"The Acceptable Lust"

From the Sacramento Bee:

Sacramento-area home sales tailed off slightly in August from their July highs, while median prices in Sacramento County, the largest sector of the region's real estate market, held steady at $210,000. Though only one month's worth of data, it show the first time since May 2007 that median prices in Sacramento County have not fallen from the previous month.
...
Sacramento County's $210,000 median sales price...is down 32.7 percent from the same time last year, and off 45.7 percent from the county's August 2005 high of $387,000.

From the Sacramento Bee:

The refinancing wave is on. Prompted by the financial chaos on Wall Street and the move by investors to the kind of bonds that fund mortgages, rates have plunged fast the past two weeks. But here's the bad news: Those in need most of refinancing probably can't. Credit standards are tight, locking out all but the most qualified borrowers.

"Credit standards are getting higher all the time," said William Martin, chief executive officer of the Bank of Sacramento. Martin said many lenders have taken such big losses on mortgages that they simply have less money to loan.

The dramatic drop in values over the past two years also means it will be difficult for many borrowers who now owe more than their homes are worth to refinance. "For every one we're accepting we're having to turn away two because there's not sufficient equity for the property," said Brent Wilson, a mortgage strategist with Sacramento's Comstock Mortgage.

From the Sacramento Business Journal:

The Modesto Bee this week announced plans to lay off 12 employees, including its sports editor....The layoffs are part of a companywide effort announced this week by The Modesto Bee’s parent, The McClatchy Co., to reduce its work force by another 10 percent, or about 1,150 full-time positions.

From the Sacramento Business Journal:

The McClatchy Co.’s credit rating was downgraded by two notches Wednesday as Moody’s Investors Service put the Sacramento-based newspaper publisher deeper into junk bond territory. Moody’s lowered McClatchy’s credit rating to B2 from Ba3....

From Portfolio.com:

In all the public finger-pointing about the American real estate bust, surprisingly little attention has been paid to its origin...However terrible the sins of the financial markets, they’re merely a reflection of a cultural predisposition. To blame the people who lent the money for the real estate boom is like blaming the crack dealers for creating addicts. Americans feel a deep urge to live in houses that are bigger than they can afford. This desire cuts so cleanly through the population that it touches just about everyone. It’s the acceptable lust.

Consider, for example, the Garcias. On May 30, the New York Times ran a story about a couple, Lilia and Jesus Garcia, who were behind on their mortgage payments and in danger of losing their homes. The Garcias had a perfectly nice house near Stockton, California, that they bought in 2003 for 160 grand. Given their joint income of $65,000, they could afford to borrow about $160,000 against a home. But then, in 2006, they stumbled upon their dream house. The new property was in Linden, California, and, judging from its picture, had distinctly mansionlike qualities. Its price, $535,000, was a stretch.

Then, of course, the market turned. The Garcias failed to make their mortgage payments and couldn’t sell their original house. They owed the bank about $700,000 and were facing eviction. The mistake supposedly illustrated by the Garcias’ predicament was that they held on to their former home in Stockton as an investment. The moral: Americans are in their current bind because too many of them saw houses as moneymaking opportunities.

But the real moral is that when a middle-class couple buys a house they can’t afford, defaults on their mortgage, and then sits down to explain it to a reporter from the New York Times, they can be confident that he will overlook the reason for their financial distress: the peculiar willingness of Americans to risk it all for a house above their station. People who buy something they cannot afford usually hear a little voice warning them away or prodding them to feel guilty. But when the item in question is a house, all the signals in American life conspire to drown out the little voice. The tax code tells people like the Garcias that while their interest payments are now gargantuan relative to their income, they’re deductible. Their friends tell them how impressed they are—and they mean it. Their family tells them that while theirs is indeed a big house, they have worked hard, and Americans who work hard deserve to own a dream house. Their kids love them for it.