Sacramento's RealtyCrack Addiction

New York Times - Sacramento economy's addiction to realtycrack among nation's highest

From the Sacramento Business Journal:

An upswing in home prices and a surprising rebound in consumer confidence this week have economists buoyant about a possible turnaround in the national economy. But for Sacramento? Not so much. Sacramentans’ mortgage debt, the weakness of the commercial real estate market and a bleak outlook for California overall have tempered any bright spots for the local economy.
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“We predict things to get a little worse over the next 12 months,” said Ryan Sharp, director of The Center for Strategic Economic Research in Sacramento, which forecasts the region’s economy. “Sacramento isn’t going to outperform California.”
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Ezra Becker, director of consulting and strategy for TransUnion’s financial services group...said Sacramentans’ mortgage problems are affecting spending habits. “A lot of people took pay cuts, they were laid off or had to make other adjustments,” he said.

From the Sacramento Bee:

A major credit reporting company predicts mortgage delinquency rates will continue rising in the Sacramento area – with 12 percent of homeowners falling at least two months behind on their payments by year's end. That's nearly twice the national projection and a dramatic jump from just two years ago, when less than 2 percent percent of area homeowners' notes were delinquent.
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Double-digit percentage unemployment and unpaid furlough days are increasingly catching up with homeowners who have "safe" fixed-rate loans, rather than the subprime loans that initially sparked the housing crisis. Mike Himes, director of NeighborWorks Homeownership Center in Sacramento, which counsels struggling and first-time homeowners, said his office is seeing more clients facing growing debt and making choices between house payments and other expenses. His clientele includes a growing number of state workers whose paychecks have been pared by unpaid furloughs. "There's a lot of money borrowed to stay in the house and keep up with living expenses," Himes said. "This is becoming more and more of a problem."

Sacramento Foreclosure 'Surge' Dead Ahead?

From CNN Money: Buy foreclosures now - before it's too late

In many markets, if you want to buy a repossessed property, you better come with your best offer first -- and fast. You've heard of speed dating? It's got nothin' on foreclosure buying these days. In many places, anyone who wants to buy a foreclosure better act fast, or they're going to come away with bupkus.
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The hot spots for this fast-paced foreclosure activity are former bubble markets where foreclosures soared -- places like California cities Sacramento, Riverside and San Bernardino. In Sacramento, for example, the inventory is down to less than 30 days, making it a cut-throat market.
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The trend is causing intense agita for buyers. "People feel like they're getting left out," said [Caesar] Dias, the agent in Stockton.

From News10:

Declining home values might also be in our future, especially homes priced at $300,000 and up. Jim Waters, a regional director for Lyon Real Estate, said there are more than 20,000 foreclosed homes waiting to be released by lenders just in the Sacramento region.

"We're going to see a good surge, probably in the middle to latter part of September or the end of the 3rd quarter, and that surge will run all the way through the end of the year and all of next year, from what they're telling us," said Waters, who talks regularly with banking executives.

When asked if the economy will see as many foreclosures in the coming year as the past two years, Waters replied, "More, more."

From the Sacramento Bee:

In Sacramento "we have a lot more decompressing to do," added Sanjay Varshney, dean of the College of Business Administration at California State University, Sacramento. "Normally, I would have said we would have defined a bottom, too, later this year or early next year. I think for us the challenge is the government layoffs have just begun. "We might be looking at our cycle to be pushed out compared to the national cycle," he said.

Ryan Jessup: Sacramento Bee's Latest Housing Bubble "Victim"

One of the most disappointing aspects of the media's coverage since the housing bubble burst (besides the blind reliance on "expert" opinion), has been the parade of so-called victims. Is it just me, or has the media struggled mightily in its search for legitimate causalities of the housing bubble fiasco? Are they looking in the wrong places? Is it simply that there is not enough genuine victims?

I pondered these questions as I read an article by Jim Wasserman in Sunday's Sacramento Bee. Among others, the story profiles a man by the name of Ryan Jessup, who "walked away" from his Oak Park house (this site says it was a short sale).

[M]any who can afford their payments have decided it's no longer worth it. They walk, or, as is becoming the trend, park rent-free in the house for months until they get the boot.

It's a question that Ryan Jessup of Sacramento answered a year ago, when he, too, sensed the financial game had turned against him. Early in 2008, the software engineer stopped making payments on his Victorian house in Oak Park. A long habit of playing by the rules, he said, had provided him a good income, a credit score of 804 and a lovely $430,000 house. But when playing by the rules meant riding down the housing market to who knows where, he said, "It came down to morals or survival. I chose survival. It made no sense to stay."
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Many borrowers like Clawson and Jessup no longer feel so obligated to a financial system they believe overstimulated the housing market, sold them questionable loan products, sometimes by fraud, and then didn't provide help they need in the face of falling home values.
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Jessup walked away. "I haven't even looked (at the credit score)," he said. "It's like being hit by a train or a bus."
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Jessup, looking back, has no regrets. He lives with a friend now who has also stopped making payments on a condo bought at the peak of the market in 2005.

What Mr. Wasserman didn't say in the article is that apparently Ryan Jessup has quite the history of touting the virtues of Sacramento real estate in comments at sacbee.com. As the name sounded familiar, I dug through Sacramento Land(ing)'s "save for future use" folder and ran across some quotes by a sacbee.com commenter named "rjessup2mouse." Could rjessup2mouse be Ryan Jessup?

I started to read the article's comments and sure enough, rjessup2mouse, purporting to be Ryan Jessup quickly chimed in on his own story:

rjessup2mouse wrote on 03/08/2009 06:47:04 AM:

Good article Jim - this is a very hotly debated topic right now and weighing on alot of peoples minds. yes the house was actually in a nice neighborhood. Not all of Oak Park is bad... I was extremely choosy of where I bought and wanted to be closer to downtown as I figured the value would hold up better. It did but still fell enough for me to leave. I did not think it would increase in price when I bought it. I am sure alot of people on this board are going to be angry - I figured as much - I am not happy with the way it turned out and I lost alot of $$$ on it. But to me it was better to lose alot then to lose it all (and keep losing). One of the reasons I chose to be a part of the article was for the people who were not speculators or anyone who thought the market would go up forever. Just for normal people who had always played by the rules and then the game changed. Each situation is different and deciding to miss that first payment is a tough one.

Assuming that rjessup2mouse really is Ryan Jessup, let's take a look at how Jessup got to the point of parting with his own bit of Sacramento real estate. Below are some excerpts from comments made by Ryan Jessup over the last few years. Jessup's arguments (and tone) nicely encapsulate the mindset of many, whether "experts" or not, in the face of the housing bubble's implosion.

For those who choose not to wade through the excerpts, here is a summary of Ryan Jessup's assertions over the years:

(1.) Employment is strong
(2.) Population growth is strong
(3.) Home prices will not crash
(4.) It's all about affording the monthly payment
(5.) State government is strong
(6.) The sky is not falling
(7.) This will not be like the .com implosion
(8.) There are a lot of buyers out there (especially in my neighborhood)
(9.) My neighborhood is special/great/different [see green highlights below]
(10.) The economy is strong
(11.) Those who did not buy "missed the boat"
(12.) Real estate is not the stock market
(13.) Real estate is not wildly unaffordable
(14.) People have made millions on real estate
(15.) Construction employment is still going strong
(16.) My industry sources say things are good
(17.) This is nothing like the 1990s (as in not as bad).
(18.) The bottom is near
(19.) Good areas (i.e. where I live) are doing fine
(20.) The worst is behind us
(21.) I bought in 200x, I will be fine
(22.) Subprime will have little impact
(23.) The Bay Area will save us...

Now on to the excerpts. Let's start out with Ryan Jessup's take on the Sacramento Bee's ill-conceived 'No Panic' piece, which was published just as home prices were going negative (yoy).

rjessup2mouse at 7:28 AM PST Tuesday, June 20, 2006 wrote:

To a lot of negative folks - the market will be ok

There are people who write comments in these sections that would LOVE to see housing fall down. So you come up with your doomsday scenarios and facts to support your own theories. Sorry - this article is one of the better ones around. Solid job and population growth in Sacramento will keep from a market crash. Sorry for all you "experts" out there who need to bash the bee and think the market is 53% overvalued. If prices drop 53% here I will buy 20 of them..... I do believe prices will drop a little more and then basically become stagnation for a long time. People who own should not expect appreciation for 5 years at least. Homeowners - just ride out the current downtrend by staying in your house. Homebuyers - maybe wait a couple of months. Or find a homeowner who is panicking and get a bargain.

