Paquin Predicts Sales Bottom for 2008

From the Sacramento Bee:

The prediction season is here. On Thursday, Greg Paquin, president of the Folsom-based Gregory Group, told capital- area home builders that they can expect to sell 7,710 new homes next year in El Dorado, Placer, Sacramento, Sutter, Yolo and Yuba counties. That compares with expectations of 8,116 homes this year, he said. Builders had almost 9,600 sales last year.

Paquin believes the average price of a new home – $404,689 this year – will fall to $374,337 next year. His good news: Builders will find a bottom in 2008. "With the spring sales season of 2009, you will start to see some positive movement in sales rates," he told a gathering of the North State Building Industry Association.

Some of Paquin's recent predictions:

"Maybe this is the bottom," Paquin said. (Sacramento Bee, January 2007)

[Reality: Maybe not]

"I would suggest on the new-home side that we haven't reached the bottom point yet, and I'm optimistic we will in 2007. ... I think next year is going to be very similar to this year. I don't necessarily think it's going to go down a whole lot more. I think new-home sales are going to be relatively the same as this year." (Sacramento Bee, December 2006)

Folsom-based home-builder consultant Greg Paquin has predicted sales of 9,500 to 10,000 new homes in 2007. (Sacramento Bee, December 2006)

[Reality: 6,087 sales YTD, Q3 2007]

Paquin's view is that the boom may be over, but the basic strengths of the market will allow for a soft landing. He and others call it a normal market. He predicted that sales in 2006 will be even with or slightly less than the 14,094 homes sold last year. (Sacarmento Business Journal, April 2006)

[Reality: 9,588 sales in 2006]

Via the North State Building Industry Association:

• Greg Paquin's presentation
• NAHB's Bernard Markstein's presentation

Sabbaticals for Sacramento Homebuilders

From the Sacramento Bee:

When times get tough, the tough ... take a sabbatical. That's the philosophy of developer Martin Tuttle, who is temporarily leaving his VP post with Sacramento builder New Faze Development.
...
Tuttle says his wife's job offer came at the right time – just as the tough housing market forced New Faze to reduce its staff by about one-third, through layoffs and attrition.
...
"I don't really think we have much choice," he [New Faze boss Allen Warren] says of the firm's decision to downsize and wait out the current downturn...And what if there's no quick turnaround? "Maybe when Marty comes back, I'll take a sabbatical," Warren says.

From Reuters:

The fires that scorched California may be out, but a bigger man-made disaster, the housing market, burns away, threatening the U.S. economy and holders of billions of dollars of debt backed by homes...[W]ith some analysts predicting top to bottom falls in prices of as much as 40 percent, California looks headed for a recession.
...
"We are heading into a state recession and that will take an already horrendous mortgage problem and take it over the top," said Christopher Thornberg, of Beacon Economics in Los Angeles. "Prime loans will be in trouble too. We've got a giant mess on our hands."
...
Market rates have gone up, lending criteria have gotten tighter and a bunch of borrowers have handed the keys back to the lenders, who then try and sell into a plunging market. In Sacramento County in September, 27 percent of all sales were by lenders who had repossessed homes, according to DataQuick.

From the Stockton Record [updated]:

When Consuelo Magat bought a Mossdale Landing home in Lathrop three years ago, she had no idea she was buying into an area that would emerge as one of the hotbeds of foreclosure activity in California. Magat, who now lives in Vallejo, said she bought the Lathrop house for $636,000 as a residence but then had to buy a home in another area when it turned out that a daughter was unable to get into a nearby Catholic school.

Magat rented out the Lathrop house in April, she said, but was in mortgage trouble by June because she became unable to carry the monthly payments on two houses. Her lender was unsympathetic to her plight and declined to refinance because there was no equity in the house and its valuation was less than the loan balance, Magat said. She wanted to sell the Lathrop house, she said, but in this slow market, "nobody wants to buy it."
...
[F]ormal foreclosure proceedings hit record levels both in California and in San Joaquin County...Nearly 3,000 households in San Joaquin County received a notice of default in the third quarter, DataQuick reported. That was up nearly 230 percent from 898 notices issued in the third quarter of last year.
...
Dave Harmon, a Coldwell Banker Grupe real-estate agent with foreclosures now accounting for 80 percent of his listings, said that over the past six months, the number of foreclosures quadrupled and then doubled again. Foreclosure activity has been quickening in the past couple of weeks, and he expects the pace to continue picking up over the next six to 12 months.

Here's what the Stockton Record reported back on April 1, 2007:

The market is showing signs of picking up, said David DiDio, mortgage broker and real-estate agent at Greene Dream Homes and Loans in Stockton. If buyers indeed are moving into the market, foreclosure homes could be bought up by fall.

Builders 'Getting Body-Slammed Right Now'

From the Sacramento Business Journal:

First things first: Sacramento's economy won't rebound to greatness next year. It should grow a little, economic forecasters say, but it will take until 2009 for the housing market to revive and fuel other sectors such as retail and construction. In the meantime, they say, there's no reason to panic.
...
"The main thing that will determine how fast Sacramento recovers is how fast the housing sales recover," said Stephen Levy, director of the Center for Continuing Study of the California Economy in Palo Alto. "I don't see any reason that the volume of housing activity needs to go down any further. It's already well below the equilibrium levels for long-term demand," he said. But while sales volume might have bottomed out, prices most likely haven't.
...
Sacramento was hit particularly hard this year, with the median price of a resale home falling 15.7 percent in the two years from its August 2005 peak to August 2007. That's the second-biggest drop of 15 regions across the state, and it was driven in part by rapid new-home construction that caused a supply glut when demand softened, the association said.

