"The Naysayers Have Been Silenced"

From the Sacramento Bee:

Jose Espinosa worked his way out of the strawberry fields of Central California in the early 1990s, determined to learn a profitable trade. He did, and as a craftsman in stucco and walls, he enjoyed 12 straight years of handsomely rewarded construction work. Six months ago he was laid off and now may lose the house he and his wife bought a couple of years ago in Stockton. They had saved $30,000 for a down payment. "That was my life savings," said the 38-year-old legal Mexican immigrant.
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His mortgage is $2,700 a month, he said. When he bought the house, he was earning at least $1,000 a week building houses....It was enough to make him feel secure. "Everybody said it was a good idea to buy a house. So we got excited and did it," Espinosa said. "My problem now is not a subprime loan. My problem is there is no work."

From News 10 (video):

Due in large part to the mortgage crisis, the demand for new homes -- and new lumber -- is down. The [84 Lumber] Florin Road store became expendable, and [Auggie] Aleman, along with about 20 co-workers, were told without warning that they were out of a job.
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For Aleman, his wife and two kids, it means they join the ever-growing group of people who are suffering from the slow housing market. "I had a big home," said the 27-year-old husband and father of two. "Now, I gotta find a small home, because I can't afford to live in my home anymore."

Forbes: America's Riskiest Real Estate Markets

7. Sacramento, Calif.

With a 3% foreclosure rate, the country's fifth worst, Sacramento is still a long way from working out its lending difficulties. More problematic? Construction was one of the city's biggest drivers of job growth, and jobs have slumped in line with stalled building. The good news, according to Radar Logic, is that transaction volumes are up, something that could have a lot to do with the city having the nation's highest rate of homeowners reducing prices, based on data from ZipRealty. Sacto's biggest risk is whether or not it can add enough jobs to bring money and buyers into the city.

From the Sacramento Business Journal:

[B]uyers hesitate to commit for fear the market is still falling. Carmen Micsa, a broker associate with Re/Max Gold in Fair Oaks who specializes in condos, helps persuade prospects with an offer of a seven-day cruise. "I started doing this two years ago when the market turned," said Micsa, who offers the deal to both buyers and sellers. "You do anything possible so that you can motivate people to become homeowners."
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Such tactics get mixed reviews, however. "We used to do a lot of that wacky stuff," said Cohee at Pacific West. "Nobody is going to buy a home based on that. Maybe it will get them out to talk to you."

From the Sacramento Bee:

Most folks agree that times are tough in the real estate business. But don't say that out loud if you work at the local brokerage offices of Cornish & Carey Commercial. Annoyed by the negative comments of co-workers, one employee suggested a $1 fine be collected from anyone uttering a discouraging word about the current real estate market.

"He was tired of it," C&C boss John Frisch says of the semi-serious proposal. "It doesn't help your (work) attitude to be around negativity." The idea was first adopted in the firm's Roseville office. Then it spread to Sacramento. Since then, Frisch says, the naysayers have been silenced. Not a single dollar has gone into the C&C kitty.

Has all that positive thinking helped boost sales? "It hasn't trickled down to the market yet," Frisch says.

Sacramento Real Estate Market - March 2008 Water Cooler (2)

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Membership in Central Valley Realtors Association Plunges 59% in 1 Year

From the Stockton Record:

The Central Valley Association of Realtors, a trade group covering Stanislaus County and much of San Joaquin County, was expecting a huge membership loss this year as more and more agents dropped out of the sales market. But instead of an expected drop from 2,900 to 1,700 year to year, the association...has seen membership shrivel to about 1,200...Cliff Coler, the group's interim chief executive officer, said declining membership and revenue have meant a cutback in staff from 13 to four.
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Karl Enzmann,...Realtors group president-elect, said there was some surprise at the depth of the membership decline...."Some of the numbers hit us in the face like a cold bucket of ice water," he said, and belt-tightening has meant a 50 percent cutback in the CVAR budget.

From the Sacramento Bee:

Sacramento-area home builders are being extraordinarily cautious this year about starting new homes. That's evident in the newest count of building permits taken out at area city halls. Home builders in El Dorado, Placer, Sacramento and Yolo counties are pulling back at more than double the statewide average rate, seeking only 589 building permits to start new houses, condominiums and apartments in January and February. That compares with 1,833 permits the same time last year, the Burbank-based Construction Industry Research Board reports.
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When builders slow down like this, it means fewer jobs all down the line, from subcontractors to materials suppliers. It's also partly why the state Employment Development Department is reporting that jobless numbers in the capital region are up nearly one percentage point over February 2007.

From the Stockton Record:

Home starts in San Joaquin County slowed to 46, the lowest monthly level in years, based on building permits pulled in February, the Research Board reported last week. That was an 82 percent drop from 249 in February 2007.

From the Stockton Record:

It appears other county residents also are short on funds to pay essential expenses like property taxes. In 2004 and 2005, about 3.5 percent of those who owed property taxes were delinquent on their payments, according to the San Joaquin County Treasurer-Tax Collector's Office. That number rose a percentage point in 2006 and passed 7 percent last year. Homeowners get two tax bills each year, one in November and one in February. This tax year, nearly 10 percent of payers missed the first payment....

