Real Estate Fraud Crackdown - 'Too Little Too Late'

From the AP:

[F]raud helped artificially inflate home values that have since come crashing to earth..."Let's not lose sight of the fact that there is immense criminal fraud involved in this financial crisis," said U.S. Attorney McGregor Scott, whose district spans California's vast Central Valley and is among those most affected by the housing bust. "It's a profound ripple effect that affects everyone."
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In Scott's California district, prosecutors have filed charges related to housing scams against 53 people in 15 ongoing prosecutions. They have another 15 active investigations against 68 individuals. They estimate hundreds of millions of dollars have been paid out by banks and other lenders because of mortgage fraud in the Central California district, which stretches from just north of Los Angeles to the Oregon border. "We're running out of bodies to handle these cases," said Scott, calling on Congress to approve more money for investigators and prosecutors. "We're just being overwhelmed."
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"I wish they had engaged in this earlier," [Paul] Leonard [director of the California office of the Center for Responsible Lending] said. "I think it's constructive to sort of root out these evil and malicious scams when they occur ... Given the state of the economy, it's too little too late."

From the Modesto Bee:

The economy appears to be in a "mini-depression" but could start growing again by mid-2009, the publisher of Forbes magazine told a Modesto audience Wednesday...[Rich] Karlgaard also said the housing market, especially depressed in the Northern San Joaquin Valley, is starting to turn around as buyers bid up underpriced homes.

From the Modesto Bee:

And then ... the crash. The bottom dropped out of the real estate market and almost without warning the nation itself fell into an economic sinkhole that seems to have no bottom...While Central Valley cities have been especially battered by the crashing real estate market, there's reason to hope we will recover faster than the rest of the country. Our economy is still based on agriculture, and agriculture will weather this storm better than many other markets.

From Sacramento News & Review:

It could get worse. Much worse. If unemployment continues to increase as the economy unwinds, by this time next year, the state may not be able to pay all of those who are eligible for [unemployment insurance] benefits, according to EDD spokeswoman Loree Levy.
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Combined with the recent wave of job losses from the collapsing housing bubble, [a]...structural gap [between payroll taxes and benefits] led to a 55 percent decrease in the fund during the past year. EDD forecasts a $2 billion-plus deficit next year, and double that figure by 2010.

In short, unemployment insurance, established in 1935 during the Great Depression as a component of President Franklin Delano Roosevelt’s New Deal program, may not provide workers enough protection from the present downturn, which many economists are already calling the next Great Depression.

From the Sacramento Bee:

"This year I told my mom, 'Don't be surprised if you receive a macaroni necklace as a gift made by me, not your 3-year-old grandson,' " said Shelly Hutchens of Sacramento. Hutchens was joking, but there's more than a bit of truth there, too. A state employee and mother whose husband is in the construction industry, Hutchens said her family and friends have felt the effects of a slumping economy. "We're at a different time. If you haven't been affected by the economy, you know someone who has," she said.

From the Sacramento Bee:

Office Depot will close two of its Sacramento-area locations today as part of a wide-ranging, cost-saving measure announced on Wednesday by store officials. Stores in Citrus Heights and Rocklin are among six California stores to be closed...About 40 full- and part-time employees at the Citrus Heights and Rocklin stores will be affected by the closures, said spokeswoman Melissa Perlman.

Interactive database: See who is laying off workers

'Nobody has any proof that we’re at bottom'

From the New York Times:

This town, 59 feet above sea level, is the most underwater community in America. Because of plunging home values, almost 90 percent of homeowners here owe more on their mortgages than their houses are worth, according to figures released Monday. That is the highest percentage in the country. The average homeowner in Mountain House is “underwater,” as it is known, by $122,000.
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Even relatively recent arrivals are feeling a pinch. Kenny Rogers, a data security specialist, moved into Mountain House last year, buying a foreclosed property on Prosperity Street for $380,000. But the decline in values has been so fierce that he too is underwater.

From the Sacramento Business Journal:

After sitting out much of the housing slump, investors such as [Ethan] Conrad lately have been drawn back to land by steep discounts as banks foreclose or homebuilders dump their holdings. Not everyone is convinced land has hit bottom, but Conrad likes the prospects. “I’ve watched values plummet by a pretty shocking amount,” said Conrad, who bought 267 lots from homebuilders William Lyon Homes and JTS Communities Inc. in the past few months, spending about $11 million on assets that cost those homebuilders $45 million. “All of the signs are of a healthy market coming back.”
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Some real estate brokers, however, have yet to see clear signs of a recovery. Guy Spitzer is a vice president at Cornish & Carey Commercial who concentrates on land and investment properties after a career with builders Renaissance Homes, Lennar Homes and Centex Homes. He is much more cautious about the state of the market, saying it’s possible that private investors have leapt too soon because they can’t reap profits until homebuilding is profitable again. “I have been a homebuilder for 25 years; I’m the guy who had to buy those deals,” he said. “Nobody has any proof that we’re at bottom. Our country is going into recession and that’s going to cause additional pain in California — it’s just a tough, tough time.”

