80% Off

From the Sacramento Bee:

It's now possible to buy a Sacramento home for less than the price of a Honda Accord. At least two dozen homes in the Sacramento region sold during the last three months for $25,000 or less....In Oak Park and Del Paso Heights...median home prices have fallen 80 percent from their mid-2006 peak to around $60 a square foot.
...
On Tuesday...Deutsche Bank lowered the price on a vacant, 728-square-foot home on 21st Avenue in the heart of Oak Park from $29,000 to $19,000. The house had belonged to the same family for years. An investor purchased it for $197,000, or $270 per square foot, in mid-2005, property records show...Seven months after buying it, the first investor sold the property again to another out-of-town buyer for $255,000, or $350 per square foot. In December, Deutsche Bank foreclosed. Today, the home is selling for $26 per square foot.
...
Most real estate experts expect many more sub-$25,000 homes on the market. They predict more foreclosures, leading to more vacant homes, leading to more desperate banks..."There's a whole lot of inventory that has not been cleared," said [Real estate investor Reggie] Lal, the real estate investor, referring to foreclosures still on the market. The number of homes selling for less than $25,000, he added, is "going to explode."

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

Bailouts and the Bubble Bloggers

From the Weekly Standard:

There seems to be real bitterness about the idea of forcing people to subsidize the imprudent housing choices of their neighbors. That bitterness is on display on other websites, such as StopTheHousingBailout.com, which urges readers not to get stuck "paying for other people's greed & ignorance" and encourages them to lobby their congressmen.

Much of the opposition to the bailout, however, comes from people who are only tangentially interested in the politics of the matter. Beginning in 2005, hundreds of websites and blogs sprouted up warning about the housing bubble. At the time, these people were often viewed as doomsayers or cranks. Thoroughly vindicated, many of their sites are now de facto rallying points against Obama's plan, purely on grounds of economic prudence.

The blog FlippersInTrouble, for instance, gives exhaustive data on the losses being racked up by speculators in Sacramento, which won't help build sympathy for the beneficiaries of the bailout. HousingDoom.com, a site which began by looking at economic aspects of the bubble in 2006, is now saying, "What the market needs is more foreclosures." There is no obvious political pattern to the bubble bloggers. Some are freemarketeers. Others, such as those who run HousingPanic.com, are Democrats who see the bubble as one more failure of the Bush administration. Yet nearly all of the bubble sites, left, right, and center, are now lined up against the bailout.

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.
...
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.
...
[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.

Stockton: $250,000 Off Peak

From the Stockton Record:

TrendGraphix said the median sales price fell from $190,000 in October to $175,000 last month in San Joaquin County. That compares with a $200,000 sales mark in January 2002, when TrendGraphix began tracking sales as the market was well into the start of a six-year boom.

That's a whopping $250,000 price cut from its $425,000 peak in September 2005.



From CNNMoney:

The worst performing market in the nation [according to Zillow.com] was Stockton, Calif. The average home price there plunged 32.3% year-over-year to $210,179 in the first three quarters of 2008. Almost as bad were nearby Merced, down 31.2% to $167,282, and Modesto, was was off 30.4% to $197,368 in the same time period.

[Zillow's Stan] Humphries expressed surprise that these areas are still performed so poorly. "I would have thought that they would have produced some more positive trends by now," he said, "but we are seeing no slowdown."

From the Christian Science Monitor:

The housing market in California's Central Valley...is showing signs of new life...Buyers are out in force. Here in Lathrop, Calif., and in nearby Stockton – the nation's foreclosure capital – home prices could be bottoming out..."At this point, I don't think you'll see more price declines in Stockton," [says ForeclosureRadar's Sean O'Toole].
...
A recent NAR survey found 20 percent of buyers are investors, but Stockton-area real estate agents put the investor share at one-third or more...The pricing floor provided by these investors, however, has broken through several times when the number of new listings exceeded the ability of investors to absorb them, he [real estate agent Jim Muthart] says.
...
Strong rent prices are key to a good return, and rents have softened recently, says Muthart...[D]on't assume each foreclosure equals a new renter, argues Caroline Latham, CEO of RealFacts, a rental data-tracking firm. Many families who are foreclosed on will move in with another family or move to a cheaper region, not rent. "We are seeing a return to the notions that [investors] had in 2005," warns Ms. Latham, referring to the buying frenzy in the run-up to the housing bubble peak. "They think they'll be able to rent it and come out smelling good."

Sacramento Foreclosures 8x 90s Record

From the Sacramento Bee:

More than 7,600 Sacramento-area homeowners surrendered their keys to the bank in July, August and September as foreclosures in the region and state showed no signs of leveling off, according to the newest statistics from La Jolla-based MDA DataQuick. The Sacramento region recorded almost 10 percent of the state's 79,511 foreclosures during the third quarter, the newest numbers show.

Sacramento County Foreclosures
2008 Q3: 5,643 (up 173.3% YoY)
1997 Q2: 703 (1990s record)

Sacramento County Notices of Defaults
2008 Q3: 5,541 (up 12.0% YoY)
1997 Q1: 2,441 (1990s record)

From DQ News:

Of the [California] homeowners in default, an estimated 20 percent emerge from the foreclosure process by bringing their payments current, refinancing, or selling the home and paying off what they owe. A year ago it was about 46 percent.

From the CVBT:

Stockton in the Central Valley continues to lead the nation in foreclosures, despite the buffer of the a new state law delaying initial foreclosure actions...Stockton took the top spot, with 3.69 percent of its housing units receiving a foreclosure filing during the quarter. Stockton's foreclosure activity was down 9 percent from the previous quarter but still up 87 percent from the third quarter of 2007 [according to RealtyTrack].

Other California cities in the top 10 for foreclosure rate were Riverside-San Bernardino at No. 3, Bakersfield at No. 4, Sacramento at No. 7, Fresno at No. 9 and Oakland at No. 10.

From the Sacramento Bee:

As property tax bills land in mailboxes across the region, county assessors are reporting record numbers of complaints and assessment appeals from homeowners who assume – in the midst of a declining housing market – they've been overbilled. In Sacramento County, which mailed out its annual property tax bills Friday, the Assessor's Office received 2,000 calls Monday. Placer County officials report getting triple the number of assessment appeals this year compared to a year ago. In El Dorado County, four times as many people are appealing, and officials say the number is growing.

Local officials say there is a widespread misconception – that declining home values amid a soured economy and the subprime mortgage crisis will automatically result in property re-assessments and lower tax bills.

From the Stockton Record:

City Hall intends to flip houses, using $12.1 million from the federal government to buy and restore abandoned or foreclosed homes, then sell or rent them out...."This is kind of a windfall," Councilman Steve Bestolarides said. "This is going to give us an opportunity to really deliver something."
...
The program allows money to be used until 2013. Until then, money used to buy and renovate a house would be recovered when the house is sold, allowing the city to recycle that money into additional home purchases, officials said. "These funds give us a huge opportunity," said Fred Sheil of STAND - Stocktonians Taking Action to Neutralize Drugs - a nonprofit group that buys, renovates and sells homes to people with low incomes. "We have the potential for double or triple or quadruple this money."

From the Sacramento Bee:

State workers such as Tamara Martfeld are worried..."I'm not buying anything that I don't have to," said Martfeld, a 25-year state employee who lives and works in Sacramento. "Co-workers I've talked to say the same thing."
...
Economists who watch Sacramento say the region usually avoids the wild swings of places like the Silicon Valley, thanks to our vast, stable and secure state workforce. By their sheer numbers and buying power state workers are the grease that lubricates the local economy. They make house payments, buy food, go to the movies and pay taxes. And, says University of the Pacific economist Jeff Michael, most of the tax money paying their wages comes from outside the area. "But ... if they're feeling anxiety about their future income or retirement, they pull back on consumption," he says. That drags down everyone.

From the Stockton Record:

The housing meltdown has regional transportation officials considering scaling back on what projects can be completed with the half-cent sales tax approved by voters in 1990. Originally thought to generate $735 million over its 20-year life span, Measure K's half-cent sales tax could instead bring between $650 million and $670 million, said officials at the San Joaquin Council of Governments.
...
Original projections showed revenue from sales tax rising steadily from year to year throughout the 20-year span of Measure K, but it has peaked. "Now we're looking at falling off a cliff here," said Steve Dial, deputy executive director of the Council of Governments.

