'Rewarding Risky Behavior Will Only Perpetuate the Problem'

From the Sacramento Bee:

Nearly 7 percent of home loans in El Dorado, Placer, Sacramento and Yolo counties were 90 days or more delinquent during June...up from 2.8 percent the same time last year...First American CoreLogic reported today.

From the San Jose Business Journal:

Home builder Taylor Morrison Inc. has merged its Bay Area and Sacramento operations into a new Northern California division with its divisional office based in Sacramento. The company has cut its regional staff by about 33 percent, or roughly 35 people, said Steve Wethor, western region president for Taylor Morrison.

From the Sacramento Bee:

[T]he growing store closings and empty commercial spaces are an eerie echo of the housing downturn that has slammed the region...For the longest time, the retail sector and commercial real estate were relatively immune to the meltdown that spread through residential real estate. No more. An almost identical chain of events that took down housing in Sacramento is spreading into shopping and its vast network of building owners, leasing agents and national investment brokers.

"As the bottom was dropping out of the housing market, I hardly noticed a thing," said Scott Crowle, associate director of national retail for Encino-based brokerage firm Marcus & Millichap. "Then it trickled down to my business." Crowle works in the broker's Rose-ville office. It recently released a national index that ranked Sacramento's retail scene in the bottom quarter of 43 U.S. metro areas.
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Like home builders in 2005 and 2006, commercial developers in the region overbuilt in 2007 and are still building as consumer spending slows...As with housing the past two years, there is too much supply in the commercial sector and too little demand. Building values are falling. Rents are, too.

From the Sacramento Bee:

The tough times have hit the RV industry hard. Three area dealers – La Mesa RV Center in Davis, Dan Gamel's Rocklin RV Center and Nu Star RV Center near Rancho Cordova – recently announced they're closing up shop...The reasons are all too familiar: Look to low consumer confidence, flat household incomes, high gas prices and tight credit for the decline.
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Henry Myers of Sacramento isn't waiting for the economy to improve. He was shopping the RV lots in Davis – including La Mesa RV Center – looking for a large trailer. "I know you hear this everywhere, but it's true: Now is the best time to buy," Myers said. "If you have the money to buy a house, prices now are lower than they have been in years. The same thing is going on now with (RVs)."

From the Sacramento Bee:

First the banks took away C.C. Myers' pride and joy. Then they moved to take away nearly everything else. The result was bankruptcy. Stripped of his beloved Winchester Country Club housing development and facing the potential seizure of numerous personal assets, Myers filed for Chapter 7 personal bankruptcy protection last month.
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"I think this was his baby," said Donna Lucas, a retired Winchester homeowner whose living room overlooks the Sierra. "I just can't imagine the pain of putting your heart and soul into something at his age and losing it all. It's just tragic; it really is."

From the Press Democrat:

The Santa Rosa bank has more bad loans than any other local financial institution, the result of a risky bet on builders in the Sacramento region near the peak of the housing boom...About three-fourths of Exchange Bank's problem construction loans were made to builders with projects in the Sacramento area, according to bank officials.
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"They were proven developers with proven market success. They went to a market with very attractive performance. It was what we perceived as an intelligent risk," [bank president William] Schrader said. "If you look back now, you might call that an aggressive move. We certainly didn't see the full magnitude and I don't think any of the major players there saw a correction coming like this one."

What once was a promising region for Sonoma County builders has become a quagmire of homes that take months to sell.

From the Stockton Record:

For church Sunday, Pastor Kyle Hedwall had his congregation bring lawn mowers, form crews and spread throughout Mossdale Landing, a subdivision full of brown and weed-filled lawns in front of homes left vacant by foreclosure...Hedwall...mowed lawns on his street before calling for Sunday's mow. About 30 people mowed nearly 50 lawns, he said.

From the Stockton Record:

Dale Nichols, president and CEO of a real estate corporation that owns a Help-U-Sell realty franchise in Stockton and another in Lodi, said he expects the foreclosure market to have pretty much completed its run in San Joaquin County by next spring. Most adjustable-rate mortgages will have already reset by next year, he said, and the mortgage industry will be under growing pressure to work with struggling homeowners to keep them in their residences. "I'm looking for 2009 to have more stability in the market," he said.

Nichols said he's also seeing a lot of people looking at Stockton-area real estate via the Internet. "Basically, there's been a lot of bad press about the real estate meltdown in Stockton, and that has caused investors to come in and look at the market," he said. "They're absolutely buying."

From CNBC:

The federal rescue of Fannie and Freddie is just one sign we aren’t at the bottom of the housing mess yet. Other signs are all over Stockton, California. First dubbed “The Foreclosure Capital of America” a year ago, I came back this month, expecting to find some signs of a turnaround. I was disappointed.
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[N]o one seems to think we’re through the worst of it. “If we have the bulk of defaults in the pipeline now, we could wash it out within 12 months,” realtor Kevin Moran told me. When I asked if he thinks the “bulk of defaults” is in the pipeline, he answers, “No.”
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Realtor Kevin Moran is hanging on, hoping to ride it out. You could say Moran himself personifies all that’s happened in Stockton. Since we first met a year ago, his income has collapsed, and his own home went into foreclosure. Like a lot of other people around here, he’s trying to regroup. “My ego wants to say it happened to everybody,” he says. “And then my other side wants to say how foolish I was, and I think the truth is somewhere in between the two.”

From the Stockton Record:

The outer bands of a Category 5 mortgage hurricane began strafing San Joaquin County about 18 months ago, uprooting families, damaging homes, devaluing property, devastating whole neighborhoods and destroying lives. Yet the eye of this financial storm remains months away from passing over the Central Valley. The analogy to Hurricane Katrina that struck the nation's Gulf Coast three years ago was heard numerous times Saturday afternoon during a congressional field hearing on the foreclosure crisis that drew four members of Congress, nine key witnesses and about 100 interested onlookers to a meeting room at the Stockton Arena.

From CVBT:

[Rep. Dennis] Cardoza says 25 percent of his district has been, is now or will be in foreclosure. “We have some devastating consequences,” he says. There have been more 12,000 foreclosures in San Joaquin County since January 2007 and “there’s no relief in sight,” says Steve Guiterrez, who has been a county supervisor for 12 years.
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Foreclosure nightmares are not confined to Stockton. Merced Mayor[/Realtor] Ellie Wooten detailed the statistics for the hearing. There have been 2,185 foreclosures in Merced County so far this year, equal to one home out of every 20, Ms. Wooten says. It will just get worse, she says. Fifteen percent of Merced County mortgages are now delinquent by 90 days or more, she says. One out of 12 property owners unable to pay property taxes, she says.

From the Modesto Bee:

"We risk creating a moral hazard with government intervention to step in and save those who would otherwise lose their homes," warned state Sen. Michael Machado, D-Linden. "Rewarding risky behavior will only perpetuate the problem."

Machado predicted "the hardest hit areas of the Central Valley are likely to take at least two years before they hit bottom, and even longer before they begin to recover." He said foreclosures likely will keep increasing because so many valley residents took out risky adjustable rate mortgages that soon will require much higher monthly payments. "Unable to refinance due to minimal equity and tight underwriting standards ... many of the borrowers with payment-option ARMs (adjustable rate mortgages) are likely to become the next wave of foreclosures," Machado said.