Friday, October 17, 2008

Flippers.gov

From the Sacramento Bee:

The federal government soon will send Sacramento city and county nearly $32 million to help fix up foreclosed properties -- a tool to prevent deterioration in neighborhoods hard hit by the housing crisis. Sacramento received one of the largest allocations in the nation....

City and county officials today detailed a plan that includes paying developers to buy foreclosed properties, restore them and either rent or sell them. In an effort to spend the money more quickly, the county and city also would become real estate flippers. About 40 percent of the money would be used by SHRA [Sacramento Housing and Redevelopment Agency] to buy and restore properties then sell them directly to buyers.
From the Sacramento Bee:
The supply of competing single-family house rentals is still growing, says Janet Regan, a broker with Citrus Heights-based Horizon Properties, who manages 450 rental homes for clients. Investors are buying bank repos and renting them out, she says. Homeowners who left the region but can't sell their homes are renting theirs, too. "They don't have them on the market because the market is horrendous," Regan says.
From the Modesto Bee:
Apartments, of course, aren't the only rental option for Modesto families these days. There are thousands of rental houses in the city, and their numbers are increasing daily as investors scoop up bargain-priced foreclosed properties. "We have a flood of investment homes on the rental market now," said [Debra] Clover, whose company manages more than 300 of them.
...
Many of the families who had been living in those [foreclosed] homes have left the county, Clover said. "When these people -- especially those who were commuting to the Bay Area -- lose their houses, they don't stay here to rent. They move closer to their jobs," Clover said.
From the Stockton Record:
Hank Klor, a Stockton-based tax and financial adviser, spoke to a 49-year-old single mother who owes nearly $250,000 on two mortgage loans, recently had her income drop by a third and can't make her paycheck stretch over all the necessities anymore. With her home worth only $140,000 to $150,000 because of falling prices, refinancing seems impossible. She might seek to have her loans modified, get the lender to agree take a loss on a short sale or, Klor said he told her, "You need to look at the possibility you may have to walk away from your home."
From the Sacramento Business Journal:
Year-over-year, the capital region lost an estimated 9,800 jobs, or 1.1 percent of the total. There were 3,700 fewer construction jobs; 3,700 fewer retail trade jobs; 2,900 fewer leisure and hospitality jobs; 2,200 fewer financial jobs; 1,300 fewer government jobs and 1,000 fewer manufacturing jobs than in September 2007, when the local jobless rate was 5.4 percent.
From the Stockton Record:
Hayward-based department store chain Mervyns LLC is expected to announce today that it is filing for Chapter 7 bankruptcy protection, a move that means shutting the doors of its 175 retail outlets, including two in San Joaquin County.
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[N]ine are in the greater Sacramento area....

6 comments:

smf said...

So...

Are we seeing the beginnings of a rental housing excess bubble?

*chuckle*

seshadri said...
This comment has been removed by the author.
Diggin Deeper said...

One of the key areas that will affect the rental markets here would have be job losses. Couple that with rising Treasury Bond interest rates and the picture doesn't look too good.

It's interesting to watch the bond market as the Treasury prints more and more paper to stabilize the credit markets and liquify the rest of the world. As with the RE market, when there's an oversupply of anything it causes prices to come down low enough to get a bid. As we know in the case of bonds that means that as prices come down, interest rates rise. And if the recent TIC report is any indication, we're not getting too much foreign support right now. In August the Treasury received less than $20B in net foreign purchases after receiving less then net $7B the previous month. We're now three months in a row where we have been unable to fund our monthly nut from foreign debt purchases.

We do get a break on gasoline prices as it looks like oil prices will continue to slide as long as the dollar continues to rise or remain at this level. But I'm banking that oil will not stay low for too long as we are continuing to print money as fast as the world demands. We might get a short term reprieve (maybe a year) but unless deflation and depression are the net result of all that's going on, inflation will have its way before too long. And that would mean that the dollar would give in, and oil prices, along with other dollar denominated commodities would respond. I wouldn't be surprised if we test new highs on oil sometime in the next 18 months, but that's only if we find ourselves in a recession rather than a depression.

Sacramento real estate is probably deeper in trouble than most could have imagined and the economic problems we face should keep the lid on for many years to come. The severity of the downturn, with net job losses, rising interest rates, and volatility in other major markets, just keep beating down on a very thinly diversified city.

PeonInChief said...

Hmmm. What the situation in Modesto points up is that supply and demand doesn't work in rental housing markets. If a 15% vacancy rate doesn't pull down rents substantially, I think we may have to try something else.

Cow_tipping said...

I think every market in the country has over supply ... by atleast 1000 houses in the smallest markets and over 10,000 in larger markets.
Market is dead for years to come ... just that some places are dodging reality ... for now. DOA in all areas IMHO. Do not underestimate the power of flooding the market.
Cool.
Cow_tipping.

Cow_tipping said...

And who else thinks that the goverenment is capable of buying houses, fixing it up cheaply and selling for a profit ... who else ...
Its going to end ... very very badly ... painfully horrible.
Cool.
Cow_tipping.