From the AP:

The federal government should move swiftly to enact a second economic stimulus package to help teetering homeowners or face another possible crisis — banks stuck with a massive stock of vacant homes, Gov. Arnold Schwarzenegger warned Wednesday. A day after urging congressional leaders to consider a new jolt for the ailing economy, the Republican governor said Washington needs to "put money into the housing market." California has been devastated by the mortgage crisis, with thousands of foreclosures and median home prices falling sharply. "The key is to make people stay in their homes," the governor said during a panel discussion with investor Warren Buffet.

From the BMIT blog:

This bubble threw a whole generation of young people for a loop. They did the work, they got the education, and then they were told because you took time for school now all you can afford is the desert or the barrio. Message was loud and clear, screw this young generation because we need our retirement.

Flippers.gov

From the Sacramento Bee:

The federal government soon will send Sacramento city and county nearly $32 million to help fix up foreclosed properties -- a tool to prevent deterioration in neighborhoods hard hit by the housing crisis. Sacramento received one of the largest allocations in the nation....

City and county officials today detailed a plan that includes paying developers to buy foreclosed properties, restore them and either rent or sell them. In an effort to spend the money more quickly, the county and city also would become real estate flippers. About 40 percent of the money would be used by SHRA [Sacramento Housing and Redevelopment Agency] to buy and restore properties then sell them directly to buyers.

From the Sacramento Bee:

The supply of competing single-family house rentals is still growing, says Janet Regan, a broker with Citrus Heights-based Horizon Properties, who manages 450 rental homes for clients. Investors are buying bank repos and renting them out, she says. Homeowners who left the region but can't sell their homes are renting theirs, too. "They don't have them on the market because the market is horrendous," Regan says.

From the Modesto Bee:

Apartments, of course, aren't the only rental option for Modesto families these days. There are thousands of rental houses in the city, and their numbers are increasing daily as investors scoop up bargain-priced foreclosed properties. "We have a flood of investment homes on the rental market now," said [Debra] Clover, whose company manages more than 300 of them.
...
Many of the families who had been living in those [foreclosed] homes have left the county, Clover said. "When these people -- especially those who were commuting to the Bay Area -- lose their houses, they don't stay here to rent. They move closer to their jobs," Clover said.

From the Stockton Record:

Hank Klor, a Stockton-based tax and financial adviser, spoke to a 49-year-old single mother who owes nearly $250,000 on two mortgage loans, recently had her income drop by a third and can't make her paycheck stretch over all the necessities anymore. With her home worth only $140,000 to $150,000 because of falling prices, refinancing seems impossible. She might seek to have her loans modified, get the lender to agree take a loss on a short sale or, Klor said he told her, "You need to look at the possibility you may have to walk away from your home."

From the Sacramento Business Journal:

Year-over-year, the capital region lost an estimated 9,800 jobs, or 1.1 percent of the total. There were 3,700 fewer construction jobs; 3,700 fewer retail trade jobs; 2,900 fewer leisure and hospitality jobs; 2,200 fewer financial jobs; 1,300 fewer government jobs and 1,000 fewer manufacturing jobs than in September 2007, when the local jobless rate was 5.4 percent.

From the Stockton Record:

