'There was a lot of denial going on'

The Sacramento Bee interviews Doug Pautsch, former Sacramento division president of Centex Homes (2006-2008). On the past:

Q: Sacramento was one of the first U.S. housing markets to fall apart. Was it a problem communicating that to headquarters?

A: The first nine months everyone was in denial: "That's just a little cold that Sacramento has, just a little speed bump. We'll get through it. It's just Sacramento."

They didn't realize it was a flu that would become an epidemic. My local counterparts and I would talk about it. At their respective corporate offices, not just mine, people just didn't understand. Across the country everyone was full speed ahead. Money was flowing and sales were happening. It must just be Sacramento because it went up so quickly.

It was six to nine months before people realized this wasn't just a Sacramento issue. They'd say maybe it was just California or Florida, and maybe it was just Northern California. There was a lot of denial going on. But as we know, everybody caught the flu.

On the present & future:

Q: Where is this market going?

A: I think we're at the bottom. We're going to bounce around a little bit...I think it will be next year when we start to see recovery. I define that as prices starting to go up.

Related Centex posts:

Centex $150,000 Off 12-hour sale
Centex Extends "Special One-Time" Sale
Surprise! Centex 28-DAY Sale
One last chance for savings
Deals...likely to recede within weeks
A special opportunity to save up to $150,000
The Centex 9-MONTH Sale
2007: 'This year should be similar to last year'
$175,000 Off? Centex, Say It Isn't So!
Buyers believe the market has bottomed and is bouncing back

Stockton Realtor: 90% of Sales are Foreclosures and Short Sales

From Lyon Real Estate (via Home Front):

Our [4-county] average price has dropped to 297,000 down from a high of 472,000 in June of 2006. Inventory is now 16% lower than the same period last year but this does not mean we are at the bottom yet. There has been a continued increase in ‘notice of default’ being filed and those homes will be coming on the market in the next 60 days. In addition to that, REO (bank owned) accounts for 58% of all Pended and Sold transactions.
...
[E]ven though sales are brisk and better than last year we are still seeing price per foot of the sold properties continue to drop. REO inventory is expected to increase through the summer and if interest rates start to rise we will see greater pressure on home values to decline.

Unlike 2006 and 2007, there was no spring bounce in Sacramento home prices this year.



From the Stockton Record:

The momentum in existing-home sales in San Joaquin County has continued to build, with May sales reaching the highest monthly level since August 2005 as more buyers snapped up primarily foreclosure properties...The median selling price also continued to slip, sliding from $240,000 in April to $237,000 last month throughout the county, the report said. That's the lowest median price seen in the county since February 2003.
...
In a traditional sales market, a cross section of houses sell,...Art Godi of Art Godi Realtors...said. Currently, about 90 percent of sales are foreclosures and short sales, and almost all are under $250,000, he said, "and that's the bottom of the market."

From the Sacramento Bee:

Developer Allen Wayne Warren once planned to build hundreds of new housing units on and around Del Paso Boulevard, the North Sacramento main street the city has worked for years to revitalize. But the falling real estate market caused Warren to scale back his dreams. Now, he's negotiating to sell three mostly vacant properties on the boulevard to the Sacramento Housing and Redevelopment Agency.
...
If Warren accepts $1.4 million for the mostly vacant properties, he will be taking a substantial loss. According to property records, he paid about $2.5 million for the properties in 2005 and 2006.

From the CVBT:

For home sellers who are desperately devout or devoutly desperate, Modesto mortgage banker Philip Cates has something he’d like them to bury. Mr. Cates sells plastic statues of the Roman Catholic Saint Joseph. Home sellers desperate for any kind of nibble from a buyer are supposed to bury the statues near the “for sale” sign in the front yard, head down, “feet toward heaven,” he says.
...
Mr. Cates, who operates out of a modest suite of offices in a downtown Modesto building that house his Service 1st Lending office, says business, at least the statue selling business, is booming...Mr. Cates says he is now “the largest seller of St. Joseph statues in the country.”...“It’s kind of my hedge bet for the mortgage industry, I would say,” he says.

From the LA Times:

Home-mortgage specialists may have been the first lenders to suffer for their roles in financing the housing bubble. But, as foreclosures rise and home prices fall, many smaller banks and thrifts that backed residential developers and home builders are watching black ink turn red and are spending uncomfortable amounts of time with regulators.
...
Residential construction loans, which generate big fees, were especially profitable for smaller banks -- until housing collapsed in places like the Inland Empire, where prices are down more than 30% from their highs, and the Central Valley, where some former boom markets are off more than 40%.
...
According to data tracker Foresight Analytics of Oakland, 15.8% of single-family home construction loans were at least 30 days delinquent in Riverside and San Bernardino counties last quarter, up from just 1.7% a year earlier. The delinquency rate was 14.7% in Los Angeles County, 14.9% in Orange County and 15.4% in Ventura County. It was 30.4% in Merced County, near Sacramento.

From the Modesto Bee:

The Modesto Bee is cutting 15 jobs, or 4 percent of its work force...and The Fresno Bee, 44 people, or 7 percent of its staff.

