Real Estate Fraud Crackdown - 'Too Little Too Late'

From the AP:

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

From the Modesto Bee:

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

From the Modesto Bee:

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

From Sacramento News & Review:

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

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

From the Sacramento Bee:

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

From the Sacramento Bee:

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

Interactive database: See who is laying off workers

'In Survival Mode'

From the Sacramento Bee:

[Mike] Wood is the [Sacramento police] department's lead investigator of real estate fraud, a position created three years ago and partly funded by a county grant to deal with an influx of financial crimes that came with the boom in the real estate market. He is one of only a handful of real estate fraud detectives in Sacramento County.

With the economic downturn, new forms of fraud, scams and schemes in the real estate world have emerged, keeping Wood busy. As more homes go to foreclosure, for example, "professional squatters" move into vacated bank-owned homes, pretend to lease out the properties and abscond with renters' deposits.

From the Sacramento Bee:

Already struggling, Sacramento's commercial real estate market is getting hammered by a fresh wave of retailer bankruptcies, including Mervyns, Linens 'n Things and Shoe Pavilion...Garrick Brown, research director at commercial broker Colliers International's Sacramento division, said the vacancy rate in the region's major shopping centers rose to 8.8 percent in the third quarter, up from 7.6 percent in the second quarter. It was 6.7 percent in the first quarter. By the first quarter of 2009, when Mervyns closures and others take effect, the vacancy rate will top 10 percent, he said.
...
"Mervyns' demise quickens the shakeout in the Sacramento retail property market and, in the short term, creates a little panic for landlords and tenants," said Heath Kastner, a vice president with commercial broker CB Richard Ellis. "The Sacramento area right now is in a tough spot for retail. A lot more people are closing their doors compared to new businesses opening."

From the Sacramento Bee:

The meltdown finally finished off the Melting Pot in Rocklin. The 3-year-old fondue restaurant on Lonetree Boulevard in Rocklin opens at 4 p.m. today for the last time after more than a year of fighting declining sales and dwindling crowds. "I've done everything I could. I've looked at all the options," owner Mike Frampton said earlier this week. "But the last two months were just too much." His restaurant's demise is a window into how recent wild swings on Wall Street and the credit crunch have pinched retailers and restaurants: Nervous customers spend less. Nervous banks lend less.
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[Frampton] open[ed] his restaurant in November 2005. The region was booming. In December of that year, the median price of an existing home peaked at about $505,000 in Rocklin's two ZIP codes, according to real estate researcher MDA DataQuick. Last month's median price: $325,000.
...
Frampton saw much of it coming, "although I didn't realize how bad things would be – I don't think anybody did," he said.

From the Sacramento Business Journal:

The local Small Business Administration district and nearly 100 lenders are still making loans, but fewer people are seeking them, said Jim O’Neal, district administrator of the Sacramento SBA office. After years of breaking records for the number of loans made, the Sacramento SBA office approved only 912 loans in the year ended Sept. 30 — a decrease of 37.5 percent from the record 1,460 loans made the previous year...“It is easy to say the bankers are not lending, but the businesses are not seeking money either. Their customer base has shrunk, and they are being cautious,” O’Neal said.

From the Sacramento Business Journal:

For years, Inter Flora kept so busy selling its artificial plants for homebuilders’ model homes that its owners had little time to cultivate other types of customers. Then came the housing bust, and nearly the bust of the two-decades-old wholesaler. The new owner of the now-leaner Rancho Cordova company is reinventing Inter Flora and himself, and vows never to depend on homebuilders or any other single type of customer.

From the Stockton Record:

"We've had more transactions through September this year than I've had in the prior 10 years," said Jerry Abbott, president and co-owner of Grupe Real Estate, Stockton. "We're having a boom year, but the prices are 60 percent or less what they were at the peak of the market" several years ago...San Joaquin County's median sales price slid...41%...declining from $325,000 a year ago to $192,000 last month, TrendGraphix reported.

From Reuters:

Last week, Wachovia Corp said borrowers with its "Pick-a-Pay" ARMs and living in or near Stockton and Merced, California, owed at least 55 percent more on their mortgages, on average, than their homes were worth.

From the Modesto Bee:

During the first nine months of this year, Stanislaus County issued 408 new home building permits. Compare that with the 3,670 permits issued during the first nine months of 2005, according to Construction Industry Research Board statistics. That's an 89 percent decline in new home construction. "There's so few of us builders left," said [Modesto home builder Mark] Wilbur, estimating that about five locally owned companies still build subdivisions in Stanislaus County. "We're just in survival mode now. We're not going to be profitable for another couple of years or so."