Hayward-based department store chain Mervyns LLC is expected to announce today that it is filing for Chapter 7 bankruptcy protection, a move that means shutting the doors of its 175 retail outlets, including two in San Joaquin County.
~~~
[N]ine are in the greater Sacramento area....

'The lenders still just have their heads in the sand'

From the Modesto Bee:

A record-breaking 3,000 homes were lost to foreclosure during July in the Northern San Joaquin Valley, pushing the 12-month foreclosure total to more than 20,000 homes. Mortgage defaults on those properties cost lenders about $1.1 billion in July, according to statistics released Tuesday by ForeclosureRadar....

"We're going to see even more foreclosures this month," predicted Sean O'Toole, founder of ForeclosureRadar, which tracks every California foreclosure. "The lenders still just have their heads in the sand." O'Toole said mortgage companies continue to be unrealistic in dealing with borrowers because they haven't accepted how bad the real estate market is in places like the Northern San Joaquin Valley.

From the Appeal Democrat:

Roughly three quarters of Yuba-Sutter homes purchased in the last five years are worth less than their mortgages, said Zillow.com, an Internet home-value provider.

And the last year has continued to be brutal to area homeowners. Zillow.com's median home value estimate for the second quarter sagged by 23.4 percent for the Yuba City metropolitan area compared with a year ago. Nationwide estimates dropped 9.9 percent for the same period.

"Obviously, Yuba City isn't doing that wonderful, comparatively," said Zillow spokeswoman Sarah Mann.

From the Stockton Record:

Sales of existing homes - mostly foreclosures - in San Joaquin County continued to rise in July for the sixth consecutive month. A total of 1,036 single-family home sales closed last month, up nearly fourfold from the previous July, according to figures from the latest Coldwell Banker Grupe-TrendGraphix monthly sales report, based on Multiple Listing Service data.
...
This while the median selling price countywide continued to drop, from $220,000 in June to $215,000 last month. That continuous slippage back to selling prices not seen since spring 2002 is driving sales, real estate brokers said.

From the Financial Times:

Subprime mortgage defaults are soaring in the northern Californian city of Merced and angry local officials are placing much of the blame for the rout on property speculators from the nearby San Francisco bay area..."There should be a special place in hell for those people," James Marshall, Merced city manager, says of the speculators.

From the Merced Sun-Star:

Merced Councilwoman Michele Gabriault-Acosta, a residential Realtor, hadn't read the Financial Times piece, but said such stories could keep people from moving to Merced. "It doesn't help matters," said Gabriault-Acosta. "People look at that and they automatically think negatively of the city." Gabriault-Acosta said her real estate clients routinely mention negative news coverage they've read about Merced.

She likened reports of Merced's housing bust to coverage of the downturn Detroit experienced in the 1980s during the collapse of the American auto industry. "You start to second-guess whether it's somewhere you really want to move to and bring your family to," she said.

Sacramento Foreclosures Now 6x 1990s Record

From Sacramento Bee (updated):

Foreclosures again climbed sharply in the capital region during April, May and June as 6,075 more households surrendered their keys to the banks, property researcher DataQuick Information Systems reported today. But DataQuick's numbers show that the rate of growth foreclosure activity in Amador, El Dorado, Placer, Nevada, Placer, Sacramento, Sutter, Yuba and Yolo counties declined during the quarter from previous levels...DataQuick analyst Andrew LePage said it's unclear if the slowing growth rate indicates a plateau or the inability of overwhelmed banks to process the foreclosures.
...
Sacramento County accounted for 73.6 percent of foreclosures in the region with 4,475 [up 169% year-over-year].

Sacramento County foreclosures in the second quarter were six times as numerous as the record reached during the 1990s housing bust.

From DQNews:

Last quarter's default numbers were a record in almost all of the state's 58 counties. That included Los Angeles County, where last quarter's 21,632 residential defaults surpassed the prior record of 21,444 recorded during first-quarter 1996...Foreclosure resales have emerged as a significant market factor, accounting for 40.0 percent of all California resale activity last quarter. A year ago it was 5.4 percent.
...
Of the homeowners in default, an estimated 22 percent emerge from the foreclosure process by bringing their payments current, refinancing, or selling the home and paying off what they owe. A year ago it was about 52 percent.

Sacramento County defaults totaled 7,325 in the second quarter, up 91% from a year ago.

From the WSJ Developments blog:

Phoenix appears to be joining the ranks of other weak markets, such as Las Vegas, Sacramento and Fort Myers, Fla., where distressed sales are creating “mini sales booms” compared to last year when sale activity was all but dead. One gray cloud on the horizon, though: “Growing anecdotal evidence that most of the distressed properties are not being sold to true owner-occupants, but rather to new groups of investors/speculators looking to develop rental portfolios or otherwise flip the homes after a short holding period,’’ the Raymond James analysts point out in their report.

From the Sacramento Bee:

A signature Sacramento program that has helped almost 300,000 lower-income people nationally buy homes in the past decade – while stirring controversy for years – is likely to be shut down this week, Nehemiah Corp. of America officials acknowledged Monday. The nonprofit giant believes Congress and President Bush will ban its decade-old down-payment assistance "gift" program within days as part of a larger housing bill, Nehemiah President and Chief Executive Officer Scott Syphax said Monday.
...
Others say ending the program will harm prospects for a recovery in the housing market. "It takes a major player out of our market," said Jon Kaempfer, senior loan consultant at Sacramento-based Vitek Mortgage.

From the Sacramento Business Journal:

Sacramento County’s property tax revenue increased a modest 1.9 percent in 2008-09, evidence of declining home values and fewer sales...It’s a dramatic drop after 9.4 percent and 15 percent gains during the previous two years, respectively.

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.

"Buy and Bail"

From the Wall Street Journal:

Next month, Michelle Augustine plans to walk away from her four-bedroom house in a Sacramento, Calif., subdivision and let the property fall into foreclosure. But before doing so, she hopes to lock in the purchase of another home nearby. "I can find the same exact house as what I live in right now for half the price," says Ms. Augustine, 44 years old, who runs a child-care service out of her home. She says she soon will be unable to afford her monthly payments, which will jump to $4,000 from $3,300 in August, and she doesn't want to continue to own a home that is now worth $200,000 less than what she paid for it two years ago.

In markets hit hardest by falling home prices and rising foreclosures, lenders and brokers are discovering a new phenomenon: the "buy and bail," in which borrowers with good credit buy a new home -- often at a much lower price -- then bail out of the "upside down" mortgage on their first home.
...
Ms. Augustine, the Sacramento day-care provider, became a first-time homeowner in November 2006 by taking out two loans with nothing down to cover the $426,000 home purchase. With her home valued at about $220,000 now, she is actively looking in nearby communities for another one to buy before the bank forecloses on her current home.

From the Wall Street Journal:

The Sacramento Association of Realtors says that a whopping 65.5% of 1,654 homes sold by Realtors in May were bank-owned, foreclosed, homes. The median sales price in Sacramento County and the City of West Sacramento May was $230,250, down 34.2% from a year ago.
...
Sacramento may be leading the nation in the sheer percentage of lender sales, which are known in the business as “real estate owned,’’ or REOs.

From the Sacramento Union:

The truth is that...Congresswoman [Laura Richardson] is a failed speculator. She flipped houses as the housing bubble was popping and her bets have come due. Now she wants some sympathy and, yes, a bailout. If Congress and the White House decide to rescue defaulters like Richardson, it will be a “life-changing moment” for the nation. We will have rewarded those who carelessly leveraged themselves during the housing bubble at the expense of those who prudently avoided mortgages they could not afford.

"New But Blighted Fields of Dreams"

From the Modesto Bee:

The signs are painted over. The models are empty. All building has stopped at the three Falling Leaf subdivisions in Modesto's Village I. With less than half of the planned 314 homes complete, developer William Lyon Homes has quit construction. Empty lots growing weeds remain. Falling Leaf apparently is the latest victim of the housing market downturn plaguing the Northern San Joaquin Valley.
...
Falling Leaf repeatedly cut prices. Example: Its smallest house, a 1,620-square-foot plan, was priced at $379,000 in August 2006, then dropped to $329,990 by February 2007 and dropped again to $269,900 in April 2007. By last month, the development drastically sliced prices on its remaining inventory to about $100 per square foot.

From the Modesto Bee:

Modesto home builder Harinder Singh Toor hadn't planned on being a landlord, but he's become one because he hasn't been able to sell what he's built. Now he rents out eight custom homes, some as large as 5,400 square feet. "I built this house to sell, but I haven't gotten a single bite on it in a year," Toor said about the empty five-bedroom, four-bath house on North Canyon Drive. He had hoped to sell it for $1.2 million, but he'll settle for $3,000 a month in rent, even though that will cover only about half of his carrying costs.

From the McCook Daily Gazette:

The sign proclaimed "House for Sale (bank owned)." The construction looked recent and maybe a little ticky tacky but the place was obviously abandoned, with lawn, landscaping shrubs and trees dying from drought. A house, or three, down the block was not even completed but abandoned mid-construction. The current housing financial crisis is vividly on display in and around Merced, California. It was enlightening to drive through the new but blighted fields of dreams in the town that used to be our home some 35 years ago.
...
I asked my host, Jim Glidden, what happened to the people that purchased and then abandoned all the new housing...The speculators from San Jose and other affluent areas simply abandoned their investments. The poor souls who purchased a home to live in are emotionally as well as financially strapped and either leave to rent if their job is still available or just hang on by the skin of their teeth.

