Sacramento Housing Affordability Index 1991-2008

The National Association of Home Builders recently updated their housing affordability index which measures the share of homes affordable to those with median income. (More on methodology here) Thanks to Neil, I've pushed the chart back to 1991 for a bit more perspective. In the fourth quarter of 2008, affordability in the Sacramento region was 66%, up from a low of 7% in the last quarter of 2005. That puts the index just under the 1990s high of 71% reached in the first quarter of 1998. During the 1990s, this measure of affordability remained over 50% for 7 years.

'Nothing Left To Trim'

From the Sacramento Business Journal:

Angel Ahumada, founder of recruiting firm Integrity International Partners of Rancho Cordova that recruits professionals for the building industry, said homebuilding companies have pared down staffs and combined offices as much as possible. “I think that 2009 will be a survival year for everyone in the housing market,” he said. “Layoffs are finished and office consolidations are over with — there is nothing left to trim. I heard from one of my senior executive contacts that he sees ‘large storm clouds ahead’ for them.”
...
[Gregory Group's Greg] Paquin admitted he hasn’t been able to accurately call the bottom of the housing market, as housing sales appeared to bottom out at various points during the past two years. “I was joking with some people this morning that it was probably the lowest since there’s been a capital in Sacramento,” he said of the fourth-quarter figures. “That’s probably not true, but the reality is no one’s buying.”

From the Sacramento Bee:

GreenFiber LLC, a manufacturer of natural fiber insulation, on Tuesday closed its plant in Sacramento, citing the decline in the local housing market and decreased demand for its products. The company said the 26 employees working at the plant...received severance pay.

From the Sacramento Bee:

It's approaching crunch time for Circuit City Stores Inc. and Fresno's Gottschalks Inc., two troubled retail chains whose possible demise would add to the miseries of Sacramento's commercial real estate market..."We're going to see more of this," said George Whalin of Retail Management Consultants in San Marcos. "We're just getting started."
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The region's shopping center vacancy rate, pegged at 8.8 percent in the third quarter of 2008, will probably peak at around 11 percent sometime this fall, said research director Garrick Brown of broker Colliers International's Sacramento office...Rents have fallen by a third in some areas of Sacramento.

From the Sacramento Bee:

J.C. Penney's decision to close its Carmichael call center on March 20 will cost 260 local jobs and put a dent in the Sacramento area's recent reputation as a call-center magnet...At the dawn of the decade, Sacramento was being hailed as a call-center mecca. From 1996 through mid-2001, about 40 centers set up shop in the Sacramento area, according to the Sacramento Area Commerce and Trade Organization.
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Layne Holley, managing editor of publications with the Colorado Springs, Colo.-based International Customer Management Institute (ICMC), said Monday that call centers are a likely cutting point for retailers amid the recession.

From the Stockton Record:

The median sales price fell to $133,000 in Stockton and $165,000 countywide...In Stockton, that has meant a 47 percent drop in prices in 12 months alone, from $250,000 in December 2007 to $133,000 last month, according to figures from the Grupe Real Estate-TrendGraphix monthly sales report....Foreclosures continue to dominate the existing home market, accounting for 84 percent of all December sales.
...
"Median sales prices may go lower, but they can't go much lower," he [Mike Collins of Collins Realty in Stockton] said. "Some people pay that much for a high-end luxury car."

From the Associated Press (hat tip DJ/SMF)

The number of people leaving California for another state outstripped the number moving in from another state during the year ending on July 1, 2008. California lost a net total of 144,000 people during that period — more than any other state, according to census estimates.
...
Financial adviser Barry Hartz lived in California for 60 years and once ran for state Assembly before relocating with his wife last year to Colorado Springs, Colo., where his son's family had moved. "The saddest thing I saw was the escalation of home prices to the point our kids, when they got married, could not live in the community where they lived and grew up," Hartz says. "Some people call that progress."

From News10:

"It's getting too expensive for us to live here. We just can't afford it," said Cathy Hawkins of Sacramento. The Hawkins are moving from California for an area that's more affordable to live..."We just lost our house to foreclosure and I recently lost my job," said Daniel Hawkins.

Over 10,000 Jobs Lost in Sacramento Region, Unemployment Jumps to 7.9%

From the Sacramento Business Journal:

California and the Sacramento region’s jobless rates both increased a half-percentage point, reaching the highest levels since 1994....The Sacramento area’s jobless rate increased to 7.9 percent, from 7.4 perent in September and 5.5 percent a year ago, according to the state report.

From the Sacramento Bee:

[T]he Sacramento region has lost 10,200 jobs in a year, a 1.1 percent decline. The state has lost 101,300 jobs in a year, a 0.7 percent drop.

Interactive Map: Unemployment by County

From News10:

Stacy Brown of Sacramento hasn't missed any [house] payments, but said she's worried about the months ahead. "Our hours are being cut due to the budget, so I see my salary decreasing so I just want to try to keep ahead of the game," she said. She was among dozens waiting up to three hours to meet with their lenders.

From News10:

Mike Lyon of TrendGraphix said to get ready for another 10 percent price drop over the next four months. It could very well dip to 2001 pricing, he said.
...
Lyon predicted the median home price will bounce above $200,000 in the coming months but says that won't be because home prices are increasing. Instead, he expects foreclosures on larger move-up homes to increase, especially in newer subdivisions in the foothills. He believes those homes will have foreclosure pricing in the $300,000 range and up, thereby increasing the median price of homes in the area.

From the News-Review:

Ray Davis won’t ever refute a moniker bestowed upon him — “the eternal optimist” — because the chief executive officer of Umpqua Bank sees signs of financial recovery, even in these troubled economic times. Take the housing market in Sacramento, Calif., for example, where the average selling time for a home went from 18 months in September 2007 to now less than five months, Davis said...“People are bidding on foreclosures which says we’re hitting bottom in Sacramento,” he said....

From the Sacramento Bee:

Bank repossessions again accounted for the majority of home purchases, especially in Sacramento County, the largest sector of the region's real estate market. DataQuick said two-thirds of the county's sales involved bank repos. "The bad news is there's a lot of foreclosures in the market. The good news is they're selling," said Pat Shea, Sacramento regional manager for Prudential California Realty. "Teachers, policemen, nurses – they can all buy houses now."

Interactive Map: Sacramento Home Price Trends By Community

From the Appeal Democrat:

Yuba County's $175,000 median price in October was 34.5 percent below a year ago, MDA DataQuick reported Thursday...Median prices in the county have fallen 50.2 percent since their November 2005 high of $351,500...Sutter County's October median price was $183,000, down 29.7 percent from the same time last year....Median home prices are now 46 percent below their December 2005 peak of $339,000.

From the Modesto Bee:

Stanislaus County homes sold for a median $161,500 last month....Home prices have dropped a staggering 59.2 percent below the $396,000 peak hit in December 2005...Merced County is even worse. Median-priced homes there sold for $136,750 last month....Merced prices have plunged 64.3 percent since peaking at $382,750 in December 2005...San Joaquin County home values...are 55.7 percent below their November 2005 peak of $451,500.

"It's impossible to say when the bottom will hit," said John Knight, professor of finance and real estate at the University of the Pacific. "I never anticipated such a huge drop in housing prices so quickly."
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[F]or "prudent consumers who waited to buy," [basically ignoring everything the UOP folks have said for the last three years] Knight said, "there are some tremendous opportunities now. Prices really cannot go much lower ... because it's becoming less expensive to own than to rent. That provides kind of a floor to housing prices."

"Great news: Home prices have fallen!"

From Fortune:

With declines of 30% or more California markets like Sacramento and San Bernadino, home prices and rents in those areas are approaching equilibrium, according to Deutsche Bank analyst Lou Taylor, who compiles a valuable quarterly survey housing costs in 55 urban markets.

As home prices continue to fall, Taylor predicts that dozens of grim markets could reach equilibrium by year end. "We're getting back the affordability levels of 1999, before the bubble began," says Taylor.

From the Modesto Bee:

Great news: Home prices have fallen! At least that's great news for people buying homes. New statistics show home affordability has soared in the Northern San Joaquin Valley as plummeting prices enable more families to attain the American dream...The National Association of Home Builders/Wells Fargo Housing Opportunity Index calculates that nearly 60 percent of homes sold in the region during July, August and September were affordable to local median-income families.
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The affordability index, however, is only as good as the data it's based on, and some question whether the income statistics used are current. The index, for instance, calculates that the median- income Stanislaus family earns $56,500 per year. But many workers in the region have lost jobs this year, and unemployment is rising. "Income numbers often lag," cautioned Dr. Stephen Endsley, a Modesto real estate investor. "It may look like we have housing affordability, but do we really consider unemployment? First-time buyers have to have confidence before they go out and buy, but many of them have questions about (the stability of) their employment."