From the Associated Press:

From department stores and convenience chains to call centers, managers who only a year ago had to scramble to fill holiday jobs are seeing a surge in the number of seasoned applicants — many of them laid off in other sectors and desperate for a way to pay the bills.
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David Ortega, a training store manager at the 7-Eleven in Citrus Heights, Calif., that got more than 100 applications, noted that many applicants have management experience — including those who even owned their own construction business. The store in a suburb of Sacramento, which has been hard hit by the housing slump, usually saw candidates who came straight out of high school, he said.

Estimate: Up to 50% of Foreclosure Sales Go to Investors

From the Stockton Record:

Stockton area real estate brokers say that at least 80 percent of home sales this year are foreclosure homes and that as much as half of those sales involve investors. According to figures from Coldwell Banker Grupe-TrendGraphix monthly sales reports, based on Multiple Listing Service data, there have been more than 3,600 closed sales on single-family homes in San Joaquin County. If eight out of 10 of these are foreclosure properties, that means about 2,900 foreclosure sales, with perhaps up to 1,450 of those bought by investors and headed for the rental market.

From the Sacramento Business Journal:

Financial Title Co., headquartered in Citrus Heights, abruptly closed its 57 branches in California late Wednesday, as well as shuttering operations in Arizona and Texas, the California Department of Insurance said. The company has 10 offices in the Sacramento market.

From the Sacramento Bee:

Mortgage brokers said Monday the FHA program, in which the federal government's guarantees make loans more affordable, accounts for the vast majority of their business. That's become increasingly true as credit markets tighten and conventional mortgage guidelines become more restrictive. Some experts said the FHA's guarantees are playing a major role in the fledgling recovery in Sacramento's real estate market.
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With conventional lenders demanding down payments of 5 percent or 10 percent, the 3 percent down payment required by FHA has become a bargain. That could make the FHA "the new lender that's going to deal with risky loans," said Steven Krohn, an economist and analyst with the Real Estate Group Inc., a consulting firm in Sacramento. "They've moved in to kind of remove the financing risk from the banks and the investors."

From Calculated Risk:

In a number of previous housing busts, real prices declined for 5 to 7 years before finally hitting bottom. That is my expectation for the duration of the price declines in the bubble areas. The bottom for real prices will probably be in the 2010 to 2012 period. The less bubbly areas will probably bottom sooner. If this bust follows the historical pattern, we will continue to see real price declines for several more years, and the rate of decline will probably slow....

'Investors Are Just Gobbling That Stuff Up'

From the Sacramento Bee:

When DataQuick Information Systems reported this week that Sacramento County posted its first gain in year-over year home sales in 37 months, these were the neighborhoods that made it happen: working-class areas in south Sacramento, North Highlands and North Sacramento, Elverta and Citrus Heights...What they have in common is an abundance of homes with falling values, heavily discounted bank-owned residences and scenes of multiple bids by investors and first-time buyers.
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During the third quarter of 2007, Meadowview's 95832 was one of California's most default-prone ZIP codes....April sales jumped 266 percent over the same month in 2007. The ZIP code's median sales price was $185,000, down 44 percent in just a year...[DataQuick's Andrew] LePage said 79 percent of the April sales in that ZIP code were homes lost to foreclosure during the past year.
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"Investors are just gobbling that stuff up," said Fair Oaks-based real estate broker Warren Adams of Security Pacific Real Estate...[Broker Kevin] Cooper said most of his clients are investors.

From the Lodi News Sentinel:

Foreclosure numbers in Galt don't touch those in Elk Grove or Stockton. But abandoned homes are increasingly a part of the small community's landscape, worrying officials and city residents alike. "It's getting to be a mess ... something needs to be done because Galt is not looking pretty right now," Galt resident Al Baldwin told city leaders, speaking at last night's City Council meeting.

"I don't want to get anybody in trouble, but I don't want the city to look like a garbage dump either," added Baldwin, a regular at council meetings, noting one west side neighborhood has five abandoned homes on the same block.

It's not clear how many homes are in foreclosure in Galt. A search of several real estate Web sites, including www.foreclosurelistings.com, shows there are more than 100 properties either in foreclosure or in its early stages.