Sacramento had a steeper fall because it had a steeper climb. Even though the market remained cheaper than the Bay Area, the gap got too narrow, said Levy, and Sacramento doesn't pay the wages needed to sustain the prices Sacramento houses were fetching. His forecast calls for prices bottoming out in 2008, which should make sales volume pick up by the end of that year.
...
A lot depends on the public's perceptions next year. "The only danger to the overall economy is if consumers get spooked by what they see in housing prices and start cutting back on consumption," said Levy. "If people agree with me that the volume activity levels are about at the bottom, we've taken that hit."
~~~
Scott Anderson [vice president and senior economist, Wells Fargo]: The housing market declines have been a little more severe than we expected, given generally neutral mortgage rates. All this has been driven by overvalued housing and tighter lending restrictions. It's a significant adjustment for no real increase in mortgage rates.
...
People think of Sacramento as being a fairly affordable place to live, at least by California standards. I'm not sure that's anymore the case. From a national viewpoint, it's no longer a low-cost place of doing business.

Stephen Levy: The Sacramento region needs to provide for housing that's affordable to a broad range of people. That's an economic issue, not just a housing issue. The threat to the Sacramento economy right now is in unaffordable housing.

From the Sacramento Business Journal:

The Sacramento region remained mired in ninth place -- unchanged from a year ago -- in a comparison with its chief economic competitors in the West. The six-county region ranked low in a matchup with 10 communities plus the United States as a whole, according to the latest Prosperity Index report released today by the Sacramento Regional Research Institute..."In fact, the region received the lowest score among competitive regions in both the job growth and unemployment rate indicators," the report said.

From the Sacramento Bee:

The [Sacramento] region added 1,700 jobs in September, following two straight months of job losses. The region's unemployment rate was 5.4 percent, the same as the month before. But it was well above the 4.3 percent of a year ago because of job losses in construction and other housing-related industries. The region's construction and finance sectors lost 1,300 jobs in September.
...
[A]nalysts agree that retailing is a key industry to watch for signs of where the economy is heading. California retailers did minimal hiring in September; there were no net gains in retail jobs in Sacramento. September is usually a month when retailers expand their payrolls, to handle back-to-school sales and get a jump on the December holidays. "Retail is kind of flat," Lyons said. "Retailers are holding back."

From the Sacramento Bee:

Growing consumer debt, the subprime credit crunch and the housing market's steep slowdown have spurred real concerns that shoppers may curtail holiday spending this year. The housing slowdown and credit worries have whittled away at local retail leasing, a pillar of commercial real estate during the housing boom. According to broker CB Richard Ellis, retail vacancies jumped to 7.1 percent for the third quarter, up from 5.9 percent a year ago.

From the Sacramento Business Journal:

Bank deposits grew in the Sacramento area less than 1 percent in the past year, a far cry from the double-digit growth in deposits common earlier this decade...For the first five years of this decade, the region's fast deposit growth prompted banks from all over the country to open offices here. Now that the branches are here, the deposit growth is slowing overall.
...
The decline in growth could mean people have less money, that they are saving less or that they are shifting money from insured accounts to other investments such as stocks, bonds, real estate, or Treasury bills or municipal bonds. It could also point to more money going into credit union accounts.

From the Stockton Record:

Months have passed since the days when dozens of homes at a time were going up in any given subdivision in San Joaquin County. But these days, the typical new-home development looks as if it's nearly in hibernation as the housing market steps into the third straight year of decline.
...
Greg Paquin, president of the Gregory Group, said builders have responded to a very slow market not only by cutting prices further but also by either delaying or stopping projects or in a few cases by selling standing homes at auction. "They're getting body-slammed right now, frankly," he said.
...
"Valley new-home construction sites are ghost towns," said Shane Hart, vice president in charge of acquisitions, development planning and marketing for Stockton-based Grupe Co...Grupe has offered as much as $150,000 in incentives per home, yet sales have become so slow that construction was halted at three developments in Stockton, Waterford and Tulare.
...
Paquin said there's more bad news on the horizon for new-home builders, who in recent months offered such low prices and incentives that they even drew buyers from the existing-home market. The flood of foreclosures is attracting the attention of bargain hunters and forcing existing-home prices down so much that those homes are getting more attention from potential buyers, he said.

From the Sun Post:

Complaints from two developers that rising foreclosures and a large housing inventory have crippled sales led the [Manteca] City Council this week to postpone the fees developers owe for homebuilding reservations under the city’s growth cap. The council’s 3-2 vote to postpone millions of dollars in fee payments for two years was opposed by councilmen Jack Snyder and Steve DeBrum, who worried that it could damage the city’s budget.
...
Stockton attorney Mike Hakeem — lobbying on behalf of developers Raymus Homes and FCB Homes — countered that no one else would be willing to pay for the reservations this year because the housing market was so bad.
...
During their discussion, councilmen both for and against the extension focused on the need to keep home prices up. “These are significant factors when it comes to how we need to proceed as a local city government to protect the values of our homes,” said councilman Vince Hernandez, after alluding to an auction of 34 new homes at highly discounted prices last weekend.

From the Modesto Bee:

Unemployment rates in Stanislaus, San Joaquin and Merced counties swelled above last year's averages, the result of a shaky economy and deepening housing crisis. The three counties each gained at least a percentage point from the previous year, with Stanislaus County recording the biggest jump. The county went from an unemployment rate of 6.6 percent in September 2006 to 8 percent last month, according to state Employment Development figures released Friday.
...
The housing slowdown has taken an even larger toll on San Joaquin County. Its unemployment rate was 7.8 percent last month, up from 6.5 percent the previous year. The county saw huge declines in manufacturing, construction, professional business services and financial activities. Combined, those industries lost about 2,100 jobs. "All are definitely related to the housing crisis and mortgage credit issues," Baker said.

September Massacre: Sacramento New Homes Median Plunges 22% YOY

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

By County
By Zip Code

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

New Homes

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

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

Existing Condos

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

Existing Detached Homes

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

All Homes

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

From the Sacramento Bee:

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

From the Modesto Bee:

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

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

From the Stockton Record:

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

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

Stockton's Repo Bus

From the Stockton Record:

It's not a magic bus, just a vividly marked one - REPO HOME TOUR.COM - that real estate agent Cesar Dias hopes will work some magic for him in a bleak home-sales market. Dias, an agent and loan officer at Approved Financial & Real Estate Center, 1140 N. El Dorado St., has launched a weekly Saturday bus tour to try to get buyers interested in looking at some of the area's growing number of foreclosure properties.

The bus absolutely is just a marketing ploy, he said, because anybody can go look at foreclosures with any agent. But between a dozen and 20 people a week have taken the tour of 10 to 12 bank-repossessed homes the past few weeks, Dias said, and a few deals have been made. Not bad in a market where home sales in September dipped to the lowest level so far this decade.
...
[T]he latest Coldwell Banker Grupe-TrendGraphix monthly sales report, based on Multiple Listing Service data,...indicates that sales and selling prices of existing homes in San Joaquin County have continued to drop as the market moves into its third consecutive year of decline. The 228 sales countywide in September were the fewest this decade, as were the 289 pending sales last month. That compares with 796 sales and 716 pending sales in September 2005, just before the downturn hit. And median selling prices have fallen sharply, from $370,000 in July to $325,000 last month, a 12.2 percent drop in two months.

From CBS 13 (video):

A sleek-looking high rise in downtown Sacramento, called Epic Tower looks similar to the proposed Aura Project. It's an aggressive proposal considering the real estate market's current downturn. High rise condos like the Towers on Capitol Mall prove investors can get in over their heads. The Aura proposal is another example...Craig Nassi's BCN Development is behind both Epic Tower and Aura projects. Nassi hopes to break ground next year probably after city planners make a decision in January.

From the Sacramento Bee:

Jose Olagues knew the bad news. Like so many area residents, he's seen his Tahoe Park home decline in value. The good news: He's among 50,000 Sacramento County property owners who can expect to receive a shrinking tax bill. "That is sweet," said Olagues, who may be in line for a rebate from his mortgage company, which rolls his taxes into his monthly bill. "If they want to give me money back, that is cool."