From the LA Times:

[Sean] O'Toole, 40, founded the website ForeclosureRadar.com last year. The site, he said, lists every default, auction and foreclosure in California...Rather than join the rush of those mining for gold in distressed real estate, O'Toole has set himself up as Levi Strauss once did. Instead of selling jeans to prospectors, though, he is selling foreclosure data to would-be buyers.
...
[In 2002] rather than compete with thousands of speculators flipping new homes, he scoured property records to find distressed houses. Over the next few years he bought and sold 152 such properties...He's stopped buying foreclosed houses because his time and money are tied up in the website, O'Toole said. But he also said he "doesn't want to catch a falling knife" as house prices plummet. Although the foreclosure explosion is fueling his business, foreclosure sales have turned into a speculator's market, O'Toole said.

From the Daily Democrat:

Yolo County officials released their 2008-09 recommended budget Friday, which included layoffs, hiring freezes and other hard-line cost-saving elements to keep even during the lean years predicted to come. "This is probably the most difficult budget for Yolo County in more than a decade," County Administrator Sharon Jensen stated in her budget letter to the Board of Supervisors. "The economy in California is still reeling from the massive shockwaves of the sub-prime mortgage crisis and its effects on housing values, the bond market and the consumer economy." As a result, the report stated the county will have to use $8.3 million of its reserve funds to keep afloat, leaving only $8 million left for a rainy day. In addition, the county's recommended budget proposed the elimination of 118 positions or six percent of the county's total workforce.

From the Sacramento Bee:

The collapsing housing market is squeezing all local governments, but Sacramento County is feeling a special pinch. Today, county supervisors will begin deliberating on a budget that could affect almost every resident in this county. Supervisors face a $123.7 million shortfall, and so they are considering cuts to medical clinics, senior centers, youth programs (to keep kids out of gangs), domestic violence counseling, probation services and many other programs.

From News10:

Cali Krystal of Sacramento said she came to EDD to discuss her efforts to seek work...The former state office technician moved from Santa Barbara to Sacramento in December. "The cost of living was really high in Santa Barbara," said Krystal. "I thought I'd relocate back to Sacramento where a lot of state jobs are here." But her job search has fallen victim to California's tough economic times. "I've been looking for work with the state since January," she explained. "Before they did the state budget cuts, I was being called for interviews back to back. Then once the [budget reduction] bill got signed, it all just stopped."

From the Modesto Bee:

United Way of Stanislaus County warned its partner agencies that a downturn in charitable donations will result in funding delays of up to six months. Overall giving, said Tom Ciccarelli, United Way president and chief executive officer, is down about 9 percent.
...
"I've been a CEO for a long time," Ciccarelli said, "and I've never seen an economy like this. What scares me is (the) 'perfect storm' of factors." With food and gas prices climbing, and the bottom falling out of the housing market, Ciccarelli said, more people are worried about hanging on to their jobs and paying their bills.
...
At the same time, Ciccarelli said, more people are turning to United Way and its partner agencies for help. "In this economy," he said, "we're seeing, and will continue to see, an increased demand for services. "All my life, I've pretty much been a 'half-full glass' kind of guy. But this is different. We really need to get out front and plan to weather this perfect storm."

From the Chico ER:

A government agency that tracks the price of housing and has flagged Butte County repeatedly for high appreciation again indicates falling prices in this market. The Office of Federal Housing Enterprise Oversight listed declines in Butte County house prices for the first quarter of 2008 in a study released last week...The service showed that comparing the first quarters of 2007 and 2008, Butte County's housing prices were down a little more than 7 percent this year...Long-time appraiser Tom Fiscus of Chico has confirmed that his business is down. "I've seen this (slump) three or four times, but never this bad. I've seen the requests (for appraisals) dwindle."

From Bloomberg:

The California Public Employees' Retirement System, the largest U.S. public pension fund, may sell part of its $2 billion in residential land holdings after the investments lost 31 percent last year amid falling home prices and forecasts of further declines. Sacramento-based Calpers hired Morgan Stanley to review seven land deals it made with joint-venture partners and real-estate advisers, said fund spokeswoman Pat Macht.
...
U.S. home prices will fall another 10 percent through the end of next year, with even steeper declines expected in "bubble areas'' in parts of California, Nevada and Arizona where there's already an "overhang of supply,'' Michelle Meyer, economist for Lehman Brothers Holding Inc. in New York, said in an interview.

From the Daily Breeze:

The real estate broker who bought Rep. Laura Richardson's house at a foreclosure sale last month is accusing her of receiving preferential treatment because her lender has issued a notice to rescind the sale. James York, owner of Red Rock Mortgage, said he would file a lawsuit against Richardson and her lender, Washington Mutual, by the end of the week, and has every intention of keeping the house. "I'm just amazed they've done this," York said. "They never would have done this for anybody else."

From The Hill:

The Congressional watchdog group Citizens for Responsibility and Ethics in Washington (CREW) on Tuesday fired a shot at Rep. Laura Richardson (D-Calif.), describing her financial problems as “appalling” and calling her a “deadbeat congresswoman.”...“Rep. Laura Richardson’s appalling financial dealings raise serious questions about her ethics,” Sloan said in a statement. “What kind of responsible adult — much less elected public official — only pays her bills when she’s called out by journalists?

From KCRA:

"Even the Models Had Dead Lawns"

From Home Front:

Mostly, it was acres and acres of dead subdivisions that just jumped out at a driver touring this part of the state. In so many places the streets and sidewalks are in, the utility wires are sticking out of the ground, the street signs are up - and it's nothing but weeds almost as far as you can see.
...
In Edgewater: A street of 20 houses built by Roseville's JMC Homes with only one house occupied. In Plumas Lake: a Ryland Homes subdivision called Thoroughbred Acres. Five lovely models and nothing else. Behind it a pile of Ryland flags and poles. I walked up to read the writing on the flags and a jackrabbit ran off. Down Arboga Road, another subdivision by Lakemont Homes. Even the models had dead lawns.

I don't mean to pick on Plumas Lake. But some of it looked like a poster child for the consequences of risky lending. In many neighborhoods there is an overpowering feeling of abandonment and at the very least, neglect. I cannot remember anywhere - not in Lincoln nor Merced - seeing so many unkempt and unmowed lawns.

From the Sacramento Bee (hat tip Jeff):

Sacramento's $58 million shortfall for next fiscal year is only the start of the city's budget woes: The gap between what the city takes in and pays out is forecast to become even wider over the next five years, requiring cumulative cuts of about $200 million, according to city officials.
...
Like the state and other cities across the nation, Sacramento is struggling with the subprime mortgage meltdown and a worsening economy. Russ Fehr, recently named city treasurer, said the budget crisis is caused by low revenue and escalating costs, much of that attributable to negotiated labor contracts. Sales tax revenue is below estimates. He said the downturn of the housing market and rising unemployment are likely to mean a significant slowdown in property and utility users tax revenue.
...
More deficits and more cuts are coming over the next five years, City Manager Ray Kerridge warned in the city's budget overview. "The reductions will be deeper and more difficult since many of the nonessential services are already proposed to be eliminated in 2008-09."

From the Sacramento Business Journal:

Sales of existing homes in the Sacramento area increased 68.5 percent year-over-year in April....The median sales price here was $235,000, about a 35 percent drop from April 2007, CAR reported.

From the Daily Breeze:

Rep. Laura Richardson, who lost her Sacramento home in a recent foreclosure auction, has also defaulted on properties in Long Beach and San Pedro, records show. Richardson, D-Long Beach, was able to bring her payments up to date on the Long Beach home relatively quickly, but the San Pedro property lingered in the foreclosure process for almost eight months, and still has a pending auction date.

In her first interview since the news broke Tuesday that her Sacramento home had been foreclosed, Richardson blamed the foreclosure on a miscommunication by her lender. She offered no apologies for failing to make payments on three separate homes and expressed no regret for failing to pay nearly $9,000 in property taxes.
...
As a member of Congress, Richardson makes $169,300 a year. As a member of the Assembly, she made about $116,000, plus a per diem for living expenses in Sacramento.

From the Associated Press:

She said she is like any other American suffering in the mortgage crisis and wants to testify to Congress about her experience as lawmakers craft a foreclosure-prevention bill.
...
Rather than shy away from voting on mortgage-related bills, Richardson said her experiences could help her craft legislation to make sure others don't experience what she did. For example, she sees a need to add steps to inform property owners before their property can be sold. "We have to ensure that lenders and lendees have the tools with proper timing to resolve this," she said.

More on the House flipper in trouble at Calculated Risk.

Sacramento Incomes Dropped as Home Prices Bubbled

From the Sacramento Bee (hat tip DJ):

Even as housing prices doubled and the construction industry flourished, most Sacramento County residents saw their incomes effectively drop during the housing boom, according to new state tax figures. Adjusting for inflation, the median income of Sacramento County families who filed joint tax returns fell about 1 percent from 2002 to 2006, a showing worse than 51 of the state's 58 counties, according to California Franchise Tax Board figures released this week.
...
Several economists said the apparent good times created by the boom masked problems in local sectors not related to housing. And many local residents were fooled into feeling flush by the abundant cash coming in from home equity loans – the same, nonrecurring funds that would later turn into high-interest debt.