From the Stockton Record:

The City Council on Tuesday approved The Grupe Co.'s $3 billion plan to build 7,000 homes in a massive subdivision on a Delta island on the city's northwest side.
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Two people spoke against the proposal Tuesday, saying the city is unwise to expand into the Delta and to approve vast housing plans while Stockton is in a foreclosure crisis. "It cannot help but further depress the housing market," said one of the speakers, Ann Chargin.

From the SF Chronicle:

Jing Hua Wu, the engineer who police say fatally shot three executives at a Santa Clara startup company last week just hours after being fired, spent the last few years amassing a large portfolio of investment properties. According to public records from eight counties in three states, Wu and his wife own at least 19 homes and vacant lots worth more than $2.4 million...Records show that Wu and his wife, Jie Zheng Wu, went on a property-buying spree starting in 2004...In California, they bought a modest home in Elk Grove (Sacramento County)....

[A]uthorities said they are looking into whether Wu's financial situation had been affected by his foray into real estate before the nation's foreclosure crisis.

Blog commenters eat real estate "experts"

DataQuick: Sacramento Unsold Repo Inventory Increasing

From Bloomberg:

Home prices fell in four out of every five U.S. cities in the third quarter, a record spurred by distressed foreclosure sales across the country. The median price of a U.S. home declined 9 percent from a year earlier....

The steepest price declines were all in California. The area surrounding San Bernardino had a 39 percent fall in its median home price to $227,200. Sacramento saw a 37 percent decline to $212,000, and San Diego had a 36 percent drop to $377,300. The U.S. median is $200,500.

From CNN Money:

"We're clearly seeing a broadening, as well as a deepening of the declines," [Mike] Larson [a real estate analyst at Weiss Research] said. "That indicates we've moved past the time when price drops were fed by bursting of real estate bubbles to one in which the broad economic downturn, marked by job losses, is taking hold."

From the Sacramento Business Journal:

Homebuyers snatched up repossessed homes at an impressive clip this year, but that doesn’t mean the Sacramento region’s housing troubles are easing. That’s because lenders might be foreclosing on homes faster than they can sell them.
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[T]he inventory of foreclosed homes isn’t dropping. The backlog of unsold repossessed homes has actually grown in the past year, to about 5,000. That number includes homes repossessed over a two-year span prior to Aug. 1 that didn’t sell by Oct. 20 (allowing a reasonable period to spruce up and market them for sale). The backlog has increased from about 3,300 at the same time last year, DataQuick said.
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Not all repossessed homes make it quickly to market. Only about 3,100 foreclosed homes were listed for sale through MetroList as of the end of October, even though the backlog of unsold foreclosures is 5,081 homes. Those homes will eventually make their way to the market.
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At least one national bank is looking to rent some of its repossessed homes rather than sell them. HomePointe Property Management, a Sacramento company that typically manages rental properties, just signed a contract to rent out “a handful” of foreclosed properties throughout the region.

From the Sacramento Bee (hat tip patient renter):

Sacramento County's lowest-income neighborhoods continue to take the toughest, most destabilizing punches of the region's two-year foreclosure crisis, says a new report from the Sacramento Housing and Redevelopment Agency. And it's getting worse. "Foreclosures are continuing to increase," said Joel Riphagen, SHRA redevelopment analyst.
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Now, many of the region's lowest-income neighborhoods have seen huge spikes in sales as home prices have fallen. Investors are snapping up homes formerly occupied by owners with intent of renting them.

From the Sacramento Business Journal:

I think they [lenders] had continued to underestimate the problem up until very recently. The other part of it is, I go in with a reasonable approach. What I’m hearing from people I know at lending institutions is that the number of people asking for modifications, some sort of help, is somewhere around 80 percent of their customers, but the number of people who actually qualify for that help is closer to 30 to 35 percent.
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Some people with a fixed-rate mortgage read about modifications being available, so they would like to see their interest rate modified downward. There’s not much the bank can do for those people.

From the CVBT:

Residents of the Central Valley are frustrated and angry that so little impact has been seen from the Wall Street bailout, says U.S. Rep. Dennis Cardoza, D-Merced, who is criticizing Treasury Secretary Henry Paulson of foot dragging.
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Mr. Cardoza says he “reluctantly” supported the $700 billion banker bailout only after guarantees were included in the legislation that taxpayers would be protected and the foreclosure crisis would be averted.

From the CVBT:

The thousands of homes lost to foreclosure and the resulting depression of home prices are beginning to make California bit more affordable...The Sacramento region and Stanislaus County were the second- and third most-affordable metro areas in California with 59.9 percent and 59.7 percent affordability, respectively.
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The building industry argues that today’s relatively high affordability levels are likely to be a short-lived phenomenon after the market correction is completed as underlying demographic trends point to rising prices in the future once the large supply of foreclosed homes is sold. “The increase in affordability is great news for people who are looking and who qualify to buy a home in the current market, and we definitely encourage those people to do so and take advantage of the low prices while they last,” says Robert Rivinius, CBIA’s president and CEO.

From the Sacramento Business Journal:

The rough and tumble economy did not spare Sacramento-area banks in the third quarter despite the more cautious nature of community-owned banks. Only three of 11 area banks earned more through the first three quarters of the year than they did during the same nine-month period in 2007...In the aggregate, locally based banks earned $12.9 million through the first nine months, down 52.6 percent from earnings for the same period last year.
...
In a normal market, people pay off a home-equity loan because they could otherwise lose their home. In the current market, people have already lost their home, and there is little or nothing for the bank that made the equity loan to recover.

From the Manteca Bulletin:

Closing schools to weather the deepening budget crisis is among 100 ideas being scrutinized by Manteca Unified...The double whammy of declining enrollment due to the foreclosure crisis coupled with the state's mid-year deficit projection that has ballooned to $28 billion has opened the door to such a move.

From CBS13:

No too long ago, Elk Grove was booming with growth. In fact, it was fastest growing city in the country at one time. Tonight, it's forced to pay the price for the nation's faltering economy. The city took a big hit today with another dealership closure. Customers who bought at Elk Grove Saturn came back for a tune-up today to find their dealership closed.

From the Sacramento Bee:

AAA said gas fell another penny in Sacramento on Monday to $2.24 a gallon, the cheapest it's been since May 2004...If prices hold, that translates into savings of more than $2.5 billion a month across the state. But that's more than offset by the fallout from the housing crash. So-called "equity extractions" in California – the dollars generated by home equity loans, refinancing or outright sales – have fallen by $41 billion this year, according to researcher MDA DataQuick.

Not surprisingly, Californians aren't suddenly reopening their wallets. "We're doing the same things that we did when gas was almost $5," said Marty Walter of Orangevale during a stop at a Union 76 station in Roseville on Monday. "We're getting into the pattern of saving – let's not do anything unless we have to." Cori Brown, pumping $15 worth of fuel into her 1996 Ford Explorer at a Chevron station on Richards Boulevard, feels the pinch. Until food and rent decline as much as gas, "it doesn't make a whole lot of difference," she said. "This is a depression, and I'm living through it."

50% Off Peak For Stockton & Modesto Metros; Merced Down Nearly 60%

From the Modesto Bee:

This spring, median-income families could afford about half the homes sold in Stanislaus, Merced and San Joaquin counties. Compare that with three years ago, when the region's families could afford only about 3 percent of the homes sold. That's the upside of the housing downturn.

The downside is that home prices keep declining: July's median sales price plummeted to $190,000 in Stanislaus County. That's less than half what houses were selling for in December 2005, when prices peaked at $396,000.
...
San Joaquin's median sales price fell to $220,500 in July [down 51.2% from the $451,500 peak]. Merced's median fell to $155,000 [down -59.5% from the $382,750 peak].

From the Sacramento Business Journal:

The sharp fall in median home price in Greater Sacramento has helped drive up affordability....About 55.7 percent of all homes for sale in the four-county metro area were priced so that a family making the median income in the region could afford them, according to the National Association of Home Builders/Wells Fargo Housing Opportunity Index. That was the highest affordability rating among any California market in the study, and was even better than the U.S. figure of 55 percent for the second quarter of 2008.

From the Appeal Democrat:

In Yuba County, sales in July climbed 43.3 percent above a year earlier. The $183,500 median price was down 33 percent from the same period last year. In Sutter County, sales jumped almost 26 percent while prices were off 30 percent from July 2007, at $203,000.