From the Star-Ledger:

The second quarter of the year fared no better than the first, as the nation's commercial real estate market continued its downward trend, according to the latest PricewaterhouseCoopers Korpacz Real Estate Investor Survey...Transactions involving significant office, apartment and retail properties plunged at least 79 percent in April compared with a year earlier, the report states, while industrial sales fell the least, 67 percent.
...
According to the survey, the office market in cities including San Francisco, Philadelphia and Fort Lauderdale, Fla., are in contraction. Other Florida cities, including Miami, Tampa and Jacksonville, are also declining, as are San Diego and Sacramento, Calif.

Curbside Home Auctions

Sacramento Real Estate Market - 'It's Never Been As Bad As It Is Today'

From the Sacramento Bee:

"We keep seeing more and more horror stories about the economy," said Michael McGee of Winchester McGee Financial, a Rancho Cordova mortgage brokerage firm. McGee said higher mortgage rates aren't helping a housing market that he believes is the worst of his 36-year career. "It's never been as bad as it is today," he said.
...
Consultant Steve Dutra said higher rates will blunt the impact of falling housing prices, which analysts had hoped would kick-start a new round of buying. "With prices coming down, we were hoping interest rates would stay low as well," said Dutra, a vice president in the Sacramento office of Irvine-based John Burns Real Estate Consulting. Higher rates means "a certain amount of people will be taken out of the market," he said.
...
Alan Wagner, president of the Sacramento Association of Realtors, said he's trying to persuade potential homebuyers to jump in now before rates get any higher. "Now's the time to buy your property," he said.

Yet other analysts weren't as hopeful. Dean Wehrli of consulting firm the Sullivan Group said higher rates aren't especially worrisome – but the economic trends are. "We have to be worried about jobs again – Sacramento's job growth has slowed down so much the last few months," he said.

From the Sacramento Bee:

The Sacramento region's slumping housing scene is affecting at least one dealer in high-end wine. Roseville wine merchant Marcus Graziano, customarily a big buyer at the Premiere Napa Valley barrel auction each winter, spent just $80,000 on unusual wines during this year's sale last weekend. "Our business is still growing, surprisingly, but a lot of my clients are in home building," said Graziano in explaining why he cut back his bidding this year. A year ago he spent about $250,000 at the sale and the year before he invested $174,000.

From the Sacramento Bee:

As fears of falling home values continue to grip the Sacramento-area market, more home builders are offering limited protections against losses to help worried buyers sleep at night..."I started hearing about it maybe three or four months ago," said Hanley Wood's Kathryn Boyce. "Builders know there are a lot of people who aren't buying because they think the market is going to go lower."
...
To woo anxious buyers, KB promises if it lowers prices during the three or four months between a signed sales contract and finished construction, the buyer will get the lower price.
...
One of the Sacramento region's leading town house and condominium builders, Reno-based Pacific West Cos., is going a step further. It's telling customers that if they buy today and the builder drops prices before the development is finished – even as far out as two years – they'll be reimbursed for the difference.

From CNN Money:

Many owners simply went too far amidst the mania, over-improving their homes beyond what the local market would bear, according to Darius Baker, a veteran Sacramento, Calif., contractor. In the past his clients were more likely to opt for expensive redos even if they were planning to move, since they knew they'd recoup most of their costs. "I definitely saw a lot of tract houses built in the 1970s, in developments with three basic floors plans, get expensive renovations," he said. "We did a lot of radical projects, moving walls around, installing granite counters instead of Formica and cherry wood cabinets instead of oak."

From the Stockton Record:

Cesar Dias, a real estate agent and mortgage loan officer in Stockton, became a media star in October after he launched a bus tour for people interested in buying foreclosed homes in the area. The catchy marketing concept not only has worked for Dias - he said his business is up fourfold - it's now being picked up by other real estate agents and brokers, with at least a half-dozen such repo bus tours being staged in the Sacramento metro area alone...TV news crews from France, Japan, Australia and Holland, and even "60 Minutes," among others, went along for one of the Saturday Repo Home Tour.com jaunts....

...Dias recently decided to franchise, in a manner, his concept by charging real estate agents and brokers a consultation fee for helping them start up their own tours. There already are a half-dozen "alliances" up and running, he said, and as many are about to launch. His goal is to have 50 in place during the next 60 to 90 days."I had no idea it would be that large," he said. "Every week, every month, it's just been growing and growing."

Fire Escape?

From KCRA (hat tips - Spacebar & SacramentoCrash):

Across the country, fire investigators are looking at some homeowners in foreclosure as potential arsonists...Sacramento fire investigator Steve Johnson said spite, revenge and pyromania are a few reasons for arson. But firefighters are adding desperation to that list. "Nationally, we've been told foreclosed homes have been set on fire," Johnson said. "People are thinking this is the easy way out."
...
"That sign in the front yard is always going to be in the back of our head going, 'I need to really concentrate on why is this an accidental fire? To make it look like an accidental fire? And in retrospect, they are trying to burn their house down to pay it off?'" Johnson said.

From the Tri-Valley Herald:

An early morning house fire gutted a Tracy home Wednesday morning, a few hours before bank and police officials arrived to post an eviction notice on the foreclosed property.
...
While conducting the investigation, Bramell said representatives from the bank and the San Joaquin County Sheriff's Office arrived at the scene to post an eviction notice. A document posted in the window, dated Feb. 20, 2008, said the family was being ordered to leave the home, which is currently owned by World Savings Bank. Bramell called the notice an "area of interest" for the investigation, which is still ongoing and being completed in conjunction with the Tracy Police Department.