From the Press-Telegram:

Rep. Laura Richardson provided documentation Friday showing that she is up to date on the previously delinquent home loans that earned her national attention over the summer. "What I wanted to show you is everything is currently in order and has been resolved," Richardson said during a meeting with a reporter and editor at the Press-Telegram.
...
As for the Sacramento home, she said she plans to list it for sale or rent in December.

From CNBC:

[N]o matter how far we go in modifying, restructuring, writing down principal on loans in order to stop foreclosures, the bottom line is that most of the borrowers in trouble had no business being in the homes they bought in the first place. You can modify their loans for five years, but they will probably lose the home anyway.

Is that mean? It’s not meant to be. I just think that in order to set the market right we need to let prices fall to where they must and start over again with mortgages, buyers and homes that make sense. We’re all losing money here, but that’s because so many people took advantage of free money during the housing boom (and don’t get me started on how those who didn’t take advantage of that free money still get screwed). I understand the need to restore the credit markets and stop the crash in housing, but keeping folks in homes that are way beyond their means is just prolonging the pain of the inevitable.

From the Wall Street Journal:

Just as in the 1930s, there is no evidence that the policy makers have any understanding of what they are doing. They need to make way for the natural forces of repair. They need to let housing prices fall. They need to let firms go bankrupt. They need to let firms that are healthy thrive. They need to let healthy firms buy the sick firms. It is time to let the imprudent fail and the prudent pick up the bargains.

A recession is coming (or has already arrived) no matter what happens in Washington. The question is whether the attempt to forestall it is going to make it worse and turn it into another Great Depression. By acting without rhyme or reason, politicians have destroyed the rules of the game. There is no reason to invest, no reason to take risk, no reason to be prudent, no reason to look for buyers if your firm is failing. Everything is up in the air and as a result, the only prudent policy is to wait and see what the government will do next.

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

From the Sacramento Bee (hat tip SMF):

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

From the Sacramento Business Journal:

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

From the Sacramento Real Estate Blog:

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

From the Sacramento Business Journal:

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

From the Sacramento Business Journal:

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

From the Sacramento Bee:

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

From the Real Deal:

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

From the Sacramento Bee:

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

From the San Jose Mercury News:

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

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

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

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

Stockton's "Butterfly Effect"

From Home Front:

Like many in real estate...Jeff Johnson, who runs the Citrus Heights branch of a national mortgage lender, Platinum Home Mortgage...says that the elimination of down payment assistance...will keep thousands of would-be buyers out of the market. He believes that just as the sales here have started to rise, this federal decision is going to slow them down again..."We're really going to be in trouble."

One reader's response:

Mr. Johnson's comment "We're really going to be in trouble" shows his narcissistic view of the real estate market--it's all about me. If buyers can't get free money or bad loans, I'm not going to make $500,000 this year like I did last year. What people need is low home prices, not gimmicks to get into an expensive home. The market shouldn't be about people in the business making lots of money, it should be about people not in the business being able to afford a home. It's the mentality of people in the business thinking they need to make more that leads to less people owning homes. How about if we prohibit investment in single family homes, support more use of the Internet and less use of real estate agents and mortgage brokers, require a reasonable down payment to ensure buyer commitment, and let the market work in a sensible way, then maybe people who are responsible would be able to own a home.

From the Sacramento Bee:

On paper, the Silvertip Estates development in Orangevale may seem like a great deal for home buyers. The 32 single-family homes on a four-acre lot near the corner of Greenback Lane and Almond Avenue range from about 1,700 to 2,000 square feet and start in the low $400,000s, according to the development's Web site. Homes were slated to be available this spring, it said.

But call the number listed and you'll find it has been disconnected. Drive by the project site, and all you'll find is weeds. Silvertip Estates is one of several developments planned by Fair Oaks-based developer Sixells LLC that has become a casualty of the housing downturn...[T]he once prominent development company now finds itself sputtering along in a dismal economic climate.
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[Sixwell project manager Jim] Franklin denied recent reports that the company was going out of business. "There's no plan to shut the doors and no plan for filing for bankruptcy," he said. But without any work to do, he wondered if – by default – it already was. "When you're not doing any business, are you out of business?" he asked.

From the Sacramento Bee (hat tip Jeff):

Increased costs prompted Lowe's Home Improvement Warehouse to pull out of a proposed store in Rocklin, according to a spokeswoman. Property owner and developer Paul Petrovich, however, said architectural details added by the Planning Commission killed the deal. "The amount of money that was added onto their building as a result of the Planning Commission busted the budget, in addition to the tougher economy," Petrovich said.

