Wednesday, December 10, 2008

"New Year Bodes Ill for the Central Valley" Economy

From the Sacramento Real Estate blog:

Prices have fallen yet again...Sacramento county is now at $122.69 a square foot, a drop of 34.3% over last November...Median price has also fallen for the same period - here we see a fall of 40.3% year over year. Median price last November was $293,000 and is currently $175,000.
From Sacramento-based Foreclosures.com:
The nation's foreclosure hemorrhage has finally slowed and 2009 should see a significant decline in foreclosures as buyers return, pushing home prices up and fueling a real estate recovery, according to the 2009 Outlook from ForeclosureS.com....

"Recovery is underway. Affordable is back in the housing market," says Alexis McGee, real estate expert, educator, and president of ForeclosureS.com. "In 2009, housing will not only recover, but we'll see buyers leap into this market in droves, depleting our housing oversupply, and actually put higher price pressures on the market. With 4.5% fixed mortgage rates, housing prices lower than they were 'pre-housing bubble', commodity prices lower, tax credits available for homebuyers, and the government eager to stimulate our economy, for the first time in years I can see prices rising again in 2009," adds McGee.
From the CVBT:
The New Year bodes ill for the Central Valley as the global recession deepens, says a new economic analysis by the University of the Pacific. “While home prices are beginning to find a bottom and real estate sales have surged with low prices, the outlook for the agriculture industry, trade, transportation and other key service sectors have weakened substantially in the past three months,” says the report written by Jeff Michael, director of the Business Forecasting Center at the Eberhardt School of Business at Pacific in Stockton.
From the Sacramento Bee:
Get ready for two years of 9 percent unemployment. California and Sacramento's jobless rate will top 9 percent sometime early next year and won't fall below it until early 2011, according to an economic forecast released Tuesday by the University of the Pacific. The higher unemployment is the obvious result of a deepening recession as the economy moves well beyond the initial job losses in construction and mortgage lending. "We're out of the housing thing and into a pretty severe … traditional structure of a recession," said Jeff Michael, director of UOP's Business Forecasting Center.
...
Michael said the Sacramento area figures to lose 2 percent of its jobs next year, a significant downturn.
From the Modesto Bee:
In preparation for slower times, Pacific Southwest Container of Modesto has laid off an undisclosed number of employees. The container manufacturer...joins a growing list of San Joaquin Valley companies that have scaled back their staffs to reflect slowing business...[A]s consumer confidence wanes and people buy less, there is less need to make and ship the goods that once flew off store shelves.
...
Initially, the decline in the valley housing market triggered job losses in real estate, finance, construction and other, related industries. As the economy continued to slow, the ripple effect has forced other businesses, including The Bee, to trim workers. Jeff Michael said he isn't surprised to hear of Pacific Southwest Container's layoffs. The director of the University of the Pacific's Business Forecasting Center said it is part of a coming wave in the manufacturing sector. Goods that people can put off buying will take a hit, Michael said.
From the Tracy Post:
As a soft housing market and rising food and fuel costs eat away many folks’ disposable income, the ancient art of bartering has become an increasingly common way to get what one wants.
...
Out-of-work Tracy carpenter Donald LaMmond, 42, can’t afford Christmas presents this year for his two daughters, ages 7 and 11, so he’s trading his handyman skills for board games and dolls to put under the Christmas tree. The contractor and his real estate agent wife, Kimberly LaMmond, 39, represent a pairing of two of the hardest-hit professions in today’s economy — definitely a source of stress for the couple, who sold their home 2½ years ago for much less than the loan that paid for it. "We’re both learning how to update our resumes, to get back out there," he said. "And we’ve applied to McDonald’s and Wal-Mart, but it’s hard to get out there — other people want those jobs now, too."

13 comments:

smf said...

"Recovery is underway. Affordable is back in the housing market," ..."In 2009, housing will not only recover, but we'll see buyers leap into this market in droves, depleting our housing oversupply, and actually put higher price pressures on the market.

*sigh*

Listen, not enough people for all those houses out there, OK?

Even if prices were 'normal', you still have too much out there.

And not only that, you will have new tracks that will slowly be abandoned.

And all those 'investors' that will soon realize that their expected profit does not materialize.

This has years to go before it plays out.

Jacob said...

Median price last November was $293,000 and is currently $175,000.

But last year was a great time to buy...

I wonder what we have more of, foreclosures, or bottom callers...

Prices are lower as are rates, sure, but job losses are hitting us now. If you don't have a job then it doesn't really matter how much a home costs...

And job losses are starting to pick up. We were doing about 100k a month and last month was 700k or so, and during a month that usually adds seasonal jobs.