From the Sacramento Business Journal:

GMAC LLC is going to be closing its regional business center in Roseville by the end of the year...The Roseville center has 56 employees....

From the Sacramento Business Journal:

"There has been a significant slowdown in new loan activity within the region, coupled with regional fallout from the subprime mortgage debacle," said David Kaiser, chief executive officer, in a news release. "While Granite Community Bank did not directly participate in the subprime mortgage industry, the region's economy and many of our clients have been impacted."

From the SF Chronicle:

Vallejo is on the brink of a dubious distinction - becoming the first city in California to declare bankruptcy. The fiscal crisis, which comes more than three years after the state took over the city's debt-ridden public schools, is a result of snowballing police and firefighter salaries and overtime expenses coupled with plummeting tax revenue from the weak housing market, officials say.
...
Since the federal government allowed municipalities to declare Chapter 9 bankruptcy during the Depression, fewer than 500 cities have taken the action, according to federal court data.

From the Tri-Valley Herald:

Continuing struggles in the real estate market have affected municipal bonds in the past month. As a result, Manteca officials are taking measures to keep the city's redevelopment bond money intact. Over the past 30 days, the credit rating for the city's $50.7 million variable rate bonds has been downgraded twice, Finance Director Suzanne Mallory said, adding the credit downgrades didn't have anything to do with local problems.

From the Lincoln News Messenger:

The Western Placer Unified School District is exploring California’s financial hardship program as a means to fund future schools. Cathy Allen, the district’s assistant superintendent of facilities and maintenance, presented trustees with a crash course in State Allocation Board funding opportunities at a Tuesday school board meeting. The program is available for districts that, despite levying maximum developer fees and exhausting opportunities for local debt capacity, are still unable to fund facility projects.

“We’re just looking at all the options and this is one,” Allen said. “We’re still collecting developer fees, but we have to be concerned about the foreclosures and how that affects the tax amounts (the district collects).” A downturn in the housing market led Western Placer to shelve proposed new facilities, including Twelve Bridges High School.

From ABC News:

It's a tactic called "re-listing," which is legal and more common than you think. "Re-listing is just refreshing the home on the market," [Minnesota realtor Joe] Niece explained, "making the home look like it just came on the market."
...
Across the country in Sacramento, California, the problem got so bad that Michael Lyon, CEO of Lyon Real Estate, blew the whistle after he noticed that one third of all "new" listings were re-listings. "This is just silliness," he said. "I'm sorry, but you can't pull the wool over the buyer's eyes."

Lyon forced his regional listing service to set a new standard. "We let people see all the previous listings, period, there are no secrets," he said. "We want the buyer to know everything about all the times it was listed, so we can allow them to truly investigate the home." The Sacramento listing service also requires a material change in the house if it is to be re-listed.

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.

Moody's Home Price Forecast: Stockton -25%, Sacramento -19%

From the CNN Money:

Over the next few years, more than three-quarters of the nation's housing markets will suffer a decline in home prices. Many will experience double-digit hits in a forecast that has worsened considerably in recent months. According to an analysis conducted by Moody's Economy.com, price declines will exceed 10 percent in 86 of the 379 largest housing markets. And 290 of the cities will experience price drops of 1 percent or more.
...
The Stockton, Calif., metro area, where Moody's predicts a 25 percent price drop, will be the hardest hit among the 100 most populated cities surveyed. Prices in Stockton - in California's Central Valley - rose quickly through 2005 as many would-be Bay Area buyers, frozen out of the expensive San Francisco area housing market, moved in. That influx drove up the median, single-family home price to about $375,000. Stockton prices peaked during the first quarter of 2006 and have gone downhill since. Prices likely won't turn around until the end of next year.
...
100 largest metro areas by population that are forecast to witness a decline in the median existing single-family house price [peak - bottom]:

#1 Stockton: -25.0% [06Q1 - 08Q4]
#5 Modesto: -22.3% [06Q2 - 08Q3]
#7 Fresno: -20.0% [06Q2 - 09Q1]
#9 Sacramento: -19.1% [06Q1 - 08Q4]
#15 Visalia-Porterville: -16.1% [06Q2 - 08Q4]
#19 Bakersfield: -15.6% [06Q2 - 09Q1]

Flashback to Moody's October 2006 predictions:

• Stockton: -15.7% [05Q4 - 08Q4]
• Sacramento: -9.9% [05Q4 - 08Q2]

According to DataQuick, the median price of an existing single-family home in Sacramento County has already declined 17.1% from peak.

From the Wall Street Journal:

To make an American mortgage executive wince, just say "Stockton." Last month, RealtyTrac.com, an online property marketplace, cited the central California city as the nation's foreclosure capital....A 26-month backlog of Stockton homes is for sale. Buyers are scarce; prices are skidding.

That's bad news for the mortgage industry, which could use some pointers on coping with adversity. Some shakeout in the housing market was inevitable. But as defaults and foreclosures mount nationwide, there are signs home lenders are responding in ways that aren't making the rout any easier on themselves....[T]he industry has largely neglected the "back end," the grim but vital task of salvaging loans that go sour.