Most property owners – in Sacramento County and elsewhere – will still see an increase in their property tax bills, which started arriving last week. Sacramento County taxes 446,000 properties. But the county's move to reduce the taxes on 50,000 properties – just over 10 percent of county properties – is perhaps the most sweeping in the state.
...
The silver lining for some recent Sacramento County homebuyers is nothing but bad news for schools, the seven cities within the county, the county government and special districts that rely on property taxes. The Sacramento County assessor's recalculation of property taxes wipes away $15 million in tax revenue.

From the Associated Press:

Wells Fargo & Co.'s earnings grew at its slowest pace in more than six years during the third quarter, dragged down by deteriorating home loans likely to cause more trouble in the months ahead.
...
Like many other lenders, Wells Fargo is being hurt by a combination of crumbling home values and overextended borrowers who can't afford to make their monthly mortgage payments as their once-low adjustable interest rates reset to higher levels. "The housing sector is weak and we are not immune to that," Atkins said.
...
Atkins said the bank is having the toughest time collecting from homeowners in parts of the Midwest and California's Central Valley, where many borrowers now owe more money than their properties are worth.

From the MarketWatch:

U.S. home builders grew even more pessimistic in October, hit by a triple whammy of tight credit, abundant supply of homes for sale and falling prices. The seasonally adjusted housing market index fell to a record low of 18 in October from 20 in September, the National Association of Home Builders reported Tuesday. It's the lowest reading in the index since its inception in 1985. "The market for new homes is dead for all practical purposes," wrote Patrick McPherron, an economist for Moody's Economy.com.
...
All three components of the home builders' index notched record lows in October. Sentiment fell in three of four regions, with builders in the West the least optimistic.

"Artificially Cold" Real Estate Market

From the Sacramento Business Journal:

The area's first developer-driven auction of new homes attracted a lot of attention and bids -- but none high enough to close a deal. Twenty bidders left the auction late last month thinking they'd landed a steep discount from the asking price for a piece of an award-winning housing development near the river in West Sacramento.

But the deals never closed escrow. Two weeks after the auction, the bank that holds title to the homes canceled the sales, citing auction rules that the bids didn't meet minimum prices. Other than sore feelings from some of the bidders, it's as if the auction never happened.
...
Even though the auction saw some lively bidding, the homes failed to get anywhere near the reserve prices, let alone the list prices. For River's Side, the final bids were an average of $88,000 less than the reserve prices, [John] Leonard said...Leonard said a confidentiality agreement with the lender prevents him from discussing details, but that the bank didn't think the auction environment correctly tested the value of the homes.

From the Redding Record Searchlight:

Here's another sign of a stagnant real estate market: Some developers in town are taking their homes off the market and turning them into rentals. Two weeks ago, East Oak Estates in south Redding announced this would be the last weekend some of its homes would be for sale. They were going to start leasing them out.

But East Oak developer Karen Margrave said buyers waiting for some colossal closeout sale will be sorely disappointed. She has no plans to sell her homes at below what she paid -- nor she says will other builders. So they're getting into the rental business while waiting it out..."We know prices are going to go back up, and we believe they will start rising again next spring," Margrave said in an e-mail.
...
Brad Garbutt, who's been selling real estate in Shasta County for years, said it's unusual for developers to rent back their homes. "I don't recall any developer on a large scale doing something like that," Garbutt of Real Estate Professionals GMAC said. "Developers usually can't do that. They can't stop everything because the bills keep coming." Glen Jones of Greater Shasta Homeplaces in Redding agreed that it's strange to see a builder get into the rental business. "I have never seen it before, but we have never had this situation," Jones said.

From the Tri-Valley Herald:

In light of the lethargic housing market, local home builders are asking city leaders to alter the structure of existing development agreements to give developers more time to build. During Mondays Manteca City Council meeting, developers of some of the newer subdivisions plan to ask for an across-the-board extension in the amount of time they have to build homes once theyve obtained building permits. If approved the deadline would be extended from three to five years. The builders believe that an extension would offset some of the problems caused by an overabundance of houses and a downturn in the housing market
...
The proposed increase was spread out over the period of time real estate experts predict the market will reach bottom and turn around. The market was artificially hot a couple years ago and is artificially cold now. People are worried, but the market is resilient, [George] Gibson [of Stockton-based FCB Homes] said.

From the Modesto Bee:

[Sarah] Huff and her husband, John, say their contractor, Viking Pools Mid-Valley Inc., has closed its doors without finishing their pool, and she doubts she'll ever get her money back or a finished pool out of the defunct business.
...
[Viking western regional sales manager Aaron] Stahl and other pool industry officials said the housing market bust has hurt many pool contractors, which prospered when it was easier to buy a home or refinance a home loan. As a result, some business owners may be more likely to cut corners to stay afloat, industry officials and consumer experts said.

That may have been the case with Mid-Valley. [Tina] Hill, who worked there for 2 years, said orders slowed dramatically over the past year, mirroring the free fall in home prices and sales. "I'm sure it's a direct result of that," she said. "There were a lot of problems, off and on, and the last three months there were just more of them." Don Burns, president and chief executive officer of the California Spa and Pool Industry Education Council, said many pool contractors are struggling because of the housing slump.

From the Stockton Record:

Countrywide Financial Corp., sharply paring its work force nationally in the midst of an on-going housing slump, has closed its Stockton loan-processing center. A company phone message and a notice posted on the front office door said the March Lane center has closed and has been consolidated with a Countrywide center in Elk Grove.
...
One Stockton resident, Susan Feighery, has been trying to get a Countrywide mortgage loan for a condo purchase, but she said she is frustrated because her loan application has been delayed as it has seemingly bounced from one person to another as staffing dwindled...[S]he was told several times that her loan application was being passed to someone else and that the previous handler no longer worked for Countrywide.

From the Sacramento Bee:

Speaking of office vacancies, the Sacramento region is holding its own for now. But look out for next quarter. "There are not enough tenants to go around," says [local Cornish & Carey exec John] Frisch, who reports that the region's vacancy rate is 15.22 percent, up a hair from the previous quarter.

The cause for concern: Nearly 3 million square feet of new office space is under construction in the multicounty region. But there's not nearly enough business growth to absorb it. "I expected a lot more red ink at the bottom of the (space absorption) tables," Frisch says of his company's third-quarter vacancy report. "I think there will be next quarter."

'I lost a quarter million dollars in value. I'm screwed.'

From the San Jose Mercury News:

When homeowner Dave Cantrell walked into the hotel ballroom Saturday where Anderson Homes was auctioning off one-third of the brand-new houses in his Manteca subdivision, he tried to be optimistic. He approached Anderson Homes executive Craig Barton, shook his hand and wished them both luck that the buyers would bid close to the latest asking prices of the 34 homes in the Paseo West subdivision that have been sitting empty since the real estate market soured.

But when the rapid-fire bidding was over 90 minutes later - and one winning bidder stood up like a prize fighter with his arms raised in triumph - Cantrell didn't even want to look at Barton, the man he invited into his home two weeks ago to calm the fears of his 26 neighbors who worried the auction would tank the value of their homes. "I'm feeling my worst fears right now," said Cantrell, who estimated that the auction devalued his neighbors' homes by roughly $200,000 each compared with what many of them paid a year ago. "I lost a quarter million dollars in value. I'm screwed."

Cantrell bought his home a year ago for $670,000 (not including the $90,000 he paid to install a pool and miniature golf course). The winning bidder Saturday of an identical home five doors down the street paid $391,000 - 38 percent less than what he paid.
...
When the auction was over, Cantrell walked outside and lit a cigarette to calm his nerves. He expected his neighbors to knock on his door when he got home to ask how things went. "I just hope," he said, "they don't kill the messenger."
...
Overall, the homes went for about 32 percent below the original asking price. The minimum bids had been set about 40 percent below asking price.

'I Don't Believe It's Getting Worse....'

From the Sacramento Bee:

Sacramento-area home builders are on track this year to sell the fewest number of new homes since 1997 following one of the toughest quarters yet in the ongoing housing slump. At the current pace, capital-area sales could dip below 8,000 this year, only slightly above the 7,455 registered 10 years ago, according to the Folsom-based Gregory Group, a home building industry tracker.
...
Home building giants and local family builders alike -- struggling with tightened credit standards for buyers, excess inventory and consumers waiting for still better deals -- sold 1,592 homes from July through September in the six-county region, the Gregory Group said in a report scheduled to be released today.
...