From the Sacramento Bee:

The cosmetic surgery industry is in need of a lift. Soaring unemployment, high gas prices and the mortgage crisis have left consumers with less discretionary income. For plastic surgeons, that means fewer patients are coming in for elective procedures.
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"Now financing (companies) are becoming more difficult in who they approve," said [Dr. Shahriar] Mabourakh [of the Folsom Plastic Surgery & Laser Center]. The Folsom doctor started seeing a decrease in calls from prospective patients in December.

'You've Brought a Pistol To a Nuclear War'

From the Sacramento Bee:

The nation's new housing bill will offer a lifeline to an estimated 400,000 struggling borrowers starting Oct. 1, including many in Sacramento...The government will guarantee $300 billion in refinancing funds to get people out of risky adjustable loans and into safer 30-year fixed loans...The bill lets borrowers refinance their homes at what they're worth today – instead of the extreme high price paid during the boom.
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[S]ome experts said lenders, already taking huge losses when homeowners default, might work with the FHA program. This is a way for the banks to take less of a loss, said Elk Grove foreclosure attorney Jonathan Stein. "I think lenders who already own a lot of real estate are going to be more inclined to follow through on this," he said. In other words, refinancing will be easier than maintaining vacant homes.

From the ForeclosureTruth blog:

[The] Housing and Economic Recovery Act of 2008...gives local governments a total of $4 Billion to purchase and rehabilitate or redevelop foreclosed properties..."$4 billion is kind of a meaningless sum," [ForeclosureRadar's Sean] O'Toole said. "It can't possibly make a difference. You've brought a pistol to a nuclear war."
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By the time California gets their share, we are talking about enough money to perhaps buy 10 percent of the properties foreclosed upon in ONE MONTH.
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There is an awful lot in this package, but nothing that strikes me as likely to fundamentally turn the tide. The reality is that housing prices will continue to correct until home prices are once again in line with incomes using traditional financing. The sooner the powers that be accept this and focus on smoothing out the transition while minimizing the affect on taxpayers the better off we will all be. And hopefully next time we'll collectively keep our eye on maintaining home affordability rather than artificially building home equity so that we never have to go through this again.

From the Sacramento Business Journal:

Sacramento has the 18th highest mortgage closing costs in the country, according to a new study by publicly traded Bankrate Inc...Sacramento’s average closing cost is $3,179.

From CBS News:

The promise of the suburban dream is what brought Nichole Cinaglia and her daughters to a neighborhood more than 30 miles outside of Sacramento, California.
...
Nichole can't afford the $800 in gas she burned each month commuting to her job, so she's selling her house for less than half what she paid for it...Nichole Cinaglia plans to rent near her job. But she still thinks about the life she used to have. "I don't miss the commute, but I miss the idea," she says. "I miss that it was mine." A dream abandoned miles away now is beginning to fade.

'I don't think any of us are guaranteed anything anymore'

Recently foreclosed homes made up 61.4% of all resales in Sacramento County during the second quarter. That was the 6th highest rate in California, according to DataQuick (via Jon Lansner's blog). The usual suspects: Merced, San Joaquin, and Stanislaus captured the first three spots, with Yuba at #4.

Sacramento Bee housing reporter Jim Wasserman appeared on CNBC.

From the Sacramento Bee:

Unlike an elite city like San Francisco, Sacramento's growth has been fueled by an influx of educated, family-oriented residents – the populations that have been fleeing such high-priced places where the housing supply is constrained.
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The fact Sacramento has fared far better than these cities over the past 15 years suggests the region's recent problems lie not in a lack of downtown condos and nightlife, but with a housing market that, as in much of California, has been totally out of whack. Once a consistently affordable locale, by the mid-1990s Sacramento's housing prices jumped almost nine times income growth, an unsustainable pace seen in a few areas such as Riverside, Miami and Los Angeles.

As a result, the refugees from the coastal counties who had been coming to Sacramento for affordable housing stopped arriving. Net migration to the region, more than 36,000 in 2001, fell to less than 1,000 in 2006.

From the Sacramento Business Journal:

“In the past 12 months, I have seen builders slash their staffs by more than 50 percent and consolidate operations in one office,” said Angel Ahumada, founder of recruiting firm Integrity International. “Before the builders had offices everywhere — Sacramento, Central Valley and the Bay Area. The current trend is to have one office run all three.”

From the Sacramento Bee:

Californians – spooked by negative economic news and the tens of billions of dollars they've lost to rising gas prices and disappearing home equity – are ratcheting down their spending. It's true even for those who've avoided foreclosure or a pink slip. Tim Einer, a software trainer in Lincoln, considers himself upper middle class but has seen his home equity fall by $225,000. He traded his Jaguar for a fuel-efficient Chevy, scrapped a European vacation and stocks up at Target whenever possible. "I have worries all the time – you just see how the economy is," Einer said. "I don't think any of us are guaranteed anything anymore."
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The falling real estate market has been doubly burdensome for Meredith Wharton, a Folsom real estate agent. Not only is she "working twice as hard for half the reward," she and her husband, Mark, have had to adjust to the decline in their own home equity. Because they both live mainly on commission income, they frequently use their home equity line of credit to smooth out fluctuations in their paychecks. But their available credit was recently cut in half, to $50,000, reducing their financial cushion.

From the New York Times:

The first wave of Americans to default on their home mortgages appears to be cresting, but a second, far larger one is quickly building. Homeowners with good credit are falling behind on their payments in growing numbers, even as the problems with mortgages made to people with weak, or subprime, credit are showing their first, tentative signs of leveling off after two years of spiraling defaults.
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“Subprime was the tip of the iceberg,” said Thomas H. Atteberry, president of First Pacific Advisors, a investment firm in Los Angeles that trades mortgage securities. “Prime will be far bigger in its impact.”

From the Sacramento Business Journal:

Aggressive belt-tightening efforts by lenders and a dismal economy put the squeeze on the commercial investment property market in the Sacramento region during the past year. Investors plowed almost $5 billion into Sacramento office buildings, shopping centers, apartment buildings and warehouses in June 2006 to June 2007, fueled by a seemingly endless supply of “cheap” money. But in the past 12 months, investment has declined to about $2.1 billion, a 58 percent drop from the peak, according to figures from brokerage CB Richard Ellis.

“It’s a weird time right now,” said Jon Wilcox, a senior associate at CB Richard Ellis who exclusively represents investors looking to purchase income-producing property. “Nobody can find a price point yet. ... (Investors) can sense blood in the water. They’re going in and offering 10 (percent) to 15 percent lower than the asking price.” He said foreclosures that have driven housing prices down might start hitting investment property soon.

Rejected Transplants

From the Sacramento Bee:

Three years ago this month, median sales prices peaked in Sacramento County. The result: The end of the housing boom. Across three years, the damage has piled up. In 2006, the spring rebound that area real estate agents were predicting failed to materialize...A discussion at year's end with some real estate professionals had a common thread: Foreclosures probably wouldn't get out of control.

Attached to this article is a nice chart showing the decline from peak in eight area counties.

From Bloomberg:

Home prices fell in 23 of 25 U.S. metropolitan areas in May from a year earlier [according to Radar Logic]...Sacramento had the biggest price drop, falling 31 percent from May 2007....The number of transactions rose 27.7 percent in Sacramento and 13 percent in San Diego from a year earlier and fell in the 23 other areas surveyed.

From the Sacramento Business Journal:

National homebuilder Ryland Homes will end more than 20 years of building in Northern California and gradually wind down operations in the region, including Sacramento.

From the Modesto Bee:

Could real estate woes persuade residents to abandon the Northern San Joaquin Valley? Bay Area transplants -- nicknamed BATs -- swooped into the valley en masse during the 2000-to-2005 building boom...At least one industry analyst suspects the valley's foreclosed families are headed back to the Bay Area, especially those who had been commuters.
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"We saw similar (population shifts) happen in the 1990s, but nothing close to this level," [Steve] Dutra [VP for John Burns Real Estate Consulting based in Sacramento] said...."The data won't show it yet, but we know (the population is shifting) from our clients' reports," Dutra said. He noted that his clients are builders who monitor where people who are shopping for housing are coming from.
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Another indicator of population movement is public school enrollment. This is summer vacation for most schools, but some Stanislaus County districts already are noticing shrinking enrollments.

From the Sacramento Bee

28 percent of Sacramento households earn more than $75,000 (the higher income range); 54 percent earn less than $50,000 a year (the lower income range); and 18 percent earn $50,000 to $74,999 (the middle income range).