From the Appeal Democrat:

People still have to eat. But whether they will leave their homes and workplaces to do so is a question that puts local restaurant owners on edge...According to the 2008 Restaurant Growth Index, calculated by Restaurant Business Magazine, Yuba-Sutter residents didn't get out much for eats last year and are doing so even less this year. Scoring, based on local restaurant sucess and demographic measures, pegs the national average at 100. Yuba-Sutter scored 11 in 2008, down from 31 in 2007.
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Steve Brammer, chief of operations at the Economic Development Corp. in Yuba City, says the restaurant business — like many other types of businesses — is inextricably linked to the housing market. With fewer and fewer residents able to pay their mortgages, the idea of eating out seems more and more extravagant.

The Average Buyer blog notes substantial declines in local airport activity.

From The Independent:

American Dream Realty – Reduced Price! The estate agent hammering the "for sale" placard into the yellowing lawn of a family home in the Weston Ranch district of Stockton, California, this week could hardly have been optimistic. Almost every second home had a similar sign. This suburb, created from nothing 15 years ago, had promised so much to the low-income families who streamed in during the building boom, a roof of their own at last for people deemed "sub-prime borrowers" and – perhaps – a nice profit if house prices continued to defy gravity, as they seemed they would a few years ago.

When the crash came, when the US housing market ran out of sun seekers migrating from the North and speculators hoping to flip their purchases for a quick buck, the surge in foreclosures blighted neighbourhoods. In Stockton, foreclosure capital of the US last year, the lowering of tone has been tangible, in an unpleasant way: residents became alarmed at the number of abandoned swimming pools lying uncleaned, magnets for mosquitoes and disease. Such things don't show up in the statistics, but they are as telling an indicator as the 25 per cent drop in American house prices over the last year alone.

In Weston Ranch as elsewhere, egged on by brokers on fat commissions, during the boom, residents had taken on mortgages they could not afford. Of all the bits of jargon, it is the "Ninja" loan that will stand out as the abiding symbol of the US real estate bubble – "no income, no job, no assets". Now that their cheap "teaser"-rate loans have run out and they can't find credit, they're giving up. Meals lie half finished on dining tables as families bolt the moment the sheriffs arrive to repossess the property. In many cases, owners simply post the keys through the letterbox and walk away rather than continue to pay for a home that is slumping in value.

Even now, it is impossible to know what, precisely, triggered the credit crunch. In the familiar story that is always used to explain chaos theory, the flap of a butterfly's wings in the Amazon rainforest can provoke a tornado on the other side of the globe, because even the tiniest chance alteration in a weather system can be amplified into the most dramatic of outcomes. Nature has always been global; now the globalisation of finance has made similar phenomena possible in economics. In the case of the credit crunch, the butterfly's wings might have been the crack of a real estate auctioneer's gavel a couple of years ago, heard in some corner of California, as a former dream home in Stockton went for a knockdown price as a foreclosure special. Or some casual gossip in a bar that prompted a buyer to pull out of a deal. Or a family break-up that forced a distressed sale. At some point, the momentum behind America's property boom ran out, the moment where reality caught up with the debt delusion. The credit crunch would follow, a trillion-dollar ($1,000,000,000,000) meltdown of banking losses that has left the world's financial system so feeble that banks are too scared even to lend to each other, for fear they will never be repaid.

Related posts:
Loans to Sacramento Trailer-Home Buyers...Trigger a Global Credit Crisis
California's New Canary in the Coal Mine
Placer Pops - YoY Depreciation Era Begins?

I guess Stockton and Sacramento were special after all!

Rocklin - Special, Ergo Not So Special

From the Placer Herald:

Although Rocklin has earned a reputation as a desirable, upscale family friendly place to live, the current mortgage crisis has left its mark on the real estate market here. According to the Foreclosure Data Bank, there are currently 79 foreclosure properties in Rocklin, 32 more will be auctioned and 19 are bankruptcies.
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The bank-owned, or “REO” (real estate owned) properties that have resulted from foreclosures are driving the entire market down in Rocklin as it has in many other areas in the state and the nation, according to local Realtor Billy Radakovitz with Primera Realty.

Radakovitz said that Rocklin’s desirability was a contributing factor in bringing the fallout to the real estate market here. "We’ve been hit as hard as anywhere else," he said. "Rocklin is such a desirable location that it was the destination of choice, people would do anything to get here."
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"From the realtors standpoint, at around 2004 there were some of us who knew the end was near," Radakovitz said.