Jerry Abbott sees the consequences of that neglect every day. His Stockton real-estate brokerage seeks buyers for foreclosed homes. Many of his sales are at a 10% to 15% discount to already-weak market prices...To Mr. Abbott's chagrin, many lenders don't grasp the futility of holding out for boom-time prices in a collapsing market. Lenders trying to sell a foreclosed home for $250,000 often don't react pragmatically by cutting a deal when a bidder offers $230,000; instead they might counter with a token -- and potentially insulting -- price reduction of $1,000. In such situations, Mr. Abbott says, homes don't sell for ages, and when they do, they fetch far lower prices.

From Sacramento Bee:

Desperate times call for desperate measures. So over the weekend Richard and Dana Carrigan shoveled out a piece of their Fair Oaks yard, then buried a 3 1/2-inch statue of St. Joseph that Richard had bought a couple of days earlier. The couple are looking for any extra help they can get as their home goes up for sale alongside the 16,000 other area residences already on the market. "We'll try anything," says Richard Carrigan, an English teacher at Jesuit High School in Carmichael.
...
Catholic retailers say the little statues are flying off their shelves as the once-robust Sacramento-area housing market has slowed....Easter's Catholic Books and Gifts on Palm Avenue in Sacramento says customers have bought 350 St. Joseph kits in recent months. "We have a lot of real estate agents who come in and buy them in bulk," says co-owner Denise Easter-Kramer. Another Sacramento retailer, the Catholic Store on Broadway, claims more than 500 sales in two years. Owner Marilia Perez said sales spiked this summer as real estate listings increased across the region...Even the Sacramento Association of Realtors store on Howe Avenue sells St. Joseph.

From News10:

Homeowners on the brink of foreclosure are refusing to let the banks take away their homes, at least not without a fight. Two sisters from Sacramento are organizing town hall meetings to let other homeowners in on their strategy for holding onto their homes.
...
"I feel like I have to get a night job to keep my house or something," said Tony Ramirez from Sacramento. Ramirez and his fiancé Clarissa are not in foreclosure but have received notice from their lender that their loan is adjusting up $300 per month. "I'm pretty upset that when they sent us a letter saying that your house is going to go up, they didn't offer help. Like if you have hardship, we have a department that can modify your loan. I didn't even know that," Ramirez said. But he and others at Tuesday night's meeting know it now and are hungry for more solutions to avoid foreclosure.

From the Sacramento Bee:

Would you pay more in taxes to put additional cops on the street? That's the question Sheriff John McGinness wants to ask voters in unincorporated Sacramento County...The county is considering its options, but the most likely route is adding a special charge to property tax bills, a move that would require approval by two-thirds of the voters. County officials would try to get the question on the 2008 ballot.
...
The cop tax is one of several ideas the cash-strapped county has floated to improve services during gloomy economic times...Last week, the supervisors were forced to trim requests for additional sheriff's deputies and probation officers, as they approved a $2.1 billion general fund budget. Even as the spending plan was being approved, officials worried that a slumping housing market may force deeper cuts next year.

From the Sacramento Bee:

After weeks of troubling news on the real estate front, Sacramento-area housing and financial experts called Tuesday's interest rate cuts by the Federal Reserve a "good first step" in helping the housing market regain stability. But how much it will help and how fast remain an open question, say home builders, real estate agents, bankers and homebuyers. Some said the government should do more to help ease credit restrictions that make it harder to qualify for California's more expensive housing.
...
But Tuesday's action will bring little relief to thousands of Sacramento-area homeowners who owe more than their houses are worth, experts say. Most say today's tightened lending standards will continue to block them from refinancing their way out of trouble. That means more of the defaults that in August caused one foreclosure for every two home sales locally.
...
Ron Leis, a real estate broker in Carmichael, said the region's home prices are still too high for many first-timers -- even with interest rate cuts. "The rate cuts will help," Leis said. But they don't dent the affordability problem, he said.

From the Stockton Record:

Congress appears poised to throw beleaguered homeowners a lifeline and help potential buyers qualify for federally backed mortgages as a way to combat the flood of foreclosures hitting the nation...Tuesday the House passed legislation 348-72 to overhaul the Federal Housing Administration, which backs mortgages for moderately priced homes...The House also passed an amendment to the legislation sponsored by Rep. Dennis Cardoza, D-Merced, that would raise the loan limit to the lower of either 125 percent of an area's median home price or 175 percent of the national loan limit...The Cardoza amendment would allow loans for as much as $430,000 in San Joaquin County and $368,000 in Stockton to qualify for FHA assistance.
...
Most of the San Joaquin Valley delegation voted for the bill; Rep. George Radanovich, R-Mariposa, was the lone holdout. Rep. Jerry McNerney, D-Pleasanton, who represents a large portion of San Joaquin County, was an "aye" vote. "The number of home foreclosures in San Joaquin County and throughout California is startling, forcing many families out of their homes and into financial ruin," McNerney said. "Many of those families took out interest-only or adjustable-rate mortgages because there was no other option. This bill takes major steps to address this and ensure that the American dream is within reach of all Americans."