The market is not providing housing affordable to folks in the lower and middle income ranges. The city's most recent housing update estimates that only 15 percent of households in 2007 could afford the median-priced home of $300,000. Home prices are dropping as the real estate bubble has burst, but even home prices of $220,000 remain unaffordable for the bulk of Sacramento households.

This mismatch between housing prices and incomes is a relatively new development for the Sacramento market. In 1997, 65 percent of Sacramento area households could afford a median-priced home.

From the Sacramento Bee

In another marker on the economic misery scale, a 1.1 million-square-foot mall on tap for southern Sacramento County has stalled, officials confirmed Thursday. The Elk Grove Promenade, an open-air regional mall that repeatedly has pushed back an opening date, is among a number of retail projects nationally that General Growth Properties Inc. of Chicago will delay, several City Council members said.
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City Councilwoman Sophia Scherman...expressed fear that conditions would deteriorate at the mall, where parking lots are poured and future retail spaces are rising. "I don't care how it's done," Scherman said. "I want security there. I don't want it to become a blight."
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Mayor Gary Davis...said, Elk Grove's economic climate will rally. "It's just a matter of timing. It's going to turn back around," Davis said. "It's not like in this downturn the place is going to hell in a handbasket. … That's not happening."

From Sacramento Bee:

Already burdened with its worst unemployment in 12 years, the Sacramento area figures to suffer even more following Gov. Arnold Schwarzenegger's decision Thursday to lay off 10,300 temporary and part-time employees and cut most full-time workers' salaries to minimum wage. Though the cutbacks are expected to be temporary, the news sent a chill through a metro area that has one of the worst foreclosure rates in the country.
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With the real estate market just starting to get healthy, John Arvanitis, president of Sunrise Vista Mortgage Corp. in Citrus Heights, said lenders may think twice about approving a mortgage for a state worker affected by the governor's order. "If you're an underwriter and you see someone who's listed as one of those casualties who's gotten laid off or had their salary reduced indefinitely, that's going to be significant," Arvanitis said.

'Promises, Promises, Promises'

From the Sacramento Business Journal:

[Leslie] Appleton-Young’s job includes overseeing the association’s analysis of the statewide housing market and industry trends. Realtors want to know what’s ahead, so sometimes she has to make predictions. Usually, she’s right. [LOL!] Sometimes, she’s not.

Last fall, she estimated that median home prices in California would drop 4 percent in 2008. Recently, she revised her estimate to 8 percent to 10 percent. [The median has dropped 19.1% since December.]
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[Appleton-Young:] What jumped out at me, in looking at the statistics, was that the percentage of first-time buyers was low, 26 percent of all home buyers. That’s the lowest number since 1979, and it’s a testament to the affordability hurdles that first-timers face.

Jim Wasserman has the latest TrendGraphix figures. The SAR numbers for June are available here.

From the Sacramento Bee:

The bailout of mortgage firms Freddie Mac and Fannie Mae will help stabilize the wobbly recovery in Sacramento's real estate market, analysts said Monday. But the collapse of big mortgage lender IndyMac Bancorp Inc. last week continued to shake Wall Street, depressing the prices of other bank stocks, and showed that many perils remain.

From the Sacramento Business Journal:

“The government sector seems to be strong when we need it to be and the private sector is strong when it needs to be,” said Bob Burris, deputy director at the Sacramento Area Commerce and Trade Organization. “It’s kind of a hedge in difficult times.”
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Nobody is discounting the concern about 10 percent across-the-board cuts in state government, but there appears to be consensus that actual job losses will not be significant. “Our thought is the state employee reduction will largely be absorbed through elimination of vacant positions or retirements,” said Michael Cohen, director of state administration for the Legislative Analyst’s Office.

From the Sacramento Business Journal:

Steven Cochrane: Prices peaked in late ’05, though the plunge really started about a year ago. The trouble is there’s no end in sight yet. It’s going to get worse before it gets better.
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I’m fairly certain when the budget is passed, we will start to see some cutbacks in state employment. Sacramento will be the hardest hit — Sacramento and any other area that has a high concentration of state government.
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Suzanne O’Keefe: The market is maybe reaching a bottom.
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Sanjay Varshney: The foreclosure rates are still high. Yes, there are a lot of foreclosures that have been picked up by buyers, but that certainly hasn’t had an impact on declining values of existing homes.
...
Sacramento is much more vulnerable. The reason is that Sacramento does not have the paychecks to support the housing market that evolved in the last five years...Really, we need to go back to ... when a good 3,000-square-foot home was only $250,000.

From the Appeal Democrat:

Patti Clary, director of YouthBuild for the Yuba County Office of Education, said the $165,000 three-bedroom, two-bath house on Pine Street — on the market for a year — would have been snapped up during the boom days of California home-buying. "These were a real deal," Clary said. "Now they're not."

The YouthBuild houses still represent a good buy, excellent construction and a program that provides 18-to-24- year-olds training in building and other skills, said board of education President Sidney Muck..."The question still looms whether it's overpriced," [Mercy Housing vice president Greg] Sparks said. "I don't think that they're way out there."

From the Sacramento Bee:

A number of small school districts in the foothills of Placer County are considering a merger to combat years of dwindling enrollment and shrinking funds from the state....Placer Union High School District initiated a preliminary study of district reorganization by the Placer County Office of Education to see how merging school districts would improve the schools' financing.
...
The additional cash flow might entice districts hit hard by a struggling housing market, an older population and fewer students to keep schools open.

From the Stockton Record:

The dramatic decrease in this area's population growth may be some of the best news possible for our cities. Census Bureau figures released last week show that from 2000 to 2007, Stockton's population grew roughly 17 percent, to 287,245. That makes Stockton the 62nd-largest U.S. city.

But much more interesting, perhaps, is that population growth slowed considerably starting in 2005, coinciding with the start of the real estate market meltdown. The collapse of the overheated housing market throughout California, but especially in San Joaquin County, with its proximity to the Bay Area, means this area has grown increasingly less attractive to Bay Area residents looking to escape stratospheric housing prices.

From the Modesto Bee:

When Joe Melendrez bought his home in Bridle Ridge, a master-planned community on Oakdale's southwest edge, the promise of a park and friendly neighbors were crucial. "I assumed I'd look out the window to a park and could cross the street to visit my neighbors," he said. "I'm still waiting for both."

Rather than a lush park, with kids playing and families enjoying picnics, Melendrez looks out over a field of knee-high dead weeds and construction debris..."Promises, promises, promises" Melendrez said. "The only activity around here is when they dump more concrete in the field that was supposed to be a park."
...
At least two builders in Bridle Ridge declared bankruptcy, city manager Steve Hallam said....

LA Land: Waiting in line: That was then... This is now.

Congresswoman "Walks Away" from Curtis Park Home; Merced Hits 50% off Peak

From Capitol Weekly (hat tip JC):

As the real estate market softened in 2007, the new owner of a three-bedroom, 1,600-square-foot house in Sacramento's Curtis Park neighborhood ran into trouble. The house that was purchased for $535,000 in January had lost equity. The owner fell behind in her payments, and eventually, the bank seized the home.

What makes this story different from the thousands like it is that the owner of this house was a member of Congress. The story of the foreclosure of Long Beach Democrat Laura Richardson's Sacramento home is a tale of a real estate market gone sour...While being elevated to Congress in a 2007 special election, Richardson apparently stopped making payments on her new Sacramento home, and eventually walked away from it, leaving nearly $600,000 in unpaid loans and fees.
...
"It's kind of silly. You would think people who are making decisions for others would be able to make good decisions for themselves," she [the former owner] said. "She should have known what she could afford and not afford."

Steepest price declines in the nation - check
Home of the most hated flipper in the nation - check
First Congressional Rep. to walk away from home - check

UPDATE #1: Max has more on the story at SacRealStats.

UPDATE #2: Richardson responds - From the AP (hat tip LA Land):

In a statement issued Wednesday, Richardson blamed that constant job-shifting for the financial problems related to the Sacramento property. She said the home was not in foreclosure and had not been seized.

"I have worked with my lender to complete a loan modification and have renegotiated the terms of the agreement—with no special provisions," Richardson said. "I fully intend to fulfill all financial obligations of this property."
...
Richardson's chief of staff, Kimberly Parker, told the AP that the mortgage on the home had been sold but the house had not. The Sacramento County Assessor's Office continues to list Richardson as the owner, even though the May 19 document on file at the Recorder's Office states that Red Rock Mortgage bought the home at public auction.
...
Records on file at the Sacramento County Tax Collector's Office also show Richardson is delinquent in paying $8,950 in property taxes.