"It is tough. It's tough up and down the state," said Chris Hanson, a Sacramento-area executive for Costa Mesa-based Warmington Homes. The firm recently laid off 15 Sacramento staffers and folded its capital operation into an East Bay division.
...
Sacramento builder John Leonard encountered roadblocks, too, after auctioning 22 West Sacramento town homes last month. "The homes we sold at auction were too low and didn't meet the bank payoff requirement," Leonard said Thursday. Leonard said his lender rejected all bids because they were at least $88,000 below minimum for each unit. He said negotiations are proceeding for investors to take over the River's Side at Washington Square project.

Gregory Group data
Historical sales charts

From the Sacramento Business Journal:

Sacramento's new-home prices have rolled back to where they were in spring 2004, and they're predicted to keep dropping before there's any recovery. The average new home in the six-county area costs $429,678, and the median price has fallen to $389,990, according to the latest data from new-home analyst The Gregory Group.
...
"It's the same thing each week," [Dunmore Homes VP John] Slaughter said of the housing indicators. "The news doesn't change. I don't believe it's getting worse, but there's no indication that it's going the other way."
...
New-home communities are now selling property at an average rate of about one home every three weeks. Paquin said he's talked with builders who say they can hold out for the next six to nine months at that rate, but the slump is expected to last at least until the end of 2008.
...
According to the state's Employment Development Department, the Sacramento region lost 2,000 jobs in August, a downturn largely attributable to the housing slump, the agency said. The area has 4,800 fewer construction workers than it did at the same time last year. Financial jobs, which include those in the mortgage lending business, are down by 2,000 from a year ago.

From the Sacramento Bee:

Hail to real estate forecasters who stick out their necks in a volatile market and make predictions for 2008. Most of what they predicted this time last year for 2007 missed the mark by a mile. Most were simply too sunny.

Consider the California Association of Realtors. Last fall, looking at 2007, it predicted sales of existing homes in California would fall 7 percent from 2006. Actually, it's more than triple that -- a 23 percent drop from 2006 to the fewest sales in 12 years. ...
While sale prices statewide likely will fall 4 percent next year, [CAR deputy chief economist Robert] Kleinhenz said it will be worse for hard-hit Sacramento and the Central Valley. Watch for sales prices here to fall another 8 percent to 12 percent next year, he said.

From the Sacramento Bee:

During the recent housing boom, Oak Park attracted considerable interest among real estate investors and people looking for a more affordable alternative to other established neighborhoods near downtown...Since the housing market fell into its slump, foreclosures have produced boarded-up homes in some parts of Oak Park and other city neighborhoods.

[Architect/Developer Ron] Vrilakas isn't sure what to expect. He and Rosenbloom have sold two units so far and are working with two other buyers. "Unfortunately, we're hitting the housing market at the absolute wrong time," he said. "If we sell these in this market, it will be a really good sign for Oak Park."

From the Sacramento Bee:

The federal government has warned the city of Sacramento that it plans to slap growth restrictions on North Natomas because of its flood risk. In a letter dated Sept. 27 -- but which city officials say they didn't receive until Monday -- the Federal Emergency Management Agency informed Sacramento that it was denying the city's request to continue allowing unrestricted growth in North Natomas while the levees are improved.
...
Yet Mayor Heather Fargo said the hit from FEMA isn't as bad for the city as it would have been a few years ago, when the housing market was strong. "It does help us, in a perverse way, that the market is slower," she said. "We're not getting a big push to do a lot of new residential development right now."

From the Merced Sun-Star:

Merced finally ranks No. 1. Unfortunately, it's the nationwide foreclosure rate. Merced saw more foreclosure-related activity than any other metro area in the country in September....

Sharon Mogliotti, a mortgage planning specialist with CTX Mortgage, called the skyrocketing foreclosure rate a "history-setting" moment for Merced. "Our mortgage industry and the economy has never been through a market like this," she added. Mogliotti has worked in the mortgage industry for 40 years.

Take the Money and Run?

From KCRA (hat tip paperboy):

On Friday, the FBI and IRS arrested *****, a loan officer with First Liberty Financial in Sacramento. He was arrested while boarding a flight at Sacramento International Airport. Agents said at the time, he had thousands of dollars in cash and believe he was trying to flee the state...**** is a former employee of VFM Investment Group.

From the Sacramento Bee:

Sacramento-based Comstock Mortgage announced its second local merger in five months, adding ATM Mortgage of Sacramento to its home loan operation...As numerous wholesale mortgage lenders close amid the nation's housing slump, it's become harder for small mortgage brokerages, said [ATM's owner Jeff] Tarbell.

From the Wall Street Journal:

As America's mortgage markets began unraveling this year, economists seeking explanations pointed to "subprime" mortgages issued to low-income, minority and urban borrowers. But an analysis of more than 130 million home loans made over the past decade reveals that risky mortgages were made in nearly every corner of the nation, from small towns in the middle of nowhere to inner cities to affluent suburbs.
...
To examine the surge in subprime lending, the Journal analyzed more than 250 million records on mortgage applications and originations filed by lenders under the federal Home Mortgage Disclosure Act. Subprime mortgages were initially aimed at lower-income consumers with spotty credit. But the data contradict the conventional wisdom that subprime borrowers are overwhelmingly low-income residents of inner cities. Although the concentration of high-rate loans is higher in poorer communities, the numbers show that high-rate lending also rose sharply in middle-class and wealthier communities.
...
The Journal compared the fastest-growing high-rate loan markets to the rankings compiled by foreclosure-listing providers RealtyTrac Inc. and ForeclosureS.com. In Stockton, Calif., for example, high-rate loans accounted for 33% of total home-loan volume last year, up from 13% in 2004.

Subprime Tidal Wave Interactive Map

From the Modesto Bee:

It's a title no one wants, but counties in the Northern San Joaquin Valley keep passing around the undesirable honor of having the nation's highest home foreclosure rate. Merced County is the latest to get that title, pushing Stanislaus County into the No. 2 spot and San Joaquin County into No. 3...The three Northern San Joaquin Valley counties have been at or near the top of the dreaded foreclosure ranking every month for about a year.
...
Home values in the valley have declined an estimated 15 percent to 30 percent since the 2005 housing market peak, and about half as many homes have sold this year compared with last year.
...
RealtyTrac said lenders repossessed 921 homes last month in Stanislaus, San Joaquin and Merced counties. In September 2006, by comparison, 14 homes were taken back by lenders.

From CNN Money (hat tip J):

California claimed six cities among the top 10 metro areas for the number of filings. Merced topped the list with one of every 68 households, followed by Modesto, Stockton, Riverside-San Bernardino, Vallejo-Fairfield, and Sacramento.

From the Stockton Record:

Susan Dell'Osso thought she would be overseeing the building of luxury riverside homes by now. But with area home prices dropping, Dell'Osso, the perennial face behind the controversial, superlevee-reinforced River Islands development, announced this week it will be another year before model homes rise out of the Delta soil.
...
"We're all ready to go. Our levees are certified, our sewer is on standby, but the market's just not there," Dell'Osso said....If home prices go up by April, River Islands will have models up by the end of 2008, Dell'Osso said.
...
The dipping housing market caused the projected flow of builder fees to be the biggest revenue reduction in the city's most recent annual budget, according to Mayor Kristy Sayles...The city has cut back on the funds it will spend on improvements to Valverde Park and the construction of the new Lathrop teen center, in addition to leaving some staff positions vacant instead of hiring new employees, she said.
...
In 2005, Lathrop approved 921 building permits for residential units. So far in 2007, there have been 197 permits, according to numbers from the Construction Industry Research Board, which tracks the California building industry.

From the Stockton Record:

Few areas are more vulnerable than new Lathrop neighborhoods west of Interstate 5 that are protected by a levee known as RD17...Speculation is that RD17 won't be certified, forcing property owners to pay more for insurance and Lathrop officials to work with builders in upgrading the levee.
...
Like San Joaquin County and California, the housing market in Lathrop and areas of southwest Stockton has been slowed by the home-mortgage and foreclosure crisis. Suddenly imposing additional flood insurance costs could force more homeowners out of the market. Where would they go?

"Giving up on a fast-falling market"

From CBS Evening News:

In California, where developers have been racing to turn farmers' fields into subdivisions, they're now walking away, leaving houses partially built. Those who have already moved in wondering what will hit next. “I'm concerned that once the weather starts getting bad, there's tile piled on the roof that could just fly off,” homeowner Marius Gieske told CBS News correspondent John Blackstone.

Dunmore Homes had building projects in a dozen California communities from Bakersfield to Yuba City. Now it’s halted work everywhere, giving up on a fast-falling market. “We couldn't sell a moving target,” said John Slaughter, vice president of construction and operations for Dunmore Homes. “What we wanted to do is stop.”

'Our Neighborhood Has Depreciated Tons and Tons of Thousands of Dollars'

From CBS 13 (and video):

Northern California is home to one [of] the highest foreclosure rates in the entire country. Some homebuilders are leaving half-built homes in new developments. One of 15 sites in Elk Grove are on hold after struggling Dunmore Homes company sold [to] a local business man.

