Squatlord Republic?

From the Sacramento Bee:

California saw a 42.5 percent drop in home sales at $1 million or above last year, according to a report Tuesday by market researcher MDA DataQuick...The dropoff was slightly worse in the Sacramento area: 50 percent in Sacramento County and 45 percent in Placer...The high end was battered by the downward price pressure at all levels of the market and was hit by a severe shortage of financing, said DataQuick analyst Andrew LePage.

From the Sacramento Bee:

The nation's foreclosure crisis has sparked scams nationwide, emboldened squatters and homeless advocates and led to numerous federal indictments. But this?

Sacramento police were in one of the city's most affluent neighborhoods Tuesday investigating a scheme with a twist: claims that the house involved is under the protection of a sovereign republic and that trespass could be met with "self defense" and "justifiable homicide." The bizarre case unfolded Tuesday in a gated West Natomas neighborhood that boasts million-dollar homes and some of the city's most prominent residents – think members of the Maloof family.

From News10:

The mortgage industry insider who admitted on his company Web site that he had been involved in massive mortgage fraud was charged Thursday with multiple felonies. The complaint was sworn by an IRS agent who said Christopher Warren, 27, fled the country on a private jet on Monday, the same day he replaced the home page of the Triduanum Financial Web site with a seven-page essay outlining his crimes and asking for forgiveness.

From the Sacramento Bee:

As soon as they default on a mortgage – or before – the calls begin. Often, the firms seek $1,500 to $4,000 upfront to help them out of jams with housing-boom loans...."It's similar to after a hurricane hits," said Tom Pool, spokesman for the California Department of Real Estate. "The bogus contractors come and collect money for repairs and don't do anything. These people are on their last dollar, anyway, and these loan-modification companies are having them draw on their credit cards with false promises."
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Pool said DRE has shifted staffers to investigate 250 cases of loan-modification offenses. Many involve former real estate agents.

From News10:

John Laing Homes has shut down construction on its northern California projects according to company insiders...At the height of the housing boom, the company employed 165 people in the Sacramento area according to insiders. By the time the final layoffs came, the staff numbered 31.

Another report from CBS 13.

From the Stockton Record:

Kevin Huber, president of Stockton-based Grupe Co., said foreclosures have significantly affected development and home building in both the short and medium term, because foreclosures are selling well below what it costs to develop and build new homes. "Nobody's going to start a new home knowing you're going to lose money," he said. There's probably 18 months to two years more of foreclosures dominating the marketplace before home builders can compete again in a "normal" market, he said.

From the Sacramento Business Journal:

Sacramento ranks No. 9 on a list released Thursday of the metropolitan markets with the largest potential for distressed retail real estate assets. Madison Marquette, which owns 20 million square feet of retail and mixed-use properties across the country, compiled the list with its own research along with that of CoStar, a commercial real estate information company.

From the Sacramento Bee:

The city of Sacramento sent layoff notices Thursday morning to 24 employees within its development services department. Four supervisors - including the city's chief building official - were among those to receive layoff notices.

'You didn't have a choice but live in debt'

From the Sacramento Bee:

"Welcome," says the letter dated May 20, 2005. "It is a pleasure to have you as a new loan customer of Fremont Investment & Loan." They were only 18 words written at the height of a housing boom. But mailed to Erin O'Hagan of Sacramento, and multiplied hundreds of thousands of times elsewhere in the United States, they launched a financial crisis that is now rocking the world. More than three years after getting that letter, O'Hagan said, "Who would have thought it all would crash and burn the way it did?" Not just her own world. The whole world.
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In the spring of 2005, Erin O'Hagan worked at Chicago Title's Roseville branch, helping close the thousands of escrows that were part of the region's sizzling housing boom. "I was making a better salary than at any time in my life," she said. "I never thought it would end."

From the Tennessean:

Some banks, trying to reduce their exposure to risk, have been canceling the remaining balances on existing home equity lines of credit. That's what happened to [Wayne] Anderson on his second home in Sacramento. His lender, Citigroup, informed him that home values were falling in the area. A spokesman for Citigroup, Mark Rodgers, said in an e-mailed statement: "The reduction or suspension of the line protects our customers from borrowing more than the value of their properties."
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Anderson had hoped to use his home equity loan for unexpected expenses, such as maintenance on one of his two homes. He moved from Sacramento last year to find more work, but was unable to sell his home in a declining real estate market, so he rented out the home in California while buying a new one in Mt. Juliet.

He said the high cost of homeownership in California helped fuel certain feelings about debt — feelings that he no longer has. "Prices were through the roof,'' he said. "You didn't have a choice but live in debt. The average person can't afford those houses. You just become accustomed to living in debt. I've come to this realization I don't want to live in debt anymore. All the money I was making was trying to pay off those credit cards."

From the Christian Science Monitor:

[Kevin] Smith, a car salesman, faces many of these pressures and is reconsidering his expenses. Between his home and a second rental property, he’s $400,000 under water. He recently lost his renter, to boot. “If the principal balance isn’t reduced for everyone, then this situation is going to keep going on,” says Smith. He figures within three months he will stop making payments on both mortgages. “Several friends in the neighborhood, they are talking about the same thing.”
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As for the roof over Smith’s head, it’s now worth roughly $475,000. That’s low compared with his $690,000 mortgage, but perhaps too high for a replacement loan insured by the Federal Housing Administration (FHA).

Smith might get more time to cut a deal with his lenders if Obama becomes president. His plan calls for a 90-day moratorium on foreclosures by those financial institutions getting federal bailouts. The idea is to give time for new loan modification programs to get up and running. “I think it would be delaying the inevitable [unless] there would be help with the balance,” says Smith, who says his lender, GMAC Mortgage, “hasn’t been too flexible.”

From the New York Times:

An eternity ago, people in this city in northern San Joaquin County braved four-hour round-trip commutes to the San Francisco Bay Area for a toehold on the dream. Today, Manteca’s lawns and driveways are storefronts of the new garage-sale economy — the telltale yellow signs plastered in the rear windows of parked cars Friday through Sunday directing traffic to yet another sale, yet another family. “You can get great deals,” said Sharrell Johnson, 32, who was scouting for toys in the Indian summer heat last Friday amid boxes of tools and DVDs and forests of little skirts and shirts dangling from plastic hangers on suspended rope. “Sad to say, you’re finding really good things. Because everybody’s losing their homes.”

From the Stockton Record:

There may be a financial crisis on Wall Street and a housing crisis on Main Street, but it's a busy time for jewelry buyers and pawnbrokers. That's a mixed bag for Annette Hoag, co-owner of Annette's North Stockton Jewelry and Loan on Pacific Avenue. In terms of making small, short-term loans, she said, "We're up 57 percent in the last six months, but what people don't realize, the retail side of the business ... is gone. People aren't buying anything."

From the Fresno Bee:

The Valley's economy isn't dependent on heavy manufacturing like the industrial Midwest, where plant closures have devastated communities and helped boost the national unemployment rate to 6.1%. But the waves from Wall Street's market tumble, the credit crisis and declining consumer confidence are rocking segments of the Valley economy once thought insulated from job losses.

Jeffrey Michael, director of the Business Forecasting Center at the University of the Pacific's Eberhardt School of Business, said the Valley seems headed into a second phase of recession. After the collapse of the real-estate market and the burst homebuilding bubble, "it's spilling over into consumer spending. We're starting to see some pullback in employment in retail, restaurants and other consumer-discretionary things," Michael said. "What we're seeing in this second phase is a more broad-based weakness; there are fewer 'safe havens' out there for jobs" except in health-care fields.