Cue the Marketing Mavens

From the Sacramento Business Journal:

Scavenger hunts and concert sponsorships are just a couple of the more creative tools that marketing firms have recently unveiled to lure potential buyers to a sluggish new-home and condominium market.
...
Greg Paquin, a new-home analyst and founder of The Gregory Group, said price cuts and incentives are now widespread, so homebuilders are looking for new ways to distinguish themselves. "The philosophy is: 'Let's get people in the door before they go next door,' " Paquin said. "Everyone's trying to be unique and stand out from the crowd."

Advertising has become common on radio, with live presentations at new-home sites; television advertising is the next logical step, he said. Paquin noted other ploys, such as free dips in swimming pools for those touring model homes.
...
With a market expected to continue to slump, perhaps for another 18 months to two years, according to Paquin's estimate, builders will likely continue to rely on unique marketing. "Soon you'll be seeing hot air balloons with messages on the side," Paquin said.

Saving the Sacramento Real Estate Market with Night Lights & Kings Magnets

From the Sacramento Bee:

A magnet for sales

What do real estate agents really need to boost sales? The answer was on display this week when members of the California Association of Realtors came to town to lobby the Legislature -- and roam a Sacramento Convention Center expo. Sure, there were the perennial title insurers, sign post makers (Show special: $29.95) and lenders -- "Loans, we have loans." But look what else was on display in the exhibition hall:

• Night lights on top of For Sale signs. In a tough market that requires every competitive edge, it "provides up to 150 more selling hours per month," the advertising brochure said.

• The pocket mortgage calculator. People are always asking, "How much?" The salesman whipped out his calculator, punched in a $300,000 loan at 6 percent and had the answer in three seconds flat. Sold!

• A cell phone headset that eliminates in-car noise, crying children and fellow agents in cubicles. "It's what they use in NASCAR," said the saleswoman.

• Refrigerator magnets, also known as "lead generation tools." Said a Minnesota-based salesman: "The Sacramento Kings (magnet) is one of our most popular products."

No kidding, you say.

"At least in this area," he said.

From the Modesto Bee:

"In this market, it's vital to be priced right from day one," said Daniel Maez, a Realtor with Century 21 M&M and Associates.

Kathy Rodriguez, a broker with California Prudential Real Estate, said a seller wants his or her house to be priced in the lowest 10 percent of similar homes on the market. "In today's highest inventory, less than 10 percent of the homes on the market are going from active to pending to sold," Rodriguez said.
...
Mike Kline, a broker with ReMax Executive, said many sellers have a tough time setting a realistic price in today's market. "Our marketplace has changed, and you are no longer going to get the same price you got in November of 2005," said Kline, who has worked in the real estate business for 35 years.

From Forbes:

Market corrections follow three basic recovery patterns. A V-shaped recovery where a market experiences a sharp, fast decline but comes out strong once it hits bottom; a U-shaped recovery, where prices decline gradually and recover slowly; and an L-shaped curve, a hard, fast fall with paltry price bounceback following the market trough.
...
Slower recovery rates are expected in markets such as Minneapolis and Boston, where a slumping local economy, slow job growth and negative migration numbers hamper long term prospects. Along with other U-shaped markets like Sacramento, that have double-digit subprime lending share, Zandi says it's going to be harder for these markets to get going again.

From the Sacramento Bee:

Still going ... going ...

That big foreclosure auction on June 23 at Cal Expo is drawing "good, but not great" response, said Robert Friedman, chairman of the Irvine-based auction firm, Real Estate Disposition Corp. Friedman said 220 bidders have registered for 107 area houses being auctioned.

From the Stockton Record:

According to Shelly Cannon-Keely, office specialist in the Stockton office of commercial real-estate brokerage firm CB Richard Ellis, as the soft housing market has affected the office sector, the vacancy rate for all types of office space in San Joaquin County rose to nearly 7.4 percent in the first quarter of this year.

Flashback: Jasmine Condominium

Sacramento Land(ing), April 25, 2006:

This condo complex in Elk Grove wants to reward reluctant buyers "big time."

Jasmine, a community of attached homes in Elk Grove, will hold a special spring celebration with as much as $50,000 off some homes, as well as special financing and other incentives. "When we say this is a special celebration, we really mean it," said Scott Bolli, director of sales for Pacific West Cos., a residential development company. "We've never offered so much. If you've been waiting, it's paid off, big time."

Wow! I wonder what the payoff will be if one waits even longer!

Sacramento Land(ing), May 30, 2006:

At Jasmine:
May 13, 2006: "Prices start in the high $200,000s"
May 20, 2006: "Home prices start in the mid-$200,000s"

Today, seven Jasmine condos went on the auction block. A reader sent in this ad:

Seven Luxury Condos in Elk Grove
Reduced! Opening Bids Now From $149,000!

'You Don't Want to Test the Market Anymore'

From the Sacramento Bee:

The spring home sales season is under way, and pros say this year you'll need every trick in the book to sell your house.

So take the mounted deer head off the wall, roll on a coat of cheery yellow paint and bring out the vanilla spray, say real estate agents. With nearly 11,500 homes for sale in the capital region -- and hundreds, perhaps thousands, of additional homeowners considering the same -- 2007 is going to be more competitive than ever for sellers.