According to DataQuick, the total home price decline exceeded 53% back in December. Funny, I don't remember any recent reports of software engineers buying 20 homes at a time. Also note Jessup's advice for homeowners to ride out the downturn.

rjessup2mouse at 9:24 AM PST Thursday, June 22, 2006 wrote:

...I also agree there seems to be alot of negativity. Those generally come from people with a vested interest in seeing the market fall. Everyone tried to talk me out of buying in 2002 - saying that it was better to rent and the sky will fall. All I can say is I know a TON of friends that sure hate renting and I am sure glad I didn't listen to the naysayers. It really all comes down to the monthly payment and can you afford it...If you are in the house for the long haul - you will be fine if you lock in a good rate and price isn't as important...


rjessup2mouse at 2:45 PM PST Wednesday, June 28, 2006 wrote:

Prices will fall some but they won't crash
But I am suprised that there is a 42% chance that they won't decline. Prices will decline some but won't crash as incomes need to catch up. The State of California is Sacramento's main employer and the state is in hiring mode and doing well. There seems to be quite a few positions open.


rjessup2mouse at 9:13 AM PST Thursday, June 29, 2006 wrote:

...Prices will fall a little and then stagnate for a long while. There seems to be a vicious negative tone to the people who have an interest in the market and sky falling. I think you will see a pretty large difference in the .com drop and a housing drop. Wether you have money or not - there are people (alot) that have $ to buy houses and the region is not short of buyers . Plus the economy here is strong. People are simply waiting to see if they can get a better deal by holding off some. This combined with homeowners panicking to get the the best price now before any drop - that is why you see so many homes on the market. Prices have gotten high but they won't fall overnight (like stocks) and won't change much on even a yearly basis. I think the largest correction might happen in the next 3 months. Like I have said before - buyers - wait a little to get a better deal - homeowners - don't panic and remember why you bought your house (to live in) and ride out the real estate game in sac.


rjessup2mouse at 7:57 AM PST Wednesday, July 12, 2006 wrote:

I agree prices are falling - I never said anything otherwise. I just don't believe the extreme view of the market falling apart. Extreme views rarely happen and are more based on theories and in cases such as this thread - hopes of someone who has a vested interest. Alot of people want to focus on the negative and ignore positive. There are too many things in Sacramento's favor for housing to fall apart. I totally agree a price correction is currently happening. I think a 8-10% correction is in order, then basically very little or no appreciation for roughly 5 years.


rjessup2mouse at 1:25 PM PST Tuesday, July 18, 2006 wrote:

markets are dictated by emotion coupled with supply and demand.I think there will be some more slight drops followed by some large stagnation. Can't wait to see all "the sky is falling" comments in this thread shortly.


rjessup2mouse at 10:10 PM PST Wednesday, August 2, 2006 wrote:

no the sky is not falling but there are going to be bouts of depreciation and people that have a difficult time. Sacramento will be ok. People who are looking for massive depreceation are in for a very slow letdown...


rjessup2mouse at 5:01 PM PST Thursday, August 3, 2006 wrote:

jobs are very healthy and growing in sacramento right now. Be thankful as that does have the biggest impact and is a massive cushion against the sky is falling folks...


rjessup2mouse at 8:24 PM PST Wednesday, August 16, 2006 wrote:

people who are waiting for a crash are in for a slow dissappointment. Prices will probably fall a little more and then hold steady for awhile. The regional economy is too strong for a crash. In fact I have seen alot of Pending Sales in my area (East Sac) because some folks are swooping in to pick up $10-20k price drops...


rjessup2mouse at 7:34 AM PST Thursday, August 17, 2006 wrote:

NoNewArena sounds like a reasonable voice


rjessup2mouse at 9:15 AM PST Thursday, August 17, 2006 wrote:

The people who want housing prices to crash are people who have an agenda. So they try and add fuel to the fire and get joyful of a families demise, just be glad you are not them. There is alot of jealousy over missing the boat and not making $ while others made a lot of money. yeah - prices may fall a little - it isn't going to crash - and the local economy is strong - and mortgage rates are falling. There are alot of buffers. I am already seeing some Pending sales in my neighborhood finally. Buyers wanted to see 10k -20k price drops. People seem to forget there are alot of buyers. And simple math - owning your own home over the long run saves $$. It seems as if its a big game/stock market right now. When prices do a hit a bottom - I bet they spring back up pretty good as people pull inventory out because their houses are making money again and buyers pent up demand comes in pretty quickly.


rjessup2mouse at 12:59 PM PST Thursday, August 17, 2006 wrote:

Be funny when the price bottom hits to see how fast the mentality turns again. Sacramento housing will not fall 25% - thats too steep a decline with so many buyers out there.


rjessup2mouse at 9:05 AM PST Friday, August 18, 2006 wrote:

No the market will not tank - sorry for people who want it too its simple math. what you would be paying for rent principle tax write off = Sacramento is not as overpriced as you would think. sorry andersb - the local economy does matter and the housing market is NOT the stock market. They are both assets but they ACT VERY DIFFERENT. People need to realize that the underlying factors that make them different but I will let you figure that out yourself. I am blown away by the hositlity of people on these postings with their number twisting to try and persuade that the housing market is going to fall 50%. Yes - the market is dropping right now and may drop a little more. But I bet it won't even drop 10% more. But there are alot more factors than simple hope it tanks so you can make a buck by getting a cheaper house. Seems some areas are already starting to rebound (midtown, east sac and med center area)...There are A LOT of buyers out there.


rjessup2mouse at 11:48 AM PST Friday, August 18, 2006 wrote:

...There are too many good things about Sacramento for the market to tfall alot. People have been saying the Bay Area is totally unafforadable and overpriced for about 25 years. that doesn't mean that it was going to drop. Just because some people don't have money - doesn't mean it isn't out there. Don't get me wrong - I probably will not buy in the next 2-3 months or so to see what happens. The market is not good- except maybe closer to downtown - that seems to be showing some suprising strength the last couple of months as prices dropped some and inventory is lower.

rjessup2mouse at 12:43 PM PST Friday, August 18, 2006 wrote:

...People have made MILLIONS on real estate. I don't believe i know ANY wealthy renters but I know a TON of wealthy homeowners...


rjessup2mouse at 8:38 AM PST Thursday, August 31, 2006 wrote:

...Currently I don't believe prices are really that much higher than they should be. I am sure alot of people would disagree with that and probably about 90% of folks on this forum(most people on this forum have a vested interest in wanting prices to come down)...I believe housing will fall maybe a little more and then hold steady for a long time. Just my personal opinion but my track record for being correct has made a lot of $ for people.


rjessup2mouse at 8:46 AM PST Thursday, August 31, 2006 wrote:

I see you are a doomsdayer. Yes - even though the state is adding many jobs and employment is very strong in sacramento its going to all fall apart because....housing employment is down? ummm hate to tell you that construction employment is doing REALLY well right now. All of my construction sources say there is more work then they have folks right now. And comparing the 90's bust to today is comparing apples and oranges. But these housing forums are full of it. Some people on these forums need to get up in the morning and drink a little reality.


rjessup2mouse at 9:25 AM PST Wednesday, September 20, 2006 wrote:

Home prices are close to bottom...Some really good deals are out there. Good areas seem to be closer to downtown...


rjessup2mouse at 12:07 PM PST Sunday, September 24, 2006 wrote:

Thinking a 40% decline huh? your in for a big let down. And heck - that 40% you said was modest. why not bottom at 75%?? you should be able to pick up a 2000 sq foot for around $150k soon right? if you wait long enought maybe at $125k? Some people are absolutely nuts - how do you possibly think it could decline by that? how?


rjessup2mouse at 7:32 AM PST Sunday, October 1, 2006 wrote:

East Sac, Med Center, Midtown and Land Park have been selling alot lately. Closer to downtown seems to have gotten hot(relativly) in the last month and a half actually.


rjessup2mouse at 11:00 AM PST Wednesday, October 18, 2006 wrote:

...I disagree that prices will drop much further though...I think prices by far have gone through the worst of it now.


rjessup2mouse at 7:23 AM PST Thursday, October 19, 2006 wrote:

...and no - I bought in 2002 - I am fine...


rjessup2mouse at 8:57 AM PST Saturday, December 16, 2006 wrote:

...[Y]ou paint a pretty bleak picture of downtown. I think there are plenty of beautiful areas in downtown, east sac , med center and such.


rjessup2mouse at 7:41 AM PST Friday, December 22, 2006 wrote:

Have to completely disagree with Mr.Lyon's assessment on 10% decline for sacramento. Most "experts" predict 3.5%. His is by far the biggesst drop prediction I have read about. This last year seems to have come in about 8.2%. I thought it would have been 10% this last year so it was almost 2% better than i even expected. So is Mr. Lyon saying that this year should be worse than last? Why is he the only one saying this?


rjessup2mouse at 10:25 AM PST Friday, December 22, 2006 wrote:

I have no number crunching but I would have to say that I predicted a 10% drop for the year last year (I was off by 2% )and I will predict a 3-4% drop this year. But I am no expert - I just listen to people who are in the industry and what they see happening.


rjessup2mouse at 9:07 AM PST Sunday, December 31, 2006 wrote:

...Smart money right now is saying that sac is going to do 0 to -3% for the year....


rjessup2mouse at 1:08 PM PST Friday, January 5, 2007 wrote:

people are so negative that have an agenda or a vested interest. The bee has covered stories that make housing look bad and they cover stories that make housing look good. Are you some of the same folks that said it would be down 20% this last year? I remember those predictions a year ago. Looks like Sac was down 8.2%. Some areas in Sac were worse than that and some areas less. But just hoping/waiting for the bottom to fall out is not going to make it happen. California Real Estate is and always will be a good investment long term. The worst is over. That doesn't mean it is bottom but I believe by far the worst is behind.


rjessup2mouse at 10:01 AM PST Wednesday, January 17, 2007 wrote:

Oak Park is changing and I have seen investor interest in it. Next to it - The med center area - is a really good place to have a home and rather safe. Remember - not all of Oak Park is considered "bad".


rjessup2mouse at 8:22 AM PST Wednesday, March 14, 2007 wrote:

...I am not to worried about the subprime headlines of right now. It will have some impact I am sure but not much. Just like everyone was saying the housing market would already be down 35%...


rjessup2mouse at 8:41 PM PST Wednesday, April 4, 2007 wrote:

I think Med center area is already pretty nice.


rjessup2mouse at 1:02 PM PST Thursday, April 5, 2007 wrote:

kindof what I have been saying - Dowtown and Midtown are solid
the suburbs and sub divisions have taken a large hit while closer to downtown has been fairly steady. The houses closer to downtown are bouncing back quicker because people are realizing that you can't make these homes anymore and therefore have good price stability. There will only be less - never more of these homes.


rjessup2mouse at 8:20 AM PST Friday, April 13, 2007 wrote:

funny to see the gloomers again :-) - always makes me chuckle to see the 40% drop again predicted/wanted by home buyers. I am sorry for the doom and gloomers - your not going to get anywhere near that price drop. Not even close. Housing I think is going to take a small hit again - with negative publicity being the bigger culprit than what will actually shake out with the subprime situation. People tend to forget that we are tied to the bay area home prices and that the local job market is plenty strong. I am no real estate agent or optimist - just a realist. For the past few years my predictions have been pretty close - and i would predict possibly another 2-4% drop...


rjessup2mouse at 12:53 PM PST Friday, April 13, 2007 wrote:

...my finances are fine are yours? do you own a house or have you ever? I didn't think so. WIll you? and do the math - its not that tricky - fairly simple actually. As far as predictions - I am sorry to say that it has been fairly accurate. I do appreciate how emotional you are over it - I believe you probably one of the "its going to drop by about 30%" correct? Makes me laugh.


rjessup2mouse at 12:59 PM PST Friday, April 13, 2007 wrote:

isn't it funny? I have been seeing these posts for 2 years now - the predictions by most of the gloomers have been that the market would have dropped 25% as of now. It has not. I think I said 7 - 15% from the start.

I find the final two comments, made in January 2008, particularly interesting given that Jessup purportedly stopped paying his Oak Park mortgage in early 2008.

rjessup2mouse at 11:33 AM PST Friday, January 18, 2008 wrote:

a little advice - the really good deals
If you want a bargain and something thats gonna retain its value. Buy where a bunch of houses are NOT for sale and try and scoop up a bank repo. Some downtown and surrounding areas have it- just gotta find the right pockets of places.

0 out of 3 people found this comment helpful.


rjessup2mouse at 1:46 PM PST Saturday, January 19, 2008 wrote:

time to buy or at least look pretty hard
you folks that are sitting should be looking right now.

1 out of 5 people found this comment helpful.

Record High: Sacramento Unemployment Reaches Double-Digits

From the Employment Development Department [pdf]:

The unemployment rate in the Sacramento-Arden Arcade-Roseville MSA was 10.4 percent in January 2009, up from a revised 8.8 percent in December 2008, and above the year-ago estimate of 6.4 percent...The unemployment rate was 10.6 percent in El Dorado County, 9.6 percent in Placer County, 10.4 percent in Sacramento County, and 11.6 percent in Yolo County.
...
Between December 2008 and January 2009, the total number of wage and salary jobs fell from 874,900 to 855,200, a loss of 19,700 jobs...Between January 2008 and January 2009, job losses in the region totaled 35,200 jobs, or 4.0 percent.

The unemployment rate now exceeds the 90s recession, according to the Sacramento Bee:

Technically, the new rate wipes out the old record of 9.3 percent in February 1993. Local unemployment statistics aren't kept farther back than 1990 because of big changes in how the rates are calculated. It's likely that things were actually worse in the 1982 recession, said economist Jeff Michael of the University of the Pacific. But he believes the current downturn will equal or exceed the '82 slump in terms of unemployment.

The Bee's article from 2006 is looking pretty silly isn't it?

Related post: 'Piece of Cake' Housing Downturn Exceeds 90s 'Depression'

Moody's Economy.com: Sacramento Real Estate Market to Bottom in Q4 2009

From Home Front:

How many times have we asked this question - where is bottom of this housing market - and seen it pushed farther into the future? One more time today, comes Moody's Economy.com, pushing it out until the fourth quarter of this year for El Dorado, Placer, Sacramento and Yolo counties.

From the Modesto Bee:

"To survive, you have to pare back your expenses, cut down advertising, let your employees go and ride it out," [Joseph] Anfuso [of Florsheim Homes] said. During the past two years, he's reduced his staff from 55 to 11...When housing was hot, Riverbank's Monschein Industries employed 406 people to craft cabinetry and countertops. Now only 72 remain.
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To stick it out, some builders have drastically slashed prices. When Taylor-Morrison's Carriage Lane project opened the summer of 2007, its 1,127-square-foot model had an advertised base price of $271,990. Now it's just $139,990. That's a nearly 49 percent reduction.
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[T]he housing slump won't end anytime soon, analysts warn. "The Central Valley is not immune to the slowing national economy and the region's housing market is feeling the effects," said Greg Gross, director of Metrostudy's Central Valley division.

From CBS 13:

Other job seekers expressed frustration at what they see as a growing divide between the instability of the private sector and relative safety of government employment. "The idea that state employees are somehow exempt from feeling the pain -- I find that somewhat ludicrous," said Pat Young of Corona del Mar, a former vice president of real estate developer Pacer Communities who lost his job in 2007. "They're upset because they're being docked two days a month. I think they look rather foolish against a backdrop of people who have lost their jobs entirely."

SacBee: The fastest shrinking job sectors in Sacramento

From News10:

Not bad for a day's work: In a down market, a Sacramento real estate broker made $275,000 buying a bank-owned home in West Sacramento and reselling it the same day. While other real estate professionals were struggling to stay afloat in the worst market in generations, the "flipper" was on a roll. Two months after buying the West Sacramento house, he picked up bank-owned homes in Sacramento and Rio Linda and flipped them both in a matter of weeks for a profit of $358,000.

The secret to his phenomenal success is simple: He's a crook.