Also this video clip from CBS13: Congresswoman Defaults On Sacramento Home

UPDATE #3 (Thursday): Capitol Weekly responds

In other news, Merced home prices broke the 50% off peak mark. From the Modesto Bee:

Stanislaus County homes sold for a median $225,000 last month....At the market peak, Stanislaus homes sold for a median $396,000. That's a 43.2 percent decline in 2½ years. San Joaquin County prices have dropped even more. Last month, the median sales price hit $245,000....San Joaquin homes peaked at $451,500, but prices have plunged 45.7 percent since. Merced County is even worse. Its homes sold for a median $186,000 last month....Merced's homes peaked at $382,750 before plummeting 51.4 percent.
...
Just released first-quarter 2008 calculations from the National Association of Home Builders-Wells Fargo Housing Opportunity Index show that the percentage of affordable homes has more than doubled in the valley since the fourth quarter of 2007. The new figures show median-income Stanislaus County families could afford to buy 36.2 percent of the homes sold in the county this January, February and March...Merced and San Joaquin counties have seen similar shifts in affordability. Median-income families can afford 28.3 percent of Merced homes and 35.5 percent of San Joaquin homes.
...
While the real estate market downturn has increased affordability, Stanislaus families had a much easier time buying homes 10 years ago. During the first quarter of 1998, nearly 80 percent of all Stanislaus homes were affordable for median- income families.

Chart of Stanislaus County's Affordiability Index since 1996.

Radar Logic: Sacramento Home Prices Drop Nearly 30% YoY

From the New York Times:

At the end of 2007, areas with the highest vacancy rates in housing intended for owner occupancy fell into two categories: Rust Belt areas like Detroit, Cleveland and Akron, Ohio, and former boom areas like Orlando and Tampa in Florida, and Las Vegas. Although home prices have fallen sharply in parts of California, only the Sacramento area shows high vacancy levels.

High vacancy rates put renewed pressure on prices, of course, and also serve as a warning that the home building industry may have a long wait before it can regain volume.

From the Modesto Bee:

"The new home sales rate is nothing short of dismal," lamented Dean Wehrle, vice president of Sullivan Group Real Estate Advisors. He said Stanislaus, Merced and San Joaquin county subdivisions are averaging one sale per month...Sales have been so slow throughout the three-county region that Hanley Wood said the inventory of approved lots is enough to last until 2012.
...
New home prices have dropped dramatically to lure buyers, but Wehrle said homes in the region still cost far too much for most residents...He said it was "outrageous" how the region's home prices more than doubled from 2000 through 2005, rather than appreciating at a more "natural" 6 percent a year.

Though home price have fallen since 2005, Wehrle's charts demonstrated how it will take until the end of 2011 or early 2012 for the valley's housing market to stabilize enough to bring it in line with builders' current median prices. He said that means builders must continue dropping prices or stop building.

From Bloomberg:

Home prices fell in 22 U.S. metropolitan areas in February, led by Sacramento and Las Vegas, as record foreclosures deepened the housing slump. The price per square foot in Sacramento, California's capital, dropped 29.8 percent to $161 from a year earlier, according to a report released today by New York-based Radar Logic Inc., a real estate data company.

From Radar Logic:

The increasing number of foreclosures occurring throughout the country has introduced a new supply of homes and a larger segment of a nontraditional type of seller. This increasing segment of foreclosures in the market highlights a type of unusually ‘motivated seller’ who is influenced by a desire for greater liquidity rather than obtaining a higher price. Radar Logic’s analysis creates a baseline estimate by tracking sales by financial institutions (e.g. banks, mortgage servicers), foreclosure service firms, and foreclosure auction sales in order to track the trends of motivated sellers. After taking ownership of the homes, the institutions face capital constraints and incur carrying costs. If they believe prices will not rebound soon, they have an incentive to unload the house quickly and minimize losses.

As this segment becomes a larger fraction of transactions, many markets show significant differences in both price levels and price trends between motivated sellers and the rest of the market. In all 25 MSAs motivated sales show median prices at lower price points than non-motivated sales. Some markets currently experiencing large percentages of motivated sellers include Sacramento (51.7% of all transactions), Las Vegas (44.1%), San Diego (37.0%) and Los Angeles (27.0%). In Sacramento, year-over-year price per square foot declines of 29.8% are influenced by more than half of the market being motivated sellers selling for 26.4% less than non-motivated sellers.

From Time:

The black bus rivals a greyhound in size but has an interior like a limo--and it gets a few curious looks as we wander into the dense neighborhoods of Elk Grove, Calif., a quiet suburb 15 minutes south of Sacramento. Five of us--a mortgage counselor, three investors and I--are looking at 10 recently foreclosed homes....

Like many communities across the U.S. that boomed during the housing bubble, Elk Grove is feeling the pain of the housing burst...Elk Grove alone has about 2,120 bank-owned houses for sale and 1,280 in pre-foreclosure, according to RealtyTrac, a real-estate-data website.

From the Stockton Record:

Clearly this foreclosure mess has yet to run its course. That should surprise no one who paid attention in the first half of this decade and saw, for example, the median home price in Stockton jump from about $100,000 in 2000 to about $400,000 in late 2005. At the same time, more and more of the sales pressure from speculators and Bay Area transplants that fueled the run-up in prices was being financed by interest-only and adjustable-rate mortgages. In other words, too many people were speculating in homes here or buying homes they could not afford.

The good news is that home sales, which have increased each month this year, continue to climb. Granted, most of the sales are of foreclosure properties, but until those homes are sold, there is no real hope of the market stabilizing. It will take time. How much is unclear since we cannot yet tell how many more homes will fall into foreclosure.

From the Auburn Buzz:

If a deal is not reached, the bank will hold a foreclosure sale on more than a third (137 unsold lots) of the 409 lots in the Winchester development, it’s massive 35,000-square-foot country club, and its pristine 18-hole private-member golf course. In preparation for a possible sale, Winchester Country Club employees confirmed bottles of wine and other items in its gift shop have been discounted in an effort to move the merchandise before the scheduled foreclosure sale.
...
While the soft housing market in Placer County and throughout the nation is at the root of Myers’ financial woes at Winchester, there is speculation he failed to lower lot prices and club membership fees, which run up to $80,000 a year for non-residents, as the market softened.

From the Sacramento Business Journal:

Home furnishings retailer Linens 'N Things filed for Chapter 11 bankruptcy protection Friday and said it will close 120 underperforming stores as part of its restructuring, including its store in North Natomas and 26 other California locations.
...
"The significant deterioration in the mortgage, housing and credit markets and the resulting impact on the retail marketplace, particularly the home sector, has overwhelmed the operating and merchandising improvements that we have made over the past two years," said Robert J. DiNicola, Linens Holding executive chairman....

The Porta-Potty Index

From the Sacramento News & Review:

I was searching for signs of the coming economic apocalypse along the stressed seams of Sacramento’s suburban neighborhoods, and honey buckets [aka porta-potties] seemed like a perfectly reasonable place to start...It seems reasonable to expect, given rising unemployment in the construction industry, to find stacks of honey buckets piling up all over the country. We might point to this excess as an indicator of reduced economic activity, a honey-bucket index, if you will.
...
After the real-estate bubble popped 18 months ago, the porta-potties began stacking up at the rental place [my Dad] drives by on the way into town [Redding]. Nowadays, so many honey buckets have been returned, they’re stacking them outside the fence. Surely, my father speculated, the same phenomenon must exist in Sacramento.

Indeed it does. At J & J Sanitation in south Sacramento, the excess toilets were stacked four-deep next to an adjacent vacant warehouse. The sweet stink of what seemed like 1,000 honey buckets wafted over the razor wire at Waste Management’s compound off Elder Creek Road. At United Site Services in north Sacramento, the porta-loos, hundreds of them, were stacked high and deep behind the security fence.

From the Chicago Tribune:

Rolling Meadows-based homebuilder Kimball Hill Homes, citing the "challenges faced by the homebuilding industry" in the housing sector's meltdown, said it filed for Chapter 11 bankruptcy protection but will maintain normal operations while it restructures. "Our issues are financial, not operational," said President and Chief Executive Ken Love.

Kimball Hill has developments in Sacramento, Rancho Cordova, Galt, Stockton, Ceres, and Merced.