"Price it right and present it right, and hope you get lucky," says Yuba City broker associate Doug Bryan.
...
"That's all good," Bryan says, referring to aromas, colors and welcomes. "But the price is what does it. If the buyer feels it's reasonable for them, they'll make the leap."

Adds [Sacramento real estate agent Patrick] Lieuw: "If you price a property right, it's still moving. Pricing is critical nowadays. You don't want to test the market anymore. You want to be proactive instead of reactive. Pricing is really the key for the 'wow' factor."

'How Are We Going to Stand Out?'

From the New York Times:

For newspapers, February was the cruelest month. So far. Revenue from advertising was in striking decline last month, compared with February a year ago, and were generally weaker than analysts had expected.
...
"I’m reluctant to say that a single data point is a trend," said Barry Parr, a media analyst at Jupiter Research. "But those are scary numbers, especially when we’re not in a recession."
...
The Tribune Company, whose papers include The Los Angeles Times, The Chicago Tribune and The Baltimore Sun, reported losses of more than 5 percent. So did McClatchy, whose papers include The Miami Herald, The Sacramento Bee and The Lexington Herald-Leader in Kentucky.
...
In some cases, particularly in Florida and California, they traced the weaknesses to volatile real estate markets.
...
Lauren Rich Fine, a media analyst for Merrill Lynch, cautioned in her analysis of McClatchy’s February numbers not to "overreact to just one month of poor performance." Nonetheless, she said, McClatchy’s problems were "just starting." She cited the stark comparison between California’s hot real estate market last February, when revenue from classified real estate ads was up 48 percent, and its weaker market this February, when that revenue was down 20 percent.

From the Sacramento Business Journal:

It's tougher for real estate agents to earn a buck this year; the days are gone when it was enough to stick a sign on the lawn and wait for offers. With sales volume and prices down, agents are having to dust off old marketing strategies and adopt some new, proactive ways of putting properties in front of prospective buyers.
...
For agents and buyers, that means an increased reliance on the Internet... As with so many other categories of advertising, a post on Craigslist can come at the expense of a newspaper ad. "I tried this avenue because I wasn't getting results from newspaper advertising," said Cheryl Rouse, an agent with Keller Williams Realty in Sacramento who has started posting on Craigslist.
...
[A]gents are having more conversations about what improvements the house needs to put it in show condition. "You've got 25 properties to compete with; how are we going to stand out? In this type of a market, that's what we are seeing more of," said Reneé Catricala, a Coldwell Banker agent in Sacramento.
...
For agents who have been in the Sacramento market only long enough to see it during the hot years, the new realities might be confounding. One message that could be difficult to swallow is that the hot market was the aberration, not the recent, cooler one.

"Dominos Are Beginning To Fall"

The Bay Area's CBS station covers the Elk Grove auction:

The ripple from a slow housing market consumes a different victim almost daily. In the Belavida subdivision in Elk Grove, brand new homes sit for months. Desperate to avoid still more losses, home builder Standard Pacific sent upgraded model homes to auction last Saturday with a bargain price tag...[A] 4 bedroom home went for $440,000, a good $150,000 less than it sold for 18 months ago.
...
With so many homes on the market, it's almost impossible to sell your way out of a crisis like that. Consequently a record number of homeowners are going into foreclosure.

Appraiser Amy Perkins says that ripple has left major banks and mortgage lenders with staggering losses. "There weren't any short sales, very few for the last 3 years in a row," Perkins said. "And within a 20 mile radius I've been seeing 300 or more."
...
Mortgage broker Jennifer Miller of Green Valley Mortgage says the banks bear some of the responsibility; they made getting a home loan too easy. "They have started tightening the reigns a little bit and aren't just saying: just sign on the dotted line and we'll give you a couple hundred thousand dollar home," Miller said. "It's not that simple anymore."

'You're Screwed'

So what happens when, for the first time during the current housing bust, a homebuilder puts their homes on the auction block? A CBS 13 video looks at how the Standard Pacific homes fared at the West Coast Home Auctions sale in Elk Grove.

An excerpt from the video:

Reporter: He showed up out of curiosity because he already owns a home in the development and he's not happy about the auction.

Homeowner: You're buying it at $600,000 or $580,000, and all of the sudden they sell it for $430,000.

Reporter: Actually, they sold it for an even lower price: $410,000.
...
Homeowner: It hurts because if you bought it for $580,000, what are you going to do in 2 years, if you have a 2-year fixed on your house and you go to refinance and you don't have value in the house? You're screwed.

Previous story here.

Hat tip to a Sacramento Real Estate Statistics blog reader. Read more at SacRealStats.

We're #1: Sacramento Tops PMI's U.S. Market Risk Index

It’s official. My bubble market can beat up your bubble market. For the first time, Sacramento tops PMI’s list of riskiest housing markets, knocking San Diego off its bubblicious perch. The U.S. Market Risk Index ranks the likelihood of home price declines in two years for the nation’s 50 largest metropolitan statistical areas (MSAs).

From PMI’s report [pdf]:

Of the 19 highest risk MSAs, eight are located in California, eight are in the Northeast, and two are in Florida. Sacramento, CA has replaced San Diego, CA as the highest risk MSA among the top 50, with a score of 604.
…
Six of the 10 areas with the highest rates of deceleration were in the West, with five in California. Sacramento led the trend with a 17.1 percentage point drop in year-over-year appreciation, followed by Phoenix at 15 percent and Oakland at 13.3 percent.