Flashback: Central Valley Housing 'Soufflé'

From the Wall Street Journal:

Cities and counties with some of the worst fallout from the nation's housing slump also are seeing a sharp upswing in vacant homes, a trend economists say might set up further declines in home prices. The national homeowner vacancy rate, which gauges the number of vacant homes on the market, rose to 2.8% in the fourth quarter, according to Census Bureau data.
...
Vacancies...jumped in some once-booming Western cities. Between 2005 and 2007, homeowner vacancies more than tripled to 3.8% from 1.2% in the Riverside-San Bernardino area, part of California's Inland Empire, east of Los Angeles. In the Sacramento area, vacancies jumped to 4.2% from 1.2%.

Interactive Map - We beat Detroit!

From the Modesto Bee:

Monica Granados regularly encounters people who aren't even trying to fight foreclosure in San Joaquin County. Granados is a process server who delivers eviction notices to houses repossessed by lenders.
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Granados said lenders these days seem much more willing to help borrowers save their homes, but that wasn't the case last fall when her Salida house was foreclosed on. Now Granados is trying to prevent foreclosure on another house she owns in Stockton, and she's optimistic about getting her lender to compromise.

From the Fresno Bee:

The Merced-based holding company for County Bank anticipates a big loss for 2007 -- caused by falling real estate values in the central San Joaquin Valley...County Bank's troubles come amid widespread problems for financial institutions across the country as they cope with the bursting of the nation's real estate bubble. While much of the attention has been on larger players on Wall Street -- most notably investment bank Bear Stearns -- the Federal Deposit Insurance Corp. reported last month that more community banks also are reporting problems.

"I think we're starting to see this issue across the state," said Joe Morford, banking analyst with RBC Capital Markets in San Francisco. "Banks in the Central Valley and in the Inland Empire, in particular, are feeling this sort of pain right now, given that those were two of the most overbuilt housing markets in the state."
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While the bank's most recently reported problems have arisen mainly in the last quarter of 2007, the August foreclosure on an $11.7 million loan for a failed condominium construction project in the Sacramento suburb of Rocklin was an early sign of problems, Morford said. "Through 2007, management indicated that was an isolated issue," he said. "Now we see there's much more deterioration across the portfolio."

From the Merced Sun-Star:

In February 2007, Capital Corp's chief consulting economist Tapan Munroe predicted that the Central Valley wasn't facing a housing bust. Instead, he termed the slowdown as a "souffle with the air slowly leaking out." Munroe and co-consultant Lon Hatamiya projected then that Merced's home prices would drop 8.9 percent. Instead, prices in Merced plummeted 16.8 percent between December 2006 and December 2007, according to DataQuick Information Systems.

From the Stockton Record:

It might not be a trend, but at least some homes are starting to move in what has been a stagnant real estate market...On its face, that would seem to be good news. Actually, that would be extraordinary news if taken out of context.

The context is this: Most of the sales are of foreclosure homes. The number of sales has been so low for so many months that any increase produces a large percentage change. And more waves of foreclosure homes will wash across this market as adjustable rate mortgages reset to higher rates and families buckle under the weight. Until those homes are sold - and nobody really knows how many more will flood onto the market - things will not settle down. We don't even know if the term "flood" is an overstatement or an understatement.

"Approaching Bottom in Sacramento" or More "Wishful Thinking"?

From the Sacramento Bee:

[T]here's no doubt the steep drop in home values – median prices in Sacramento County are almost 28 percent below last year's figures – and relatively low interest rates have sparked interest. [DataQuick's Andrew] LePage said investor buys accounted for 18.6 percent of February closings in Sacramento County. That's up significantly from 12.7 percent in November and December. [The high for investor buys was May 2004 when they accounted for 25 percent of sales.]
...
Overall, sales remained weak, though real estate broker Tom Zipp of Citrus Heights said Thursday that rising investor activity "traditionally signals the bottom part of the market."

DQ stats by county (All Homes & Existing SFH/Condos/New Homes)
DQ stats by zip code

From the SacBee's Home Front blog:

I heard 17 months ago at a local builders conference that the eyes of the nation were on Sacramento and Washington D.C., seeking signs that the first markets into the tank would be the first to lead the way out. That turned out to be wishful thinking. Nine months ago again I heard Sacramento-area home builders say we were already scraping along the bottom. That, too, was a little premature. Now again there is a lot of buzz in the real estate industry that we're approaching bottom in Sacramento. Maybe we are.

From the Sacramento Bee:

If you see a stretch limousine cruising your Placer County neighborhood Saturday, it won't be for prom night. It will be one of the first limo foreclosure tours in the United States, prowling Rocklin, Roseville and Lincoln.