From the Sacramento Bee:

A host of real estate scams popular during the 1990s housing downturn are back this year and snaring unsuspecting homeowners and renters, say law enforcement and real estate officials. "The ones that know how to do it are remembering how to do it and doing it again," says Elk Grove real estate agent Alan Wagner, president of the Sacramento Association of Realtors.
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One is the fake landlord scam. Sacramento real estate agent Carey Covey says a would-be renter at one of his listings lost $2,000 after handing a security deposit and first month's rent to someone pretending to rent him the house. The house had been foreclosed on and was owned by the bank – not by the person posing as the landlord...Covey says con artists "track homes that have been on the market for a while, have them re-keyed and put an ad in the paper or Craigslist and offer it for rent."

From the Sacramento Bee:

Undaunted by the recent failure of two high-rise condominium projects planned for downtown Sacramento, a Los Angeles-based developer proposes to transform a leafy, four-block area south of the Capitol with five new residential towers. The Bond Cos., an experienced developer of infill housing and retail projects nationwide, filed an application with the city of Sacramento Thursday to replace 206 low-rise apartment units in the Capitol Towers neighborhood with five towers ranging from 15 to 33 stories....In total, Bond Cos. is proposing to build 1,646 new housing units.
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Mark Bachli, a principal in the Bond Cos., said the "market will determine what is actually built" on the Capitol Towers property, bounded by Fifth, Seventh, N and P streets.
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Jim Pachl, an environmental lawyer...is watching the latest idea for Capitol Towers with a wary eye...Pachl said he's troubled by the recent failure of the Aura and the Towers condominium projects. The Towers was under construction when it melted down financially, leaving a huge hole in the ground on the Capitol Mall. "I'm sitting here saying, 'How realistic is this?' " Pachl said.

Curbside Home Auctions

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.

Foreclosure Pets Phenomenon Intensifies

From News 10:

The Sacramento SPCA...is seeing a dramatic jump the number of animals being surrendered by owners who are going through foreclosure...During the last four months of 2007, the Sacramento SPCA took in 176 dogs and cats from people who said they were surrendering them due to "moving," said [Director Rick] Johnson. That is 100 more than the same four months in 2006. Johnson doesn't see the situation getting better any time soon.

From the Sacramento Bee:

The Sacramento City Council approved the $130 million sale Tuesday of its Sheraton Grand Hotel and garage on J Street – along with an unusual agreement to return about $23 million of the city's profits to the buyers as subsidies for additional downtown projects. Council members voted 8-1 in favor of the sale despite a public admonition by interim city Treasurer Tom Berke that more review is needed, particularly given the depressed state of the real estate market. He suggested the city might hold on to the hotel longer and wait for prices to rise.
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Other council members called the price fair, and expressed fear that market conditions would deteriorate further and the deal would evaporate...Councilman Steve Cohn, addressing Berke, said, "If you're correct about how severe this recession is, now is exactly the time to sell.
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In a brief appearance at Tuesday's council meeting, [David] Taylor said the Sheraton deal provides a way to keep downtown redevelopment alive during a bad economic cycle. "We were frankly seeing so many projects die downtown over the past 18 months that we were concerned about our ability to perform on some of the downtown projects we've been working on," he said.

From the El Dorado Hills Telegraph:

More than 70 people packed the main room of the senior center to ask questions and listen to updates about area road issues from a guest panel consisting of Richard Shepard, Department of Transportation director, Russ Nygaard, DOT deputy director, supervisors Rusty Dupray and Helen Baumann, and Captain Bill Donovan, of the California Highway Patrol.
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Shepard and Nygaard were unable to give specific timetables for the completion of many DOT projects because of lack of funding, which Shepard said is directly tied to the housing market. "We’re facing a housing slowdown at the moment," Shepard said. "And 50 percent of our Capital Improvement Program revenue comes from housing development fees."

From the Associated Press via the Washington Post (hat tip Housing Wire):

Anticipating a surge in troubled financial institutions, federal regulators aim to increase by 60 percent the number of workers who handle bank failures. The Federal Deposit Insurance Corp. wants to add 140 workers in the division that handles bank failures, bringing the total to 360, said John Bovenzi, the agency's chief operating officer.
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Gerard Cassidy, managing director of bank equity research at RBC Capital Markets, projects 150 bank failures over the next three years, with the highest concentration coming from states such as California and Florida where an overheated real estate market is in a fast freeze.

CAR: Sacramento Median Price Decline Breaks 30% YoY, Sales Rebound

From the Sacramento Business Journal:

The median price for homes that sold in Greater Sacramento in February was $258,680, a 30 percent decrease from a year ago, according to the California Association of Realtors...Home sales in the region...were up 10.7 percent compared to February 2007.