Forbes: Stockton Home Prices to Drop to Mid-1990s Levels

From Forbes:

Topping the charts [of the Forbes Misery Measure] is Stockton, Calif., which was the runner-up on our list last year...Stockton was ground zero for the housing boom and now the subsequent bust. Home prices more than tripled between 1998 and 2005 and then came crashing down last year...Things are not looking much brighter in 2009 as housing prices are expected to fall another 36% on the heels of a 39% drop in 2008. Also, unemployment is expected to jump to 13.3% from 10.4%, according to economic research firm Moody's Economy.com.
~~~
[H]ousing prices should keep falling back to their mid-1990s level when the median home price was $130,000.

From Business Week:

It was good while it lasted. But the housing crisis and the recent economic downturn have forced many of the America's fastest-growing towns to adapt to the new reality of falling home prices and rising unemployment. And it's not clear whether the builders will return or whether the nation's next boomtowns will rise elsewhere.
...
When the construction boom crashed a few years ago in the farming town of Elk Grove, Calif., south of Sacramento, it caught retail developers off guard. The launch of the 1.1 million-square-foot Elk Grove Promenade open-air shopping mall, originally set for 2008, has been pushed off until the end of next year even though the project is nearly complete. Not only is the developer struggling financially, but the mall is located on the edge of a rural expanse where Elk Grove was expected to develop.

"When everything was booming, the builders said, 'We're going to get ahead of the game,'" said Garrick Brown, director of research for Colliers International in the Sacramento regional office. "Usually retailers follow rooftops. In this case, they followed building permits."

From the Sacramento Bee:

The McClatchy Co. will trim payroll, curtail its retirement plan and cut operating expenses by at least $100 million following a dismal fourth-quarter earnings report Thursday. Posting a net loss for the quarter, The Bee's owner is readying its third round of major cutbacks in less than a year. Details are still to come, but layoffs are likely, and the Sacramento publisher will freeze its pensions and suspend contributions to its 401(k) plans.

ADDED - From the Modesto Bee:

County Bank, reeling since the real estate market collapsed in the Northern San Joaquin Valley, was shut down late this afternoon by state regulators, the Federal Deposit Insurance Corp. announced. The FDIC agreed to sell bank's deposits and branches to Westamerica Bank of San Rafael...The move comes a week after County Bank reported its losses linked to bad real estate development loans had swelled to about $96 million.

"The [Stockton] Man Who Started the Global Recession"

From Time:

Some communicable diseases can be traced back to what medical researchers call "patient zero", the first carrier of an illness and often someone who has no symptoms...The global recession has a "patient zero", a single person who set off the series of events which may lead the economy into its greatest downturn since The Great Depression and, by some estimates, push 50 million people around the world out of jobs this year, according to The International Labour Organisation. "Patient zero" bought a house in Stockton, California, in 2003 after getting a subprime mortgage. He defaulted on that mortgage 39 months later.

From the Stockton Record:

Tonight Stockton will get another dose of national attention as a foreclosure hot spot in yet another round in the TV spotlight. This time, though, say the producers of the "Deals on the Bus" series by Discovery's TLC channel,...will show a new real estate trend: People riding in tour buses in the quest to buy nice yet affordable homes in communities hard hit by the housing downturn. "It's kind of like speed dating for homes," said executive producer Carlos Ortiz of Actual Reality Pictures, an independent Los Angeles-based film company that has filmed such reality-genre programming as "Flip That House" for TLC.

From News10:

The managing broker behind a failed mortgage operation posted a rambling essay on the company's Web site describing his years of fraudulent activity and asking for forgiveness. The seven-page essay by Christopher Warren, 27, replaced the home page of Triduanum Financial which abruptly closed its doors last month.
...
Warren said WTL Financial faked credit scores and W-2s to peddle loans to investors who failed to scrutinize the files. "I made over $2.25 million, all of which was spent on 24 cars, five houses and drugs," he wrote.

From the Sacramento Business Journal:

A custom homebuilder that had been among the region’s top in revenue before the housing downturn is preparing to file for bankruptcy as it’s being investigated for fraud and other complaints. The Contractors State License Board has referred two complaint violations against Ultimate Development Inc. of El Dorado Hills to law enforcement agencies for investigation.
...
“The recession has essentially shut down residential construction and there are virtually no credit opportunities available anymore,” he [owner Kevin Javaheri] said.

From Home Front:

The Construction Industry Research Board and California Building Industry Association now reports 65,380 construction starts in 2008. It's the lowest since CIRB began keeping records in 1954 in the Eisenhower Administration.
...
It's so low that even in the lowest point of the 1990s recession - 1993 - with Southern California base closings, a defense industry imploding in the wake of the cold war ending, with job losses from San Diego to Eureka, builders still planted 84,656 houses on California soil. That's 19,276 houses more than last year.

From the Sacramento Business Journal:

The worst period in the construction industry was in 1990 and ’91, and we’re fast approaching that now. The only reason we’re not already as bad now as then is that voters approved some infrastructure bonds and that money is still available and working. As a consequence, our picture is not as bleak as, say, homebuilders. But if the state doesn’t come up with a plan by Feb. 1 and it runs out of money, our industry, and the state, could be worse off than it was in 1990 and ’91.

From the Sacramento Bee:

Fighting to avoid a bankruptcy filing and apparently unable to finish the job, the developer of the long-delayed Elk Grove Promenade shopping mall is seeking investors to bring the project across the finish line...The mall has become something of a poster boy for the Sacramento area's hard-hit commercial real estate market...The mall's opening has been postponed three times, the victim of a poor economy and Elk Grove's disastrous housing market.

From the Sacramento Business Journal:

For Ike’s Landscaping, business started spiraling downward halfway through 2008...Although Ike’s had a strong first half in 2008, [president Eric] Aichwalder said, “We’ll be down to 20 employees in the next few months.” Ike’s employed 133 last year.

The bottom line for commercial landscapers is the market’s getting tougher. “Owners are watching all their dollars because tenants are coming to them for reduced rents,” said Ken Reiff, managing partner in the Sacramento office of brokerage NAI BT Commercial.

From Inman News:

[According to Radar Logic] San Francisco had the highest [price] decline, at 36.8 percent year-over-year during the November period, followed by Phoenix (down 34.6 percent) and Sacramento, Calif. (down 32.4 percent).

From the Modesto Bee:

Rental home rents also have become a bargain throughout in the region. "The economy is driving the rental prices down," said Kris Marin, who manages about 250 rental properties in the Northern San Joaquin Valley for Tri-Tal Realty. "There are a lot of vacancies. It's hard to find good, qualified tenants if the rent is too high." So to get homes occupied, Marin said, monthly rents have fallen about $100 for three-bedroom homes and about $200 for four-bedroom homes.
...
Al Nazmi said his family members have purchased more than 20 foreclosed houses during the past 18 months..."Most Modesto investors have run out of cash to buy homes the last three months," said Nazmi, noting how few people attend the daily foreclosure auctions on the county courthouse steps. But out-of-town investors are filling the void: "I have friends in neighboring states who are buying homes in Modesto now." All those investors are turning former owner-occupied houses into rentals. Those homes now compete with apartment complexes for tenants.

From the Press Democrat:

Exchange Bank reported an $18.5 million year-end loss Friday, its first annual loss in at least five decades....The problem loans are concentrated in construction lending, largely among loans made to home builders in the Sacramento region. The bank expanded into the Sacramento area earlier this decade near the peak of the housing market. Now, with housing mired in a deep downturn, many builders are struggling to stay in business and pay off their loans.

From the Appeal Democrat:

Plummeting revenues due to the construction slowdown will lead to layoff notices for eight Yuba County employees and the deletion of 12 vacant positions.
...
[Supervisor Mary Jane] Griego noted the development boom that preceded current conditions and that she said was spurred in part by dramatic increases in housing prices in Placer and Sacramento counties. Those increases helped push development into Yuba County, she said. "We'll never see that again," Griego said of the extraordinary rise in home values in this region and the rest of California. "It was like the stars came together for Yuba County."

From the Sacramento Bee:

The economy is in such wretched shape – finishing 2008 with its worst performance in a quarter century – that some forecasters have begun writing off 2009 as well...Some analysts are rethinking predictions that the recovery would start in late 2009; now they're talking 2010...Two weeks ago, [CSU Sacramento economist] Suzanne O'Keefe said job growth could resume in Sacramento by September. Now she says it probably won't happen until 2010.

Bay Area SOS

From the Sacramento Bee:

The recession has finally caught up with Silicon Valley and much of the Bay Area...The economy here escaped the worst of the housing market crash – but not the more recent slump in consumer spending. That's hitting the tech sector hard.
...
Sacramento is hurting because it's being starved of the eastward migration – of people, jobs and wealth – that occurs when the Bay Area is healthy.
...
State records show Intel Corp. laid off 200 workers at its 6,000-employee Folsom research park last year, and it continues to struggle...Hewlett-Packard Co...let 70 workers go at its Roseville campus last year, bringing employment to less than 3,500. As it integrates its acquisition of EDS Corp., it plans to lay off 24,600 workers worldwide over three years, which could affect Roseville and EDS operations in Sacramento, Rancho Cordova and Folsom.