From the Sacramento Business Journal:

Two of Sacramento's top builders have unloaded 250 acres approved for new homes in Rancho Cordova for 16 cents on the dollar -- the first major land sell-off in the capital area since housing sales collapsed last year. The buyers are Ron Alvarado and Charles Somers, land developers themselves and partners in a large janitorial and building maintenance company. They bought the property last month from Pulte Homes and Centex Homes at a steeply discounted price of $8 million, according to multiple real estate sources who spoke about the deal on condition of anonymity.
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At the height of the local housing boom, $8 million would have fetched less than 20 acres of land approved for new homes as prices had escalated to $600,000 an acre in some areas. Builders and developers are still waiting for a new benchmark on what land is worth in today's economy. The buyers in this deal, Alvarado and Somers, paid $32,000 an acre.

From the Sacramento Business Journal:

SAFE Credit Union has "assumed the worst" after enduring a horrible fourth quarter, moving a hefty $21 million to its reserves for loan losses this year with the dismal economy and the hard-hit housing market. The aggressive additions to reserves pushed the area's second-largest locally based credit union to a $5 million loss for 2007. And the credit union plans to add $1 million to its reserves every month of this year. The credit union experienced a rapid deterioration of consumer loans in the fourth quarter, said Henry Wirz, chief executive officer of SAFE. "It was a very sudden change."
...
What was surprising was how many of the borrowers had excellent credit when they applied for credit, he said. "They are prime borrowers, yet in our portfolio they are becoming a higher portion of delinquencies."

Sacramento Real Estate Prices: Cliff Diving

Some January price statistics for Sacramento County via the Sacramento Real Estate blog:

• Median: -27.5% YoY
• Average: -28.4% YoY
• Price per square foot: -27% YoY

From the Stockton Record:

A second major foreclosed-home auction will be coming to Stockton next week, with about 85 Stockton-area houses going up for sale at the San Joaquin County Fairgrounds.
...
"The sellers are motivated, but they're not going to just dump the properties on the market," company spokesman Joe Joffrion said.
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Jerry Abbott, president and co-owner of Coldwell Banker Grupe, said the real estate community looks upon foreclosure auctions as a good way to help clear out some of the foreclosure properties that continue to dominate the sales market. About 70 percent of current sales are foreclosure properties, he said.

Agent Bubble is reporting that 50% of Sacramento listings are either short sales or foreclosures. The Sacramento Real Estate blog says 67% of all sales in January fell into those two categories, compared to 7% a year ago.

From the Wall Street Journal:

Sales of large commercial buildings have dropped nationally, but the downswing in north-central New Jersey has been particularly chilly. In the fourth quarter, the region's overall sales of office, retail, warehouse and apartment properties valued at $5 million or more fell 75% from the year-earlier quarter to $811 million. The region tied with the metropolitan areas of Sacramento, Calif., and Kansas City, Mo., for the largest percentage drop of 50 major U.S. markets, according to Real Capital Analytics Inc., New York, a real-estate research firm.

From the Modesto Bee:

Knowing that Stanislaus County has one of the highest foreclosure rates in the country, I find it disturbing to read that Modesto planning commissioners voted 4-3 to approve the Tivoli project. I wonder if they are reading the same newspaper or watching the same TV reports on the housing market as I am. The proposal calls...[for] more than 1,300 new homes, 800 condos and duplexes, and 1,000 apartments.

Granted, these proposed homes will not be completed for some time, as stated by the investors, but when hearing that the current market crisis is expected to last for at least another couple of years, I cannot help but ask: Who will buy all these new homes? Considering the market is not expected to bounce back for quite some time, I fear that just as we begin to see a light at the end of the tunnel and finally begin to clear a large inventory of existing homes, the emergence of so many new homes will cause us to backslide.

From KCRA:

The housing market may be in a freefall but that didn't stop Rocklin Voters from giving the green light to the [Clover Valley] development of more than 500 homes.

"Conditions Will Get Worse Before They Get Better"

From the Sacramento Business Journal:

Pacific West Cos., of Reno, Nev., was on a roll in recent years, selling out condominium communities in the Sacramento region. Then came 2007, and a troubled housing market. The company's Montessa Attached Homes in Rocklin fizzled. The project, slated for 171 condos, has pre-sold just seven since the spring. The development company started returning deposits to those buyers last week. "We are clearing out our inventory of buyers. We don't want to string them on forever," said Taylor Cohee, head of sales for Pacific West.
...
The Rocklin condo market has been hit hard by overbuilding in the past couple of years. Some of the big national builders dramatically cut prices on units there. D.R. Horton Inc. and Ryland Homes, a subsidiary of The Ryland Group Inc., sold some condos for $100,000 less than planned.
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At a time when about one-quarter of homes sold in Sacramento are foreclosure properties, [Bruce] Slaton [founder & owner of SacramentoCondos.com] predicts conditions will get worse before they get better..."I think the foreclosure numbers are going to increase a lot between November and May because the largest pool of adjustable rate mortgages start indexing -- stepping up -- then. That will probably result in twice as large an inventory of bank-owned properties as we have right now. Right now, we have a bad housing market and a good economy. If we have a bad economy next year, that's going to open a new chapter."
~~~
Economy-watchers like to point to Sacramento's job numbers as a sign that the housing downturn isn't too devastating. What the region has lost in construction jobs it has picked up in government and services. The total job figure is as high as ever, and the economy remains strong.

That's great news for a construction worker with the skills to get a government or service job. Otherwise, the numbers from the state Employment Development Department are bleak. As of September, 69,100 people had construction jobs, down from 73,600 a year earlier and from 76,600 in September 2005 -- which also happens to be the peak for the industry. That's almost a 10 percent drop in the course of two years.
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"Commercial hasn't slowed down very much. We know that it will if the housing side slows down long enough," [president and chief executive officer of the North State Building Industry Association John] Orr said. And with more players concentrating on commercial, that means more competition for the firms already specializing in it.
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"Everyone's workload is still healthy," [Larry Booth, president of Frank M. Booth, a mechanical engineer and contractor]...said. "But the residential component of construction is still the biggest piece of the pie. To assume that the big part of the market slowing down is not going to affect the commercial industrial side -- I think it is going to affect us at some point."
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Leo Koo used to have four salesmen on the floor at his Lifestyle Furniture Gallery on Arden Way. Now he has two. Sales have fallen by half in the past year, and Koo blames the downturn in the housing market. With fewer people buying houses, there is less demand for new furniture.
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Dwindling margins and the hard-hit housing industry cut into third-quarter profits for local banks as more troubled real estate loans surfaced in the Sacramento region...[B]ankers are closely watching the once-booming housing market that has been a bust during the past several months.

Previously red-hot markets such as Sacramento, Merced and Fresno saw falling home prices and have farther to fall as the market slows, said David Harvey, managing partner of Hot Creek Capital LLC, a bank hedge fund in Reno, Nev. "Some of these markets are of a national concern to financial companies," he said. "The entire east side of the Sacramento Valley, where there was such a big rise in single-family housing development, is now stagnant."

From the Modesto Bee:

Looming budget cuts mean Modesto residents are about to see fewer services for their tax dollars. Reductions in the number of police officers, firefighters and park services are on the table this week as the City Council begins looking for more than $14 million to protect a reserve in Modesto's $135 million general fund...City Manager George Britton put a hiring freeze in place three months ago and asked Modesto executives to find ways to cut their budgets by 7 percent.
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Modesto's budget recovered in 2005 and 2006 because the city benefited from a housing boom that raised its property taxes, construction-related revenue and retail spending that contributed to greater sales tax receipts...But the outlook started to worsen in March and April when revenues began to decline. Since then, Finance Director Wayne Padilla has refined the city's budget picture to reflect continuing shortfalls. Last month, a sales tax consultant advised the city to trim its revenue projections by $1.2 million. This month, Padilla cut another $1 million in expected revenue linked to property transfers.

From the Stockton Record:

A committee examining ways Manteca can create more housing that is affordable and attractive to police officers, teachers and other similar professionals wants city leaders to tap into the failing housing market that has left foreclosed homes dotting the city. The committee, formed in February when city officials saw a need for homes the middle class could afford, recommended recently that city staff examine ways Manteca could buy and reuse foreclosed or repossessed homes.
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[I]nstead of building new housing, the city could purchase existing homes that are going for below their market value and resell them using a 99-year land lease, meaning the city would own the land and only sell the house on it, cutting down the buyer's total cost,"...[committee head Ben Cantu] said.

Turning foreclosed houses into affordable residences is not something many cities have done, according to Max Neiman, the associate director of research at the San Francisco-based Public Policy Institute of California. "It strikes me as very innovative to have cities looking at the foreclosure issue as an opportunity to deal with other problems," Neiman said.

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."

