Thursday, October 16, 2008

'Foreclosures have taken the place of new construction'

From the Sacramento Bee:

The excesses of the housing boom pushed another major Sacramento home builder and land developer on Wednesday to seek personal bankruptcy protection from creditors. Christo Bardis, co-founder of Sacramento-based Reynen & Bardis Communities, filed for Chapter 11 protection in U.S. Bankruptcy Court in Sacramento, the development firm announced. He listed liabilities of $100 million to $500 million and assets between $10 million and $50 million.
Most of the millions of dollars now owed by Bardis and Reynen were used to pay for thousands of acres of land that have since collapsed in value. "Both he and John Reynen … backed a lot of these deals with their personal fortunes," said Dean Wehrli, a vice president with the consulting firm Sullivan Real Estate Advisors. "They were way, way too hungry for land during the good years and even a little bit beyond. … They were still buying even after it was obvious that things were changing."
From the CVBT:
For landlords, it’s not been a year of contemplating vacations in Bora Bora. The average rent per square foot in the Central Valley in the third quarter was $1.11, a penny higher than in 2007 [according to RealFacts].
From the Stockton Record:
San Joaquin County home construction remains in the doldrums, based on the latest building permit figures from the Construction Industry Research Board. The Burbank-based research board reported that in the first nine months of 2008, county builders took out 641 permits for single-family homes valued at a total $143 million. During the same period of 2005, the height of the housing bubble, local governments issued nearly eight times as many home building permits, 4,976 in all, with a value of $1.17 billion.
John Beckman, executive officer of the Building Industry Association of the Delta, said area home builders at looking at 2010 for any upswing in activity. "Foreclosures have taken the place of new construction," he said Tuesday, noting that there's probably a year's worth of inventory - foreclosure homes being actively marketed or simply vacant - that needs to be absorbed at current sales rates.
From the Sacramento Bee:
U.S. automakers' efforts to streamline operations continue to chip away at Sacramento area new-car dealerships. On Wednesday, Chrysler Jeep of Elk Grove said it is ceasing new-car sales as part of a consolidation buyout, but the site will remain in business as a large-scale used car lot.
Forbes: America's Worst Bang For The Buck Cities - #10 Sacramento

From the Mercury News (hat tip HBB):
[CAR chief economist Leslie Appleton-Young] predicts the median price of the houses sold statewide next year will be $358,000, down 6.0 percent from $381,000, which is CAR's estimated median price for all of 2008.
She acknowledges that her calculations for 2008 turned out to be wrong by a longshot...[F]or the median price, it was forecast to drop just 4 percent. Now, Appleton-Young estimates the state's median house price for 2008 will be 31.7 percent lower than in 2007.

Why such a big gap in forecast versus reality? "What we missed was the credit crunch at the high end in the jumbo market," Appleton-Young said. She noted that she was working on last year's forecast just as financing for jumbo loans began to tighten, but the full effects weren't yet evident in September 2007.

Stephen Levy, an economist at the Center for Continuing Study of the California Economy, in Palo Alto, said the Realtors' forecast for 2009 is "at the optimistic end of plausible. Last year they were clearly wrong," he said, and he questioned Appleton-Young's prediction in CAR's report Wednesday that a California recession could end by the second half of 2009.


Jacob said...

hmm, so 4% predication by a shill turned out to be 31% down. So 6% should be good for at least 20% if there if things start to improve to 40% if things get worse.

Either way, I'm firmly in wait and see mode.

CA will have a worse budget problem next year than this year. More job losses to come. Credit will be tight for years, if not forever. If we base tightness of credit on the bubble years, credit will always be tighter. Banks will be demanding 20% down for any non FHA loan, and good luck finding a pickyback lender.

But at least we are closer to the bottom than the top. We are 50.4% down and it can only go down 49.6% more at most...

Maybe another 15% off plus some time to absorb the excess and we can get back to a normal market. At least 2 years once foreclosures peak imo. And who knows when that will be.

Golden 1 to the Rescue said...

Yes, but will it really take that long if everyone who has already faced foreclosure could just jump back in at a lower price.

I like my home and can easily afford my payment, but why wouldn't I let it go, if I can just turn around and by it again for 80% of my current loan balance?

The bailout package and the Hope 4 Homeowners legislation really has the potential to rain on the prudent and patient buyers parade.

It could get much worse and it probably should, but will the Feds let it?

wrong moves said...

"I like my home and can easily afford my payment, but why wouldn't I let it go, if I can just turn around and by it again for 80% of my current loan balance?"

This type of thinking is becoming very prominent IMO. I find it frankly morally disgusting and just plain slimy. It seems there is no personal pride or responsibility any more. All of these people made a legal contract and a promise to pay back the money they borrowed. Why don't you all just break the promise to your spouse, hell I bet many Marines would like to go back on the promise to serve their country while they are pinned down by some camel jockey with a gun.

I wish those mortgage owners would just take what is coming to them, but that isn't what this country is about any more.

For those of you who are thinking it, YES, I am thinking about moving to another country, just because I can.

smf said...

Wrong Moves:

It would be only logical to let a house go if its value falls down hard. $100K would get someone a good college education. Two excellent cars, etc.

And a $100K drop is nothing compared to what I have already seen out there.

But in a moral sense, it is not correct.

Cow_tipping said...

Milton Freidman I think said ... the main job (he said only job) of government is to enforce contracts. essentially bring back debtors prison, throw the case serins of the world in jail and make them work their debt off or they can live free and stay with the terms of the original contracts. If they are the victims of some fraud ... as in the mortgage broker changed their salary and forged their signature, then do the same with the broker. Else its just too easy to walk.

Patient Renter said...

the main job of government is to enforce contracts.

That's true. If you read our historical documents you'll find that the primary role of government is to protect the freedom and liberty of its citizens. Enforcing contracts is one aspect of this.

Somehow we've gone from having the government protect liberty to having it provide like a parent, sacrificing liberties in the process. I always think of this exerpt from the Creed of Freedom:

"If government is powerful enough to give us everything we want, it is also powerful enough to take from us everything we have. Therefore, the proper function of government is to protect the lives, liberty, and property of its citizens; nothing more. That government is best which governs least."

Jacob said...

I agree there is a moral issue of people not paying their mortgage when they are able to, but, their contract has remedies.

For example, the loan is secured by the asset, in this case the house. If the debtor defaults the bank gets the asset.

Too bad the asset is worth less than half the loan amount, that is the banks fault.

The banks made these risky loans and didnt require any downpayment, so they need to just go bankrupt and go away and die for thier stupidity.

The home owners were never going to pay back the mortgage except with more debt.