From the Sacramento Business Journal:

Sacramento’s office market went backwards in 2008. The vacancy rate for Sacramento’s office buildings rose for the seventh straight quarter to end the year. And for the first time in two decades, tenants used less space at the end of the year than they occupied at the beginning, according to the region’s top brokerages.
...
Even traditionally stable areas have seen a drop-off. Nico Coulouras, vice president at Lowe Enterprises Real Estate Group, which controls about 700,000 square feet in the Highway 50 submarket, one of the best-performing areas in recent years, said leasing activity in that area was steady until November. “Then, it got quiet,” he said.

From the KCRA:

Home Depot Inc. said it is cutting 7,000 jobs and closing its smaller Expo chain, including a store in Roseville, as the recession continues to batter the nation's housing market.

From the Stockton Record:

...[San Joaquin] County's unemployment rate hit 13 percent in December, up 1.1 percent from November, according to data released Friday by California's Employment Development Department. It is the highest rate in the county in 12 years.
...
In recent months, [UOP economist Jeff] Michael had been saying that San Joaquin County employment numbers weren't as bleak as the national numbers and wondering whether that was a short-lived phenomenon. "Pretty clearly it was a blip," he said. "My reaction to (the new employment report) was, 'Wow!'"

From Business Week (hat tip RV6Flyer):

We asked AXIOMetrics, a Dallas-based apartment data company, to assemble a list of the 25 large metros where the rate of rent declines accelerated most in the fourth quarter.
...
Sacramento/Arden-Arcade/Roseville, Calif.
Rank: 24
Rent drop: -1.9%
Q4 2008 rent change: -3.9%
Q4 2007 rent change: -2.0%

From The Housing Bubble blog's Ben Jones:

We had...[a serious recession] in Texas when I was young. At first, lots of people hoped oil and real estate would bounce back and save our necks, but economics don’t work that way. We had a bubble and it didn’t come back.

What is frustrating to me is that the ongoing debate is headed by the fools that got us in this situation. Housing isn’t going to lead us anywhere. The fact is we’ve had the largest financial mania in history. It’s not going to return, and we better start working on how we will work and live in the future. Nobody can turn the clock back, and hoping that housing will lead a recovery is just as futile wishing oil would rebound in the 80’s.

Sacramento Unemployment Hits 8.7%; Rental Occupancy Drops

From the Sacramento Bee:

Greater Sacramento unemployment jumped to 8.7 percent, up from 8.1 percent a month earlier...The region has now lost 22,400 jobs in the past year, or 2.4 percent of its employment base.

From the Sacramento Business Journal:

The highest local jobless rate was in Yolo County, at 9.8 percent. The county has a labor force of 99,900 with 9,800 unemployed last month. The county had a 9 percent unemployment rate in November.

From the Sacramento Bee:

Unaccounted for [in the employment numbers is]...the growing numbers of workers who have had to settle for less of a job than they wanted. "The pain in the economy is much greater than the jobless numbers would indicate," said economist Sung Won Sohn of California State University, Channel Islands...Jenny Beard, owner of the Express Employment Professionals office in Roseville, said the number of former full-time workers seeking part-time work is undeniably up. "I'm positive of that," she said. "We're seeing many candidates who just want to keep themselves employed."

From the Sacramento Bee:

Sacramento-area rental occupancy dropped nearly a percentage point – 0.7 percent – in the fourth quarter of 2008 compared with the year-previous quarter, according to a survey released Wednesday by Novato-based rental industry analyst RealFacts...About 93 percent of area rental properties were occupied, one of the lowest occupancy rates in the state....
...
One local analyst cited a "cacophony" of factors contributing to the drop, from overbuilding, to single-family homes turning to rentals in a disastrous housing market, to a struggling economy.

From Home Front:

Here at The Bee, we do a ton of stories on the housing market, but don't often enough explore the world of apartments that house an estimated 35 percent of the region's population...The bottom line right now: the apartment industry is slumping, too. Sales prices are falling, a few have fallen into foreclosure and buyers are waiting on the sidelines to see if prices fall more, the two said. There's still more supply than demand, which has lessened investor interest, too, in apartments.

From the Placer Herald:

Placer County’s foreclosure rate continued to gain steam in 2008, according to a year-end analysis of government records. And experts say to expect more of the same in 2009. The number of foreclosures in the just-ended period was up more than 110 percent from a year ago, with 2,552 residential properties being taken over, compared to 1,193.
...
Homes in all segments of the market – from “starter” homes to area mansions – showed up on county default rolls last year en masse, experts say. “It’s pretty much going after all of them,” said Ben Herb, president of the Placer County Association of Realtors. “Even the houses that are a million-plus have been going into foreclosure.”

From CBS13:

Loan consultant, Robert Turrietta, say that one particular foreclosed home in Sacramento's Oak Park neighborhood lost almost 75 percent of its value. "This particular home transferred a couple of years ago for around $200,000 and just recently sold and closed escrow for $39,000," Turrietta explains. Turrietta says while home prices fall, nearly half of the buyers applying for a loan are getting denied.

Related Post: Housing Bubble Casualties: Professionals 'Suckered' into Oak Park

From the Sacramento Bee:

Most of Sacramento's local banks bet small on the real-estate boom and, as a rule, they haven't been badly hurt by the bust. But according to federal filings, most local lenders have a larger stake in the commercial real estate market, where vacancies – and loan defaults – are expected to soar this year as more businesses fold.
...
[Colliers International's Garrick] Brown anticipates 5 percent to 6 percent of the region's commercial real estate properties will go into foreclosure in the next two years. That's similar to the rate of home foreclosures locally in 2007-8, according to data from foreclosures.com.

Merced breaks the -50% YoY mark. From the Modesto Bee:

Stanislaus County's median sale price was $157,500 in December,...44 percent below the $281,250 in December 2007 and 60 percent off the $396,000 in December 2005, when the bubble was at its biggest...[YoY price declines:] 51.8 percent in Merced [and] 47.5 percent in San Joaquin.
...
Richard Green, director of the University of Southern California's Lusk Center for Real Estate, said the market is being hammered by tight credit, expectations of further price declines and job losses. "If you see the unemployment rate turn around, that's when you'll start to see housing prices bottom and start turning in the other direction," Green said. "Until that happens, I'm pretty gloomy."

From the Sacramento Bee:

Sacramento County is about to announce a mid-year budget shortfall of $42.3 million....As a result the county at the Feb. 10 Board of supervisors meeting will propose getting rid of almost 200 positions on top of almost $30 million in cuts, according to an official, not authorized to speak on the budget, who had been briefed on the situation.

From CBS13:

With a skyrocketing foreclosure rate and plummeting sales taxes, Stockton has to cut $30 million from their $180 million general fund...[O]fficials say layoffs are inevitable.

From CBS13:

The recession is leaving some doctor's offices empty. More women are putting motherhood on hold and recent reports show contraceptive sales are through the roof. The data runs about two years behind, we won't know for sure until 2011, but it appears that with the economic slowdown has come something of a pregnant pause.

Share of Sacramento Homes Sold to Investors Hits 25%, Back to Bubble-Era Levels

From the Sacramento Bee:

In 2008, long to be remembered for fear and opportunity, capital-area investor Scott Arbuckles and partners also saw the sudden opening...Last year, he bought eight Sacramento County repos priced below $120,000 to fix up and rent. By December, investors like him accounted for one in four home sales in the county – the most since mid-2004 – according to statistics released Tuesday by MDA DataQuick of La Jolla.
...
"It's fair to say we've seen the beginning of a recovery in sales," said [DataQuick's Andrew] LePage. "But it's a strange recovery that's not as broad-based as you'd usually see. A lot of starter homes sold and nothing happened. A lender gets the money back, but no one is moving up."
...
The outlook for 2009: more of the same, said LePage. "I think so much is riding on the health of the job market this year in Sacramento. For the market to really stabilize, you have to end that vicious cycle of foreclosures in hard-hit areas, and it's going to be hard to do that if more people are thrown out of work."

DataQuick statistics by county
DataQuick statistics by zip

From The Union:

I just want to know one thing: If Barack Obama fixes the economy, will that fix the shortage of girls available for the Nevada County Girls Softball Association? This year, unlike many years prior, the association’s participation has dwindled. Both league president Jennifer Ulatowski and NorCal representative Todd Richards referenced the faulty economy as to why the league has about 275 girls right now, compared to the 400 that participated a year ago.
...
“I’m pretty sure it’s the economy,” said Richards, who doubles as a coach in the league. “Most of the Sacramento leagues are feeling the hurt too.”...[R]ecreation, at this point, appears to be a luxury to some and their children that few can afford. At least, a lot of parents have said as much...What’s even tougher is acknowledging that the numbers may not come back anytime soon in a community that has more and more families moving away.

DataQuick: Sacramento Median Price Drops Below $180,000

From the Sacramento Bee:

Median sales prices dipped to $176,000 in Sacramento County last month, reflecting the dominance of bank repos in the market following a wave of 2008 foreclosures...[That] is the lowest since May 2001.

From the Sacramento Bee:

Greg Paquin of the Gregory Group, the Folsom housing market consultant, said new-home sales in greater Sacramento will total 4,695 this year, the same as 2008. But he acknowledged that prediction is probably optimistic.

From Home Front:

It was...interesting to see the links between the real estate declines that started here in Sacramento in 2005 and the budget nightmares that are now in full swing statewide as home values fall. The speakers made it especially clear that the housing crash that started in the Central Valley and the Inland Empire of Southern California is now happening everywhere in the state.

Realtor Julie Jalone:

I believe 2009 will be a repeat of last year when looking at inventory and unless the recession continues or the credit crisis worsens I predict we will have less than 10 thousand homes on the market by the end of the year. Having fewer homes on the market will dampen the downward pressure on home prices...I believe 2009 will be another year of declining prices/value although by late year I think we will see some firming of prices and maybe even some upward movement in the most desirable neighborhoods.

From the Manteca Bulletin:

Stockton-Manteca-Modesto was among the very first regions to feel the impacts of loose lending standards. This area led the nation for more months than anyone else when it came to foreclosures. It is also expected to be the first to pull out of it. The reason why the region was first going into the mess and will be the first coming out is due to growth.

The worst is either over or close to it in Manteca. That doesn’t mean there won’t be more foreclosures — there will be. It doesn’t mean prices are going to start climbing again any time soon nor does it mean that retail is going to bounce back overnight. We took a huge punch in the gut of the economy — housing — but we’re getting up for the next round and are still a strong contender. That’s not the case elsewhere.

From Housing Wire:

[H]ousing has some serious correcting to do yet ahead of it...If you want to know which markets are going to bleed most heavily through this year, then, you need look no further than those markets that are already mostly underwater relative to home equity.
...
The nation’s most troubled housing market by this measure would be the town of Tracy, Calif., in San Joaquin County....Ensconced by the 95391 ZIP code, a full 88.7 percent of outstanding mortgage debt in this area is estimated to be underwater, with 91.5 percent of all mortgages ranking as “near negative equity” by First American CoreLogic.
...
Coming in at number four? Rancho Cordova, Calif., home to the 95742 ZIP code and part of Sacramento County in Northern California — 84.3 percent of the 2,099 mortgages in the ZIP have reached a negative equity position, CoreLogic’s data showed, while an additional 83 mortgages are considered “near” negative equity as well...[Y]et another NorCal property disaster waiting to unfold.

From the CVBT:

A very grim outlook for employment in the Central Valley is found today a study [pdf] prepared for the U.S. Conference of Mayors. It predicts that by the end of the year, unemployment rates will be as high as 17.5 percent in Merced. But the report says every major metro area in the Valley will be in double digits, with more than 36,000 jobs being lost over the next 12 months.
...
The largest job loss [in the Central Valley] is predicted for the Sacramento metro area – 17,900 jobs. It is estimated that will put unemployment at 10.0 percent.

From LA Land:

Because housing is just one part of an increasingly dismal economic picture -- add to that the giant budget problems here in California -- I scratch my head every time I read a prediction that California housing prices could stop their decline in 2009. I just think there are too many factors in the big picture for a quick bounce back.

From the Sacramento Bee:

The current economic downturn has created a window of opportunity for people looking to remodel their homes and who can still afford the investment. Skilled crafts-people – once too busy for small projects – are looking for work. Lumber is bargain priced.
...
"There's never been a better time to remodel," said [George] Henley, who has been in the home construction business for 30 years. Henley and many other local contractors have experienced the ups and downs of the building market before. "It was bad in 1980, again in 1990, but never this bad," he said. "Business might slow down for building new homes, but remodeling usually stayed steady. Now, we're seeing a slowdown for remodelers, too."

From the Sacramento Bee:

Surprisingly, [St. Joseph statute seller Philip] Cates acknowledged Thursday that "sales are a little bit flat. We're wondering if people aren't talking about it anymore, or if people are light with the $10."

Home Front noted one possibility: banks, dumping repossessed properties, now account for three-fourths of home sales in Sacramento. Presumably, St. Joseph isn't part of their corporate tool kits.

From the Sacramento Bee:

"The breaking point is property value," said Kevin Baker, supervisory special agent of the financial crime squad at Sacramento's Federal Bureau of Investigation. "If it goes stagnant and declines, that's when fraud comes to the surface," Baker said. Reports of mortgage fraud from financial institutions to Sacramento's FBI office increased from 500 in 2005 to more than 3,000 in 2008, Baker said. Based on 2008 figures, the Sacramento region ranks fifth nationally in the number of mortgage fraud cases.

From the Modesto Bee:

Home values in many Northern San Joaquin Valley communities have declined more than 60 percent since the housing boom peaked three years ago. "This has been very, very difficult on our residents," said Rick Robinson, Stanislaus County's chief executive officer. "We were not a wealthy community to begin with." Robinson recalled how Stanislaus enjoyed unprecedented growth before 2006, "then our world collapsed."
...
Besides first-time buyers taking advantage of bargain prices and near-record low interest rates, [PMZ real estate agent Judi] Alves said, investors are scooping up foreclosures. "The average Joe now has an opportunity to become an investor and to add a rental home to their retirement portfolio," Alves said.

"Serious Trouble" Ahead

From News10:

A big presence in the Northern California home-building industry says it could be shutting down some projects. John Laing Homes spokeswoman Linda Mamet confirmed to News10 Wednesday the homebuilder is "reviewing operations based on market conditions and will determine whether sales will continue. Some offices may be closed. It is not clear on whether all or part of the Sacramento area operations will be closed."
...
Sacramento real estate consultant Jake Allen says the company appears to be in serious trouble. "I think it's a very sobering sign of the times, when we see a large, national builder like John Laing Homes that is essentially on the ropes at this point in time and looks like fighting for their life."

From the CVBT:

There’s a smidgen of good news for the Central Valley in the latest PMI Mortgage Insurance Co.’s “risk index.” The region, where the mortgage meltdown started more than a year ago, is surpassed by many Florida cities that PMI estimates will have the risk of lower house prices two years from now. Still, virtually every metropolitan area in the Central Valley is ranked at better than a 90 percent likelihood of further price declines.
...
Merced (High) 95.4
Modesto (High) 96.5
Sacramento (High) 96.3
Stockton (High) 96.6

From the CVBT

The Stockton metropolitan area in the Central Valley led the nation in 2008 in per capita foreclosures, according to a report from RealtyTrac Inc. of Irvine, a foreclosure information company. Stockton’s foreclosure rate last year was nearly double that of 2007, says RealtyTrac, up 99.16 percent. There were 21,127 homes in some level of foreclosure in Stockton last year, or 9.46 percent of all homes.
...
Sacramento was ninth, says RealtyTrac, with 39,876 homes foreclosed or 5.20 percent of all units.

From CNN Money:

[RealtyTrac's Rick] Sharga thinks that as many as 70% of the bank-owned homes listed on RealtyTrac's site have not yet been posted on multiple listings services (MLS), the industry databases of homes for sale. Those homes are less likely to be sold because most real estate agents won't know they're available. "Either banks are overwhelmed and can't get the houses on the MLS quickly, or they're deliberately slowing down so they don't have to take markdowns to actual home values on their books," Sharga said. Either way, it has the effect of underestimating the foreclosure inventory problem.

From the Sacramento Bee:

Facing a projected $8.6 million shortfall in the current fiscal year alone, the city of Folsom on Tuesday took the first step toward effectively throwing out the current budget and adopting a new 18-month spending plan that would take the city through June 30, 2010. The proposed plan calls for the elimination of 55 positions – including 39 layoffs – and service cuts. Folsom joins other area municipalities looking to cut because of the recession.

From the Sacramento Bee:

Faced with losing 43 jobs, including a dozen police and firefighter positions, Lincoln's remaining city workers also have been asked to take a two-year pay freeze.

From the Sacramento Bee:

Roseville city officials announced Monday a voluntary employee buyout program to close a nearly $4.5 million budget gap. The city has been freezing positions and cutting costs since March 2007, but another 40 to 50 positions must be eliminated, City Manager Craig Robinson said in a letter to employees.

From the Sacramento Bee:

The city of Sacramento is more than $11 million short of balancing its books, meaning more cutbacks are likely in the coming weeks. Mayor Kevin Johnson said Monday that "the outlook is not good" for a city that already made significant cuts in recent weeks.
...
Asked if it is likely city officials will need to make midyear cuts next month – either through layoffs or reductions in services and programs – Johnson said, "I think we will have to."

'Nothing Left To Trim'

From the Sacramento Business Journal:

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

From the Sacramento Bee:

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

From the Sacramento Bee:

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

From the Sacramento Bee:

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

From the Stockton Record:

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

From the Associated Press (hat tip DJ/SMF)

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

From News10:

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

'One more sad cry in a horrible storm'

From the Sacramento Bee:

Sacramento's economy stands to lose around $1 billion over the next 18 months because of layoffs and unpaid furloughs imposed on state workers by Gov. Arnold Schwarzenegger..."The purchasing power of the state worker in Sacramento is huge," said Teresa Halleck, president of the Golden 1 Credit Union. "The last thing any one of us wants to see is further impact to the local economy."
...
"It seems like one more sad cry in a horrible storm," said Mike Lyon of Lyon Real Estate in Sacramento. Although it won't devastate the housing market, the cut in payroll will make a dent, he said. Some homebuyers probably will have deals fall through or won't qualify for a mortgage, he said.

From Bloomberg:

If you were searching for pockets of optimism in the U.S. housing market, where would you look? Easy guesses would be to avoid Detroit, Cleveland or any cities with domestic automobile plants or troubled manufacturers. Then there are the foreclosure gulches of Central and Southern California, which include the Modesto, Stockton, Bakersfield, Riverside and Sacramento areas. Those cities will take a long time to recover. Too many homes there were sold at bubble prices to people with dodgy finances.

From the Sacramento Bee:

In the wake of a prolonged California housing slump, nearly one-third of the state's homeowners with a mortgage will find it impossible to refinance, according to Irvine-based First American CoreLogic. In Rancho Cordova's Sunrise-Douglas area, almost nine in 10 homeowners of ZIP code 95742 fit into that category, said the firm. That's because the ZIP code consists almost entirely of new homes sold and financed at near-market highs. Falling values have erased their equity.

Elsewhere, thousands spent part of their home equity gains during the boom. All are now "under water," industry shorthand for owing too much to refinance. Analysts call the condition a major contributor to the state's foreclosure crisis.

From the Sacramento Bee:

The city of Sacramento is poised to approve a huge new shopping center just a few miles from the Elk Grove shopping center where construction has stalled. City Council members are scheduled to vote Tuesday on Delta Shores, a new community with about 5,000 housing units and 1.3 million square feet of retail – the equivalent of an Arden Fair mall.
...
[A]t least one retail expert suggested the city could be making a mistake. "If they were starting to build it today, it would be foolhardy, and in 2010 it could be foolhardy," said George Whalin, head of Retail Management Consultants in San Marcos. "I don't know anybody who is looking to build anything new," Whalin added. "The mall guys, the shopping center guys, all the discussions now are how do we pull back, how do we stop projects that are on the drawing boards."

In December, Sacramento median home price dropped to $180,000 according to SAR [pdf], a decline of 55% since peak.

Average Buyer has a handy chart of equity destruction by zip code. Price declines from peak range from 18% to 76%.

Sacramento Real Estate Statistics notices that so far in 2009, Sacramento home inventory is on the rise à la 2007.

"Could it get any worse for Sacramento's home builders?"

From the Sacramento Bee:

Could it get any worse for Sacramento's home builders? Publicly traded home-building giants and family builders alike endured their harshest year in possibly a generation in 2008, according to statistics being released today by the Folsom-based Gregory Group. Area home builders sold just 4,695 houses last year in El Dorado, Placer, Sacramento, Sutter, Yolo and Yuba counties [down 73% from the 2004 peak]....

During the fourth quarter, average new home prices fell 10 percent from 2007, to $384,347....The capital region's new home average peaked just shy of $500,000 in the second quarter of 2006....

2006 Sales Forecast: 14,094 (approx.)
2006 Sales Reality: 9,588

2007 Forecast: 9,500-10,000
2007 Reality: 7,407

2008 Forecast: 7,710
2008 Reality: 4,695

Gregory Group Q4 2008 statistics

From the Sacramento Union:

Ashley Feeney said that as a Sacramento homeowner and one who works in the building industry, he was disappointed to see home prices plummet in 2008. “I’m still working, so basically my situation is okay, but having to wake up every day having the psychological tolls of the newspapers and the media reporting the pain of the nation is a little depressing,” Feeney said.

From Christianity Today:

Pastor Johnny Murillo had often empathized with his congregation members at Christian Worship Center in Sacramento, California. But when one member came to his office during the 2006 Christmas season, panicked and desperate to keep his home from foreclosure, it hit too close to home. "Dude, I know what you are going through," Murillo told him. "There is a way out."

He really believed there had to be a way out. The only problem was that at the time, he didn't know what it was. Unbeknownst to anyone else, Murillo was also facing foreclosure.

From the Stockton Record:

Rep. Dennis Cardoza, D-Atwater, has a plan to reverse the housing crisis and boost the economy: a 4 percent interest rate on fixed-rate, 30-year loans for all current homeowners and qualified buyers of foreclosure properties. Under his newly proposed legislation, federal mortgage giants Fannie Mae and Freddie Mac would allow homeowners to refinance their mortgages at 4 percent interest on 30-year, fixed-rate loans. That would benefit not only homeowners struggling to make monthly payments but also those who have faithfully paid their bills each month but have been unable to refinance because of lost equity.
...
Carol Ornelas, CEO of Visionary Home Builders, which builds housing for low-income families and also provides mortgage counseling, said the plan wouldn't help many people in the Central Valley, though, because they still would have too-high mortgage costs even at such a low interest rate.

From the Sacramento Bee:

California will close most state offices on the first and third Fridays each month starting in February, padlocking DMV outlets and other services while reducing state worker pay to help survive a massive budget problem, according to a state Department of Personnel Administration memo...The state will save an estimated $1.3 billion over 17 months under the furlough plan. The move could have a significant impact on the Sacramento region, where the state employs 73,536 workers in Sacramento County alone, including 63,818 full time.

Report: Sacramento Headed for Double-Digit Unemployment in 2009

From the Sacramento Bee:

A new forecast says unemployment will hit 10 percent in Sacramento this year [a rate worse than anything from the 1990s recession]. That's the most striking finding from the premiere issue of the Sacramento Business Review....The review also says the Sacramento region can expect to lose 14,500 jobs in the first quarter of 2009 alone. By contrast, the region lost 12,700 jobs in the 12 months ending in November.

From the Sacramento Business Review report [pdf]:

Construction...has become the largest production input in Sacramento since 2000 and hit its peak in 2005. Currently, construction contributes to 56% of Sacramento’s goods production input. We view this larger exposure to real estate as one reason the region was hit particularly hard by the housing collapse, partially offset by the larger exposure to the relatively stable government sector...By the end of 2005 - coinciding with the peak of the residential market - 26% of all jobs in the region were real estate related. Since that time the real estate sector has steadily lost jobs and now represents only 22% of overall employment.
...
While this U.S. recession officially began in December 2007, we believe the Sacramento region felt the economic effects earlier given the region’s large exposure to housing price declines, and the collapse in construction and in real-estate related financing activities. Using unemployment and taxable sales as a gauge, Sacramento was likely in its own local “recession” as early as 2Q07. Given our negative outlook, we would be looking closer to the end of 2009 or early 2010 for a local recovery and job growth to return, but we also believe there is a greater risk that a recovery occurs later than this rather than earlier.
...
While a recovery is at least a year (or two) away, it is likely we will reach or approach the bottom of the [real estate] downturn by the end of 2009. The local residential market is further along in the cycle than most the rest of the country, having already incurred a significant correction in pricing. As such, we expect the Sacramento region to be one of the first markets to recover. However, whether we reach the bottom soon and how long we remain there is dependent on how quickly the credit markets thaw and the depth and duration of the current economic recession.

From Housingpredictor.com:

[I]n the state's capitol of Sacramento, which has been one of the states harshest hit areas, the increase in foreclosure sales is also helping to boost the ailing home market. The real estate crisis is forecast to deflate home values in Sacramento another 15.7% by year's end.

From News10:

City employees in Lincoln are bracing for layoff notices that could come as early as Friday, according to Mayor Spencer Short..."I think everyone saw the slowdown coming but it was just a sudden collapse because of the mortgage crisis and everything else," said Short.

From the SF Chron:

"My policy prescription: Let them get foreclosed on," [economist Christopher Thornberg] said. "The home market is not going to recover, on the building or appreciation side, until two things happen: a) all these people with dodgy mortgages who bought things they couldn't afford get shoved out and b) all those homes get absorbed. The fastest way to do both of those things is to let prices fall."

"An MSM Confession"

From the Sacramento Bee:

Sacramento-area real estate market befuddled the experts

Home Front spent time in the electronic library this week, looking at how experts misjudged the extent of this decline as the housing market began to wobble and shift in 2005 and 2006, even 2007. We aren't trying to pick on analysts who were then swimming in uncharted waters after a long, euphoric boom. The Bee's real estate coverage, too, had its overly sunny moments.
~~~
We feature a lot of real estate experts who misjudged the extent of the downturn - and note that our own coverage was sometimes overly rosy, too, as a result.
...
It had occurred to me a couple times as I researched today's column that there were early people saying we were going over a cliff with this housing boom. They were mostly bloggers and not mainstream "experts," predicting this was a disaster soon to unfold. Therefore, in the process that often leads to these kind of business stories, they seemed to have less weight than someone who sold houses for a living or financed them. (There's an MSM confession for you).