From the Sacramento Business Journal:

Dunmore Capital LLC and its affiliates have lost more than one-fourth of the 7,000 acres they once controlled, and more land is at risk if disputes over tens of millions of dollars in debt can’t be resolved. An investor in six of the company’s properties from Bakersfield to Red Bluff has foreclosed on about 2,000 acres. Another 400 acres, which are considered among the company’s most promising development sites, are at risk of foreclosure as lenders filed notices of default alleging late payments on $28 million in loans.
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A year ago, the Dunmores touted a deal with a Dutch pension fund and other institutional investors they said would carry them through the housing slump. But since then, they have been hit with numerous allegations of default. The company has resolved many of its debts, but the recent round of filings presents a new challenge.

From CBS 13:

A large fence weighing hundreds of pounds was stolen in broad daylight in front of a Sacramento home, but experts say that the metal is worth virtually nothing if sold for scrap. All that's left of the six-foot-tall, rod iron fence is less than dozen posts, cut nearly down to the ground. The home on Sierra Vista Avenue has been in foreclosure for the past two months....

From the Sacramento Real Estate blog:

Hardly anyone is happy about the events of the past few weeks. To be sure, there are a few dubious winners. Those for whom predictions of economic doomsday is a hobby have had the satisfaction of saying "I told you so".

From the Modesto Bee:

Booms and busts provide valuable lessons. The housing market boomed for a decade. Then, over the past two years, it busted as the subprime loan game ran its course and, like an overworked wad of Bubblicious, left the nation covered in the reddish slime of a $700 billion bailout.

It's perfectly acceptable to blame all involved: greedy buyers who demanded the 3,400-square-foot McMansion on a tent-trailer budget, real estate and mortgage types who scored hefty commissions by nudging buyers into these exploding loans, and the greed-mongers who orchestrated this fiasco from Wall Street's end.

"The Acceptable Lust"

From the Sacramento Bee:

Sacramento-area home sales tailed off slightly in August from their July highs, while median prices in Sacramento County, the largest sector of the region's real estate market, held steady at $210,000. Though only one month's worth of data, it show the first time since May 2007 that median prices in Sacramento County have not fallen from the previous month.
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Sacramento County's $210,000 median sales price...is down 32.7 percent from the same time last year, and off 45.7 percent from the county's August 2005 high of $387,000.

From the Sacramento Bee:

The refinancing wave is on. Prompted by the financial chaos on Wall Street and the move by investors to the kind of bonds that fund mortgages, rates have plunged fast the past two weeks. But here's the bad news: Those in need most of refinancing probably can't. Credit standards are tight, locking out all but the most qualified borrowers.

"Credit standards are getting higher all the time," said William Martin, chief executive officer of the Bank of Sacramento. Martin said many lenders have taken such big losses on mortgages that they simply have less money to loan.

The dramatic drop in values over the past two years also means it will be difficult for many borrowers who now owe more than their homes are worth to refinance. "For every one we're accepting we're having to turn away two because there's not sufficient equity for the property," said Brent Wilson, a mortgage strategist with Sacramento's Comstock Mortgage.

From the Sacramento Business Journal:

The Modesto Bee this week announced plans to lay off 12 employees, including its sports editor....The layoffs are part of a companywide effort announced this week by The Modesto Bee’s parent, The McClatchy Co., to reduce its work force by another 10 percent, or about 1,150 full-time positions.

From the Sacramento Business Journal:

The McClatchy Co.’s credit rating was downgraded by two notches Wednesday as Moody’s Investors Service put the Sacramento-based newspaper publisher deeper into junk bond territory. Moody’s lowered McClatchy’s credit rating to B2 from Ba3....

From Portfolio.com:

In all the public finger-pointing about the American real estate bust, surprisingly little attention has been paid to its origin...However terrible the sins of the financial markets, they’re merely a reflection of a cultural predisposition. To blame the people who lent the money for the real estate boom is like blaming the crack dealers for creating addicts. Americans feel a deep urge to live in houses that are bigger than they can afford. This desire cuts so cleanly through the population that it touches just about everyone. It’s the acceptable lust.

Consider, for example, the Garcias. On May 30, the New York Times ran a story about a couple, Lilia and Jesus Garcia, who were behind on their mortgage payments and in danger of losing their homes. The Garcias had a perfectly nice house near Stockton, California, that they bought in 2003 for 160 grand. Given their joint income of $65,000, they could afford to borrow about $160,000 against a home. But then, in 2006, they stumbled upon their dream house. The new property was in Linden, California, and, judging from its picture, had distinctly mansionlike qualities. Its price, $535,000, was a stretch.

Then, of course, the market turned. The Garcias failed to make their mortgage payments and couldn’t sell their original house. They owed the bank about $700,000 and were facing eviction. The mistake supposedly illustrated by the Garcias’ predicament was that they held on to their former home in Stockton as an investment. The moral: Americans are in their current bind because too many of them saw houses as moneymaking opportunities.

But the real moral is that when a middle-class couple buys a house they can’t afford, defaults on their mortgage, and then sits down to explain it to a reporter from the New York Times, they can be confident that he will overlook the reason for their financial distress: the peculiar willingness of Americans to risk it all for a house above their station. People who buy something they cannot afford usually hear a little voice warning them away or prodding them to feel guilty. But when the item in question is a house, all the signals in American life conspire to drown out the little voice. The tax code tells people like the Garcias that while their interest payments are now gargantuan relative to their income, they’re deductible. Their friends tell them how impressed they are—and they mean it. Their family tells them that while theirs is indeed a big house, they have worked hard, and Americans who work hard deserve to own a dream house. Their kids love them for it.

'If you make $2,500 a month, you certainly should be out there looking to buy a home'

From the San Diego Union-Tribune:

Consumer belt-tightening has led some diners to curtail their visits to fancier eateries, providing a new stream of clients for Rubio's, [president Dan] Pittard said.
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In addition, Rubio's has been finding its own islands in the storm, opening stores in metropolitan areas that have been hit hard by the mortgage crisis, such as Sacramento.

But one of Rubio's best-performing new restaurants is in Rancho Cordova, a well-to-do Sacramento suburb that has so far avoided being dragged down by the wave of foreclosures and unemployment.

“Even in metropolitan areas that have been adversely affected by the subprime crisis, some trade areas are just fine,” Pittard said. In other words, there are some islands out there. All you have to do is look for them.

From the Sacramento Bee:

As the economic downturn deepens in Sacramento, three more area employers have instituted layoffs in recent weeks. The cutbacks are all in Rancho Cordova – at Aerojet, Wachovia Bank and failed mortgage lender IndyMac Bank – and affect 247 workers in total, putting further pressure on the metro area's economy.

From InsideBayArea.com:

San Joaquin County set a record with 18,158 defaulted tax bills, reaching an 8.5 percent delinquency rate.

From the Modesto Bee:

"Qualifying for loans has never been tougher," said Paul Carroll, owner of Carrollton Mortgage Co. in Modesto. "We have to prove everything now." Lenders no longer approve "no documentation" loans, which were common a few years ago. Now borrowers must demonstrate they can afford loan payments, verify their income and have decent credit scores.

For those who qualify, Carroll said home prices are cheap and mortgage rates are low: "If you make $2,500 a month, you certainly should be out there looking to buy a home."

Many investors are doing just that, and their loan rates also have dropped about half a percent since last week. "I'm setting up investor pools to buy a lot of houses, and I mean a lot of houses," said Mike Zagaris, president of PMZ Real Estate in Modesto.