"My personal best guess would be a few more months. It's going to take some time. It's a long process," said V.P John Slaughter who thinks it could be a white before the bulldozers break ground again, "The market has really hurt us." He's also concerned about the half built homes with winter coming. "Currently, with our lenders, we're looking at completing those homes to the point of making their weather proof," said Slaughter.

From the Elk Grove Citizen:

Home foreclosures and disruptive tenants are affecting many Elk Grove residents these days, especially those who watched their neighborhood and property decrease in value because of it...Sergio Perez lives off of Bilby Road in East Franklin. Recently, a neighbor abandoned their home and left it. The neglect could be seen in the lawn. Perez took it on himself to maintain the exterior. “I’m watering the lawn,” he said. For the sake of his neighborhood’s appearance and value, Perez has been looking after property he does not own.

[Tim] Chan said that situations like this are the main problem in the area. “The issue is with all the abandoned houses, all the foreclosures, because that is what sets it all off because A affects B, B affects C, C affects D,” Chan said. “Why are we having to pick up the slack for somebody else?”

From ABC's Good Morning America (with video):

A troubled real estate market in Manteca, Calif., has forced a town to resort to gimmicks to sell homes, including big one-day sales, much like the ones at car dealerships or appliance stores. Real estate is on the edge. Around the country there are communities of brand new luxury homes with no buyers. So the developers have now taken the drastic step of putting dozens of them up for auction at a huge discount.
...
"Within the last 13 months our neighborhood has depreciated tons and tons of thousands of dollars. I can't believe it," said Sherry Bergquist, a homeowner in Manteca, where developers will soon begin to employ this sales tactic.
...
Randy Brown's dream backyard is now just a patch of dirt. He can't bear to spend any more money on the house. "I paid $440,000 for this house," Brown said. Today, he could buy it for $285,000.
...
[H]omeowners are at their wit's end. "We can't sell. We can't refinance," Bergquist said. Even as the homes sit empty on the verge of a controversial auction, construction continues and new homes continue to go up in the neighborhood.

From the Tri-Valley Herald:

For the fourth consecutive quarter, the amount of money Tracy collects in taxes has dropped, this time by nearly 6 percent, the largest fall since revenue began declining a year ago. Coupled with fewer new homes being built in Tracy — limited to 100 until at least 2012 through Measure A — the city might have to tighten its belt before the end of the year.
...
Jeff Morri, with Stan Morri Ford in the Tracy Auto Mall — the largest tax engine in the city — said the industry is in a downturn nationwide. "We all wish we could tell you why," Morri said. "Personally, I believe, with the housing market as soft as it is, and so many foreclosures, its creating a vacuum. It's a very symbiotic relationship."

Greed "Coming Back to Haunt" "Investors"

From the Sacramento Bee:

...William Lyon Homes is offering...a 42-inch plasma in each of the 300 homes it's selling in Rocklin, Elk Grove, Fair Oaks and Rancho Cordova. But, for one month, the home builder is also throwing in a bunch of other goodies....Those would be a year's worth of free phone, Internet and premium TV service from SureWest Broadband, along with appliances, furniture, window coverings, landscaping and housekeeping services...Such incentives are becoming increasingly common as builders grapple with a slowing housing market.

From the Sacramento Business Journal:

Standard Pacific Corp. is merging its Central Valley operations into its Sacramento office. About 10 of 35 people in the Central Valley lost their jobs in that transition.

From the Sacramento Bee:

A government bailout will only shift risk from the borrowers and lenders to the taxpayers and future borrowers. It is nothing more than a new taxpayer-subsidized program that will rescue disreputable mortgage banking or brokerage firms at the expense of working families, taxpayers, and lower- and middle-income homeowners. Responsible consumers and taxpayers should not have to pay for poor decisions by a handful of consumers who took out loans they could not afford, nor should they be forced to bail out the lenders who helped these folks dive into the deep end of the financial pool.

From the Stockton Record:

Nervous homeowners in foreclosure or experiencing sleepless nights over the prospect of losing their homes were among some three dozen Record readers who took advantage of a free two-hour call-in Thursday night to speak with financial experts.
...
[Hank] Klor, a tax expert and enrolled agent the past 14 years in Stockton, fielded a call from a middle-aged woman who lives in a home she paid about $475,000 for and soon bought three more homes as investments with mortgages of at least $350,000 each. She told Klor she already had lost two of the homes and the third investment home was in the process of being foreclosed. She felt confident she had enough income to be able to keep her primary residence, although she has no savings.

"She is losing sleep over this. Potentially, she could be on the hook for taxes of over $300,000 in income in a single year," Klor said, noting the income is derived from the forgiveness of debt. "She will have some huge income exposures because of the three foreclosures. She should contact her tax adviser to get some tax relief. There is a legal way to reduce the tax if you meet the IRS rules for being insolvent," he said. "This is an example of someone who got greedy and now it is coming back to haunt her."

'To put this in the shortest term possible, this sucks.'

From KCRA:

One of the best known properties in Granite Bay, the multimillion-dollar home belonging to movie star Eddie Murphy's ex-wife, may be the housing market's latest victim. KCRA 3 reports that Murphy's mansion is now in default...According to documents obtained exclusively by KCRA 3, Nicole Murphy is behind more than $79,000 in payments.

From the Stockton Record:

Mad owners of 26 homes in the upscale Paseo West development in Manteca got nowhere with their organized protest against Lodi-based Anderson Homes, which intends to auction off 34 homes in that partially built subdivision Oct. 13. But they hope the glare from print and television media will put on enough pressure to make the company cave in to their requests that each homeowner family receive $20,000 cash compensation for lowered home values resulting from what they call a "fire sale" auction. "Basically, they blew us off," homeowner organizer Dave Cantrell said.
...
In an e-mail letter to Cantrell, Anderson Homes owner and President Larry W. Anderson wrote that in nearly 25 years of building homes, he has never asked a homeowner to pay more for a house when the value of their Anderson Home increased. "Your request for a rebate in light of current conditions leaves me perplexed," he said.
...
Randy Brown, a Manteca construction contractor, is the newest resident of Paseo West. He got the keys on his $440,000 house in mid-August, two weeks before finding out about the planned auction. The minimum bid on an auction house such as his is $285,000. "To put this in the shortest term possible, this sucks," he said.

From the Modesto Bee:

An Anderson official...defended the auction as an appropriate way to attract interest. "You can pick up the paper every day and see what is happening in the financial and real estate markets," said Craig Barton, chief financial officer of Lodi-based Anderson Homes. "We have people coming in with some level of interest in buying a home but with no level of urgency, and we felt an auction is a very efficient and proactive way to reduce our inventory. It's as simple as that."
...
The disappointment of these homeowners is likely to be repeated in subdivisions across the region as struggling developers step up incentives to lure buyers of new homes...Kennedy Wilson Auction Group, the company conducting the Paseo West auction, has others scheduled for new homes in Los Banos, Elk Grove, Pinole and San Pablo.
...
Cantrell, who works in the development business, said developers had other options: They could have offered more upgrades or a free sports car while keeping prices higher.

From KCRA:

Frequently Asked Mortgage Questions

• My payment just adjusted and I can't make the payment, what do I do?
• I owe more on my home than its worth, what can I do?
• How does a short sale work and will that negativity effect my credit?
• I just received a Notice of Default, what does that mean and what should I do?
• We have a sub prime loan, can we get rid of the pre payment penalty?
• How do we go about refinancing our home?

Housing Boom Gamblers

From CBS 13 (and video):

The county is tired of using taxpayer money to clean up the vacant properties. "The average is $1,500 to $2,000 to board up these house" said Carl Simpson, Sac. County Code Enforcement.

On Tuesday, the county may adopt the ordinance. Homeowners and mortgage companies who don't take care of properties could face fines that can go as high as 5,000 dollars in just 90 days. That could help ease some of the burden this blight is putting on taxpayers.

"We think in the spring [we] are going to see a rash and increase of open vacant home[s] because of the economy and real estate,' said Simpson.

From the Sacramento Bee:

Faced with falling home sales, builders in the flood-prone Plumas Lake development have capped the amount of fees they're willing to advance Yuba County to strengthen levees protecting thousands of new residents...A group of nine builders has been paying the fees in advance with the agreement that they would get paid back later as other landowners sought to pull building permits for their properties. This group previously had agreed to advance the county up to $135 million in fees. But now -- with the housing market in a slump -- they are willing to kick in just $30 million more -- for a total of $100 million...[County Administrator Robert] Bendorf said construction of new homes in Plumas Lake has dropped 50 percent since last year.
...