It will likely get a lot worse in 09. Eventually we will reach the bottom, but I don't see it happening in 09.

who sold their home 2½ years ago for much less than the loan that paid for it.

They sold it at the start of 06 and took a huge loss? That was very close to the peak...

patient renter said...

"Affordable is back in the housing market," says Alexis McGee

According to who? The NAR? The CAR? It's certainly not affordable according to any serious non-industry affiliated housing expert. We need facts, not propaganda.

housing prices lower than they were 'pre-housing bubble'

Sorry Alexis, no, just, no. The median is not everything. A "real estate expert" such as yourself should know that, but of course you're no expert.

This game where "experts" from god knows where cheerlead a crashing market that is having absolutely devastating effects on the domestic and global economies is not only old and tired, it is criminal. This exact sort of cheerleading was the sandy foundation upon which our current economic crisis was built, and somehow you see it fit to cause even more damage with more cheerleading. Haven't we seen enough pain from the same sort of misinformation you're spouting?

The market has crashed to hell. It hasn't "softened", it hasn't "soured", it won't be better next spring, the market is not going to come roaring back, buyers are not going to flock "in droves" to buy houses - they're going to flock in droves to the unemployment lines. Foreclosures will pile up for years. Houses, condos and neighborhoods will sit vacant for years. The excesses were unprecedented, and so too will be the continuing aftermath.

It's not a game anymore, this neverending onslaught of BS propaganda from self-interested industry associated "experts" is damaging, and really, it's no longer tolerable.

norcaljeff said...
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Diggin Deeper said...
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Diggin Deeper said...

PR...Nope it's not a game anymore...

From the Sac Bee...

California nears 'financial Armageddon,' governor warns

http://www.sacbee.com/topstories/story/1465098.html

"California's coffers are emptying so fast that the state's top fiscal officials say the plug must be pulled on $5 billion in public works projects next week, and by February or March, the state will not be able to pay all its bills"

Can't even get the New New Deal kick started before the bottom falls out on the state...If this doesn't come close to the definition of bankruptcy, I can't imagine a more appropriate term...

Again, peripheral companies that rely on state funded programs for revenues are going to be hit hard and bear the brunt of this downturn...the ratio of private company employees to state employees in Sacramento must be 2 or 3 to 1. When the pork falls off this pig, and the state bubble bursts, the collateral damage will be felt across the country. The California economy is "too big to fail"....or is it?

Screw real estate recovery...it's become so secondary and immaterial to all the other problems that have morphed from it's bubble.

smf said...

DD -

To repeat it again:

1998 budget = $70 billion
2008 budget = $140 billion

I see revenues and budget 'returning to mean'.

Diggin Deeper said...

The interesting thing is that California ranks a low 47th on the ratio of state employees (138) per 10,000 in population...

As of 2007 we were at about 387,000 FT state employees. It's probably closer to 395-400K right now. At $50,000 salary per year a cut of 10% would only take $2 Billion per year off the budget roles...add in another 25% for benefits and that would take it to $2.5 B...

It would take 25-30% fewer jobs to do anything meaningful and that's probably not going to happen...

The only other way to would to raise taxes (higher fees included smf..) The sales tax is probably going much higher at least in the short term...

smf said...

DD -

Raising taxes in this environment is a self-defeating policy.

When the problem is that people are spending LESS, how does removing more $$ from people help the situation?

Diggin Deeper said...

Is there any alternative?...Where can the state generate enough cashflow to remain effective?

I don't think we get one without the other...but if there's some other way, I'm all for it.

smf said...

Is there any alternative?...Where can the state generate enough cashflow to remain effective?

They doubled their budget in 10 years.

They doubled their budget in 10 years.

They doubled their budget in 10 years.

Seems to me like they have stuff to cut.

I don't recall getting twice as much service from the state, either.

patient renter said...

SMF - Some of that growth reflects the natural growth of the state's population, which is fair. I'm with you though, that the remainder should be fair game for reversal.

The problem is that nobody important will recognize the state's recent parabolic growth, and until you recognize the problem, it's harder to sell a solution.

Diggin Deeper said...

Those budget numbers aren't that far out of line...keep in mind the state has been running deficits and financing them for decades...We're still paying for the fiscal irresponsibilities of 1997...

Poplulation growth (plus another several million for undocumenteds) plus 10 years of inflation (or dollar devaluation)... a doubling of the budget over a 10 year period is high but not overly so.

Revenues, like housing, were projected to rise unabated with a growing economy...just like our local real estate market...

A double whammy occurs when growth not only goes negative, but accelerates...deficits snowball to a point where even the common investor shuns away from buying our state bonds...

When you take in 20% less revenue, and have run red ink as long as we have, just paying the interest on all the past debt (bonds) gets to be a challenge...