A few smaller markets, mostly in California, are considered more risky than Sacramento. See here for a complete list [pdf].

From the Sacramento Business Journal:

Sacramento housing at greatest risk for price drop

Sacramento-area homeowners beware, the local housing market has a 60.4 percent chance of lower prices during the next two years, the greatest risk nationwide, according to a report released Wednesday.

Sacramento and Placer counties edged out other high-priced markets -- including San Diego County, Oakland and Santa Ana-Irvine-Anaheim -- as the riskiest for a price reduction by winter 2009, according to PMI Mortgage Insurance Co.
…
"Years of rapid appreciation have made homes less affordable in many areas, and that's not sustainable over the long term, so what we are seeing is not unexpected," said Mark Milner, chief risk officer for PMI Mortgage Insurance in Walnut Creek. "Over time, moderating appreciation will bring prices back in line with economic fundamentals, particularly incomes, bringing the market back to a healthy balance."

From the Central Valley Business Times:

Continued deceleration in home price appreciation and decreased affordability caused the risk of home price declines to rise in cities across the country, especially in the Central Valley, says a report Wednesday from PMI Mortgage Insurance Co. of Walnut Creek, the U.S. subsidiary of PMI Group Inc. (NYSE: PMI).

Many of the metro areas in the Central Valley are among the most likely in the country to see price declines over the next two years, according to PMI. The Stockton area has a 60.6 percent chance of price declines, one of the most likely in the entire nation.

From the Central Valley Business Times:

Standard Pacific Corp. says it will sell six homes in an Elk Grove development by auction next month. It’s believed to be the first time during the current housing slump that a new home builder has resorted to auctioning off its homes. The practice was common during previous housing slides.

From the Sacramento Bee:

The home auction spectacle that began last year with impatient sellers aiming to cut their losses has expanded to home builders: The region's first auction of new houses is scheduled for Feb. 3 in Elk Grove.

Analysts say it marks the reappearance in California of a tactic employed by builders during the state's 1990s housing bust. It also signals the real estate market's continuing slowdown as it readjusts from a five-year housing boom that ended 1 1/2 years ago.

"This is a fast, efficient way for us to close out and complete the project," said Jackie Shipley, the firm's vice president of sales and marketing. "We feel like we've had a lot of success in that community. ... It's important for us to do this and move on."
…
Minimum bids will range from $430,000 to $530,000 for the four- and five-bedroom houses in a new neighborhood near Elk Grove's Franklin High School. That means bidders, expected to be a mix of would-be homeowners and investors, must meet at least the builder's minimum price to get the house.

The builder's minimums are well below market highs reached during construction of the subdivision. Early last year resale versions of the smallest $430,000 price tag sold for up to $546,000 on the next street, according to home information service Zillow.com.

From the Stockton Record:

Homes for sale now for rent
Owners forced to find cash flow by alternate means

The number of existing homes on the market has been plunging since summertime because of slow sales, and property managers now report a surge in the number of homes hitting the rental market. Jerry Abbott, president and co-owner of Coldwell Banker Grupe in Stockton, said many sales-market dropouts are investors who couldn't sell and now need some cash flow for mortgage payments.

Norbert Huston, a Stockton real estate broker who manages rentals, said business has skyrocketed since summer. He gets three calls per day from homeowners wanting him to rent out their properties, up from maybe three calls per week a year ago. Diane Starr, owner of Starr Property Management in Stockton, said the rental housing market is tough now, with more houses for rent than there are potential renters.

Adventures at the SAR Building

The Sac Rag's RunnerGirl ventures into the Death Star and lives to tell about it:

...[W]hen at the Sacramento Association of Realtors’ building this morning, I came across a large store on the building’s first floor that sells a multitude of signs, flags, banners, clothing, accessories, maps, and everything one could possibly need to sell a home (other than a firm grip on the reality of our cooling housing market.) While waiting to drop off my stuff with the lady at the desk, I experienced full sensory overload with signs screaming out to me from every wall declaring, "Ready for Quick Sale!," "POOL," "SALE PENDING," "OPEN HOUSE 1-4," and other concise taglines intended to lure prospective buyers.

The one sign that was missing, however, was one that read, "I will not be completely honest with you, so much that it ticks you off enough to file an ethics complaint, which is why you’re in this building in the first place."

Continue reading...

Pulte New House: 88% Off

This story has it all: incentives, a change in psychology, a cancellation, the flight of buyers, and finally a fire sale auction. Think of this as Sacramento's 2006 housing market in miniature. Bob Shallit has the scoop:

Discount digs: The declining real estate market has produced some bargains. But none like this: a Pulte-built home with furnishings and toys from outdoor gear retailer Cabela's, plus lots of extras.

For $5,000.

OK, this isn't exactly a full-sized residence. It measures just 8 feet by 8 feet. The furnishings are all pint-sized.

It's a playhouse, left over from the biannual "Dream, Play, House" fundraiser held in September by the Placer County Child Abuse Prevention Council.