'More Than a Rough Patch'

From the Sacramento Bee:

New data show Sacramento homeowners continue to take a big hit as the nation's foreclosure crisis churns through a second difficult summer. One of every 145 households in Sacramento, El Dorado and Placer counties faced foreclosure in July – 5,290 properties – according to Realtytrac, Inc. data service, saddling Sacramento with the 11th worst foreclosure rate in the country.
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All this, along with sinking home values and a bad economy, has Sacramento resident Leovardo Lopez, a pool builder, on edge this weekend. The 42-year-old Lopez's work hours recently were slashed. He was lucky; most of his co-workers have been laid off, but he fears he will not have a big enough salary next month to make his mortgage payment. Worse, the home he bought in 2005 is worth $150,000 less than he paid.

From the Modesto Bee:

"I'm looking for anything. I just need to make a living," said [Jerry King] the former Beck Properties home warranty representative..."First, I was looking for the same pay. Now, I'm looking for anything. I just need to make a living."
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Despite increased worker productivity since the 2001 recession, workers' wealth has not increased, Berkeley economist Sylvia Allegretto said. But they are feeling the economic bust..."The labor market has hit more than a rough patch as job loss has occurred in each month of this year," Allegretto said.

From the Modesto Bee:

As the economy shrinks, enrollment at community colleges is expanding. Modesto Junior College's enrollment ballooned almost 4 percent over last year to 18,474 students.
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"They're living in a different day and time financially. I don't think I've ever talked to so many people who have lost everything," [MJC counselor Kim] Bailey said. The Northern San Joaquin Valley's jobless rate hit 11.3 percent in July. At the same time, the region lost 3,000 homes to foreclosure. Economists say the housing market collapse is having ripple effects on the economy and forcing layoffs.

From the Stockton Record:

[Joe] Anfuso said Florsheim has sold houses in the past two months to perhaps four or five buyers who decided to buy new after finding the foreclosure market more difficult than they expected or discovering that the homes were "more challenging" than they expected. "The competition (for foreclosures) is fierce," he said. "You have people who have bid five, 10, 15 times and are getting beat out. They start asking, 'Is it really worth it?' Our agents are fielding a lot of questions from people who are looking at that market and don't like that process."

Greg Paquin, president of the Gregory Group, a real-estate information and consulting service in Folsom, said builders can be competitively priced against foreclosures, but most people don't seem to realize that yet.

From the Sacramento Business Journal:

Salt Lake City-based Woodside Homes, the Sacramento region’s 15th largest builder in 2008 based on sales volume, has announced it will file for Chapter 11 bankruptcy reorganization by Sept. 16, Big Builder Magazine reported Thursday.

From the Modesto Bee:

[Patty] Amador, whose 20-year-old Modesto mortgage company is among the region's largest, will share her concerns about recent changes Congress made to mortgage finance requirements. She said the valley's large number of foreclosures have lowered home prices, which has enabled sales to "bounce back" because first-time home buyers now can afford homes.

"Many of these buyers have the ability to qualify for loans and make payments on safe, fixed-rate mortgages. Unfortunately, few have the funds necessary for the down payment or closing costs," Amador said. "Recent legislation has not only eliminated a widely used financing tool, known as Nehemiah, but will also increase the amount of required down payment along with the monthly payment as a result of increase mortgage insurance requirements."
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Many first-time buyers...depend on down payment help to become homeowners, Amador said. "Now is not the time to be taking away financing tools, nor increasing costs to borrowers, if we are going to come out of this 'crisis' anytime soon," Amador said. "If we back financing tools with prudent underwriting, we can bring this market back without the risk of a reoccurrence of bad loans to the wrong borrowers."

'There are only so many houses I can buy in cash'

From the Sacramento Bee (hat tip SMF):

C.C. Myers, the legendary Sacramento-area building contractor, has filed for personal bankruptcy because of losses stemming from his personal investment in an Auburn residential development [Winchester Country Club]..."The market conditions are the worst we've ever seen and we were unable to convince our lenders to work with us to restructure the financing, so I was left with no other options," Myers said in his press release.

From the Sacramento Business Journal:

A St. Louis bank is foreclosing on part of the Sunset Whitney Country Club in Rocklin, creating uncertainty for the 45-year-old private club. Developer John Thomas, founder of Regent Asset Management Group LLC in Sacramento, is being sued by First Banks Inc., which says Thomas is delinquent on a $4 million loan on the golf course he bought in 2004. The club and golf course continue to operate. The bank has already taken the Sheraton Hotel on Stockton’s waterfront from Regent Asset Management.

From the Sacramento Real Estate Blog:

Up until recently, this fairly pricey community seemed immune to the price erosion in the rest of the area. In the last few months, however, we’ve sometimes had to report price drops for East Sac. In July, for example, the average sold price per square foot in East Sac was $324.61, down 12.5% from last July’s average of $370.84...With homes in East Sacramento selling for more than twice the price of homes in surrounding communities, demand for homes in East Sac has slackened from last year, with unit volume down 33.3%.

From the Sacramento Business Journal:

KB Home, the Sacramento region’s third-largest homebuilder in 2008, has merged its Sacramento and Bay Area divisions into a single Northern California division based in Pleasanton. Layoffs, which KB Home would not discuss in detail, included Sacramento division president Barry Grant. The Sacramento office remains open to support several projects still selling in the region.
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KB Home had been among the builders who were most confident about the Sacramento market during the peak of housing production, in 2004.

From the Sacramento Business Journal:

The Sacramento Bee on Monday offered the cash-strapped newspaper's first broad-based buyouts in its history, inviting a majority of the paper's full-time work force to take a voluntary severance. The Bee continues to experience big declines in advertising revenue brought on by downturns in the economy and housing market, and competition from the Internet and other media.

From the Sacramento Bee:

Bee Publisher and President Cheryl Dell...said another round of layoffs is possible if there aren't enough voluntary buyouts.
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One ray of hope at The Bee, Dell said, is that the Sacramento area entered the downturn earlier than most markets "and there's a general belief that we'll come out of this earlier."

From the Real Deal:

Margaret Ketwig, for example, is typical of many in Sacramento's middle class. Ketwig, 48, bought her four-bedroom home in 2006 for $590,000. Yet recently she lost her job. She hasn't been able to afford a payment since January. While Ketwig would like to sell, she acknowledges that she may just have to walk away. "There are so many homes on my block that are owned by the bank, that I can't compete with the prices," she said. "I can't even come close to making the house payments. I think I'll be moving in with family and starting from scratch."
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"I think the hard days are almost over," said Bob Bronswick, president and CEO of Coldwell Banker Sacramento/Tahoe. "Right now I think we've hit bottom, and we're looking at a bounce … I think things are starting to look up."

From the Sacramento Bee:

Millions of dollars in late special property taxes are forcing some cities and districts to threaten delinquent taxpayers with foreclosure...[T]his year the pace of delinquencies is increasing, particularly in California's inland areas, said Tim Seufert, managing director of the San Francisco office of NBS, a firm that does consulting work for special financing districts. "Compared to two years ago, it's up exponentially. There's no question," he said.
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Delinquency rates also were high during the last real estate downturn in the mid-1990s, but this time individual homeowners are being hit hard. "It is what in the past was considered could never happen," said Oakland attorney Susan Feller, who represents issuers of land-secured bonds. "It was always considered that once property was built and owner-occupied, you would not have delinquencies (in large volume)," she said. "You wouldn't get to these kinds of levels."