Yuba County supervisors today will decide whether to fill the gap in flood protection funding by issuing $23.3 million in debt backed by the county's general fund. It would be the largest general fund debt obligation ever assumed by the largely rural county, according to a staff report. Annual debt service would top $2 million...In theory, the county could repay the debt from future homeowner assessments, but those still have to be approved by residents, Bendorf said. Builder fees are another potential source. But if the home market remains in a slump, there's no guarantee they will materialize.
...
From the start, [Supervisor Mary Jane] Griego readily admits, Yuba County was gambling when it allowed construction to start in Plumas Lake before the levees were fixed. But she argues that it was the best way to get money for levee improvements protecting the 35,000 or so people who already live in the area.

From CBS 13 (and video):

It seems no matter where you look there are signs everywhere trying to get you to buy homes. It is a auction sign that has many homeowners not very happy. "I put all my money into this home," said Anna Alfaro, Home Owner..."These people that are coming to buy now, they have their yards landscaped and everything. How do you think we feel?" said Alfaro...People who live here say they paid close to double of what the houses will be auction off at..."It would be good if it could be turned around or if we could get our money back. At least what we put into it," said Alfaro.

From the Tri-Valley Herald:

Paseo West homeowners also chide Anderson Homes for overbuilding..."At what cost do we have to pay for their poor business plan," Cantrell said, adding that in his background as a subdivision developer others did not extend themselves that way.
...
"When we moved in, we knew we were paying more money, but we were also buying into a quality neighborhood where the price value wouldn't go down," said Joseph Leon, who moved to Paseo West from Fremont 14 months ago.

No Crystal Balls in Manteca

From the Manteca Bulletin:

"I don't have a crystal ball, but prices appear not to be dropping as much any more," [Tom] Wilson [of Wilson Group Realtors] said. In fact, Wilson has had clients who have been "fence sitting" while trying to gauge the bottom of the market take as position that this is as close to the best prices they'll get and are starting to make serious offers. It's a view shared by Allison Chinchiolo of PMZ Real Estate. She believes the Federal Reserve's rate move coupled with Manteca's appeal as a high growth area is what is responsible for her office seeing an increase in buyer interest in the past three weeks.
...
"People have been waiting for the bottom," said Chinchiolo who also emphasized she doesn't have a crystal ball, but added there are a lot of buyers who have been looking have expressed the belief prices probably aren't going to go much lower. "That's what makes this a great time to buy especially if you are going to stay put four to five years," said Chinchiolo. "You'll be amazed in what equity you're build up then compared to if you just rented."
...
Manteca currently has a 21.7-month supply of available resale homes based on the current rate of existing homes closing escrow...The current supply of homes [in Lathrop] is large enough to last 51.5 months at the current absorption rate...A six-month supply is when most economists - and Realtors - believe that buyers and sellers are on an equal footing with neither having an advantage.

Chinchiolo noted properly priced homes that reflect the market are selling in four to six months. "That isn't what people have become used to in the past six to eight years so they don't think it's normal but it is," she said.
...
A quick read of the Manteca economy based strictly on the housing slowdown that was severely compounded by the wacko lending practices that obviously benefited only those making commissions off loans that ultimately could never have been viable might tempt you to abandon ship.

But the funny thing is the only people who view this economy as Titanic are those who signed loan documents betting - or blindly hoping - equity growth would allow them to refinance in time to stave off an uptick in payments after two years that actually include a part of the principal. Some deserve empathy. Others were reckless. But one thing is for sure - the world isn't coming to an end.
...
This is not 1989. People aren't losing their jobs in wholesale fashion. The economy isn't in a dump even though the housing construction slowdown has hurt that sector. But even so, the number of new home sales are on pace to sell more this year than in 1990, 1991 and 1992 combined. The Manteca economy is different. Even though major retail and other non-residential construction activity has already taken place, Manteca is literally just on the cusp of a significant economic growth era. It is reflected in retail and office projects that are actually moving to construction.
...
No one is dismissing the sub-prime debacle - which is more accurately described as loans made to people who weren't credit worthy enough to ultimately pay them - as no big deal. But in the overall scheme of things it is a mere bump in the overall economics of the Northern San Joaquin Valley that is expected to be the fastest growing region in California for the next 20 years...The foreclosure mess is exactly that - a mess. It would be devastating if the Manteca economy wasn't as strong as it is. Keep that in mind if you're tempted to run around crying "the sky is falling down."

From the Stockton Record:

Homeowners in the upscale Paseo West development in Manteca are getting organized to see whether they can convince Lodi-based Anderson Homes to change plans to auction off 34 homes next month. Owners of 26 homes there think the home builder is treated them unfairly and in bad faith by planning to auction off vacant or under-construction homes at prices that could be more than $200,000 less than what current residents paid for their homes within the past year, said Dave Cantrell, one of the first to buy a home in the subdivision.
...
It is unlikely Anderson Homes will drop the auction, he said, and purchase contracts state that the builder might sell other properties there via auction. But homeowners would like to see at least from $20,000 to $30,000 each in cash compensation for the property-value drops that would result in the neighborhood, Cantrell said.

From the Manteca Bulletin:

"Doing something like what Steve Jobs did with iPhone when they slashed the prices seems fair," Cantrell said. In that case, Jobs cut the price of the iPhone by $200 just two months after Apple rolled at a suggested sale price of $599. Jobs made a $100 rebate offer available to earlier iPhone buyers good toward certain Apple products.

Paseo West residents concede house prices are down and many - including one owner who put $70,000 down - understand that they have lost value. But if the homes sell for the minimum bid - which is 40 percent of the last discounted prices that Anderson Homes offered - many who bought their home in the past year will see their investment drop by almost 45 percent from the original price.
...
The Paseo West homeowner paid Anderson Homes $629,000 for the same model that the builder plans to sell at auction on Oct. 13 for a minimum bid of $345,000...Cantrell understands he bought at the top of the market.

From News10 (and video):

"They didn't treat us very good as far as I'm concerned at all," said Amy Sturdevant who in August 2006 paid $585,000 for her family's four-bedroom, two-bathroom home. Now, a nearly identical home with the same floor plan right across the street from Sturdevant is set to be auctioned at a starting bid of $295,000. "I saw myself losing potentially a quarter million dollars," declared Dave Cantrell, a neighbor of Sturdevant who is rallying other neighbors to protest the move by Anderson Homes.

Not only do residents who live there feel their homes are being devalued, they are worried that investors will gobble up the houses at bargain basement prices. "The concern is that we bought into what was advertised as luxury homes in an upscale neighborhood for the area," said Cantrell. "We feel strongly at this point an investor potentially could buy and we'll become a rental neighborhood."
...
"I was talking to my wife just an hour or so ago and I told her, you know, I think we made a very serious mistake by buying this home," Cantrell said.

From the Tracy Press:

The number of houses on the market in Tracy, 946, is closing in on the total number of houses built in town at the peak of the housing boom in 2004, the last year the city added more than 1,000 houses. At the same time, RealtyTrac, an Irvine company that tracks foreclosures across the U.S., reported this month that 1,138 Tracy homeowners had received notices of default.

As a result, homeowners have slashed their asking prices to 2004 levels. “Actually, I’d have to say it’s a little lower than that,” said local broker Dave Konesky, a director with the California Association of Realtors. Konesky said one of his clients bought a Tracy house in 2004 for $430,000 and now is asking $419,000, “with no bites, and it’s a beautiful home,” Konesky said. He said that’s about as low as the homeowners want to go. “They said they’ll sell it for less than they paid for it,” he said, “but they won’t give it away.”

From the Sacramento Bee:

Granite Bay's Dunmore Homes, which raised eyebrows Wednesday with a sale to Comstock Mortgage senior loan consultant Michael A. Kane, has been slow to pay its bills, according to a report by Costa Mesa-based credit tracker Experian. Experian says that, as of Sept. 10, Dunmore Homes was an average of 52 days overdue on bills. The home-building industry average is six days. Under the category of payment trend, Experian says simply: Increasingly Late.

Dunmore officials did not return calls seeking comment. On Wednesday, Dunmore Homes said its sale will provide capital to restructure the company, which owes money to lenders and to area subcontractors. Negotiations are under way to make everyone whole, the company says.

Dun

UPDATE: More stories about Dunmore Homes. From Builder's Online:

Faced with declining sales in a sputtering Sacramento, Calif., market, venerable home builder Dunmore Homes was sold today to Michael Kane, well known in the local real estate industry.
...
John Slaughter, vice president of construction and operations, said the company cut its staff from 134 employees to 45 from 2006 to 2007, and anticipated closing slightly more than 200 homes this year - roughly 25 percent of its 2003 peak. Slaughter said the company expected no further layoffs and planned to move forward under the Dunmore Homes name with Sid Dunmore acting as an advisor.

From the News10 (and video):