From the Sacramento Bee:

After months of wrangling with lenders over huge debts accumulated during the housing boom, prominent Sacramento-area home builder John D. Reynen filed Wednesday for personal bankruptcy protection. Reynen, co-founder of Reynen & Bardis Communities, took the action to prevent San Francisco-based Bank of the West from seizing his house and other personal assets for a $26 million debt owed by his company, said Michele McCormick, spokeswoman for the builder. She said the filing will not affect the operations of Reynen & Bardis Communities.
...
Kathryn Boyce, a Sacramento-based Hanley Wood analyst, said the firm's massive land holdings are still a source of strength. "There's still land they're sitting on they haven't done anything with," she said. "They're going to be OK."

From the Stockton Record:

Real estate was bubbling in 2004 when Regent announced its [Stockton Sheraton Hotel] plans. That year, you practically couldn't build residential developments - including condos - fast enough. Condos atop a pristine downtown development overlooking the city's redeveloped waterfront core seemed like a sure winner. In hindsight, 42 high-end condos seems a bit aggressive for the still-coming-back-from-the-dead downtown market. But back then, four whole years ago, the lines on the chart seemed to run only one direction: upward.
...
Then along came 2005. The hotel was two years from being finished, and there were disturbing signs the housing bubble had expanded about as far as it could. Nobody expected a burst, at least not of the explosive magnitude that occurred.

From the Stockton Record:

[T]he prices being charged for those new homes have been way overpriced relative to the incomes of most county residents, [director of Pacific's Business Forecasting Center Jeff] Michael said. "Despite a dramatic drop of house prices (40 percent in the past 30 months), it's still expensive to live here. It's still 4.5 times the median family income compared to the U.S. average of 3.25 times median family income," Michael said.

He went so far as to say that San Joaquin County has been in its own recession since last fall, triggered by the housing meltdown and confirmed by unemployment figures that have topped 10 percent in two of the past three months. While the housing boom that started in the early part of the decade added 7,000 jobs in construction in the county, 3,000 jobs have already been lost in the downturn.

Sacramento Housing Affordability Increases...to 2004 Levels

The good news (from a buyer perspective): Homes are becoming more affordable as prices plummet. From the the Sacramento Bee:

There's a flip side to the Sacramento-area housing downturn that has would-be buyers cheering: Sacramento is getting more affordable. Falling sales prices between last summer and the end of 2007 triggered a nice jump in affordability in El Dorado, Placer, Sacramento and Yolo counties, according to an index compiled this week by the National Association of Home Builders and Wells Fargo & Co. 27.2 percent of homes sold in October, November and December were affordable to households earning the region's median income of $67,200.

The bad news? Affordability is only back to 2004 levels:

The new eligible buyer percentage for Sacramento was the best since 27.4 percent in the first quarter of 2004...[I]t doesn't take much to remember better days from 10 years ago. In the first quarter of 1998, 70 percent of area homes were affordable for people earning at least the median income, according to the home builders and Wells Fargo.

The last time affordability was this low (aside from 2004) was in 1991, at the front-end of the 1990s housing bust. Between 1993 and 2000, the index remained above 50%.

Here's a look at the index since 1995. You can download the data here.

From the Sacramento Bee:

Dozens of Rancho Murieta homeowners have been left with cracked walls and listing foundations after local builder Reynen & Bardis said it can no longer afford to fix their defective houses. Thirty-six residents have hired a law firm and begun filing lawsuits against the company, already reeling from the real estate downturn.
...
Francis Furtado, president of Reynen & Bardis' home building division, said the firm doesn't intend to abandon the Rancho Murieta residents. For the moment, it can't afford further repairs. "We are in a very tough market," he said. "There's no profit in home building. There's no profit in land development. Our income shut off. We had to hunker down. Our intention is to go back in, but right now the finances aren't there."
...
Since the bottom fell out of the land market, the firm has faced mounting pressure from creditors. It has shut down home building and recently furloughed 89 of its 180 employees.
...
The firm's problems have left Lynn and his neighbors with more than cracking walls. Their gated neighborhood is now filled with vacant and rental homes owned by Reynen & Bardis, which is now trying to unload them "as is" at bargain prices...Residents say the flood of cheap houses makes it harder for anyone else to sell, should they decide to get out.

From the Lincoln News Messenger (hat tip HBB):

The effects of a deepening national housing slump are hitting close to home. Even Gladding, McBean, one of Placer County’s oldest businesses and a Lincoln institution since 1875, is feeling the market’s pinch. “I’ve been here since 1991, and this is the most significant downturn in our market I’ve seen in that time,” said Bill Padavona, general manager and vice president of Gladding, McBean.

Padavona said the clay company has seen a 60 percent to 70 percent decline in products tied to home construction, such as sewer pipes and roof tiles. Though Gladding, McBean provides products throughout the West Coast, the market is especially bad in Northern California, where “the market has slowed to a near standstill,” Padavona said. Since the downturn began, the company has laid off 100 of its 235 employees.
...
That’s bad news as well for another Lincoln company, lumber supplier Sierra Pacific Industries. "It’s had a dramatic downward impact on lumber prices," said Mark Pawlicki, a spokesman for the Redding-based business. "Prices today go back to about 1992, the last time we had a housing recession."

"The only answer is for the government to get out of the way"

From the Appeal Democrat:

Our View: Stimulus plan is like giving drink to an alcoholic

When home prices soared as the result of cheap and easy credit, not many people considered that a crisis. It was fun for homeowners to stand around the proverbial water cooler and boast about the price of the house down the street. Well, prices have since fallen to the lowest levels since 2004.
...
What goes up often comes down. But there's more than a market phenomenon going on here. Federal monetary policy has a direct effect on lending practices, and the government is getting actively involved now. That, in particular, should be reason for worry.
...
The only answer is for the government to get out of the way and let the market self-correct. That may mean allowing prices to fall to levels they need to be so that buyers can afford them. For most people, that's not as much fun to watch, but that's the real solution.

From the Inman News Blog:

In looking at markets that may see a temporary increase in the $417,000 conforming loan limit, I ran a table yesterday that relied on median home price data from the third quarter 2007. Running the numbers again today with preliminary fourth quarter numbers from NAR highlights a potentially serious problem. All 19 metropolitan statistical areas (MSAs) identified as places that might see an increase in the conforming loan limit are declining markets...Sacramento now looks like it won't see an increase at all, based on the new fourth quarter numbers.

From the Boston Globe:

Cesar Dias, an agent from Stockton, Calif., who appeared on "60 Minutes" and is credited with starting a national trend, said foreclosure tours accomplish twin goals of moving properties and drumming up prospective buyers in lean times. "We knew we couldn't sit with our hands crossed hoping for the best," said Dias, who is working on tours in Dallas and San Diego; Las Vegas and Phoenix may be next.

From the Atlantic Monthly (hat tip Gwynster):

Strange days are upon the residents of many a suburban cul-de-sac. Once-tidy yards have become overgrown, as the houses they front have gone vacant. Signs of physical and social disorder are spreading.
...
In the Franklin Reserve neighborhood of Elk Grove, California, south of Sacramento, the houses are nicer than those at Windy Ridge—many once sold for well over $500,000—but the phenomenon is the same. At the height of the boom, 10,000 new homes were built there in just four years. Now many are empty; renters of dubious character occupy others. Graffiti, broken windows, and other markers of decay have multiplied. Susan McDonald, president of the local residents’ association and an executive at a local bank, told the Associated Press, "There’s been gang activity. Things have really been changing, the last few years."

WSJ: Still Way Too Early to Go Bargain Hunting in the Bubble Markets

From the Wall Street Journal (hat tip Calculated Risk):

If you own a home in a former bubble region like California or southern Florida, there's bad news… and really bad news. And they suggest that it is still way too early to go bargain hunting in these markets, although -- of course -- there is always the occasional deal around.

The bad news is fresh market data published Monday night by real-estate Web site Zillow.com. They show prices, as expected, kept slumping through the end of last year.

But the really bad news is that, even after a year of misery and falling prices, homes in many of these regions still aren't cheap. They remain wildly overvalued compared to average personal incomes. There is a strong long-term correlation between the two figures. And in many regions, house prices would still have to fall a very long way to get back into line. How far? Try around a third in Florida and Arizona -- and closer to 40% in California. Yes, from here.

From News 10 (video):

Countrywide Financial notified 122,000 customers that they may no longer draw on their credit lines, even if they were previously approved for a higher limit...One of them is a woman who spoke to News10 and asked that her name not be used. "Apparently the fact that I have excellent credit, that I am not late, and that I have lived in my home for 25 years didn't count for much," she said.
...
In a statement on its Web site, Countrywide said federal regulations allow lenders to block additional extensions of credit in a declining market [pdf].