Escaping Sacramento as Swarms Held at Bay

From the Sacramento Business Journal:

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

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

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

From the Lodi News-Sentinel:

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

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

From the Sacramento Business Journal:

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

Also from the Business Journal:

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

From the Stockton Record:

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

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

Two Years of Change

From Rocklin and Roseville Today

Early on we had a number of people, who came to be known as “bubblers,” who
were using words like, “crash” and “doomsday.” Right now, I don’t recall anyone being very close to predicting where we are today. The local real estate market has not crashed, not all homeowners wish they were renters; some of us who are working in the industry still have jobs and are making a living doing something we enjoy. At the same time it is also clear that all the changes of the past two years have taken their toll on companies and individuals. Many jobs in the industry are gone, there are more homeowners facing foreclosure than we know about and some dreams based on growing equity have been shattered.

Lyon pulls ads, Rocklin housing loan sucks

From the Sacramento Business Journal

Sacramento's Lyon Real Estate says it plans to significantly reduce advertising with THe Sacramento Bee, citing national statistics that four of every five homebuyers use the Internet in some way to find their homes.

Lyon's contract with the Bee is worth more than $1 million per year, Lyon chief executive officer Michael Lyon said.

From the Central Valley Business Times

A single bad loan to a housing developer in the Sacramento area is sucking most of the second quarter profits out of Capital Corp of the West (NASDAQ: CCOW) of Merced. The company says it had net income of $642,000 or 6 cents per diluted per share for the quarter ended June 30.

A year earlier, it had net income of $6,254,000 or 57 cents per diluted share. The slumping Central Valley housing industry is being blamed. The bank has had to set aside more than $3.7 million as a loan loss reserve and a provision for off-balance sheet items of $1.595 million.

It’s due to a previously disclosed $12.9 million residential construction project located in Rocklin that the bank foreclosed on July 25. The developer was not identified by the bank.

Foes line up against Clover Valley development

From the Sacramento Bee:

A 10-year-old plan to develop the valley spawned four citizens' groups, two unwieldy environmental reports, and prompted thieves to steal roughly 200 signs emblazoned with the slogan "save don't pave."

Now, the controversial proposal to build 558 homes on 622 acres of open space hidden among the suburbs of northeast Rocklin, heads to the Planning Commission for a two-day public hearing beginning tonight.

A recent telephone survey showed nearly 75 percent of the 400 registered voters who responded would support such a referendum. Less than 13 percent of polled voters supported the development plan.

The hitch is that the land already is zoned for residential use and has been for more than a decade. Clover Valley Partners has an approved development agreement that also dates to 1997.

A group called Rocklin Taxpayers for Sensitive Planning recently emerged in support of the project. In a mailer to residents, group founders said it would cost millions for the city to purchase the property and preserve it, thereby raising property taxes.

"There's a deal in place here and as much as people might wish to preserve this land, it is zoned for residential development," said Bill Halldin, a resident and member of the Rocklin Taxpayers group.

"The developers have made a lot of very appropriate compromises. The only way this is not going to happen is if somebody pays for that land, and despite all the commotion in the community for many years, nobody has stepped forward with the funds."

Commercial Real Estate: The Other Shoe Drops?

From the Sacramento Bee:

In the up-and-down world of office leasing, Roseville and Rocklin for years have been the closest thing around to a sure bet. Until now.

Demand for new leases is down. Office vacancies are up. And a lot more space is under construction. "After many years, South Placer County is changing from a landlord's market to a tenant's market," said developer Abe Alizadeh...."Incentives (for tenants) will be going up. Lease rates will be coming down."
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"It's frightening," said Elaine Hartin, a broker with 17 years of experience in the Roseville office of Cornish & Carey Commercial.
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The area's declining housing market has stifled the residential finance, insurance and real estate businesses that for years gobbled up office space. A glut of existing office space is for rent. A record level of offices are under construction.
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What concerns Strain, Hartin and others examining South Placer County's office market is an obscure but important statistic that they watch, much as a cardiologist watches a heart patient's blood pressure. The statistic, called "net absorption," measures tenant demand for leasable space. It takes the office square footage newly leased in a given three-month period and subtracts from it any vacated office space during the same time.
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For 55 consecutive quarters, stretching back to 1994, the Roseville and Rocklin market has not recorded a single negative absorption period, according to statistics compiled by the Sacramento office of commercial brokerage CB Richard Ellis....Residential finance companies fueled the winning streak in recent years as they flocked to South Placer County's booming housing market and drove demand for office space.
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Two years ago, office net absorption in Roseville and Rocklin hit 471,398 square feet for the year, roughly equal to eight football fields of office space. It was the best year ever for the region's office leasing, statistics show.