Contractors have filed millions of dollars in liens against Dunmore Homes, and in some cases against people who bought the houses. Lukas Allred, who bought a home in Monterey Village in May, discovered the company that built his fence has filed a lien against him. "We purchased our homes with free and clear title, and now we're finding out there are liens on our homes that aren't our responsibility," complained Allred.

From the Sacramento Business Journal:

Dunmore Homes, a fixture on the Sacramento residential construction market since 1953, has been acquired by a Sacramento businessman who is pursuing a restructuring of the company, Dunmore Homes announced Wednesday. The transaction involved transfer of assets and assumption of liabilities to a successor company owned by Michael Kane, a Sacramento native.
...
"The recent decline of sales in today's homebuilding industry has had a devastating effect on most private and public homebuilders," ["bouncing around the bottom" Sid] Dunmore said in a prepared statement.

From the Sacramento Bee:

Housing decline forces Dunmore to sell company

Granite-Bay Dunmore Homes, a local family owned builder since 1954, has become the first major home builder casualty of the slumping Sacramento-area housing market...The news highlights the growing difficulties of home builders in a market that is mired in a massive oversupply of for-sale inventory. Many buyers are also reluctant to commit while prices are falling.

Photos of Dunmore's Monterey Village development in Elk Grove here.

From the Sacramento Bee:

Tough times in the national housing market led to a company record loss of $513.9 million for Lennar Corp. in the third quarter, with drops in sales prices and home deliveries compounded by heavy charges to write down land values. Its shares fell almost 4 percent. Lennar, one of the nation's largest home builders, said Tuesday it had cut its work force by 35 percent this year and that it expects to pare more employees soon.
...
Lennar is the Sacramento region's third largest home builder so far this year with 420 sales reported from January through July, according to Costa Mesa-based Hanley Wood Market Intelligence. That's down sharply from 747 sales at the same time last year. Lennar, which also operates in the region as U.S. Homes and Winncrest Homes, has projects in Rancho Cordova, Roseville, Natomas and El Dorado Hills. Its biggest is at Rancho Cordova's Anatolia community, where it is a partner with Sacramento-based AKT Development.

From the Sacramento Bee:

It's no secret that Sacramento and many other California cities grew dependent on the booming housing market to drive economic growth. Statistics released Wednesday show just how true that was. Construction and finance accounted for 40 percent of metropolitan Sacramento's economic growth in 2005, the most recent figures available, according to a report by the U.S. Bureau of Economic Analysis. The national average was 27 percent.

From the Tri-Valley Herald:

Anderson Homes is auctioning off 34 homes in the Paseo West subdivision in Manteca far below asking price as a way to stir up interest among homebuyers and move homesquickly...Neighbors in the Paseo West subdivision have voiced their frustration to local newspapers about the prospects of an auction — including that they paid more for the homes when the market was booming and that housing speculators would bring in renters or the potential for foreclosure.

"It's certainly something we've thought about, but also we looked at what we paid for land and the continued downward trend in the market," Barton said. "We feel the auction could give the buyers out there a shot in the arm." "We wanted to make sure those empty houses next door were filled with families," Anderson said, noting the problem San Joaquin County and Manteca has had with foreclosures and abandoned properties.
...
The case of Anderson Homes is similar to situations throughout the Bay Area and San Joaquin Valley, said Daryl Franks, director of franchise sales for Pacific Auction Exchange. "It's a question of what's worse, do you want to slowly die of a thousand cuts or do you cut the arm off," he told a group of local real estate experts Tuesday with regards to the current housing climate.

From the Stockton Record:

...[S]ales prices dropped off in this region, falling 11.5 percent in the Central Valley, to $309,740, and 12.1 percent in Sacramento, to $332,510, the report said....Central Valley sales were down nearly 34 percent year-to-year, the state association's report said...Leslie Appleton-Young, chief economist for the Realtors association, said the sales market was already challenged by low affordability, tighter credit standards and expectations of lower prices, but the sales decline accelerated in August because of the credit or liquidity crunch that began in July.
...
Real estate agents and brokers in San Joaquin County complain that the increase in foreclosures is the top reason the sales market is so slow...Foreclosures have clogged the market, and until they clear out, there's little hope for a normal sales scene, said Mike Collins of Collins Realty in Stockton.

From KCRA:

Four men accused of being involved in a mortgage fraud scheme will face charges in federal court, U.S. Attorney McGregor W. Scott said Tuesday. In an indictment unsealed Tuesday, a federal grand jury charged James Roy Martin, 36, Mario Fellini III, 38, Gabriel Richard Viramontes, 44, and Joseph Salvatore Gallo, 34, with bank fraud and conspiracy to launder money, Scott said. Martin, Fellini and Gallo were also indicted on charges of making false statements in loan applications, and Martin, Fellini and Viramontes were indicted on mail fraud charges, Scott said.

From the Sacramento Bee:

If convicted, the defendants face up to 30 years in prison and fines up to $1 million each for bank fraud. Mail fraud carries penalties up to 20 years in prison, while money laundering can draw sentences up to 10 years, federal authorities said...Assistant U.S. Attorney Matt Stegman said the case is one of several area mortgage fraud cases being investigated by federal authorities in the wake of a housing boom that saw a major relaxation of lending standards and a rise in allegations of loan fraud.

'I Just Thought Things Would Work Out'

From the Sacramento Bee:

Driving around Sacramento's urban core, you'd never guess there was a housing market slump. New lofts, three-story row houses and condominiums conceived during the housing boom are nearing completion in neighborhoods ringing downtown...At least eight housing developments with about 500 units are either under construction or just completed in the central city. Across the Tower Bridge on the West Sacramento waterfront, another roughly 250 units either have hit the market or soon will.
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For years, city leaders pushed unsuccessfully for more homeownership downtown. But the finances didn't make sense for developers until the housing market boom pushed prices high enough to cover the extra expense of building on small, inner-city lots. When sales prices topped $300 a square foot a few years ago, developers rushed to get into the urban housing business. Projects started in those heady days are now ready to open.

The builders hope that their products -- and locations -- are interesting enough to sell in tough times. "It's a scary market," said developer Mark Friedman, a partner in Loftworks, which is building 32 brownstone-style row houses in midtown at N and 26th streets.

From CNBC (videos here and here):

These days people here are losing money, as Stockton has become infamous as "The Foreclosure Capital."...Over the weekend several foreclosed properties held open houses. We were there. And so were the flippers! After all that's happened, a new wave of speculators has descended, hoping to take advantage of the 10%-15% below market values these homes are selling for. Their plans? Fix 'em up and sell 'em at a profit! To whom, I haven't a clue.
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[T]hen there's the dental assistant, a single mother of three, who doesn't want us to reveal her name, but who has to be out of her repossessed home in 14 days. She has nowhere to go and no creditworthiness to qualify as a renter. What happened? Her $2,000 mortgage payment (which she had to work two jobs to cover) reset after two years, and it shot up to $3,800. I asked her how she thought she could take on the loan, knowing the rate would rise. "I just thought things would work out."...Her three kids want to know why notices keep getting posted on the door.

Should we feel sorry for her? I sure did. Should she be bailed out? Not if it keeps her in a house she can't possibly afford over the long run. That's not fair to the people who did stay within their budgets, people who have seen their home values plummet as their neighbors go into foreclosure.

From the Stockton Record:

The sea of foreclosed homes in San Joaquin County and its flotsam of tall weeds, partying teens and green pools are testing neighbors' patience and code enforcers' limits..."It's a real sticky situation in making sure our code enforcers aren't overworked. It's very difficult for our staff to track down the folks who are taking off," Tracy Spokesman Matt Robinson said. "They're just walking away from their homes."
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One burning question these days is: Why have foreclosures sledgehammered the Stockton metro area more heavily than about any place in the country?
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Locals and many Bay Area people began to get priced out of the market. In order to buy, households often went after low introductory teaser rates on loans for which lenders asked little or no employment/income documentation, said Leslie Appleton-Young, chief economist for the California Association of Realtors. Lenders routinely reported that for the first time, adjustable-rate mortgages and exotic loans were more common than fixed-rate loans.

Meanwhile, investors added to the price spiral by competing for homes, sometimes buying sight unseen via the Internet and looking to "flip" them for tidy profits within a year or two. Real-estate agents and brokers reported that up to 30 percent of home buyers were investors. "And then when prices quit going up, it was like musical chairs, and there was no place to sit down," said John Knight, professor of finance and real estate at UOP's Eberhardt School of Business.

"The Heart of Darkness" Real Estate Market

From the Sacramento Business Journal:

The developer that's been sued the most by contractors over unpaid bills in Sacramento County over the past year isn't a giant company with hundreds of home sites or the backer of a high-profile washout such as The Towers on Capitol Mall. It's relatively small Sixells LLC, which specializes in urban infill projects throughout the region.
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Owner David Lonich of Redding said the slumping housing market is to blame. He admitted the company owes some money it can't pay until it generates more sales, but he also said some of the claims aren't legitimate and some contractors are overbilling the company. "The No. 1 overall event was not getting the sales to generate the cash flow to cover all the bills," he said, adding that the company is not going to walk away from its projects.

From the Modesto Bee:

These are tough times for Northern San Joaquin Valley home builders. They've got too many homes to sell and too few buyers who want them. That's causing some builders to auction off houses at bargain prices and others to indefinitely postpone construction. A couple of developers are in jeopardy of defaulting on construction loans, which has put their partly finished subdivisions in limbo.
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"We're going to be lucky to weather this. It's hit us hard," said Bernie Heyne, vice president of Pacific Pride Communities. The builder has halted construction at its Thomas Terrace development in Modesto while it renegotiates with lenders, leaving nine finished-but-empty homes. It's laid off two-thirds of its staff and put its Modesto headquarters up for sale. "We are pulling back," Heyne said.
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Owner Rick Lafferty [of Lafferty Homes] said this is the toughest sales market he's experienced in his 24 years in the business: "I don't think builders can give much more."

But some builders are offering even bigger potential discounts. Anderson Homes has agreed to auction off 59 houses in Manteca and Los Banos to the highest bidders next month...To lure back buyers, the opening bids for Anderson Homes will start about 40 percent below previous asking prices.

From the Stockton Record:

Stockton is the heart of darkness, at least in the real-estate business these days. The national and international media have homed in on the Stockton metro area - meaning San Joaquin County - as one of the top foreclosure hot spots in the nation. It's the bust part of the cycle that followed an unparalleled six-year boom.
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The median sales price in Stockton fell to $295,000 in August, down from a high of $385,000 in January 2006 - a 23 percent fall over 19 months, according to figures from the latest Coldwell Banker Grupe-TrendGraphix monthly sales report, based on Multiple Listing Service data.
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Edmundo de la Cruz's Spanos Park West home up for sale, but the Stockton sales market, with 3,000 listings that include hundreds of foreclosure properties, is rugged. He and his wife, who are living on pensions, are facing mortgage adjustments that they absolutely won't be able to cover, he said...He said he and his wife have considered turning over their house to the lender in foreclosure and moving out of the area to live near one of their children.
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[Jill Rios] and her husband would just like to move out of state to somewhere else where this isn't happening, Rios said, but they feel trapped because they believe they would have almost no chance of selling their extensively remodeled home in this molasses-slow market...."I'd like to move out of California," she said. "I'm done."

Dunless

UPDATE: Another article on Dunmore Homes. From KCRA:

Last May, Jason and Gina Rossow fulfilled their dream of buying their first home in a brand-new subdivision under construction in Elk Grove. "Yeah, we were super excited," said Gina Rossow.

But now across the street are weeds. An entire field is empty with just debris. And around the corner there are unfinished homes. The Rossows' dream is slowly creeping toward nightmare. "We're just confused," Jason Rossow said.

What's causing confusion, concern, and unwelcome news is a closed sign that's on the Dunmore Homes sales office door. All construction was halted last month, and contractors filed roughly $5 million in liens against Dunmore Homes.

"That tells ya it's not a great sign for new home sales," Mike Show of the Sacramento Business Journal said..."People were predicting we'd be out this in a year," he said. "Obviously that's not the case. We're now saying it could be another year to 18 months."

From the Sacramento Business Journal:

After halting construction in August, Dunmore Homes closed the sales office last week at its Monterey Village development in Elk Grove, posting signs saying the move was temporary but leaving no indication when it will reopen. The closures follow the filing of mechanics' liens totaling more than $5 million by contractors working on that project and another in Rocklin.
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Dunmore officials did not return phone calls seeking comment about the latest events. The company halted all construction in August, but owner Sid Dunmore said in an interview at the time that the company was breaking even. Dunmore Homes sold 66 homes in the Sacramento region during the first seven months of the year, according to Hanley Wood Market Intelligence. That compares with 321 home sales for 2005, according to new-home analyst The Gregory Group.
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The effects of flagging new-home sales are showing elsewhere as some homebuilders are pulling up stakes or significantly paring down operations. Costa Mesa-based Warmington Homes, which is selling condos in Natomas and single-family homes in Galt, is folding its Sacramento division into the San Ramon office...."As we all know, it's a very difficult time in the market," [Chris] Hanson [vice president of sales and marketing] said. "I don't think you can name a builder that hasn't had layoffs."

Christopherson Homes plans to move from its 8,500-square foot Roseville office, but it's not closing the Sacramento division, said marketing manager Vicki Doyle. Instead, the company is looking for smaller space in Roseville to better fit its pared-down staff. A series of layoffs, including some last week, have cut the division to about half its size of a year ago, she said.

From the Sacramento Bee:

Sacramento-area unemployment was unchanged last month at 5.4 percent but has risen eight-tenths of a point since last year. "The numbers are starting to mount a little bit and look a little more ominous," said David Lyons, labor market consultant at EDD.
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Greater Sacramento lost 2,000 jobs in August, the second straight monthly decline. About half the cutbacks were in construction and finance. The downsizing in construction was noteworthy because usually the summer building season lasts into September or October. "The house builders definitely made a bit of a call to cut back," Lyons said.

From the Central Valley Business Times:

Doom, gloom, and what happened to our boom?

A dark mood is settling over the golden state as pessimism about California's economic conditions hits its highest point since 2003, according to a survey by the nonpartisan Public Policy Institute of California...A strong majority of residents (59 percent) expect bad economic times in the coming year — a 10-point increase since June (49 percent) and a 20-point increase since January (39 percent).
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There has been a significant shift in attitude this year —and it is very likely being driven by bad news about the stock and housing markets," says PPIC president and CEO Mark Baldassare. "For so many people, the feeling of overall financial well-being is tied to the value of their homes — something that seems increasingly threatened as they see sales slow, prices dip, and foreclosures rise."

From Reuters:

A record 26 percent of U.S. homeowners say the value of their homes has fallen during the past year, above the previous peak of 24 percent seen in 1992, a survey released on Friday showed. Reflecting the extent of the prolonged housing slump, 21 percent of homeowners polled in September expect the value of their home to decline in the year ahead, up from 18 percent in August, according to the data from Reuters/University of Michigan Surveys of Consumers.
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Homeowners in the western United States, where some of the most dramatic home appreciation had occurred, have been especially hard hit by the real estate downturn. In the third quarter, 33 percent of homeowners surveyed in the West said their home value fell during the past year, up from 23 percent in the second quarter. Nearly a quarter expect home prices to fall further in the coming year, up from 17 percent in the second quarter, said Reuters/University of Michigan.

From the Wall Street Journal:

When Susan McDonald began seeing an influx of renters in Elk Grove, Calif., just outside of Sacramento, she cofounded a community group, the Franklin Reserve Neighborhood Association. The group writes "good neighbor" letters to problematic tenants and landlords, organizes forums to discuss a variety of issues and holds block parties to encourage residents, both owners and renters, to get to know one another. Local high school students have even cut the grass on unkempt properties. For the most part, the steps have helped, Ms. McDonald adds, and when they haven't, community members have been willing to be even more aggressive.

Elk Grove resident Tim Chan, a Sacramento police officer, called the local police repeatedly to complain about loud parties, piled-up garbage and to report what he suspected was gang activity involving the renters next door. When that didn't work, he wrote a two-page letter, also signed by 21 of his neighbors, to the out-of-town landlord. "All of these items disturb the peace and quiet of our neighborhood and cause discomfort and annoyance to all that live on this street, as well as reducing the quality of life and safety of our children," Mr. Chan wrote. The letter, which was sent to city officials and also threatened legal action, got results: The tenants are gone, and the house is being fixed up.

Ms. McDonald and Mr. Chan both blame the majority of the Elk Grove's problems on absentee landlords, not the tenants. "You don't just rent a property and assume that it's going to be taken care of," Ms. McDonald says. "Come and see if the lawn is being taken care of. Come and talk to the neighbors."