From the Sacramento Bee:

...January struck an especially hard blow to homeowners in Amador, El Dorado, Nevada, Placer, Sacramento, Sutter, Yolo and Yuba counties. Banks in the eight counties repossessed 2,292 properties – 755 more than December – according to foreclosures.com, a Fair Oaks-based Web site for real estate investors.

From the Associated Press (via Forbes):

A growing share of home sales are from foreclosures, especially in states hardest hit by the housing bust. In some parts of California lately, nearly 50 percent of home sales come from foreclosed houses.
...
In December, 46 percent of homes sold in the Sacramento area and 31 percent in the San Diego area had gone through foreclosure, up dramatically from about 4 percent a year earlier, according to San Diego-based DataQuick Information Systems, a real estate information firm.

From CBS 13:

It's called "Cash for Keys," and it's been happening for years, but the strategy has been kept quiet. Until now...The deal is simple: Occupants get out within 30 days without trashing a house, hand her the keys, and she hands them back a check from the bank. Then it's done.

CBS 13 has video of the San Joaquin County mansion ransacked by thieves. Also from CBS 13: Foreclosed Homes With Pools: Home To Mosquitoes

From the Sacramento Bee:

Don Snyder's voice cracked as he talked about the end. The emotion welled up from owning Sacramento's oldest toy store, from the joy of selling playthings to Sacramento's children to watching his own kids grow up in the store's aisles. Now it's almost over. Soon Carousel Toy & Party will close for good. Snyder is shutting down the Fulton Avenue store, a Town & Country Village mainstay that started as Bob's Toyland in 1951. He's endured rough patches before, but this year the economy, the housing market and consumer confidence in toys all tumbled at once. Holiday shoppers didn't come to the rescue.
...
The housing market's slide – the Sacramento area is among the nation's hardest-hit – continues to hurt retail spending. So does the volatile stock market – along with high prices for gas and food, the escalating credit crisis and a weak job market.

From the Modesto Bee:

Northern San Joaquin Valley home values have declined so much that more than a quarter of homeowners can expect to pay less property tax next year. About 37,000 Stanislaus County homes will be reviewed. Their assessed values are expected to drop 10 percent to 40 percent, Assessor Doug Harms said Monday.
...
Assessors will be more aggressive in lowering San Joaquin County home values this year. "We're reviewing (home purchases) back to 2002," said Ken Blakemore, San Joaquin's assistant assessor.

"The Wrong House at the Wrong Time"

From the Sacramento Bee:

Sukhwinder "Suki" Kaur bought the wrong house at the wrong time. Within months of her July closing on the two-story home in Elk Grove, work in the new subdivision stopped and the builder's parent company, Dunmore Homes, filed for bankruptcy protection. Kaur, who is paying on a $430,000 mortgage, has become the target of two lawsuits and 28 liens from unpaid subcontractors and suppliers. More than a dozen other individuals in the Monterey Village development are in similar predicaments.
...
At one end of Kaur's street are the visible signs of the owners' distress. Rows of utility lines are capped and waiting for homes across a sea of mossy dirt. Nearby, temporary poles mark one subdivision entrance where a gate was never installed. In the distance, a cluster of unfinished homes are sore reminders of the unfolding tragedy. Many of the 50 or so homes completed are vacant.
...
Rebecca Westmore, senior staff counsel for the state Department of Insurance, said contractor liens could become more common as the home market slides. If builders are closing up their shop and not paying, "that's the natural fallout of this market," she said.

From the Wall Street Journal:

The six cities showing the greatest deterioration in home prices are Sacramento, Las Vegas, San Diego, Tampa, Los Angeles and Miami, according to Radar Logic, a New York-based research and analytics firm. All these locales showed double-digit declines in November from November 2006. The report, which looks at prices in 25 metropolitan statistical areas across the U.S., showed that the price per square foot for homes fell 18.6% in Sacramento to $185.98....

November was the fifth consecutive month that Sacramento has claimed the bottom spot on Radar Logic's list. To read the report, click here [pdf].

The Radar Logic stats are a bit stale. Do more recent stats show any improvement in Sacramento home prices? No, says the Altos Research blog.

From CBS 13 (video):

[T]hree zip codes in the Natomas area are being hit the hardest. Homes there typically sell for well over $250,000. But in the past year, some have seen a 50% depreciation.

From the Stockton Record:

The city of Tracy is headed toward a $6 million deficit by the end of this budget year, as the downturn in the housing market finally takes its toll on the city's property tax revenues, Tracy Finance Director Zane Johnston said.

From the New York Sun:

Mr. Clinton stopped in Sacramento at lunchtime, where he was greeted by a crowd of about 1000, according to the Associated Pres. In the afternoon, he was in Stockton, Calif., where several thousand people attended a hastily arranged rally at the University of the Pacific. He honed in on the subprime mortgage crisis, which is severe in cities like Stockton. Mr. Clinton said his wife's plan to keep people in their homes is "much more aggressive than any of the other candidates" and would stave off what he warned would be a "calamitous collapse" of the housing market.

From Reuters:

In Stockton, where single-family neighborhoods are tied together by expressways lined with small and mid-sized shopping malls, many mortgages are in defaults or foreclosure. "I go to the gym and hear a lot of horror stories," Gonzalez said. "A lot of people bought houses a year, year-and-a-half ago and paid top dollar and now can't make the payments."
...
But many who bought during Stockton's housing boom simply ignored loan terms, said Bill Herrin, an economist with the University of the Pacific: "Everybody wanted to do it now, today ... Collectively, we went a little nuts out here."

From the Stockton Record:

The CBS news magazine "60 Minutes" put Stockton on the national map last Sunday in the program's lead story about the foreclosure crisis, "House of Cards." Ground zero, reporter Steve Croft called us, and ground zero we are.
...
Croft's report, mercifully, did not paint the city as unique in this meltdown. Neither did he suggest that what's going on is the result of a concentration of nincompoops in residence (although there was one family interviewed ready to walk away from a mortgage they could afford simply because they were disgusted their home had dropped in value).

One of the many things not guaranteed in life is that your home, or anything else, will appreciate in value. Had appreciation continued unabated - something that carries its own dangers - it would have covered up all the ills being visited on us by the subprime mortgage meltdown. Stockton would not be ground zero in this one and Steve Croft would have busied himself reporting on something else, like reporting that no one, outside a few millionaires, could ever buy a house here because prices had gotten so astronomical. You know, sort of like they were two years ago.
...
The fact is this isn't over, not by a long shot. A lot more loans are going to reset to much higher rates, a lot more families are going to lose their homes, a lot more neighborhoods are going to be hurt and a lot more equity is going to be lost by homeowners who are making their payments.

Central Valley Real Estate's Elephant in the Room: Affordability

From the Modesto Bee:

Northern San Joaquin Valley home prices have plummeted, but they haven't fallen enough to become affordable for most wage earners, a new study shows. Home buyers must earn about $98,000 a year to comfortably afford a median-priced house in Stanislaus County, the Center for Housing Policy reports. But workers in only one of the 64 occupations studied -- construction managers -- earned that much last year. Even two-income couples with good jobs -- such as accountants, police officers, school teachers and firefighters -- barely can cover ownership costs, the report showed.
...
In calculating what's affordable, the study assumed not more than 28 percent of household income should pay the mortgage, property taxes and insurance. It also assumed buyers had a 10 percent down payment with a conventional loan.
...
Houses weren't always hard to afford. Anita Hellam, executive director of Habitat for Humanity for Stanislaus County, remembers during the mid-90s "when the majority of the working families living in Modesto were able to find affordable housing."

Click here to read the study. The amount of income needed to purchase the median-priced home per their methodology:

• Sacramento: $110,090
  
• Stockton: $113,683
  
• Modesto: $98,003
  
• Yuba City: $86,569
  
• Merced: $90,816

From the HomeGuide123.com (hat tip Bay Area Housing Bubble)

Historically, median home prices and median incomes have always shared a close relationship. From the mid-1970s to 2001, the historical ratio of median housing value vs. median household income was consistently between 2.6 and 3.0. What this essentially means is that median home prices were (on average) 2.8x the median household income for the last 30 years. Using this 2.8 formula, it is very easy to estimate what median home prices would be if the most recent bubble never happened.
...
There is no doubt about it. California was hit hardest by the housing bubble. Although prices have always been slightly elevated in the state, they grew by leaps and bounds during the housing boom. The result is that home prices are 61 percent higher than they should be given California's median household income of $56,645.