From the Appeal-Democrat:

Yuba-Sutter existing home sales also picked up last month. February saw 94 sales, up from 62 sales during February 2007, according to figures provided by Lloyd Leighton, a Yuba City-based real estate agent...Area sales prices were down to a median price of $231,000, dropping 17.5 percent from February 2007's price of nearly $280,000.

Leighton said it was too early to say whether the home market has hit bottom in Yuba-Sutter but the rise in sales was good to see...Leighton said he thinks the increase in activity is real. After several months of falling home prices and slumping sales, the local real estate market could be coming back — barring a dramatic increase in interest rates or a recession.

From Roseville & Rocklin Today:

According to HousingTracker, the number of homes on the market in their defined Sacramento area was 15,100 as of March 24. Surprisingly this is down from a week earlier and 0.8 percent below a month ago. Rather than seeing inventory grow, it appears to have stayed relatively flat for the past 12 weeks.

The level of inventory is still high when compared to the level of sales. Although holding right now it is still 6.6 percent above where we were a year ago. We would have to hold the current inventory level through April to be at the same level as we were at the end of April last year. With foreclosures and short sales still increasing that is a tall order. The good news is that spring inventory is not growing at a rate that it did in the last two years.

From the Sacramento Business Journal:

84 Lumber Co. said it has closed nine stores, including its outlet on Florin Road in Sacramento, as a result of consolidation. The privately held company said the closings are partly because of the slowing housing market.

From the Sacramento Bee:

Federal prosecutors in Sacramento announced Monday that 19 people have been indicted in a massive mortgage fraud case that preyed on people close to foreclosure and stripped homeowners in two dozen states of millions of dollars in equity. McGregor Scott, U.S. attorney for the Eastern District of California, unsealed the contents of two indictments Monday that detail a conspiracy to strip 115 people of $12.6 million in equity and their homes in cases that stretch from California to New York.
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The case – the largest equity-skimming scam in the country – affected about a half-dozen Sacramento-area residents and came to an FBI agent's attention when a North Highlands victim reached an FBI economic crimes agent who was taking calls from the complaint line.

From the Stockton Record:

In 2002, as interest rates fell following the Sept. 11, 2001, terrorist attacks, Lodi officials refinanced about $47 million worth of bonds issued three years earlier to pay for electric utility infrastructure projects. The bonds were refinanced from a fixed rate to a variable interest rate that resets every week. But the insurer of those bonds, MBIA, was one that succumbed to the housing downturn, and the fallout has trickled down. Earlier this month, investors pulled out $2.5 million worth of their bonds, which now are being held by a French bank at a higher interest rate until the city can resell them. More investors have followed suit, with more than $5 million in additional requests so far, but those bonds were resold much quicker, city officials said.

'The home-building industry is not in a recession. It's in a depression.'

From the Sacramento Bee:

Rancho Cordova-based home builder Reynen & Bardis Communities Inc. and a dozen related entities owe more than $1.9 million in late property taxes and penalties, Sacramento County property tax records show. The taxes, which were due in December, are the latest fallout from the real estate downturn and one that has sent a ripple through the city of Elk Grove, where the unpaid taxes and penalties exceed $1.3 million.
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Observers blamed the economy for the plight of the cash-strapped company, as well as that of other builders in similar fiscal straits. "People are talking about whether we're in a recession," said John Hodgson, project manager for Elk Grove's 1,900-acre Laguna Ridge planning area, where Reynen & Bardis entities have large holdings. "The home-building industry is not in a recession. It's in a depression."
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"It's a perfect storm of very unfortunate economic events that no one could have possibly predicted," she [Michele McCormick, spokeswoman for Reynen & Bardis Communities] said.

From the Sacramento Bee:

For thousands of people shut out of the housing market as prices doubled between 2001 and 2006, bank-owned homes are real estate's new gold rush. With more than 10,000 foreclosures last year in the eight-county capital region, the plentiful inventory of bank-owned homes has fueled a mini-boom in buying...In the last two months, buyers in the Sacramento region have scooped up more than 2,000 foreclosed homes, a 10-fold increase from the same period a year ago, according to DataQuick Information Systems in La Jolla.

From USA Today (hat tip TMTGM):

Taking shelter with parents isn't uncommon for young people in their 20s, especially when the job market is poor. But now the slumping economy and the credit crunch are forcing some children to do so later in life — even in middle age.
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Kim Foss Erickson, a financial planner in Roseville, Calif., north of Sacramento, said she has never seen older children, even those in their 50s, depending so much on their parents as in the last six months. "This is not like, 'OK, my son just graduated from college and needs to move back in' type of thing," she said. "These are 40- and 50-year-old children of my clients that they're helping out."

From the Stockton Record:

San Joaquin County is taking a breather. The county's dizzying population growth, much of it fueled by Bay Area transplants looking for more-affordable housing, has slowed considerably in the past two years.

New census figures show that in the first seven years of the decade, the county population ballooned by just over 19 percent, adding more than 107,000 residents. But interestingly, most of that growth occurred from 2000 to 2005. In the past two years, the net increase was only about 13,300 people.

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.
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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.