Six local builders created incredible tiny homes for the event. Pulte's "Mother Lode Prospector's Cabin" -- with a sluicelike slide, a hidden cave, rope swing and a miner's cart full of fake gold -- was the auction's top attraction.

It earned an award for craftsmanship and received an auction-high bid of $16,000. But the buyer had a change of heart and stopped payment on his check.

"The home was left without a home," says CAPC's Donna Wood.

Nobody has stepped up since to buy the log cabin house. So CAPC has listed it on eBay (Item No. 200059385693). Minimum bid: $5,000 (including delivery). Deadline for bids: Christmas Eve.

The home actually is valued at nearly $40,000, including the furnishings. Good deal. Great cause.

Looks like something you might find on Burbed.

Have a Merry Christmas everyone!

Misery Loves Company

From News 10:

The seller's market is no longer. Buyers now have the upperhand, demanding upgrades, free landscaping and lower prices from new home builders. But what still stops some deals from closing is when the buyer can't sell his present home.

"There have been cancellations for that reason and that reason alone," says Judy Bennett of Roseville's Westpark development. "People are very nervous about that. They don't want to be left with two mortgages."

So Westpark's builders are getting creative. Lennar, Pulte and Centex are joining forces to offer a "We Stage Sacramento" exposition this coming Saturday. The point is to help would-be home buyers become home sellers...

"The days on market have increased greatly. We're seeing now anywhere from 120 to 160 days average for houses priced from 500 to maybe 800 thousand," Norris says. "That's huge."

By joining forces, Lennar, Pulte and Centex home builders hope the exposition will create business. "It's wonderful. We're all going to succeed together," believes Bennett.

No Miracles For House Auction Sellers

The Sacramento Bee has a follow-up to Sunday's auction article:

Auctioned homes' values are pounded
Gavel drops six times as bargain hunters bid below list prices.

At least six Sacramento-area homeowners who hired auctioneers to sell their houses are in escrow today after a dramatic live Sunday auction that also proved unable to sell six other homes. The results marked the region's first major venture into home auctions as a real estate downturn heads into its second year and the market slows under the weight of 15,000 unsold houses...

In the hotel conference room late Sunday afternoon, sellers and their families sat tensely as a staff dressed in formal wear unleashed a rapid-fire auction that lured buyers to offer bids in $10,000 increments. The homeowners whispered nervously, held hands over their mouths and sometimes shook their heads no as real estate agents probed them to consider flexibility in their minimum prices.

Buyers, meanwhile, largely exercised discipline as they sat up front and held to their limits. During the hourlong auction, it took only minutes to move some houses that previously had sat on the market for months. Six sellers accepted the highest bids, but there were no emotional bidding wars to make sellers' dreams of miracles come true...

Some bids were $100,000 under previous asking prices, reflecting the growing power of buyers in a market that sellers controlled for years...

...[One] house that sold had a high bid of $435,000 -- $100,000 below its listing price...

Seller John Chargin was among the half-dozen who declined to accept a high bid -- in his case, $450,000 for an Elk Grove home he listed at $549,950. But Chargin, who wants to sell the house quickly after relocating elsewhere in California, remains upbeat about his prospects. "I think I'm going to sell this house from this auction just from getting so many people through it," he said Monday. "There is no way in this market I would have gotten that many people, so we'll see."

Another house that didn't get the minimum Sunday carried a $470,000 listing price and a high bid of $360,000. Zillow.com and Reply.com value the house between $424,000 and $472,000.

Prior post here.

Sacramento Bee: Denial, Upbeat Talk, and Price Cutting Not Working

From the Sacramento Bee:

Patrick Maloney aims today to distinguish his house from 15,000 others on the market with a tactic typically used to sell cattle and farm machinery. He's called in an auctioneer.

"I'm trying to get out quick," says the Sacramento resident moving to San Luis Obispo. Last month Maloney put up a for-sale sign asking $293,000. But so far it's attracted only lookers..."I can see the handwriting on the wall," he says. "I don't feel like sitting here six months or paying a house payment on top of rent in San Luis Obispo. I thought about renting it out, but I'm not the landlord kind of guy..."

It's finally come to this in Sacramento's weakened real estate market. Denial that the boom has ended isn't moving houses. The upbeat talk of real estate agents hasn't worked. Even price cutting isn't working for many as thousands of houses languish on the market. Almost on cue amid the quiet desperation, auctioneers have begun elbowing their way into the sales scene...

"A lot of sellers have dropped their sales prices $10,000 and no one cares," says Keith McLane, principal of West Coast Home Auctions and former Sacramento land buyer for Texas-based Richmond American Homes.

From News 10:

Thousands of homes are up for sale in the Sacramento area, but buyers aren't snapping them up like they used to. Now a group of frustrated and desperate sellers are auctioning their homes hoping to hear the words "sold to the highest bidder..."

Keith McLane of West Coast Home Auctions has been in the business for more than 10 years and says home sellers are getting frustrated with the real estate market slow-down. "A lot of people are finding very difficult to sell their houses now," McLane said. "We've had sellers that have been in the market for three, five, six months and they're saying, 'Get me out.'"

Sacramento's NPR station also had a piece on home auctions. Listen here.

Home auctions As the housing market cools, home owners are trying different ways of selling their homes. Are auctions a viable option?

Also: Flippers in Trouble Turn To Auctions