From the Auburn Journal:

Placer County Association of Realtors statistics for December show a $357,000 median value for the 226 homes sold in December -- down from $366,000 in November, and $439,700 in December 2006. The median value is well off the peak of a red-hot August 2005 real estate market in the county, when it soared to $517,500 and 486 sales were closed.
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Lyon's report by Trendgraphix showed the average price per square foot in Placer County decreased by three percent during the month of December to $194. El Dorado County's was $204 per square foot and Sacramento County's was $177. The Trendgraphix report's overall totals for the tri-county region of Sacramento, Placer and El Dorado counties mirrored the Placer County numbers. Sales were 22 percent lower than December 2006 sales and the December inventory of 13,181 homes for sale was 28 percent higher than the December 2006 inventory.
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Joe Newton, Association of Realtors president, said Monday that while the market has been awash with negative industry statistics, the downturn has meant clients buying and selling homes "rely on us even more as trusted advisors."...Placer County will continue to be a destination for people as the market sorts itself out, he said, noting amenities like nearby wildland areas for hunters, rafters and fishermen.

From the car.org:

Home sales decreased 33.4 percent in December in California compared with the same period a year ago, while the median price of an existing home fell 16.5 percent, the California Association of Realtors reported today.

Sacramento Median Price Change: -21.5%
Sacramento Sales Change: -19.0%

CBS13: Squatters Take Advantage Of Foreclosed Homes
News10: Recovery from Foreclosure Takes Time

From the Stockton Record:

New-home sales last year in the United States were in lock step with those in San Joaquin County - both saw annual sales drop by about a fourth from the previous year...[T]he average selling price of a new home in San Joaquin County dropped 12 percent over a year, from $519,350 in the fourth quarter of 2006 to $456,956 in the fourth quarter of last year.

Intentional Foreclosure - 'Is it wrong to steal when you're hungry?'

From CBS 13 (video):

This is how it works. Bob paid $420,000 for his home. Then he notices the house across the street, with more upgrades, and is selling for $315,000. So Bob, who has pretty good credit, decides to buy the cheaper house. He can't afford both, so then he walks away from his original home, letting it fall into foreclosure. That will hurt his credit, but he's willing to take the hit for a more affordable home.

"Is it wrong to steal when you're hungry? That's an issue that a lot of people are trying to figure out right now," says Linda.

LA Land has more on this trend here, here, and here.

Meanwhile, News10 (video) is reporting that squatters are now using motion detectors to protect their new digs.

From the Sacramento Bee:

Practically every Sacramento wage earner would get a tax rebate check from the U.S. government under the economic stimulus package unveiled Thursday – $600, $1,200, even more for families with kids. What's uncertain is how much good it will do for an economy in danger of slipping into recession.
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Also uncertain is the impact of a plan to boost the upper end of the housing market by raising the ceiling on so-called jumbo loans. The plan likely will reduce interest rates in certain high-end metropolitan areas of California but may have limited effect in more affordable areas like Sacramento.
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At Arden Fair mall, retired truck driver Irwin Hart of Sacramento said the stimulus package won't do enough to revive the economy. "People here are sweating because they can't buy a home, and others are sweating because they can't sell theirs," he said.

From the Sacramento Business Journal:

With home prices falling, retail spending down and fears of a recession looming, Lowe's has dropped plans for a giant home-improvement store at a big-box development in Elk Grove, and Wal-Mart might do the same, real estate sources said.

From the Fresno Bee:

Home prices fell so precipitously in 2007 that five cities in the San Joaquin Valley, including Fresno and Modesto, recorded some of the greatest declines in property values in the country, according to a report released Thursday. Modesto, Merced, Stockton, Fresno and Bakersfield finished in the bottom 10 of 956 regions sampled. The median price of a single-family house in the Fresno area fell 16.73% over the year ending in December, according to the First American CoreLogic Loan Performance HPI, which specializes in residential mortgage data and analysis for the mortgage industry.

"Prices Are Still Too High for Potential Buyers" v. Consumer "Mental Disorder"

From the Sacramento Bee:

Dean Wehrli, vice president of the Sullivan Group Real Estate Advisors in Elk Grove: Foreclosures soar; buyers wait; credit tightens. The picture for Sacramento's residential market in 2008 doesn't look good...[P]rices are still too high for potential buyers. Consequently, prices will continue to regress in the second half of this decade to the place they should have been had we not been so frenzied in the first place. If we are waiting for equilibrium – when buyers hold as much "power" as sellers – then we will still be waiting by the end of 2008.
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David Lyons, labor market consultant at the state Employment Development Department: The economic slowdown will translate into a weak labor market in the Sacramento region, with overall job losses outweighing those sectors still hiring. The regional economy is in for a very slow start to the year. The region generated a net gain in jobs in 2007, but the growth rate slowed to a crawl by year's end. As of November, the region had added just 6,600 net jobs in the past 12 months – a gain of 0.7 percent. It marked the first time the annual growth rate was below 1 percent since 1993. And 2008 is looking bleaker. It's very likely we're going to be in negative territory.
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Dan Lankford, managing director of Wavepoint Ventures, an early stage investment company with offices in El Dorado Hills and Menlo Park: Most economists agree that the U.S. economy will slow in 2008. The Sacramento region will likely feel a more pronounced tapering off, given the boom of the last several years and the large role that real estate plays in the local economy.

From the Sacramento Business Journal:

Dean Wherli, a vice president with real estate adviser The Sullivan Group, offered a scenario last month during a presentation at an Urban Land Institute event that said if new-home prices around the region had appreciated at a more moderate rate -- say 6 percent instead of the fast-rising prices between 2000 and 2005 -- the price for a newly constructed home at the end of 2007 should have been about $319,000. Instead, the current median price is $385,990. The higher price means that, despite the deep discounts by new-home builders, the region's overall prices are still about 17 percent more than they should have been under the moderate-growth scenario. Wherli said if prices were to hold throughout 2008, by the end of the year they'd still be about 12 percent above the moderate-growth scenario.

Prices, however, seem unlikely to hold. Discounts are drawing a trickle of new buyers, so homebuilders are likely to continue to offer price reductions to lure more buyers.

From the Real Estate News blog:

Our local real estate market has already corrected itself from its past excesses. The median selling price for a county home is $100,000 less than two years ago...Since we all understand the financially successful concept of buying low and selling high, why is it that buyers aren’t?

Consumers are suffering from a mental disorder called media-itice. The affliction resulting from four years of being propagandized by the major media and the economic press about the collapse of the real estate, mortgage and credit markets. Beginning in 2003, consumers have been told that the real estate market was: popping, sinking, bursting, plunging, free-falling, imploding, exploding, collapsing and in total meltdown....Is it any wonder that potential homebuyers are put off from buying a home? Yes, there are some problems but isn’t all the hoopla over a small percentage of troubled homeowners a little too much?

Legislative changes in the mortgage, appraisal and credit industries, insuring market exuberance won’t happen again, will not change consumer immediate attitude toward real estate as a long-term investment and it will do nothing to perk up the county’s housing market. What our current local market needs is a stimulus that will attract homebuyers to El Dorado County.

From the Sacramento Business Journal:

The state's estimated $14.5 billion shortfall could hit Sacramento disproportionately hard if jobs around the Capitol are trimmed. Sacramento's loss of 7,200 construction jobs during the past year was mitigated by 6,000 new hires in government. Given the decline in sales-tax revenue and building fees that have hit all cities and counties, the region can't rely on government for economic growth this year.
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Sacramento's core jobs are in financial services, construction and government, and none of them look especially strong in the coming year. Housing looks the weakest, with experts predicting further erosion in prices and even fewer sales than the estimated 7,500 new homes built and sold in 2007, down more than 50 percent from the peak years. Sales of existing homes aren't expected to recover this year either, with more foreclosures likely as another wave of adjustable-rate mortgages resets to higher rates. More than 14,000 existing homes were for sale in November 2007, 18 percent higher than a year ago, though down from the record high of 15,302 in September.

From the Sacramento Business Journal:

Sacramento's reliance on government, service, construction and financial service industries for growth in the office market could make for a lean year. With the construction industry taking a huge hit, there has been a ripple into the office market that those in the industry are hoping doesn't build into a wave. That means lease rates are stabilizing and concessions are rising. The region's office vacancy rate inched higher in the third quarter to 15.2 percent for nongovernment buildings larger than 5,000 square feet.

From the Sacramento Business Journal:

A stakeholder in Sacramento's Reynen & Bardis Communities Inc. has accused the builder of making just two monthly payments before defaulting on $19.8 million in obligations it took on this summer. The lawsuit brings the company among the ranks of other local builders struggling through the housing slump who have faced defaults and ended up in court as the market turns against them.