But from that peak, net absorption plunged to a seven-year low of 294,000 square feet in 2006, as the housing boom ended and the companies that supported it downsized or, in some cases, went dark.

"They've almost all cut back. Some put their space on the market, subleased or closed," said Jon Walker, a senior vice president at Grubb & Ellis' Roseville office.

Office demand has plummeted further this year. Roseville and Rocklin's net absorption fell to a meager 16,500 square feet for the first quarter, down from 109,000 square feet for the same period in 2006. Second-quarter figures are due next month."Obviously, things have dropped off," Walker said. "The question is, how long will it last?"
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"Roseville and Rocklin could potentially see 40 percent vacancies," [Chris] Strain [executive director of brokerage Cushman & Wakefield's Sacramento office] said. "And things won't come back to a reasonable level -- I'm talking about 15 percent vacancy -- for three years. And that's if the economy doesn't go south on us."
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[W]ith 868,508 square feet of office space sitting empty -- and another 868,000 square feet under construction -- it's unlikely the market will turn around in the short term, said Grubb & Ellis' Walker. "I'm not preaching doom and gloom, but you've got to be realistic," he said. "We've got a lot of questions to answer."

Dying on the Vine

The Sacramento Business Journal reports on the death of two downtown condo projects.

Two downtown condo-tower plans die, D.R. Horton cancels plans as market falls

Two planned downtown high-rise condominium projects fell through this week when builder D.R. Horton canceled its plans. The company's decision is a setback for downtown's revitalization, which many believe depends on bringing residents into the mostly commercial area.

But D.R. Horton's move is not surprising. Homebuilders have been backing out of deals to buy land because new-home sales have declined 42 percent in the six-county Sacramento region this year. Industry insiders wonder if D.R. Horton might only be the first to walk away from downtown development in the next few years.

D.R. Horton division president Tom Harding declined comment, but public officials confirmed the company has backed away from plans to buy a half of a block owned by Sacramento County and build a 21-story condominium tower, said Paul Hahn, the county's Economic Development Director. D.R. Horton has "notified us that as a result of the downturn in the market nationwide, D.R. Horton has been instructed not to put deposits on land for now," he said...

D.R. Horton has also dropped plans to develop a high-rise condo with 203 units along the Sacramento River just north of Old Sacramento, said John Dangberg, the assistant Sacramento city manager overseeing economic development.

Meanwhile, a Rocklin condo development has apparently been abandoned.

The Atlantis Rocklin Condominiums appear to be under water. The phone in the Rocklin office of the developer, Avant Garde Development LLC of Artesia, is no longer in service. The phone number at the sales office goes to a scratchy answering machine that is no longer taking messages. And the phone at the construction company, CDS Builders of Santa Fe Springs, rings and rings and then disconnects...

No work has been done on the project since May. So far, about 55 townhomes have been built but not completed. They have walls, exterior stucco, roofs, doors and windows. The interiors aren't completed, and many of the exterior doors don't stay closed in the breeze...

What was to be a 250-unit condominium townhouse project in two phases was started four years ago by Avant Garde. It is one of the first major projects to turn into a problem locally for a lender in some time. "It may be the first, but it's not going to be the last," said Dave Alford, local bank consultant. The recent dramatic slowdown in real estate likely will catch some developers off guard, and eventually banks will be taking back properties in various states of completion, he said...

When the sales office opened for the Atlantis condominiums last September, they were priced from $345,000 to $375,000, and there were said to be more than 100 sales reservations. At that time, the Sacramento housing market was still strong. The market has since cooled off dramatically.

American Dream Turned Nightmare

From KCRA: "At the Sacramento County Courthouse, it used to be that foreclosure auctions happened once a week. Now, several times a day homeowners are seeing their American dream turn into a nightmare. In Sacramento County during the second quarter of this year, the number of homes going into foreclosure stood at 1,866. That compares to 857 forclosures for the same time last year -- an increase of 118 percent. Elsewhere, foreclosures are up 74 percent in Stanislaus County, 87 percent in San Joaquin County and 116 percent in Placer County."

"Alexis McGee of the investor services agency Foreclosures.com said many homeowners who find themselves falling behind on their mortgage payments should not try to refinance, but rather simply try to sell..."

"So, does this mean the housing bubble has burst? McGee still describes it as a leaking bubble but said her description will change if a year from now foreclosure rates have doubled again."

From the Sacramento Business Journal: "Sacramento-area home prices dipped lower last month, and sales tumbled by almost 45 percent from a year ago, according to a report released Thursday. The region's median home price -- meaning half the homes sold for more, the other half for less -- dropped 2.4 percent to $378,590 in July, compared to the same month a year ago, according to the California Association of Realtors. Home prices also inched 1.5 percent lower from June."

"West Sacramento had the area's largest one-year drop at 16.5 percent, while home prices in Lincoln and Rocklin -- one of the fastest-growing cities in the region -- fell 13.8 percent and 12.5, respectively...Sacramento County's median home price fell 3.4 percent to $367,000 from a year ago, with Orangevale and Fair Oaks posting 5 percent-plus price drops, the largest in the county."

"Placer County's median-home price decreased to $460,000, 7.1 percent lower than a year ago. In addition to Lincoln and Roseville's double-digit price drop, Granite Bay home prices were off 7.4 percent to $735,000, still by far the priciest community in the county. Auburn's median-home price improved 11 percent to $479,000, the only price increase in the county."