From the Sacramento Bee:

Worn down, feeling deflated as a bad tire? Consider a "staycation," a stay-put vacation where you absorb the budget-minded, healing powers of home sweet home...What could be more budget-minded than spending nights in your palatial home master suite and skipping the airfare, too?
...
[E]njoy the amenities of Sacramento "resort" backyards. During the recent boom years, homeowners used their equity for massive home-improvement projects – indoors and outdoors. In the Sacramento region with its warm climate, many backyards have been designed into mini-resorts with palapas and Tiki torches, palms and cycads, fire pits and pools that appear more Maui than Citrus Heights.

From Investment News:

The opportunity presented by the housing crisis can be a double-edged sword. Not only are homebuyers sitting on the sidelines, but many homeowners, especially speculative in-vestors, are opting to rent their homes rather than sell them. This means a glut of rental homes are being dumped into the market that will compete with apartment rentals.
...
At the same time, unemployment is rising, which also could dampen demand for apartments and the ability of landlords to raise rents, [David] Harris [an analyst with Lehman Brothers Holdings Inc.] said. Americans who lose their jobs or are worried about job security may opt to rent a smaller apartment or take in a roommate to avoid paying higher rent, he said. "Most tenants will find a way to avoid paying an increase in rent," Mr. Harris said. He sees this playing out in the second half of the year.

[Craig Leupold, president of Green Street Advisors Inc., a buy-side REIT research firm] agrees. "That sort of offsets the benefit of the weak single-family housing market," he said. Mr. Leupold expects to see job losses in the construction and financial industries, and competition from single-family home rentals will likely affect apartment rentals the most in such markets as Florida, Phoenix, Las Vegas, Sacramento, Calif. and central California.

From the Sacramento Business Journal:

When Elk Grove approved its most recent major new-home development three years ago, builders couldn't move fast enough to put houses there.

Times have changed. The city is expected to approve its first new residential project since 2005, a 200-acre proposal for almost 1,200 houses by Santa Clara-based Citation Homes...But like many other approved developments across Greater Sacramento that have been mothballed, construction won't start until there's been a recovery in the housing market.
...
When Elk Grove was booming six years ago, builders sold more than 2,600 new homes in one year within the city. Last year, there were 233 new-home sales, according to The Gregory Group in Folsom. The city said as of last week there are 1,029 bank-owned properties in Elk Grove.

From the Sacramento Business Journal:

California's residential construction industry is approaching uncharted waters as a housing slump, tight liability insurance coverage and new laws for handling construction defect litigation all collide. The collision makes an already challenging business environment fraught with even more danger. Some attorneys, especially those representing subcontractors, say they fear for their clients' future. "This is going to be a big problem," said Blane Smith, an insurance-coverage attorney.
...
Tami Boeck, a Sacramento defense attorney who handles construction defect litigation at Bullivant Houser Bailey PC, worries about her contractor clients and fears what she calls a "perfect storm." She thinks some contractors, if sued, could burn through their limited insurance coverage and go belly up.

Sacramento Real Estate's 'Ripple Effect'

From the Appeal Democrat:

Six people are expected to lose their jobs and funding to 25 others cut back as the impact of the housing slump hits home in Yuba County. The Community Development and Services Agency Director Kevin Mallen said he had anticipated the slump and began closing positions when vacancies occurred in order to absorb the effects, but not all employees were safe. "This is directly tied to the volume of work. Building permits are off," Mallen said...In 2006, during the housing boom, the building department was issuing 1,200 permits; about 30 permits have been issued each month for the last six months.

From the Sacramento Bee:

Far removed from billion-dollar writedowns and the subprime meltdown, the Sacramento area's community banks appear to have escaped the worst of the housing slump. But they aren't immune, either. The downturn in real estate and the overall economy has cut into their profits just like the big banks. Although they largely sidestepped subprime lending, many are bracing for losses on loans to construction firms, subcontractors and suppliers. Two banks are owed millions by John Reynen, the prominent Sacramento home builder who filed for personal bankruptcy recently.
...
Court papers say River City and Bank of Sacramento are each owed about $6 million by Reynen, who personally guaranteed the loans and then was forced into bankruptcy by the housing market collapse. "Sacramento is so real-estate driven," [chief executive of Bank of Sacramento William] Martin , said. "There's a ripple effect."

From the Redding Record Searchlight:

We are seeing subdivisions or developers that are experiencing either a slowdown in sales ... or price declines that are such that banks can no longer cover in terms of collateral," North Valley Bancorp CEO Mike Cushman said Tuesday afternoon.
...
Cushman said higher housing inventory as a result of foreclosures, especially in the Sacramento area, are affecting every bank's bottom line...Cushman, who's been a banker for more than 30 years, said the current housing downturn is the worst he's experienced. "We actually feel pretty lucky. Most of our markets are still performing pretty well. ... It's the Sacramento area where we are experiencing the greatest reduction in values," Cushman said.

From the Modesto Bee:

Dennis Swann of Swann's Automotive Repair in Modesto said he's seeing more people forgo repairs for things they see as unnecessary, such as air conditioning. Dennis Slewoo of USA Auto Service, also in Modesto, said he's had to schedule more repairs in stages, rather than doing them all at once. Both men see the same standard: Consumers, stung by high gas prices and a downbeat economy, are clamping down on their automotive expenses.
...
"Buying a vehicle because it looks good is less and less of a reason," [publisher of Automotive Digest Chuck] Parker said. "People are looking for utility, for cars to last. People are fighting to keep their kids in school and pay their mortgage."
...
In Modesto, car dealers have reported a drop in sales over the past year that mirrors the decline in housing.

From the Sacramento Bee (updated):

By eliminating 174 jobs at its Elk Grove campus, Apple Inc. created more economic problems for a suburb that's been hit particularly hard by the real estate downturn. Apple said Thursday it's moving some of its sales and support functions from Elk Grove to the company's site in Austin, Texas.
...
[T]he job cuts come at a particularly difficult time. Real estate analysts say Elk Grove is doing worse than most other parts of the Sacramento region. Vacancies at its smaller strip malls were three times as high as the region's average at the end of 2007.

Residential foreclosures there have more than quadrupled this year and are growing at a faster rate than in Sacramento County as a whole, according to Foreclosures.com, a Fair Oaks-based Web site for investors.

CBS13: Foreclosed Home May Have Been Burned For Insurance

From the Stockton Record:

A Stockton man accused by federal officials of spearheading a multimillion-dollar house-flipping scheme has pleaded guilty and faces a maximum prison sentence of 21/2 years, his attorney said. Iftikhar Ahmad, 36, admits he was wrong, but that he also was a symptom of a broken mortgage system failing people throughout the nation, San Francisco defense attorney John Runfola said, adding that Ahmad became the fall guy for powerful bankers and brokers who go unpunished. "I'm sure there are tens of thousands of people like Iftikhar," Runfola said.
...
Runfola said his client got caught up in a "gold rush" mentality, where a lot of people were taking advantage of the skyrocketing real estate market and at times bending unchecked rules. Runfola also said Ahmad rehabilitated abandoned homes that are still occupied today.

'Basically We're in Uncharted Territory'

From the Sacramento Bee:

California's severe housing downturn claimed another fixture of the Sacramento-area homebuilding industry Wednesday when John D. Reynen, co-founder of Reynen & Bardis Communities, filed for personal bankruptcy protection...It's the second major bankruptcy-protection filing involving a privately owned land developer and builder in the capital region.
...
The company, formed more than 30 years ago, has largely shut down homebuilding and recently laid off about half of its 180 employees.

Press release available via Home Front.

From the Sacramento Bee:

During the first three months of the year, banks repossessed a record-shattering 5,278 homes in the Sacramento region, La Jolla-based DataQuick Information Systems said Tuesday. Put another way: The area's first-quarter foreclosures already are half of last year's entire total.
...
The latest foreclosure count shows that for all the initiatives by government and nonprofit and private sectors to keep people in their houses, the telling trend remains a sustained, dramatic rise in home losses and loan defaults. The forecast is for more of the same in the months ahead.
...
"We expect foreclosure rates in Sacramento to rise as long as house prices are declining," said Mark Fleming, chief economist of Santa Ana-based First American CoreLogic. Fleming said 6.1 percent of mortgages in El Dorado, Placer, Sacramento and Yolo counties are 90 days late. A year ago it was 2.1 percent.

Here's a look at notice of default filings for Sacramento County.



2008 Q1: 6,898 (up 113.3% YoY)
1997 Q1: 2,441 (1990s Peak)

From the Appeal Democrat:

Yuba County saw the highest total number of the three counties with 357 notices recorded, an increase of 136.4 percent...Colusa default notices quadrupled to 81. Sutter County defaults zoomed by 195.6 percent to reach 337 notices.

Kory Hamman, a broker who handles foreclosure sales for Hamman Real Estate, of Gridley, said the trend is toward more foreclosures. And it shows no signs of easing soon. "We're seeing more foreclosure activity, and we don't see it slowing down," said Hamman.

From the Stockton Record:

In San Joaquin County, lenders sent out 4,657 notices of default - the first step in the foreclosure process - to homeowners in January through March, up from 3,746 in the final three months of last year. That's a 170 percent first-quarter jump from 1,721 default notices in the first three months of 2007...[T]he number of homes actually repossessed during the first quarter in San Joaquin County nearly topped 2,500, more than a fivefold increase from 440 a year ago.