From the San Jose Mercury News:

Few if any lenders these days will make loans to those who already have four or more mortgages...Banks' new restrictions on the number of mortgages available to borrowers won't bother typical home buyers. But it's hobbling people...who invest in rental properties, and could even prolong California's housing slump, some observers say. That's because investors are among the most likely buyers for many of the bank-owned foreclosures now lingering on the market in the state's inland valleys.

"If we can't participate, we can't burn through these inventories and help the market correct," said Geraldine Barry, president of the San Jose Real Estate Investment Association....More often lately, she said, "What I'm hearing from our members now is, "I have a deal; I can't get money'.''

Barry and her husband recently bought a foreclosed house in Sacramento for $114,000; the previous owner owed about $250,000 on the property when the bank repossessed it. Even with a 25 percent down payment, they were unable to find a loan because they have more than four outstanding mortgages, so they paid in cash...Geraldine Barry said she wants to buy more bank-owned California properties in coming months, but has yet to figure out exactly how she will finance deals, if lender restrictions remain in place. "There are only so many houses I can buy in cash," she said.

New York Times: In the Central Valley, the Ruins of the Housing Bust
Forbes: Sacramento Second Most "Distressed" Housing Market
CAR: California's Median Home Price Decline Breaches -40% YoY

'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.

'They Have To Keep Things Going'

From the Sacramento Bee:

The uncertainty involving market leaders created the latest set of jitters for real estate markets – including Sacramento's – that can best be described as fragile. Though year-over-year sales have risen for the first time in 36 months in the area, still more restrictions and fewer loans have the potential to curb the supply of buyers and stall a recovery, brokers said.
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Brokers said the recent boost in home sales locally is largely due to borrowers with good credit and the ability to put money down. But they said they're hearing that mortgage insurers may start requiring 10 percent down payments instead of 5 percent in so-called "declining markets" like Sacramento.

Still, [Beth] Gewerth [of Mason-McDuffie Mortgage Corp. in Sacramento] said the economic system will somehow keep the loans coming. "As we all know, housing drives the economy," she said. "They can't get too exotic. But they have to keep things going so people can purchase homes and keep it going."

From the Sacramento Bee:

Centex Homes, the Sacramento region's leading homebuilder, said Tuesday it has folded its Sacramento, Central Valley and Reno divisions into one operation based in Sacramento. That marks the second builder consolidation announced in recent days. Irvine-based John Laing Homes has folded its Bay Area and Central Valley divisions into one based in Sacramento.

From the Sacramento Bee (hat tip Fred):

The chairman of Greater Sacramento Bancorp is being sued for foreclosure by two other banks. Kip Skidmore, the non-executive chairman of Greater Sacramento's board of directors, was sued by Umpqua Bank and Bank of the West over two suburban housing projects for which he guaranteed loans. Neither project involves Greater Sacramento or its operating subsidiary, Bank of Sacramento.
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[T]he lawsuits have given him a better sense of the real estate slump and its effect on banks. "It allows me to (have) some appreciation of the situation, of what developers and banks are both going through," he said.

U.S. HouseFlipper Laura Richardson Once a Real Estate Agent

From the Long Beach Press-Telegram:

U.S. Rep. Laura Richardson's housing woes - defaults in Long Beach and San Pedro, a foreclosure and unpaid property taxes in Sacramento - are well-documented.

What is less known is that the Long Beach Democrat once held a real estate license. The congresswoman was permitted to sell property in California from Dec. 16, 1998, to Dec. 15, 2002, state Department of Real Estate records show. In the late 1990s, Richardson worked for short periods of time at Action Century 21, 3626 E. Pacific Coast Highway, and Prudential California Realty (now Coldwell Banker), 1650 Ximeno Ave., agents at both offices say.

A spokesman for Richardson says she never took part in any real estate transactions.

From the Sacramento Bee:

Sacramento-area home values have an 82.2 percent chance of being lower two years from now, an improvement from previous rankings, Walnut Creek-based PMI Mortgage Insurance Co. reported Tuesday.

From the Sacramento Business Journal:

Hit hard by the housing slump and economic downturn, Sacramento furniture chain The Room Source has filed for reorganization under Chapter 11 of the U.S. Bankruptcy Code and will begin liquidating its inventory at all six locations with a court-ordered sale beginning Saturday. After several weeks, all the stores will close, according to the company conducting the sale. The retailer, which employs fewer than 200 people, began experiencing the slowdown two years ago, said Harris Blickstein, chief operating officer. People aren’t buying furniture, he said, because of fallout from the subprime mortgage bust, lower housing prices and higher gas prices.

From the Sacramento Land(ing) archives:

The Room Source isn't planning layoffs or cuts, he [Blickstein] said. Instead, "I may spend more ... on advertising." The Room Source can weather a slowdown; smaller, undercapitalized businesses may not, he said...

From the Modesto Bee:

An economy rocked by staggering fuel prices and a moribund housing market has claimed two more businesses -- Dan Gamel's RV Centers and RoomSource Furniture & Accessories...Gamel, who sold the company in 2005 and reacquired it early this year, said he has had trouble getting banks to lend him working capital.
...
Darrel Friesen, president of the California Recreation Vehicle Dealers Association, said RV sales in the state are down 40 percent from a year ago. He said fuel prices are partly to blame, and loans are harder to get because of declining home equity and tightened lending standards.

From the Sacramento Bee:

Elk Grove Ford, arguably the automaker's anchor dealership south of Sacramento, closed down operations early Friday evening in the Elk Grove Auto Mall...Keil Enterprises also recently closed its Great Valley Chrysler-Jeep-Mazda-Isuzu dealership at 2329 Fulton Ave. in Sacramento...[L]ocal auto dealer Paul Blanco announced in April that he was going to close Paul Blanco Chevrolet at 3815 Florin Road...Michael Barbieri, owner and manager of Auburn Nissan, said financial difficulties led to the closing of his dealership in Auburn on April 24.
...
"This is the reality of the harshness of the market right now," [Rick Niello, president of the Sacramento-based Niello Co]...said... "…It's like seeing a home in your neighborhood where your neighbors have left and the weeds are growing all around the place."

From the Lodi News Sentinel:

Plans to build Lodi's new drinking water treatment plant will not flow as fast as first thought, city leaders said Tuesday. That is because the $41 million plant's funding source — fees from new development — has largely dried up.

From the CVBT:

[F]or many of the first settlers, Mountain House has become a nightmare. Out of about 300 homes on the resale market in the community rising out of 4,800 acres of former ranches and farms near Tracy in the Central Valley, roughly 260 are in some state of foreclosure, according to the real estate website trulia.com.

From the Modesto Bee:

Consider it a consolation prize: Plummeting home values have cost Northern San Joaquin Valley homeowners billions in home equity, but at least their property taxes are going down..."The average assessment value decrease was $122,000, which was a shock to us," Stanislaus County Assessor Doug Harms said Monday.
...
The widespread decline in property assessments is unprecedented, causing total assessment rolls in the three counties to decline for the first time -- or at least as far back as records go.

From the Modesto Bee:

Hundreds of homeowners in Modesto and Patterson are late paying special property taxes, forcing the cities to begin a speedy foreclosure process for houses in newer subdivisions. The cities went through the same procedures last year when clusters of homeowners didn't pay Mello-Roos taxes they owe for growth-related effects such as roads and parks.
...
More than a fifth of what Patterson residents owe in Mello-Roos charges hasn't been paid, City Manager Cleve Morris said. That has cost the city about $1 million this year.