But many of these seers proved correct.

From the Sacramento Bee:

"One bright note is that the (housing) sector that led the economy into this morass is about to turn the corner, perhaps as soon as this summer, and will start to lead us out," said Scott Anderson, senior economist at Wells Fargo & Co.

It's still too early to declare real estate's revival...But 2008 could also be seen as the year Sacramento-area real estate began to show signs of stabilizing, and the idea that housing might help establish a foundation for the economy here is something experts are starting to debate. Prices and inventory are down and sales are up, even as foreclosures continue. Mortgage rates have fallen to their lowest levels in at least 37 years. The correction has been enormously painful, but there are believers who contend Sacramento will be among the first U.S. markets to recover.

From the Sacramento Bee's Bob Shallit:

We anticipate the capital region will endure higher unemployment (perhaps hitting 10 percent), more hard times in housing, a grim market for commercial real estate and perhaps a bank failure or two...Builders and buyers will continue struggling in 2009, but by midyear we see home prices bottoming out, foreclosures dropping and sales picking up, spurred by declining interest rates.

From Rocklin & Roseville Today:

I believe we will start to see some stability in the Sacramento housing market. I am not suggesting that we don’t still have some downward pressure on prices but I think we will see, in some areas and in some price ranges, price stability and even some upward movement. I believe we will see buyer’s who took a wait and see posture in 2008 return to the market. At the same time, if we learned anything from our experiences in 2008, we must be mindful that there are likely to be some additional surprises along the way.

From Home Front:

[In 2008] Dunmore Homes went out of business. Then John Reynen of Reynen & Bardis Communities filed for personal bankruptcy protection. So did C.C. Meyers, owner of Winchester Country Club. And then so did Christo Bardis of R&B. I doubt ever in their wildest imaginings did they imagine it would all some day come to this...Crossing familiar names off my list of real estate industry sources as they disappeared into unemployment. Sacramento County's median price falling back below $200,000. (On the other hand I talked with a lot of happy new homeowners this year. That was the really cool side of the free-falling home prices).

From the Modesto Bee:

The housing slump will enter its fourth year in January, but Chad Costa sees reason for hope. The Modesto real estate agent said plenty of people will benefit from the reduced prices and mortgage rates. "I think what has to be identified here is that the affordability is back," said Costa, who specializes in selling property that has gone through foreclosure. "That's the upside of this, and you don't hear a lot about that."

From the Appeal Democrat:

A huge tide of home foreclosures rippled through the nation in 2008, and few communities were battered as badly as the Mid-Valley. Defaults left hundreds of houses from Yuba City to Linda to Wheatland — built and bought in anticipation of profiting from a decade of soaring real estate prices — empty as owners seduced by adjustable-rate mortgages were caught between suddenly higher payments and plunging values for their homes.

From the Sacramento Business Journal:

Sacramento on Monday announced it has laid off eight workers in the city’s development services department due to falling revenue.

From the Appeal Democrat:

About 70 workers at Kbi Norcal on Rancho Road in south Yuba County are slated to lose their jobs in the next few months, according to an announcement Monday from the lumber and wall panel plant’s parent company, Building Materials Holding Corporation. BMHC executives...have said they will shut down the Rancho Road plant some time during the first quarter of 2009.

From the Sacramento Business Journal:

Grubb & Ellis Co. on Monday released its 2009 global forecast that predicts a troublesome year for commercial real estate in the U.S., including Greater Sacramento. “Several forces contributed to the decrease in Sacramento’s investment market in 2008, primarily the unavailability of credit, and this will linger through the coming year,” said Robert Dean, executive vice president and managing director of Grubb & Ellis’ Sacramento office...“The depth and duration of the local residential recession has virtually assured retail’s struggle,” Dean added.

From the Wall Street Journal:

The commercial market "is going to be ugly for the next 12 to 24 months," said Michael Restuccia, chairman of the San Joaquin County (Calif.) Employees' Retirement Association. "Not just bad, but ugly."

From the Sacramento Bee:

Commercial real estate is in trouble...Brokers such as [Boyd] Cahill are suffering along with their clients. For a while, they were uneasily holding ground while colleagues in residential real estate were seeing their livelihoods melt away as home sales plummeted. Then the bad economy got drastically worse and the commercial business crashed
...
As "the toughest year" of his career closes, Cahill said the first half of 2009 doesn't look much better. He thinks more retailers will file for bankruptcy protection, adding to vacancies and making it even more competitive to land the few tenants looking for space. The shakeout will strike commercial brokerage firms, too, Cahill said. His company just closed its Sacramento office and pulled staff to Roseville.

From the Stockton Record:

Foreclosures continue to dominate the existing home-sales market, making up nearly nine out of 10 purchases...[M]edian home selling prices in the city [of Stockton] dropped as low as $130,000 for November - down more than half from $265,000 the previous November.

Lela Nelson of Lela Nelson Realty said December business was hopping as more first-time buyers and investors jumped into the market as ever-dropping prices combined with historically low mortgage rates. In more than 30 years in the real estate business, she said, she has never seen a better combination of low prices and interest rates for buyers.

From the Stockton Record:

Community Bank of San Joaquin has become only the second locally based bank during the current economic downdraft to receive a warning from state and federal regulators.
...
[P]roblem loans were made before 2007 to builders. In other words, they were made to exactly the kind of borrowers you would expect to be doing business with such a bank, and they were seeking loans when business, especially real estate, was booming...In fairness, no one saw this coming, certainly not the kind of downdraft we've experienced. And with San Joaquin County being the nation's foreclosure capital, the real estate market collapsed here with unprecedented speed and severity.

From the New York Times:

[T]he ultimate symbol of suburban success has become one more reminder of the economic meltdown, with builders going under, pools going to seed and skaters finding a surplus of deserted pools in which to perfect their acrobatic aerials. In these boom times for skaters, Mr. Peacock travels with a gas-powered pump, five-gallon buckets, shovels and a push broom, risking trespassing charges in the pursuit of emptying forlorn pools and turning them into de facto skate parks.
...
California officials estimate that there are tens of thousands of abandoned pools in the state, with as many as 5,000 in places like Sacramento County, where a building boom in the capital’s suburbs has gone bust.