From SBS (Australia):

DAVE HARMON, REAL ESTATE AGENT: In this particular cul-de-sac I've personally had one of the listings on this home that after being it on the market for a year we couldn't sell it, we couldn't find a price at which someone would buy the home.

Real estate agent Dave Harmon works in the Californian city of Stockton. It has the dubious distinction of having the highest rate of home repossession in America.

DAVE HARMON: And since that time the home next to it is in foreclosure, it is for sale now, two others behind me, another across the street and two more on the end. So half the homes on this cul-de-sac have been hit with a foreclosure situation. Now the bad news is that the half that haven't been hit yet will be in the near future.

California's Central Valley is the epicentre of the subprime crisis. In some Stockton suburbs, one in four houses has already been repossessed by the banks and the foreclosure rate is still accelerating. It's not expected to peak until October. I've travelled to Stockton to see the scale of the bust in America's housing boom - a crisis which has badly shaken the US financial system.

The video is available on the right side under "Desperate Households."

'I've never seen this many bank-owned properties and so many foreclosures'

From the Sacramento Bee:

Scared by growing numbers of bank-owned houses and for-sale signs in their neighborhoods, a handful of local cities are launching moves to help homeowners threatened with foreclosure. Their initiatives so far are limited to offering advice. Nobody's opening up the checkbook to bail out homeowners.
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"We don't know how far this is going to go," says Jim Lynch, community enhancement manager in Citrus Heights. "We've had housing setbacks over my 35 years, but I've never seen this many bank-owned properties and so many foreclosures."

Rancho Cordova, home to 175 foreclosures since January, plans a December workshop looking at solutions for homeowners in default...Folsom officials also have begun talking with Neighborworks. The city has seen 90 foreclosures since the start of the year, according to Foreclosures.com....Sacramento, with 1,740 foreclosures since Jan. 1, has ramped up code enforcement efforts to deal with vacant housing.
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[Reed] Flory [Rancho Cordova's housing services administrator] said the city is especially concerned about its new Sunrise Douglas subdivisions, south of Highway 50...[M]any of the homes there came onto the market in 2005 and 2006. Those were peak buying years for borrowers now facing adjustable-rate mortgage resets and falling home values. Rancho Cordova City Councilman Ken Cooley recently counted 79 homes for sale in Anatolia and fears some may be "fire sales" by troubled borrowers.

From the Sacramento Business Journal:

One of every nine property tax bills have been reduced compared to last year's assessed value in Sacramento County, the latest sign of a slumping housing market.

From the LA Times:

Gov. Arnold Schwarzenegger on Monday ordered all state departments to draft plans for deep spending cuts after receiving word that California's budget is plunging further into the red -- largely because of the troubled housing market. State officials have warned the governor that the likely deficit for next year has jumped from a few billion dollars to as much as $10 billion, threatening to wipe out the progress Schwarzenegger has claimed in getting the state's accounts in order.

In response, Schwarzenegger's finance department has ordered agency directors to formulate plans to cut budgets by 10% for the spending blueprint the governor will unveil in January, according to administration officials who spoke on condition of anonymity. That would mean substantial cuts in all state programs, including education, transportation and healthcare, the officials said.

From the Appeal Democrat:

Yuba County officials and a developer on Monday cited a weak housing market as one reason for delaying – and possibly scaling back – plans for Woodbury, a major development east of Highway 70 and south of Erle Road. The Sacramento developer, Reynen & Bardis Communities, has not renewed options to buy some of the 1,600 acres planned for Woodbury, which would include 6,250 homes, as well as stores, parks and schools, said Randy Margo, assistant county administrator.

From the Modesto Bee:

Engineering firms are feeling the slowdown in Northern San Joaquin Valley real estate just as much as other businesses. Officials with Modesto's Mid-Valley Engineering said they've cut 19 employees in the past few months, and other firms indicate they're also feeling the effects of a business slowdown. "We're paring down some because of market conditions," said Bob Lawson, chief financial officer at Mid-Valley, which has about 150 employees...Lawson and directors at other engineering companies said their slack is directly related to the dramatic downturn in real estate in the region.

Mike Lyon's North State BIA presentation [pdf]

Price Reductions Graph

Zip Realty looks at the percentage of homes on the market where the asking price has been reduced. Coverage of Folsom, Citrus Heights, Roseville, and Natomas.

Local Price Reduced Figures

The Zip Realty Real Estate Market Conditions blog has some price reduced figures for some local markets:

• Folsom, CA: 37.8%

• Natomas, CA: 35.4%

• Roseville, CA: 35.0%

• Citrus Heights, CA: 31.5%