...
Cameron Pannabecker, owner of Cal-Pro Mortgage Inc. in Stockton and a member of the board of directors of the California Association of Mortgage Brokers, said...he doesn't know any experts not projecting that the number of default notices will continue to double or triple last year's numbers quarter over quarter.

From the Sacramento Bee:

Like the hundreds of others in this Cal Expo exhibition hall, this young Yuba City couple were looking for a home at a bargain price for their three children at a two-day auction of foreclosed homes in Sacramento.

Some bargain hunters are like [Francisco] Cervantes, novices grasping at their chance for the house they've always wanted in a market they have been priced out of for years. Countless other shoppers are investors looking to one day realize a tidy profit in a capitalist economy that rewards good timing.
...
Armand Sarcomo and his wife, Rachel, were eyeing a ranch-style home on five acres listed in the Yuba County community of Browns Valley..."We're looking for a second home," said the 28-year-old union sheet metal worker. "It's a good investment. We're a young family trying to move up and take advantage of the market."

From the Modesto Bee:

Home prices in most Northern San Joaquin Valley cities have dropped significantly more than those elsewhere in California. Newman has suffered one of the state's largest declines in home values: The median March sales price was $177,250, down nearly 54 percent from last year...Stanislaus County homes sold for a median $232,163 last month, which was 33.5 percent less than March 2007....San Joaquin County homes sold for a median $265,000 last month, which was 36.1 percent less than March 2007....

From the Associated Press:

An influential economist who long predicted the housing market bubble cautioned Tuesday that the slump in the U.S. housing market could cause prices to fall more than they did in the Great Depression....Yale University economist Robert Shiller, pioneer of the widely watched Standard & Poor's/Case-Shiller home price index, said there's a good chance housing prices will fall further than the 30 percent drop in the historic depression of the 1930s. Home prices nationwide already have dropped 15 percent since their peak in 2006, he said.
...
"Basically we're in uncharted territory," Shiller said. "It seems we have developed a speculative culture about housing that never existed on a national basis before."

"It is what happens with the overall economy that is important right now"

From the Sacramento Business Journal:

More than 300 individual lenders, some who risked their retirement accounts, are expected to auction 338 acres in the Placer Vineyards development Wednesday in hopes of recouping some of the $51 million they're owed by a now-defunct company that bought the property in a complex deal. It's one of the largest foreclosures in the region so far -- an offshoot of a Las Vegas company's bankruptcy and a symptom of the hard-hit housing market.

The property is owned by the defunct Placer County Land Investors LLC, which raised $31 million to buy the land in 2004 through individual lenders who signed on for a minimum of $50,000 each. As a group of individual investors they are allowed to foreclose on the property and auction the land. Those primary lenders had hoped to earn double-digit returns but find themselves trying to wring whatever value they can from the property. More than 100 secondary lenders who agreed to take a subordinate position when they loaned a total of $6.2 million for the land purchase would receive nothing from a foreclosure, said Gerald Gordon, a Las Vegas attorney.

From the Sacramento Bee:

New statistics show regional home building off to a slow start in 2008, with 798 new-home sales in El Dorado, Placer, Sacramento, Sutter, Yolo and Yuba counties. That's 57.7 percent fewer sales than in the same months of 2007, according to Hanley Wood.

From CNN Money (hat tip Housing Chronicles):

Demand for new homes may not return to normal levels until next decade, according to the latest outlook from the National Association of Home Builders. "Traditionally when housing has been in a recession, it recovers very quickly. We don't see that happening this time," said Jerry Howard, CEO of the builders' trade group. "It could be 2010 before we see sustainable, long-term stability in the home building sector."

From Wachovia Economics Group [pdf] (via FxStreet.com):

Home prices will bottom out about the same time foreclosures top out, which we believe will be in the first half of 2009. Efforts by Congress to stem the tide of foreclosures are likely to be modestly successful at best. A very large proportion of foreclosures, which we estimate to be around 40 percent, are on homes purchased by investors and speculators. There is little Congress or the lending community can do to prevent these borrowers from going under, which will result in sharply higher foreclosures and price declines in investor-laden markets, such as Florida, Arizona, Nevada and California’s Central Valley.

From the Associated Press:

Driving around depressed developments ringed by almond orchards, John Pedrozo, a Merced County supervisor who represents Planada, could not contain his distress. "I've lived here 50 years and I've never seen anything like it," said Pedrozo, who grew up on a dairy farm. "Businesses are closing, people going bankrupt. And the empty houses are vandalized." A common problem, he said, is that on weekends, vacant, foreclosed houses are crashed for wild parties and trashed.
...
Merced County, population 246,000, underwent a housing boom over the past few years that saw developments spring up on what used to be farmland, said Rep. Dennis Cardoza, a Democrat from Merced. Now, in towns like Atwater, housing values have dropped as much as 50 percent, the congressman said. "The impact on these small towns and cities is huge," Cardoza said. "In my district, I believe we are already in a recession."

Realtor Julie Jalone in Roseville & Rocklin Today:

It is true we are starting to see some subtle shifts in the Sacramento real estate market. But the only thing dramatic is the anecdotal comments of other Realtors who are saying there is increased activity.
...
What I remain concerned about is the rate of foreclosures we are seeing in the Sacramento area...I don’t see any solutions to this trend and suspect our rate of foreclosure to continue to outpace the rest of the country through 2008.
...
Watching the housing market is interesting but it is what happens with the overall economy that is important right now. Our Sacramento economy is tied to construction and government and neither is a strong driving force right now.
...
I learned my lesson with some previous overly optimistic predictions for our local real estate market. Right now I am being cautious and want to see the foreclosure numbers come down before I start to smile.

From Sacramento State [pdf] (hat tip Home Front):

Sacramento area residents are very pessimistic about the region's current housing market. Only three percent of area residents think the housing market will take six months to recover, and 17 percent say it will take a year. The majority (51%), however, believe it will take two to three years for the market to recover, and 24 percent even claim the housing slump will last at least four years of more. Close examination indicates that regardless of county of residence, homeownership status, race, age, political party affiliation, the overwhelming majority think it will take at least two years before the regional housing market recovers.
...
Currently, sixty-three percent of area residents believe 2008 is a good time to buy a house in the Sacramento region; 47 percent say now is a good time and 16 percent claim six months from now would also be a good time. Only 30 percent of residents think that the best time to buy a house in Sacramento is at least a year from now....

From Calculated Risk - Housing Bust Duration:

It might be reasonable to expect that the dynamics of the current bust will be similar to the previous bust. After another year (or two) of rapidly falling prices, it's very likely that real prices will continue to fall - but at a slower pace. During the last few years of the bust, real prices will be flat or decline slowly - and the conventional wisdom will be that homes are a poor investment.

The Los Angeles bust took 86 months in real terms from peak to trough (about 7 years) using the Case-Shiller index. If the Composite 20 bust takes a similar amount of time, the real price bottom will happen in early 2013 or so. (But prices would be close in 2010).

From the Federal Reserve Bank of SF (hat tip Calculated Risk):

To the extent that the subprime meltdown is tied to declining house prices rather than interest rate resets, other borrowers, including prime borrowers, also could be affected. Indeed, while default rates for the latter loans are lower than for subprime loans, delinquency rates among all categories are highly correlated with house price declines across regions of the country. More formal statistical analysis confirms that differences in house-price change account for most of the regional differences in delinquency rates, whether borrowers are prime or nonprime, or whether loans have fixed or variable rates.

This analysis underscores the importance of house-price movements both to future developments in the housing sector and also to the ultimate magnitude of credit losses that are likely to be realized by leveraged financial institutions on their holdings of mortgage-backed securities and other housing-related loans. Looking ahead, it seems likely that the period of house price declines will not be over very soon, since some models of the fundamental value of houses suggest that prices are still too high, and futures markets for house prices indicate further declines this year.

Sacramento Foreclosures "Skyrocket" to "Stratospheric Levels"

From DQNews:

The number of mortgage default notices filed against California homeowners jumped last quarter to its highest level in more than fifteen years, a real estate information service reported. Lending institutions sent homeowners 81,550 default notices during the October-to-December period. That was up by 12.4 percent from 72,571 the previous quarter, and up 114.6 percent from 37,994 for fourth-quarter 2006, according to DataQuick Information Systems. Last quarter's number of defaults was the highest in DataQuick's statistics, which go back to 1992...Last quarter's default numbers were a record in 42 of the state's 58 counties.
...
Trustees Deeds recorded, or the actual loss of a home to foreclosure, totaled 31,676 during the fourth quarter. That's the highest since DataQuick began tracking Trustees Deeds in 1988. Last quarter's total rose 30.8 percent from 24,209 in the previous quarter, and jumped 421.2 percent from 6,078 in fourth quarter 2006. In the last real estate cycle, Trustees Deeds peaked at 15,418 in third-quarter 1996.
...