"The housing optimists have systematically misjudged the market"

From the Sacramento Bee:

The carpet was filthy, and the walls needed paint. The backyard was a mass of dead grass. And that was before vandals threw a rock through a back window, climbed inside and wrecked the kitchen cabinets. That happened two days before the close of escrow. For banks, this is what making home loans has come to. Such scenes of destruction are commonplace. Lenders have dealt with the chaotic wake of an estimated 20,000 or more foreclosures in the Sacramento region over the past 18 months.
...
But there is a plus to this abundance of damage. It's proving a mini-boom for a niche sector of the construction trade known as "repo contractors."

From the Sacramento Bee:

The price of the two-story, 3,800-square-foot house for sale on Aspen Grove Lane in Elk Grove stands out even in a down market. The five-bedroom, three-bath home in a gated community is listed at $387,000 "as-is" or $437,000 with repairs. The low price – and the need for repairs – stems from the house's use as an indoor marijuana farm. Last fall, police hauled out 865 plants.

From the Sacramento Business Journal:

The economy is slowing and credit is tight. This should be prime time for Small Business Administration lending. Instead, the SBA is reporting declines in lending in the region and nationwide.
...
Some banks that pushed hard in SBA locally last year have also slowed down. Bank of America made 130 loans in the district by May of federal fiscal year 2007. So far in this fiscal year, the bank’s SBA loans have declined by two-thirds, to 43 loans...Other active lenders include Capital One Bank and Washington Mutual Bank. Through May of fiscal 2007, Capital One Bank made 84 loans. This fiscal year, the bank has only made 29 loans, down 65 percent. Washington Mutual is down 68 percent over the same period last year, making 62 loans last year through May and 20 loans so far in fiscal 2008.

From the Long Beach Press-Telegram:

When she arrived in Congress last fall, Rep. Laura Richardson sought out a vehicle that would match her newfound status. She settled on a 2007 Lincoln Town Car - the choice of many representatives who lease their vehicles at taxpayers' expense. But hers was distinct: At $1,300 a month, it was the most expensive car in the House of Representives.

Richardson, a Democrat who represents Carson, has since become known for defaulting on two home loans and losing a third house in an upscale neighborhood in Sacramento at a foreclosure auction.

From BusinessWeek:

[T]he housing optimists have systematically misjudged the market. Some became convinced that the huge runup was justified by fundamentals such as population growth, rising incomes, and land scarcity. And because sharp national housing price declines are so rare in U.S. history, analysts assumed that prices would, at worst, flatten out for a few years.

What they forgot was that markets can overshoot on the downside just as easily as on the upside, with both financial and psychological forces feeding the decline. On the financial side, adjustable-rate mortgages are continuing to reset upward from their cheap introductory rates, making it more difficult for homeowners to afford their loans. What's more, each month of price declines pushes more homeowners underwater on their mortgages, making it impossible for them to refinance into more affordable loans. It doesn't help, either, that as the economy weakens, larger numbers of homeowners are finding themselves out of work.

Radar Logic: Sacramento Home Prices Fall 28%

From Bloomberg:

Home prices declined in 21 U.S. cities in January, led by Sacramento and Las Vegas, as banks sold foreclosed homes at bargain prices. The price per square foot in Sacramento, the capital of California, dropped 28 percent to $166 from a year earlier, according to a report [pdf] released today by New York-based Radar Logic Inc., a real estate data company.

From the Central Valley Business Times:

One of the Central Valley’s largest community banks, Merced-based Capital Corp of the West, which operates as County Bank, saw its bottom line plunge along with housing values and foreclosed borrowers in 2007. The company says it had a net loss of $3.6 million for the year, compared to a profit of $22.6 million in 2006. It’s the first annual loss in the company’s 30-year history.
...
"The largest factor contributing to the increased provision was the rapid decline in real estate values in California's Central Valley in fourth quarter 2007...." the company says..."The scope and rate of the decline of the real estate market were completely unexpected," says Donald Briggs, Jr., a director of the bank. "No economic forecast predicted its rapid collapse during the fourth quarter of 2007."

From the LA Times:

Wachovia Corp. signaled that it may no longer offer some Californians the controversial "option ARM" mortgages that give borrowers the choice of paying so little that their balances actually rise. In a memo Monday, Wachovia's top California managers told employees that the loans would no longer be offered in 17 California counties where property values have declined the most, including Riverside, San Bernardino and San Diego, plus the Central Valley.
...
If Wachovia cuts back, it could further disrupt distressed housing markets where the recent tightening of credit has compounded the problems caused by easy-money lending earlier this decade. "This product was the last remaining hope for the sub-prime borrower," said broker John Diamond of Bancorp Funding in Chino.

From the Stockton Record:

Five Chinese real estate officials on a three-week, coast-to-coast tour of the United States spent nearly a week visiting Stockton, which they know is the top foreclosure area in this country...The Chinese officials said they were mostly curious about the subprime meltdown in the United States...More than anything else, he said, "they sounded like they wanted to buy some of these foreclosure homes. They thought they were good deals."

CNBC on Stockton's new home market here and here. (hat tip Jeff)

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.

Last Game of the Season?

From the Sacramento Bee:

[I]f this year is like the last two, the Super Bowl is now just the last game of the season, not the opening shot of the home- selling year. Indeed, there's a chance the peak buying activity of 2008 may have already happened.

In both 2006 and 2007, escrow closings – where all the paperwork is done and buyers get the keys – peaked in March, according to La Jolla-based DataQuick Information Systems. That means the homes were likely sold sometime in January or early February.

A March peak isn't something the industry likes or wants to see again this year. In 2006, a March peak showed there wouldn't be a big spring rebound and proved the downturn was real. In 2007, the subprime crisis arrived in March and pushed down sales for the rest of the year.

So far this year, builders and real estate agents say they're seeing the usual rise in sales compared with December...Tina Wilks, who owns the midtown Sacramento office of Prudential California Realty, said investors, more than first-time buyers, are driving activity she's seen. Many are picking off houses repossessed by banks.

From publicradio.org:

[F]our years ago we bought an 80-year-old home in a nice Sacramento neighborhood. My wife, an escrow officer, and I, a notary public, were earning good money. We had every intention of staying here forever, but the subprime lending crisis has triggered another real estate meltdown. Now my wife's salary has been cut and her bonuses eliminated. My notary work has dwindled to a trickle. It becomes more difficult to make our house payment each month.

Financially it doesn't make sense to even try. We owe about $430,000 on the house. It's currently worth no more than $400,000. Selling isn't an option. Sooner or later we will probably give up another home to foreclosure. The interest rate is competitive, six and an eighth, and it's fixed until August of 2012. A sudden upward adjustment of our loan won't force us out. It's the sudden decrease in our incomes.

The Sacramento Real Estate Statistics blog digs a little deeper here.

From the Sacramento Bee:

Before the real estate bubble burst, Sid Dunmore ran one of the largest locally owned development enterprises in the region. The Dunmore empire built more than 22,000 homes from Elk Grove to Granite Bay to Nevada, making Dunmore a rich man. Yet like many other developers, Dunmore bet too heavily on a boom that was sure to end. That left his company, Dunmore Homes, with a glut of unsold property when the market crashed. After Dunmore sold it, the company filed for bankruptcy, listing assets of $280 million and liabilities of $250 million.

Dunmore is unlikely to end up in the poor house. As The Bee's Jim Wasserman reported in December, Dunmore stands to receive an $11.2 million federal tax refund for selling his company for a mere $500.

The same cannot be said for some of the families who bought some of his homes. In Elk Grove, as The Bee's Loretta Kalb reported Tuesday, homeowners in the partly finished Monterey Village subdivision are facing lawsuits and liens by several of Dunmore's contractors and suppliers.
...
Ultimately, the responsible party here is Sid Dunmore, who seems primed to benefit from a federal tax return but has remained silent on the predicament faced by people who purchased his homes. Dunmore has so far not responded to Kalb's efforts to reach him. If he continues to stay on the sidelines, it will serve as one more reason for lawmakers to get involved.

