second jobs with none to be found. Folks staying on contracts, perm jobs hard to come by. These are engineers who've been 5+ years in the industry and the area.

Me, I just want the river to stay down, along with the humidity. We're getting foreclosures here but generally it's all in the suburbs, regardless of how pricy the suburb is. But STL is about 18 mo. behind you folks.

And the name calling was fun. I love watching the bull get nervous, very nervous >; )

Diggin Deeper said...

http://www.economist.com/finance/displaystory.cfm?story_id=11751139

This is a foreign rag's view of the Fannie / Freddie mess. Kind of gives a perspective without agenda and further indicates that our RE problems are likely to continue...

Patient Renter said...

But what worries me is that the housing market wont collapse in a vaccuum. And what will happen to the rest of the economy.

Exactly. Watching housing prices fall is nice and all, but it's all for nothing if we all end up jobless.

It amazes me to see how much damage can be wrought by loose money.

James said...

dd, thanks for the economist post. I always like their perspective.

I think there is a good chance they will be taken into conservatorship in the next year and I am make some bets on that.

If the government does take them over, the equity (not debt) holders are toast. If they do survive, stock prices will post a sizable recovery. I am playing this by buying 2010 calls on FNM and 2010 puts on FRE. An off pair strangle of sorts.

In any case this all points to mortgage rates going up. Should the GSE's be nationalized, their activity will be reduced, thus making banks originate and hold more of their originations. Banks will charge more and be more picky as well.

Jacob said...

No financial instituation should be allowed to get "too big to fail". If they start to get so big that their failure will take everything else with them then the government should be breaking those companies up.

Rates have nowhere to go but up. In fact they have been steadily climbing. The FED can cut rates all they want but it doesnt change the mortgage rates.

Diggin Deeper said...

James

I am playing the short side of the long bond with an equal long in foreign TIPS. T bond rates are ticking up 3 days straight looking to make it 4 today.

Higher rates will continue to erode a prospective homeowners ability to afford. Add in the true rate of inflation (suspect around 10-12%), while continuing to suppress wages, and that hammers away at the budget of future homeowners ...not to mention those that bought but either couldn't or could barely afford. It doesn't make our markets in Sacramento any easier to deal with.

We're in "whack-a-mole" mode waiting to see who pops up next always at the ready to douse (ignite) the problem with more cash.

Diggin Deeper said...

Jacob...

I don't know who said it but this sums it up regarding the GSE's..."Too big to fail, too big to bail"

James said...

"I am playing the short side of the long bond with an equal long in foreign TIPS. T bond rates are ticking up 3 days straight looking to make it 4 today."

Not bad, I have also been short the 10 year note since March as well by selling calls aginst TLT. I am naked, but my exposure is so limited. How much lower could rates really go? If the 10 year goes to 2% I am at break even, a bet I feel good with.
I think equities will see a little weakness this week and bonds will settle down a bit. For the last three years I buy I-bond certificates and Amercian Eagles every quarter and put them in the safe for a rainy day as my inflation hedge.

Diggin Deeper said...

Not to get too far OT....

I'm with you on the Eagles but won't do the US TIPS right now. Not only will the bond values erode (as rates rise) but if the dollar continues to erode it could take the inflation premium with it. Would rather offset the dollar exposure with other currencies and pick up the inflation premium, too.

Getting back on track here's another tasty little tidbit from last week...

http://www.reuters.com/article/reutersEdge/idUSN1655761520080716?pageNumber=1&virtualBrandChannel=0&sp=true

paranoid renter said...

Nice story here in the Economist. It's all gloom and doom. Scary reading such articles...I might have worked my ass off and saved for nothing...
http://www.economist.com/finance/displayStory.cfm?source=hptextfeature&story_id=11751139

Diggin Deeper said...

Big time hit to Wachovia...$8B +

The GSE's might get a bailout but soon there won't be enough in the wallet to bail out the others...

Patient Renter said...

From that economist article:

In the end, the turtle at the bottom of the pile is the American taxpayer. But that suggests that, if Americans are losing money on their houses, pensions or bank accounts, the right answer is to tax them to pay for it.

Wrong. The right answer is to leave the taxpayer OUT of it since they had absolutely no involvement in the transaction whereas various other players (bondholders, execs, employees, shareholders, business partners) did have involvement.

I am getting tired of these socialist a-holes calling for the use of my hardearned money to clean up the aftermath of other people's stupidity and mistakes.

A wise man once said:

"The most basic principle to being a free American is the notion that we as individuals are responsible for our own lives and decisions. We do not have the right to rob our neighbors to make up for our mistakes, neither does our neighbor have any right to tell us how to live, so long as we aren't infringing on their rights. Freedom to make bad decisions is inherent in the freedom to make good ones. If we are only free to make good decisions, we are not really free."

Diggin Deeper said...

PR....appreciate where you're coming from on this....there's not enough money to gleen from those at fault to correct the excess...in the end someone's got to pay...and you know who that's going to be...

Looks like the GSE package could be $25B initally per govt estimation...kind of scary because those initial estimates, from ivory tower types, usually are way off the mark...per the norm, we're starting to be walked up gently to what the real number will turn out to be.

The real problem is trying to determine just how big those losses really are. If you recall, the best accounting minds in the country tried for several years to get to the bottom of Freddie/Fannie books and were basically unsuccessful.