Monday, August 04, 2008

'I don't think any of us are guaranteed anything anymore'

Recently foreclosed homes made up 61.4% of all resales in Sacramento County during the second quarter. That was the 6th highest rate in California, according to DataQuick (via Jon Lansner's blog). The usual suspects: Merced, San Joaquin, and Stanislaus captured the first three spots, with Yuba at #4.

Sacramento Bee housing reporter Jim Wasserman appeared on CNBC.

From the Sacramento Bee:

Unlike an elite city like San Francisco, Sacramento's growth has been fueled by an influx of educated, family-oriented residents – the populations that have been fleeing such high-priced places where the housing supply is constrained.
...
The fact Sacramento has fared far better than these cities over the past 15 years suggests the region's recent problems lie not in a lack of downtown condos and nightlife, but with a housing market that, as in much of California, has been totally out of whack. Once a consistently affordable locale, by the mid-1990s Sacramento's housing prices jumped almost nine times income growth, an unsustainable pace seen in a few areas such as Riverside, Miami and Los Angeles.

As a result, the refugees from the coastal counties who had been coming to Sacramento for affordable housing stopped arriving. Net migration to the region, more than 36,000 in 2001, fell to less than 1,000 in 2006.
From the Sacramento Business Journal:
“In the past 12 months, I have seen builders slash their staffs by more than 50 percent and consolidate operations in one office,” said Angel Ahumada, founder of recruiting firm Integrity International. “Before the builders had offices everywhere — Sacramento, Central Valley and the Bay Area. The current trend is to have one office run all three.”
From the Sacramento Bee:
Californians – spooked by negative economic news and the tens of billions of dollars they've lost to rising gas prices and disappearing home equity – are ratcheting down their spending. It's true even for those who've avoided foreclosure or a pink slip. Tim Einer, a software trainer in Lincoln, considers himself upper middle class but has seen his home equity fall by $225,000. He traded his Jaguar for a fuel-efficient Chevy, scrapped a European vacation and stocks up at Target whenever possible. "I have worries all the time – you just see how the economy is," Einer said. "I don't think any of us are guaranteed anything anymore."
...
The falling real estate market has been doubly burdensome for Meredith Wharton, a Folsom real estate agent. Not only is she "working twice as hard for half the reward," she and her husband, Mark, have had to adjust to the decline in their own home equity. Because they both live mainly on commission income, they frequently use their home equity line of credit to smooth out fluctuations in their paychecks. But their available credit was recently cut in half, to $50,000, reducing their financial cushion.
From the New York Times:
The first wave of Americans to default on their home mortgages appears to be cresting, but a second, far larger one is quickly building. Homeowners with good credit are falling behind on their payments in growing numbers, even as the problems with mortgages made to people with weak, or subprime, credit are showing their first, tentative signs of leveling off after two years of spiraling defaults.
...
“Subprime was the tip of the iceberg,” said Thomas H. Atteberry, president of First Pacific Advisors, a investment firm in Los Angeles that trades mortgage securities. “Prime will be far bigger in its impact.”
From the Sacramento Business Journal:
Aggressive belt-tightening efforts by lenders and a dismal economy put the squeeze on the commercial investment property market in the Sacramento region during the past year. Investors plowed almost $5 billion into Sacramento office buildings, shopping centers, apartment buildings and warehouses in June 2006 to June 2007, fueled by a seemingly endless supply of “cheap” money. But in the past 12 months, investment has declined to about $2.1 billion, a 58 percent drop from the peak, according to figures from brokerage CB Richard Ellis.

“It’s a weird time right now,” said Jon Wilcox, a senior associate at CB Richard Ellis who exclusively represents investors looking to purchase income-producing property. “Nobody can find a price point yet. ... (Investors) can sense blood in the water. They’re going in and offering 10 (percent) to 15 percent lower than the asking price.” He said foreclosures that have driven housing prices down might start hitting investment property soon.

5 comments:

Deflationary Jane said...

I know it's juevenile but I just can't help myself...

"Net migration to the region, more than 36,000 in 2001, fell to less than 1,000 in 2006."

Told you so >; )

wannabuy said...

The falling real estate market has been doubly burdensome for Meredith Wharton, a Folsom real estate agent. Not only is she "working twice as hard for half the reward," she and her husband, Mark, have had to adjust to the decline in their own home equity. Because they both live mainly on commission income, they frequently use their home equity line of credit to smooth out fluctuations in their paychecks. But their available credit was recently cut in half, to $50,000, reducing their financial cushion.

Let's see...
1. No more 'money from heaven' for little to no work.

2. No more MEW to prosperity. Oh my... they might have to save! Oh, the horror!

3. And I'm sure this was posted to illustrate how they were living beyond their means. Poor babies, no luxury European vacation. Sniff... Sniff...

As to net migration, I expect all of California to be negative for 2008/2009.

Got Popcorn?
Neil

smf said...

First of all, as a reminder for all, the rich get rich by knowing how to spend their money, if they spend it at all.

Second of all, it is a simple confirmation of those who pointed out to the population growth to save us all.

Guess what?

Not gonna happen.

mopar777 said...

Meredith baby - why don't you produce something of value instead of just pulling a hustle to get the sale. My wife and I both produce items of value with our hands and guess what - we've never hit a big dropoff in business in the 20 or so years we've been in out businesses, and our jobs will never be outsourced. My neighbor lives like you do. His specialty is (was) mortgage lending. During the past 17 years he's had two really rough spots when they were eating soup and hamburger helper for dinner and sending the kids over to scam food from us. When times were good they acted king and queen of the mountain and spent money like drunken sailors. Alas, now the guy is in his mid fifties and faces age discrmination. The daughter was picked up for shoplifting lately...

Jacob said...

People from the Bay moved here to commute because it was cheap to buy a home here. Take that away and through in higher gas prices and what did anyone expect...

Real estate agents really had it made for a few years. Their income doubled or trippled while most every other job was little or no increase.

And what work did they have to do over the past few years? Just list a home and wait 5 minutes for all the offers to start pouring in...

Now you have to actually work? Poor baby...

I agree with mopar. If you actually produce something of value you will be much better off. If you are just chasing the next get rich quick sceme, then good luck.

I make things with my hands as well, so to speak, not physical things, I use a keyboard to make computer applications. Each year for the past 8 or so has been better than the last for me. This year, even as we are in a recession, is going to be my best year yet.

If you make something that people want, something of value that can't be mass produced for a nickel in china, then you are much better off.