From the LA Times:

As home prices soared higher earlier this decade, the buying frenzy was fueled in part by what real estate industry experts now claim were exaggerated -- or outright fraudulent -- appraisals. A lawsuit filed by two couples this week adds a new twist: It claims that Los Angeles builder KB Home and a unit of lender Countrywide Financial Corp. pumped up appraisals in their Sacramento-area development to sell homes at higher prices.

One couple, Deborah and Lonnie Bolden, says they paid $70,000 more for their home than neighbors who used different appraisers. Their lawsuit, filed Wednesday in Los Angeles County Superior Court, alleges that KB Home and Countrywide "conspired with affiliated appraisers to generate fraudulent" appraisal reports.

From the Modesto Bee:

While lower mortgage interest rates might help some Americans refinance their home loans, Northern San Joaquin Valley homeowners are finding it more difficult because house values have plummeted. "If your current home value is less than your outstanding loan, you're dead meat," warned Paul Carroll, president of Carrollton Mortgage Co. in Modesto. Unfortunately, Carroll said, that's the case for many homeowners who are desperate to refinance their high-interest rate mortgages.
...
It's getter ever harder to refinance in the Northern San Joaquin Valley, however, because the Federal National Mortgage Association (Fannie Mae) has designated this region as a "declining market." Because of that, Fannie Mae -- which buys mortgages from lenders -- has reduced its permitted loan-to-value ratio by 5 percent. So, homeowners who used to be allowed to borrow up to 95 percent of their homes' value now can't borrow more than 90 percent. The new restriction took effect for mortgage applications filed after Jan. 15.
...
"There's a lot of people who are really stuck," said [George] Erbele, who's been in the mortgage business 19 years. "We probably used to be able to find mortgages for about 95 percent of people who requested loans, ... but now only 10 percent to 15 percent of the refinancing requests get approved."

No "Rush of Would-Be Buyers from San Jose or Los Angeles"

Monterey Village Getting Shredded - photos & video at the Sacramento Real Statistics blog

From the Sacramento Business Journal:

Sacramento County led Northern California counties in mortgage loan defaults in December, with 2,643 homes sliding into foreclosure, according to data released Friday [by Default Research Inc.]

From the Sacramento Bee:

Not so long ago, Sacramento-area home prices were miracles to behold in the eyes of Bay Area and Los Angeles residents. Oh, the wonders here of a sprawling, three-bedroom home for the same price as a tiny, one-bedroom condo there. The allure of lower-priced homes drew plenty of transplants to the Sacramento region earlier this decade. But as housing values began soaring, that affordability began disappearing.

Well, look again. Those days are coming back. The price gap between the capital region and the Bay Area is widening fast. Ditto for Los Angeles...What's going on? Well, it's not rocket science. Prices here have fallen 25 percent since mid-2005 and are still heading down. Prices in the Bay Area and Los Angeles County have held steady until recently – and they're still rising in Santa Clara County.
...
It's not yet clear what this recurring price gap means for the capital's housing market. Many real estate agents say they aren't seeing any rush of would-be buyers from San Jose or Los Angeles.
...
It's going to become tougher in the capital region to qualify for most home loans. Effective Jan. 15, Fannie Mae, the government-sponsored entity that buys mortgages from lenders, wants bigger down payments on loans made in "declining markets" like Sacramento. It means even if a national lender can get you a loan with no money down, Fannie Mae is now demanding a 5 percent down payment for loans in this market. If your loan requires 10 percent down, Fannie Mae will wants 15 percent from the borrower.

From the Modesto Bee:

The Northern San Joaquin Valley's housing market will be one of the very last to turn around in California, a building industry economist predicted Thursday..."It's going to take a very long time for builders to get the confidence to build again" in the Northern San Joaquin Valley, [CBIA's Alan] Nevin said during a telephone news conference.
...
In the San Joaquin Valley, from Bakersfield to Stockton, he projects 17,000 homes will be built in 2008, compared with about 15,000 in 2007. That's less than half the 35,000 houses built in 2005 when the valley's building boom peaked. Joe Anfuso, president of Stockton-based Florsheim Homes, said he doubts San Joaquin Valley builders will sell more homes this year than last year. Anfuso listened in on Thursday's news conference, and he said he agreed with Nevin's verbal predictions about housing markets in Stanislaus, San Joaquin and Merced counties being among the last to recover.

September Massacre: Sacramento New Homes Median Plunges 22% YOY

September DataQuick statistics for the Sacramento real estate market are now availabe via the Sacramento Bee.

By County
By Zip Code

Some highlights for Sacramento County:
YoY = year-over-year

New Homes

• Change in median price: -22.3% (YoY)
• Change in sales: -31.2% (YoY)

At $303,000, the new homes median is now less than the median for existing homes.

Existing Condos

• Change in median price: -26.0% (YoY)
• Change in sales: -60.7% (YoY)

Existing Detached Homes

• Change in median price: -11.4% (YoY)
• Change in median price: -17.1 (Peak)
• Change in sales: -43.3% (YoY)

All Homes

• Change in median price: -13.5% (YoY)
• Change in median price: -20.7% (Peak)
• Change in sales: -40.7% (YoY)

From the Sacramento Bee:

Prices have fallen across the region as the supply of homes for sale continues to exceed the number of willing buyers. At September's end, there were 16,081 existing houses for sale in El Dorado, Placer, Sacramento and Yolo counties, according to Sacramento-based researcher TrendGraphix. That's more than triple the for-sale inventory in September 2004.
...
Lena Abello, her brother and two friends stood poised to buy their first home together last month – a $303,000 single-family house in Natomas. But the shake-up in the nation's mortgage industry abruptly shuttered their dream. "The day before we were to open escrow, my lender called and said the program we were about to qualify through was no longer available," said Abello, an asset planner at a local insurance firm. "She said we were no longer approved for a loan."
...
They had hoped to buy together what they couldn't afford separately. That turned out to be a four-bedroom, 1,800-square-foot house in Natomas owned by a San Francisco real estate agent. They negotiated a $303,000 sales price and planned a fast two-week escrow. The long-range plan was to get their feet in the door as homeowners and "use real estate to build and create wealth."

From the Modesto Bee:

Welcome to 2004. It's back to the future in the Northern San Joaquin Valley as median home prices have plummeted to 2004 levels...In the last 12 months alone, Stanislaus' prices have dropped nearly 19 percent. Merced County is even worse. Prices there plunged nearly 26 percent to $260,000 in September compared with a year earlier. That's the biggest decline in California, according to DataQuick....While the housing market is bad across the nation, most statistics show that things are worse in the Northern San Joaquin Valley than almost anyplace else.
~~~
Here's some good news about housing: Northern San Joaquin Valley apartment rents have been flat for a year. That's great for renters. Of course landlords and real estate investors may not think so.
~~~
Traditional methods of selling aren't working very well for Northern San Joaquin Valley home builders, so they're trying new things. The latest marketing method by Florsheim Homes is to sell homes to whoever makes the highest offer -- no matter how low it is.
...
One is a 1,250-square-foot former Valley Rose model with many upgraded features that had been priced at $259,900. "We've tried to sell it at that price, but we haven't had any real interest," [Joe] Anfuso [Florsheim's chief executive] said.
...
"There will be people out there who want these homes," Anfuso said. "They're not going to end up going for $150,000, believe me."
~~~
A 133-unit condominium project across the street from California State University, Stanislaus, is in danger of falling through, leaving investors in the lurch....The landowner, Modesto attorney Ralph Ogden III, said low-income apartments are one of five or six options being discussed. Plans have been approved for the condominiums, but unless construction starts in the next 10 months, those plans will expire. With the amount of work still needed to break ground, that is almost guaranteed, said Planning Commission Chairman Amos Reyes. "I think that's right," Ogden said earlier this month. "In the end, (condos) aren't economically viable."

That leaves investor Michael Chadd of Milpitas very, very unhappy. Chadd bought a $100,000 stake in the condo plan. For the last nine months, he's watched his money slowly drain away. Members of Strategic Investment Group, a Danville-based real estate investment firm, had a strong pitch when Chadd met them last year at a wealth expo in San Jose. What Chadd didn't see and Strategic Investments didn't mention was the sour state of the residential building market. "We were all pretty stupid," Chadd said.
...
As the market slumped, Strategic Investment sent out rosy newsletters such as this from December 2006: "Does all the news about the declining housing market concern you? Maybe it scares you? ... We have a strong job market, healthy stock market, and a lot of opportunity. I believe that the media tends to make things seem worse then they really are. I am not delusional."

From the Stockton Record:

The 17-year-old duck-themed restaurant in the heart of Stockton's upscale Brookside development shut down suddenly after Sunday's busy brunch service, leaving a host of problems in its wake, including employees without paychecks, bounced checks, unpaid back rent and tax bills, and questions about prepaid deposits for upcoming holiday parties. "We were all shocked. We saw the sign on the door Monday morning," said Cecilia Turnage, a cashier at the Morgan Stanley financial services office a short walk from the restaurant at 3409 Brookside Road, just off March Lane.

For years, businesspeople from throughout Stockton would take clients to lunch at the restaurant, but Turnage said in recent months she'd noticed a drop in traffic in the shared parking lot. Mallard's owners admitted business was falling and attributed it to current poor economic conditions, including the housing slump. They pointed out that other area restaurants - notably Tony Roma's across Interstate 5 - had also closed without notice.

'Negative press is a major factor keeping inexperienced buyers at bay'

From the Sacramento Association of Realtors:

“An influx of homes on the market, along with the subprime mortgage situation, has slowed activity, but homes are still being sold,” says 2007 Association President and REALTOR® President Tracey Saizan...If you have good credit and want a lifetime investment, now is an excellent time to buy. The credit crunch is contributing to the notable inventory and negative press is a major factor keeping inexperienced buyers at bay,” continues Saizan, “but REALTORS® who have experienced these market fluctuations are patient and will endure the softness in this market.”

MLS Statistics for September 2007, Sacramento County and West Sacramento

Change in Median Price

• Since Sep 2006: -11.8%
• Since 2005 peak: -18.5%
• Consecutive months of YoY declines: 15
• Consecutive months of double-digit YoY declines: 2
  

Change in Sales

• Since Sep 2006: -36.1%
  
• Since 2004 peak: -69.6%
• Consecutive months of YoY declines: 28
• Consecutive months of double-digit declines: 25

Builder's Boom Recipe: Loose Lending + Bailout + Media Silence

From the Lodi News Sentinel:

Three years ago, builder Tom Doucette was "moving at 100 miles per hour" trying to keep up with the demand for new homes at his project sites. Potential buyers were "camping out" at his FCB Homes subdivisions, hoping to snatch up a piece of real estate at the peak of the housing boom.

Business is no longer a blur for Doucette...[A]ctual construction has slowed dramatically. In Lodi, for example, the number of building permits issued for detached single family homes has plummeted from 396 for all of 2005 to just 18 so far this year, according to city records.
...
The shaky housing market has led Lodi builder Dennis Bennett to build only pre-sold homes...Overall, Bennett said his company has reduced new home construction by 50 percent compared to just a couple years ago.
...
Bennett, who started his company in 1977, said there are a number of reasons for the building slowdown. The media should take some blame for continuing to highlight the trend, he said. Large, corporate home builders are also part of the problem. They've flooded regional markets with new homes creating "huge inventories." That, in turn, lowers sale prices for smaller builders.
...
Bennet said new construction won't boom again until the "huge inventories" of homes for sale are bought up. Easing some of the recent mortgage restrictions and offering federal relief to those with expanding subprime mortgages might be two ways to bring buyers back, he added. "If we get a little relief from the lending side of the business, hopefully that will help the inventory out there," Bennett said.

CBS 13 (also video): Developer Says Real Estate Buyers Are Too Worried

From the Sacramento Bee:

Sacramento city leaders have pulled back their offer to loan $10 million to fund construction of a downtown condominium high-rise. Craig Nassi, the Denver-based developer behind the 39-story Aura tower proposed for 601 Capitol Mall, lost the city's commitment after he failed to secure all of his private financing by the end of last month.
...
Nassi insists that Aura is alive. But besides having the city withdraw its money, he hasn't yet bought the land for it from local developer David Taylor...In June, Nassi said that he would have his lenders lined up within 45 days. This week, he said financing was on the horizon for the $177 million project. "We hope to have the loan ready to fund soon," Nassi said in an e-mail. He blamed the delay on "capital markets (that) have been paralyzed by the subprime fallout and the unknown of secondary market pricing."

Peer Pressure Not to Buy?

From the Sacramento Business Journal:

Rather than drop prices to entice buyers in less time, John Leonard slashed prices on 22 new homes he built in West Sacramento to sell them in a day -- he hopes in less than an hour. Leonard is owner of Leonard Development Co. Inc. of Sacramento, and he's hired a public auction company to sell homes in his River's Side at Washington Square project quickly.

He's not being forced to sell. The project is still current with its loans. But people simply are not buying them. "There isn't permission for people to buy a house. People's peers, parents and family won't let them feel good about buying. Everyone says, 'Wait a little longer and the prices will come down,' " Leonard said. "The carry cost on the project is not insignificant. We decided on the auction to expedite the sales."
...
Hundreds of people have toured the homes, but no one is willing to pull the trigger and buy one. Leonard chose to go the auction route to force the issue. "I wanted to take an aggressive approach to make people come out of the woodwork," he said.

From the Modesto Bee:

Sellers are eager to make deals, and buyers are in control, but there's nary a real estate sign in sight.

Welcome to the new and used vehicle market, where many Northern San Joaquin Valley dealers are experiencing the same slowdown seen in housing. What happens in auto sales often follows housing markets, dealers said. And that's especially true now, they said, because fewer people can refinance their home loans and use the money to buy a car or truck. "That was driving the market," said David Hillier, who owns Hillier Ford in Escalon.
...
When housing prices were soaring, many homeowners took equity out of their homes, by refinancing or getting a second mortgage. They often would use the money, which is tax deductible, for vehicles and other big-ticket items.
...
Edmunds.com spokesman Chintan Talati said consumers are taking a break on buying vehicles, just as they're stepping back on buying houses. "Housing is such a large part of everything," said Talati, adding that vehicle sales have slumped the most in places where housing has slumped the most -- such as California.
...
[Jorge] Elizalde [owner of El Tio Auto Sales] said he's also noticed that -- perhaps because so many housing loans have failed -- banks are hesitant to give car loans. So he's financing more loans himself.

Also from the Modesto Bee:

Home sellers are not automatically turning up their noses at offers that come in far below their asking price these days as prices stagnate and the inventory of homes for sale remains elevated. Realtors and other experts in the Northern San Joaquin Valley said they're seeing more offers these days that come in well below the asking price. Sometimes, sellers are accepting them.
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There's a real risk the offer will insult the seller to the point that they'll refuse to counter, Realtors say, and the seller easily could make the assumption that the buyer isn't committed to making a deal..."When you're making the offer, if you justify that offer with outside data, then it's much less likely to be perceived as being an insult or (the buyer) not as serious," he [Jon Boyd, president of the National Association of Exclusive Buyer Agents] added.
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Buyers even may write a letter to the sellers to make their point, as they did when the market was hot and they aimed to stand out from the crowd, [Dick] Gaylord [president-elect of the National Association of Realtors] said. That way, they can detail what they like about the house but express their fear of future dropping values.
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But sellers shouldn't take a low bid as the equivalent of a slap in the face, said Chad Costa, a Modesto Realtor. "The first reaction is to say, 'how insulting,' and I say that it's just how the market is right now," said Costa, with Re-Max Executive.
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Stan Lynam, who recently retired as a Realtor after 22 years, including 10 in Modesto, said sellers who receive several low bids may opt to pull their house off the market. He said a client recently reduced the asking price by as much as 15 percent, and still got few nibbles. So the client decided to wait it out.
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Valley realty experts...acknowledged that what's a low offer now could be right in line six months from now if prices keep falling.

From the Sacramento Bee:

Never mind that many people will be on a final summer road trip or making eggs and bacon at mountain campgrounds this weekend. Real estate agents will be holding open houses over Labor Day weekend, even if foot traffic is less than a regular weekend. Over the three-day Memorial Day weekend in May, agents hoped high gas prices might keep people closer to home and cruising open houses. With gas prices lower now, agents like Mona Gergen, a specialist in Sacramento's Pocket neighborhoods, just hope it's not awfully hot Sunday for traditional 2-4 p.m. showings.
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What's definitely not hot this summer is home prices here (especially if you're selling a house). The nation's gold standard for measuring rising and falling prices lists five Central Valley metro areas and Reno among 10 regions with the most depreciation. The report for April, May and June was released Thursday by the Office of Federal Housing Enterprise Oversight. It measures sales prices of the same houses over time. Once-booming El Dorado, Placer, Sacramento and Yolo counties ranked ninth nationally with a 6 percent decline in home prices from the same time in 2006. Bigger decreases were seen in Yuba and Sutter counties, Modesto, Stockton and Merced, which led the country with an 8.65 percent decline.

Beyond Mortgages

From the Wall Street Journal:

It's not just mortgages. As it gets tougher to land a home loan, some people are also finding it harder and more expensive to get other types of consumer credit. Some lenders, such as USAA, are nudging up credit-score requirements across their auto loans, credit cards and personal loans. Bank of America Corp. and Capital One Financial Corp. recently raised fees and interest rates for some of their credit-card customers. And this month, Citigroup Inc.'s CitiFinancial Auto started charging higher auto-loan rates for borrowers with less-than-perfect credit.
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Nationally, credit-card delinquencies are relatively low at 4% and haven't risen significantly in the past three years. However, in certain markets, especially those that have been hit hard by a decline in home values, delinquencies have spiked higher. In Fort Myers, Fla.; Port St. Lucie, Fla.; and Stockton, Calif., for example, delinquencies have jumped about two percentage points in the past year to as high as 5%, according to an analysis by Equifax Inc. and Moody's Economy.com.

"If [lenders] see a household start to go late on payments, they're going to be much quicker to respond," says Mark Zandi, chief economist at Economy.com. "They may reduce the size of the credit line or may raise the interest rate. They're responding much more quickly to any signs of stress."

Escaping Sacramento as Swarms Held at Bay

From the Sacramento Business Journal:

It might seem counterintuitive that apartments are suffering. Families losing their homes in a flood of foreclosures have to live somewhere. But [Charles] DeLoney DeLoney [a multifamily broker with CB Richard Ellis] and others point out that there's now a "shadow market" of homes that are rented out after owners fail to sell them. Add to that condo reversions, where units that were once for sale are now being rented out as well.

Tom Cross, manager of Star-Crossed Properties, which he describes as a "blue-collar" complex in Arden-Arcade, said the housing market had a direct impact on his property when several out-of-work construction workers moved out starting in January, presumably to find jobs elsewhere. "We got hit with eight vacancies in one month," he said. But he said he believes the market is not crashing, just landing softly.

David Harrison, a senior investment adviser with Sperry Van Ness who concentrates on the multifamily market, said there's been a lull in investment activity in apartment buildings while the market sorts itself out. Realtor friends have said foreclosed-on families might be moving to other areas. "They want a fresh start," he said.

From the Lodi News-Sentinel:

Inside Lodi's tony Sunwest subdivision, "for sale" signs dot nearly a dozen of the neighborhood's well-kept lawns. Some of those signs have become fixtures in front of the two-story mansions, staying as long, or longer, than anywhere else.

The high-end of the area's housing market — from sprawling ranches in Lockeford and Clements to river-view palaces in Acampo — has sputtered this summer, mimicking the rest of the region's slowdown. "It's the toughest market to move — anything over $1 million is sitting six months, even at a reduced price," said Pam Murray, a real estate agent who specializes in the region's pricey homes and ranches. "There's a shortage of buyers in that price range," she added.
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Potential high-end buyers — often retirees or families from Southern California or the Bay Area — haven't swarmed the area this year, looking to buy country properties, Murray noted. They've struggled to sell their own homes in their areas. "Our clients that would have been coming up here in droves and raising our prices — they're not able to close on their properties, and that's really slowing us down," she said.
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"The Central Valley is not going to look good for the next couple of years," said Thomas Davidoff, an assistant professor who specializes in real estate at the Haas School of Business at the University of California, Berkeley. "Five years out, I think things will be fine and dandy," he added.

From the Sacramento Business Journal:

A community bank has foreclosed on a high-end Rocklin condominium townhouse complex, the second luxury condo complex to collapse in Rocklin in a year. The Terraces at Stanford Ranch featured 132 condos in 29 buildings. So far, four buildings are completed, along with the pool, said Pete Guisasola, Rocklin's chief building officer.
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During the run-up of housing prices from 2000 to 2005, many people were getting priced out of homes in south Placer County. Developers responded and started building condominiums. Many of the entry-level projects have sold, but those targeting high-end buyers have struggled, said Bruce Slaton, president of SacramentoCondos.com. With all the negative publicity in the housing market and the subprime disaster, few people are interested in buying anything, Slaton said. "Prices are falling, and now you can find some single-family homes in Rocklin for less than they were asking for the condos," he said.

Also from the Business Journal:

New-home prices and sales continue to slide in the Sacramento region, as the housing market struggles, according to a report released Friday. The median price for new single-family homes dropped 10 percent to $418,000 in June, from $464,990 a year ago, according to the California Building Industry Association and Hanley Wood Market Intelligence report.

From the Stockton Record:

If it weren't already tough enough in the home sales market, the recent rash of grave news coming from the credit sector and an antsy Wall Street are putting more pressure than ever on the real estate sector. Some of the news about credit woes affecting investors and major lenders is even spilling out of the housing sector, where the trouble began piling up beginning this spring with many subprime loans going sour.

Even though there hasn't been a whisper of bad news from the commercial real estate sector, deals in that field are harder to make these days because of tightening credit standards as investors worry about all types of loans, said Randy Thomas, a Sperry Van Ness commercial real estate broker in Stockton. Commercial lenders are re-examining their loan commitments and loan procedures, he said. A lot of commercial loans are funded from the same pool of resources as subprime residential loans, Thomas said, and that means tighter credit standards.