Tuesday, August 12, 2008

"The Complete Opposite of the American Dream"

Excellent post by Max over at SacRealStats about Sacramento's shadow inventory.

The Sacramento Bee has a fancy interactive graph of Sacramento home prices back to 1990.

From Home Front:

Four in 10 homeowners who bought houses in El Dorado, Placer, Sacramento and Yolo counties since 2003 now owe more than their homes are worth, according to the online real estate firm Zillow.com.
From Bloomberg:
In four of the state's metropolitan areas -- Stockton, Modesto, Merced and Vallejo-Fairfield -- the number of homeowners whose mortgage debts exceeded the values of their properties topped 90 percent, Zillow said. In five more California areas -- the Inland Empire (Riverside-San Bernardino), Bakersfield, Yuba City, El Centro and Madera -- the percentages were more than 80 percent.
From the CVBT:
Tops in California for foreclosure sales per capita in July [per ForeclosureRadar] was Merced County at one foreclosure for every 409 residents, a jump of 305 percent compared to July 2007. Second is Stanislaus County, with one foreclosed home for every 488 residents, a 287 percent year-over-year increase. San Joaquin County is in third, with one for every 491 residents, an increase of 204 percent...Other Central Valley counties making the top ten for July are Yuba, with one foreclosure action for every 541 residents, an increase of 169 percent, and Sacramento, with one for every 704 residents, a 156 percent year-over-year increase.
From the CVBT:
The Central Valley inland seaport city of Stockton is adrift in an ocean of red ink when it comes to home sales, according to a report from Zillow.com, a Seattle, Wash.-based online real estate information company. While U.S. home values dropped nearly 10 percent in the second quarter compared to the same period a year earlier, home values in Stockton plunged 38.2 percent. Zillow says 63.4 percent of the homes that sold in Stockton in the second quarter sold at a loss.
...
Stockton’s median home value was put at $216,100, down 38.2 percent in a year and down 47.6 percent from the market’s peak, Zillow says.
From the Guardian:
The stellar increase in house prices was inflated first, fastest and furthest in California. So it is not surprising, now that the bubble has burst and the market is in freefall, that places like Stockton are suffering more than most...But the city is far more significant in the big picture of California's troubled economy than many realise. The problems facing this part-old, part-new city are being duplicated all over the state, causing an economic ripple effect that could push America's biggest economy to the brink of collapse.
From the Sacramento Business Journal:
Even a signature project such as the L Street Lofts in midtown Sacramento isn’t immune from the effects of the housing downturn. The top-floor penthouses that overlook the city were snapped up quickly to the delight of developer Sotiris Kolokotronis, including one loft bought by Kings basketball player Kevin Martin. About half of the 92 units, however, are still empty since the lofts opened for sales late last year. Kolokotronis and partner Resmark Equity Partners LLC are now in dispute over the project, according to sources familiar with the situation.
From the Fresno Bee via the Modesto Bee:
Merced-based County Bank's parent company reported Monday that it lost $12 million in the second quarter of 2008 as it increased its provisions for bad loans tied to the region's declining real estate market.
...
Key to the 41-branch bank's increasing loan-loss reserves is its "exposure to real estate declining rather dramatically in the Central Valley," Richard Cupp, the newly appointed chief executive and president of the company, said in a Monday conference call with reporters.
From the Modesto Bee:
City Council members Monday advanced a package of proposals meant to provide relief for cash-strapped builders in a down housing market.
From the Sacramento Bee:
A lot of what I'm seeing is people who were looking to upgrade their homes, and were told by real estate agents, as well as mortgage brokers, they would be able to refinance in a few years. They were told that home prices would go up, that they really didn't need to be too concerned about these adjustable-rate loan issues. And there are a fair number of people who didn't have a financial savvy about them, and believed on an $80,000 income they could afford a half-million-dollar house.

I was an economics major in college. The rule I was taught was multiply your income by three, and that's the most expensive house you can afford. Everybody seems to have ignored that rule, which worked so long for so many people. Not just consumers, but brokers and real estate agents ignored that, as well. They believed multiples of five, six and seven were going to be sustainable.

From Home Front:

This afternoon came a call from Sacramento, a woman looking for help for her sister who lives in Vacaville. Their loan payment went from about $2,000 a month to $3,200 or so, she said. She said the loan was from Washington Mutual, which makes me suspect Option ARM. That's where the payment that most people make doesn't even cover all the interest. The loan gets bigger. She was looking for some kind of phone number for help. I sent her to that HOPE NOW hotline, 888-995- HOPE. It was another sad story of two hard-working people, a Spanish-speaking mom and dad, who got "snookered" by a loan they didn't understand. Now they're having to figure they might end back up in an apartment with the kids. The complete opposite of the American Dream.

6 comments:

sacramentia said...
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sacramentia said...
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Cow_tipping said...

Think of the hard working sensible family that could not buy a house 3-4-5 years ago because they knew they had to stay under 3X of their income and these people bid up the prices into the unsustainable zone. I'd say those people are soon going to ahve a dream comming true. Every house that is "lost to foreclosure" is possibly one that a frugal and smart family can "realise the american dream" in. And they will truly own it, as in pay month after month and in a few years free and clear.
Cool.
Cow_tipping.

Jacob said...

Its only the American Banker's Dream that is dying... Along with realtors and their 20th century business model.

I have a dream too, to buy a home at 25 cents on the dollar from bubble prices. That dream is slowly coming true.

There is a really simple fix for the government to put in place to stop this boom bust cycle. Really simple to. If you buy a home and sell it within 10 years any profit not used to purchase another home if forfeited in taxes, 100%.

No more speculating, minimal investing except for true long termers. Also get rid of the FHA, Fanny and Freddy and require that banks can only loan 80% and the buyer must have the 20% to put down, no piggy back loans or anything else, money must be verified in their accounts for 6+ months.

Mandate that noone can be paid a percentage based commission on the price of the home. Flat fees only.

STOP ROSEVILLE CRIME said...

When are people going to learn that 1 + 1 does not equal 3. They were trying to get something for nothiner.

Also, when are people going to learn that downtown Sac isn't all that desirable. And who will pay a half million dollars to own a loft near where the bums like to urinate and where there's really nothing to do.

laureleaw said...

I live in midtown and would love to buy something close to where I live now. But I can't afford 350 - 600K, and most other people who live here can't afford it either.

The developers should have done some market research before they developed "luxury lofts."