Of the homeowners in default, an estimated 41 percent emerge from the foreclosure process by bringing their payments current, refinancing, or selling the home and paying off what they owe. A year ago it was about 71 percent.

Sacramento County Notices of Default: 5,807, 120.4% YoY

Calculated Risk has some nice historical charts of California foreclosures.

From the Sacramento Bee:

Foreclosures and defaults soared to stratospheric levels in Sacramento and the rest of the state last year...Notices of default in the eight-county Sacramento region, stretching from Amador to Nevada counties, were up 106 percent in the quarter. For all of 2007, foreclosures in greater Sacramento were up an astonishing 496 percent, to 10,049, DataQuick said.

From the KSN.com:

The nationwide foreclosure crisis has forced millions of people to move out of their homes. But the forgotten victims are the dogs and cats left behind. In California alone, thousands of these animas have become pets in peril.

Sydney is a two-year-old Golden Retriever and an animal victim of California’s mortgage meltdown. She currently lives at the Sacramento SPCA along with dozens of other displaced pets. "The reason Sydney is here is she was given up last year from people who were moving. And she's a wonderful dog and we've adopted her," said SPCA Director Rick Johnson.

Sydney is one of the lucky ones, because at this shelter, the number of abandoned pets has doubled in the last four months. SPCA Animal Services Worker Sarah Varanin said, "We had about 33 dogs come in on Saturday alone. So it's just increasing every day."

KCRA (video): Mayor Heather Fargo's take on the Sacramento real estate market and budget mess.

This headline caught my attention:


What they really meant was 14 years:

Only 30 percent of Placer County employers are planning to add employees in the first six months of the year, according to a recent survey by Roseville accounting firm Gallina LLP....[E]mployers were predicting the slowest growth in the 14-year history of the survey. About half as many employers plan to add jobs in the first half of 2008 as did in the first half of 2007...73 percent of those surveyed said the weak housing market was hurting business, compared to 56 percent one year ago.

Then again maybe it was a Freudian slip. From OpEdNews.com:

From an historical prospective, the real estate market has always been a gauge of the greater U.S. economy from nine months to 18 months earlier than the overall economy.
...
The entire U.S. economy is at the brink of not only a recession, but much worse teetering on the brink of a depression...There have been six depressions since 1837 in the U.S...The cause of every major depression has been land speculation. Economist Henry George discovered this fact 120 years ago. However, never before in U.S. economic history has there been as much land speculation than in the past decade. Land from Florida up the eastern seaboard in New York across the nation to California has been purchased by speculators at the highest rate in the nation’s history, much of it with little money down to protect investors interests.

From Roseville & Rocklin Today:

Last week I got sort of embroiled in a debate with some of the regulars at Sacramento Land(ing). I do enjoy reading the blog but have to remember that the diehard fans there believe very strongly that all Realtors are evil and self serving. It always makes me chuckle when you click on one of their names, like “happy renter” or a host of other equally cute monikers and are directed to their blank profiles. Why is it so hard to believe that most Realtors care about their clients and place their needs above making a commission? We understand being a Realtor is relationship business and doing what is right for the client is right for our business.

"The Deep Pockets...Are Suddenly Empty"

From the Sacramento Bee:

There's a grinch in town this year, emptying the Christmas stockings of poor children and taking the food off family tables. But the culprit isn't a green fellow whose heart is two sizes too small – Sacramento's villain has no heart at all. It's the weak economy, Virginia, and it has the people who run holiday toy and food drives panicky as needs grow and donations dwindle.
...
It's a common refrain, said Steve Heath, president of United Way/California Capital Region. "I'm hearing the same thing everywhere – it's a tough year for getting food and for getting toys," Heath said. "Part of it is the local economy. Anyone who works in the housing industry is struggling....

In the Sacramento region, the deep pockets of some philanthropic developers are suddenly empty. "Developers are going through very challenging times," said David Hosley, general manager of public television station KVIE. "Some that were very generous to us in the past can't be this year. This is what I said to one of them last week: 'Listen. We remember what you've done. We know where your heart is. And this year we understand that you can't do it.' "

From the LA Times (hat tip LA Land):

[N]obody doubts that Stockton and the rest of the Central Valley have been severely jolted. By October, foreclosures in Stockton's San Joaquin County were more than eight times last year's levels, outpacing the state's increase by 41%, according to DataQuick, a La Jolla-based information service...[S]peculators -- an estimated 40% of the home buyers in Stockton -- were buying houses in order to flip them quickly at a nice profit.
...
Pete Ponce de Leon, a 50-year-old machinist, said he and his wife were barely keeping up with their monthly mortgage payments, which shot up from $1,700 a year ago to $2,500 now. He said he cashed in two IRAs, sold his tools, sold a truck and was bracing for another rate increase this month. Along the way, he lost his job, and his lender refused to cut him a break. "Why don't they just screw us all at once instead of a little at a time?" said Ponce de Leon, who has found another job and hopes to renegotiate his mortgage.

Asked whether the higher payments took them by surprise, Ponce de Leon struck the same note as many other homeowners in trouble. "We just thought we'd be OK," he said, explaining that he and his wife had planned to use what they'd expected to be the rising equity in their home to refinance the adjustable loan at a lower rate.
...
Monaliza Botello, a 25-year-old nurse, said she was surprised when her father, who brings in $4,500 a month, last year secured a loan requiring a $4,000 monthly payment. The idea was that Monaliza's father would own the new $495,000 four-bedroom for a year or two, at which point she and her husband, Isaac, could afford to buy it from him with a refinanced loan. But the three of them, who were all living there, fell behind in their payments, and Monaliza lost her dream home...As home prices plunged, Botello's cousin around the corner also went into foreclosure, as did her godmother -- a real estate agent nearby. "Everyone was going, 'We can't refi? How can we afford this?' " she said. "Everyone was just shocked."

From CNBC's Realty Check:

I’m hearing some disconcerting rumblings from some builders, anecdotally speaking of course. One mid-sized private builder told a friend of mine that potential customers coming through their model-home doors are openly hostile. They’re not just looking for good deals; they’re looking for payback.

Apparently some of today’s new homebuyers blame the builders outright for the current housing predicament. They are telling unwitting sales reps that they are to blame for running up prices and foisting untenable loans on clients during the latest housing boom. Buyers are telling the sales people stories of how rudely they were treated during the boom, how they were told that if they didn’t want to take the deal they could stick it, because there was a line of buyers right behind them.

From the San Diego Union-Tribune:

Joseph Anfuso, a USD alumnus who served as chief financial officer for Shea Homes in San Diego before becoming president of Florsheim Homes in the Central Valley, said that when prospective buyers come window shopping at a development, “treat them like a rich grandfather, as if you're in the will.”

From the North County Times:

"The one thing I can tell about you Realtors is that you're all liars," said Joseph Anfuso, president of Florsheim Homes, a builder in California's Central Valley. Anfuso told agents during a Wednesday real estate conference at the University of San Diego that they need to stop inflating or hiding sales numbers and swallow a hard dose of reality on their cash flow if they expect to remain in business as sales continue to plummet.

Stockton Median Home Price Down 31%; Anderson Caves to Rebate Demands

From the Stockton Record (hat tip spacebar):

According to TrendGraphix, the median selling price in San Joaquin County slipped from $325,000 in September to $319,000 last month. That was down almost 25 percent from a high of $425,000 in July 2006. Stockton's median selling price slid from $279,000 in September to $264,000 in October. That was down almost 31.4 percent from a high of $385,000 in January 2006.
...
Broker Bob Riggs of Riggs & Associates GMAC Real Estate said most of those looking and buying are investors and speculators looking for great deals...A traditional sale to a family moving into a house remains a rarity, he said.
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Dave Thurman of Dave Thurman Real Estate in Stockton said the market still hasn't stabilized, because buyers feel they can buy only below market value...Thurman also bemoaned the ongoing negative news about the county's real estate market, which he said kills momentum. There is the positive news, he said, in that it's a great time for a first-time buyer to buy a home with prices between $100,000 and $150,000 less than two years ago.

From the Tri-Valley Herald:

On Oct. 22, Paseo West homeowner Dave Cantrell, a spokesman for the current homeowners, met with Anderson Homes owner Larry Anderson and chief financial officer Craig Barton. As a result of that meeting, the homeowners were offered a rebate, which they agreed to take. They also signed a confidentially agreement that precludes them from discussing the settlement. I'm not going to retire on it, Cantrell said of the payment. But what the heck — it helped take a little of the sting out if it.
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Anderson initially refused the homeowners request for a rebate prior to the auction. In a letter to Cantrell he wrote, In nearly 25 years of building homes, I have not asked a homeowner to pay more for a house when the value increased. After the auction, that sentiment apparently changed. Cantrell said he thought Anderson went into the auction expecting to get 90 percent of their asking price and that the price difference was not going to be as bad. But at the Oct. 13 auction, homes sold for about 70 percent of the original asking prices. After they saw that difference, they wanted to save face, Cantrell said. They took a big hit, but not as big as us.

From the Vacaville Reporter:

Plans for an auction of homes Sunday in Vacaville has perturbed several residents of a local upscale housing development, who are concerned about the potential effect on their property values. With help from Accelerated Marketing Partners, Pleasant Hill-based developer DeNova Homes is auctioning 18 of the houses in its Meadow Woods subdivision.
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"We expect anywhere between a $200,000 to a $300,000 decrease in our property values overnight," said Meadow Woods resident Brian McLean...[T]he minimum selling prices in the auction range from $450,000 to $650,000 and the previous pricing on these homes ranged from $718,000 to $939,900.
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"Anderson ended up going back to the existing homeowners and providing a good-faith rebate in that situation," McLean said, adding, "We're asking (DeNova) to step up to the plate and live up to the slogans." In their letter, Meadow Woods neighbors asked for $50,000 per residence to help offset the disparity caused by the auction. The response from Sanson was brief. "I appreciate the opportunity to keep the lines of communication open, but regret that we will not be able to agree to the request in the letter," he wrote.

From the Stockton Record (hat tip spacebar):

The San Joaquin County Sheriff's Office on Tuesday arrested five people and was searching for two others in the theft of appliances from vacant homes. The arrests were aided by Global Positioning System devices that the home builder KB Home had begun installing in appliances after a rash of similar thefts, the Sheriff's Office reported.

From the Associated Press:

Wachovia Corp. on Wednesday defended its $24 billion purchase last year of one of the country's largest mortgage lenders [Golden West], saying it "didn't anticipate" a housing-market slump that has led to delinquencies, defaults and bankruptcies at mortgage lenders nationwide. But general bank president Ben Jenkins added that "no one else did" either.
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Last week, the bank said in a filing with the Securities and Exchange Commission that "the expected credit deterioration will likely be focused in certain geographic areas that have recently experienced dramatic declines in housing values." At that time, Wachovia's Chief Risk Officer Don Truslow said two areas of concern were in certain markets in California and Florida. Jenkins on Wednesday said the markets in California affected are the state's Central Valley and Inland Empire.

At Least the Pot Growers Mow Their Lawns

UPDATE - RealtyTrac's Q3 2007 Metros Report - Sacramento:

• Properties with filings: 9,241
• YoY Change: 408%

From the Associated Press:

Stockton, about 83 miles (133 kilometers) east of San Francisco, had the highest foreclosure rate in the third quarter among the top 100 metro areas, with one foreclosure filing for every 31 households, RealtyTrac said...Stockton had 7,116 foreclosure filings on 4,409 properties during the quarter, an increase of more than 465 percent from the same quarter a year ago, the company said...The California metro areas of Sacramento, Bakersfield and Oakland were also among the top 10 metro areas with the highest foreclosure rates, garnering the sixth, ninth and 10th spots, respectively.

From the Central Valley Business Times:

Your home mortgage may be completely up to date, but if there are foreclosures in your neighborhood, your home’s value is dropping, says a new study by the Center for Responsible Lending. In its new report [pdf], released Tuesday, CRL says the “spillover effect” is impacting 44.5 million homes across the country...Published research … indicates that a foreclosure on a home lowered the price of other nearby single-family homes, on average, by 0.9 percent, the report says.
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Sacramento and San Joaquin counties in the Central Valley are among the nation’s top counties facing declines in house values and local tax bases due to subprime foreclosure, CRL says. Sacramento County is facing the potential of 9,257 homes being lost of foreclosure due to the subprime mortgage meltdown. In turn, those homes will lower the value of 404,930 homes in Sacramento County, the report estimates. The average drop in home value will be $4,966, the report says. In San Joaquin County, 6,200 homes will plunge into foreclosure in the next two years, impacting the value of 172,395 homes. The average drop in home price will be $7,074, the report says.

From the Associated Press:

California's Central Valley has been hit particularly hard. Thousands of homes were snapped up by San Francisco Bay area speculators who hoped to flip their homes and turn a quick profit. They were caught short when the housing market turned. Many investors and other buyers are now trapped by falling home values and adjustable rate mortgages that are resetting to higher rates. Some speculators have tried to rent their properties. Others simply walked away from the homes they bought just a year or two earlier.
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In the Franklin Reserve neighborhood of Elk Grove, a suburb south of Sacramento, homeowners are fighting inner-city problems such as gangs, drugs, theft and graffiti. During the boom, the suburb sprouted 10,000 homes in four years, attracting investors from the San Francisco area. Now many houses stand empty, weeds overtaking lawns, signs lining the street: "Bank Repo," "For Rent," "No trespassing—bank owned property." A typical home's value has dropped from about $570,000 to the low $400,000s.
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Franklin Reserve resident Susan McDonald said two of the homes on her block were turned into indoor marijuana farms. Both caught fire last summer after the pot growers tapped into the city's electric grid with faulty wiring. But McDonald, who has lived in the community for three years and is president of the residents' association, jokes that they make better neighbors than some. "The pot growers, they mow their lawns, they take out their garbage," said McDonald, an executive at a local bank. "There's been gang activity. Things have really been changing the last few years."

From the Elk Grove Citizen:

Foreclosure signs are showing up at a heightened rate around Elk Grove with trustee notices filling the classified ads, but some real estate agents are saying not to fear, the buyers market is here.
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Team Leader of Keller Williams Realty, Mindy DeMain, said the trend is something buyers can take advantage of and that the state of the housing market isn’t as bad as some may think. “Right now, you can go buy that house that was your dream home three years ago but you couldn’t dare afford it because it was $600,000, $700,000; now it’s $400,000 and you can afford that house,” she said.
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[Kris] Vogt [branch manager for Coldwell Banker] and DeMain agree on the idea that there is a misconception among some people and even the media that this can’t be a positive time for those interested in buying a home for what it is worth on the market, something that couldn’t be accomplished just last year. “If the first-time buyers don’t start buying soon they are going to miss the bottom,” DeMain said. “Investors are really starting to focus on purchasing and once investors start purchasing the property, the values will start coming up.”
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With the bottoming out of the market unclear to most forecasters,...longtime Elk Grove real estate agent, Lori Mode, of Keller Williams Realty...predicts that it could happen at the beginning of 2008. “It will level off at some point next year,” she said.

From Reuters:

The U.S. housing market's skid is nowhere near over and could extend for another five or even 10 years, according to one of the most-watched housing economists. Robert Shiller, a Yale University economist and co-developer of Standard and Poor's S&P/Case-Shiller Home Price Indices, told Reuters that declines in home values in the most vulnerable markets could well double the losses recorded thus far.

What's more, Shiller, who is also co-founder and chief economist of the financial firm MacroMarkets LLC, said predictions for a bottom within the next year or so are probably wrong, with price declines in 2008 possibly worse than those seen this year..."The bottom is hard to predict," he said. "I do not see it imminent and it could be five or 10 years too."
...
Areas most vulnerable to home depreciation are those that rose the most during the market's heyday, plus those at the center of the crisis in the subprime mortgage market, Shiller said. California and Florida are high on this list.

From the San Jose Mercury News:

Meanwhile, along with Detroit and Sarasota, Fla., [Lawrence] Yun [economist for the National Association of Realtors] said California's inland counties are among the three worst performing markets in the country. "I am closely monitoring the inland counties of California," including Riverside, San Bernardino and the Sacramento area, he said. Subprime mortgages were used to finance a high percentage of home sales in those areas in recent years. On the other hand, the inland areas are "continuing to create jobs at a respectable pace" he said, which might soften the landing for home prices there in the face of high foreclosure rates.

CBS 5 Video: Manteca Looks At Entering Housing Market

From the Sacramento Bee:

Sheila Bair, chairwoman of the FDIC, proposed last month that lenders simply freeze interest rates on so-called subprime mortgages carried by people who live in the homes they bought and who have been current in their payments so far.
...
[W]hile a few people who borrowed more than they could afford would get relief, others who sat out the housing boom because they were more prudent would be penalized. While they saved money for a down payment on their first home, the higher interest rates caused by the bailout would mean higher housing payments for the same-sized loan, further postponing their ability to get into the market.

And that's not all. One of the effects of foreclosures is downward pressure on housing prices. The bubble financed by these easy loans pushed the price of housing out of the reach of many prudent first-time buyers. The current decline, while painful to some, is a correction that eventually will make homes affordable again and bring more people into the market. Freezing interest rates at below-market levels would prop up the price of those homes. That's great for anyone who already owns a house, but it's a blow, again, to those who sat out the boom hoping that they could buy a home when normalcy returned.
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[C]onsumers who simply gambled that the market would continue to soar and that, after a time, they could refinance their unaffordable loans at a fixed rate, are not victims. They are adults who made a bad decision. And they should not be rewarded at the expense of renters who restrained themselves amid the frenzy and are waiting for interest rates and home prices to come back within a range they can afford.