Bay Area SOS

From the Sacramento Bee:

The recession has finally caught up with Silicon Valley and much of the Bay Area...The economy here escaped the worst of the housing market crash – but not the more recent slump in consumer spending. That's hitting the tech sector hard.
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Sacramento is hurting because it's being starved of the eastward migration – of people, jobs and wealth – that occurs when the Bay Area is healthy.
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State records show Intel Corp. laid off 200 workers at its 6,000-employee Folsom research park last year, and it continues to struggle...Hewlett-Packard Co...let 70 workers go at its Roseville campus last year, bringing employment to less than 3,500. As it integrates its acquisition of EDS Corp., it plans to lay off 24,600 workers worldwide over three years, which could affect Roseville and EDS operations in Sacramento, Rancho Cordova and Folsom.

From the Sacramento Business Journal:

Sacramento’s office market went backwards in 2008. The vacancy rate for Sacramento’s office buildings rose for the seventh straight quarter to end the year. And for the first time in two decades, tenants used less space at the end of the year than they occupied at the beginning, according to the region’s top brokerages.
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Even traditionally stable areas have seen a drop-off. Nico Coulouras, vice president at Lowe Enterprises Real Estate Group, which controls about 700,000 square feet in the Highway 50 submarket, one of the best-performing areas in recent years, said leasing activity in that area was steady until November. “Then, it got quiet,” he said.

From the KCRA:

Home Depot Inc. said it is cutting 7,000 jobs and closing its smaller Expo chain, including a store in Roseville, as the recession continues to batter the nation's housing market.

From the Stockton Record:

...[San Joaquin] County's unemployment rate hit 13 percent in December, up 1.1 percent from November, according to data released Friday by California's Employment Development Department. It is the highest rate in the county in 12 years.
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In recent months, [UOP economist Jeff] Michael had been saying that San Joaquin County employment numbers weren't as bleak as the national numbers and wondering whether that was a short-lived phenomenon. "Pretty clearly it was a blip," he said. "My reaction to (the new employment report) was, 'Wow!'"

From Business Week (hat tip RV6Flyer):

We asked AXIOMetrics, a Dallas-based apartment data company, to assemble a list of the 25 large metros where the rate of rent declines accelerated most in the fourth quarter.
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Sacramento/Arden-Arcade/Roseville, Calif.
Rank: 24
Rent drop: -1.9%
Q4 2008 rent change: -3.9%
Q4 2007 rent change: -2.0%

From The Housing Bubble blog's Ben Jones:

We had...[a serious recession] in Texas when I was young. At first, lots of people hoped oil and real estate would bounce back and save our necks, but economics don’t work that way. We had a bubble and it didn’t come back.

What is frustrating to me is that the ongoing debate is headed by the fools that got us in this situation. Housing isn’t going to lead us anywhere. The fact is we’ve had the largest financial mania in history. It’s not going to return, and we better start working on how we will work and live in the future. Nobody can turn the clock back, and hoping that housing will lead a recovery is just as futile wishing oil would rebound in the 80’s.

Bee: Sacramento Real Estate Market Bottoming Out?

From the Sacramento Bee:

Is Sacramento's woeful housing market bottoming out?..."We might be hitting that bottom … but we might be at that bottom for a while," said Dean Werhli, a vice president in the Elk Grove office of market researcher Sullivan Group Real Estate Advisors. "We could be skidding along this bottom for quite some time."...Even if the economy worsens, "it's going to be difficult for prices to go much lower," he said.
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Consumer advocate Paul Leonard offered a bleaker prognosis: The foreclosure crisis could worsen over the next year, and the state's faltering economy won't help. "It's certainly good to see that there is new (sales) activity, but there are still a number of factors out there that suggest that this problem is going to be with us for a while statewide, particularly if you look at the Central Valley," said Leonard, director of the California office of the Center for Responsible Lending.
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The region's economy has a lot riding on this. The bursting of the housing bubble caused considerable harm to the economy in Sacramento and across the state. As home values plunged, equity "extractions" – cash generated by refinancing, home equity loans or outright sales – fell by 34 percent last year in Sacramento, according to MDA DataQuick. That took $2.1 billion out of the region's economy.

From the Sacramento State Hornet:

As the effects of the housing crisis and the international economic crisis ripple through everyday life, students and faculty at Sacramento State are forced to change lifestyles. For some, this means driving less; for others, the changes are more severe. Many students are finding they have to spend less to survive these days. Matthew Harris, undeclared freshman, said his spending habits have changed recently. "I don't spend money at all anymore," Harris said. "The only things I spend money on are school and food, and only when necessary."...Harris said he feels it is likely the U.S. will enter into a depression in the near future. [Student Anthony] Gragg said he feels the country is not quite to the point of worrying about a depression, but it is getting close.
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[Kristin] Van Gaasbeck [associate professor of economics] said many professors are likely being affected heavily by the burst of the housing bubble. "Many instructors were recently hired at Sac State, and many, myself included, probably bought homes in the area during the housing run-up," Van Gaasbeck said. "I suspect that some of them are in a better boat than others, but depending on how much they were gambling on property values increasing, they might get stuck."

From the Tracy Press:

What developers had hoped would be the first retail-office-industrial anchor in Mountain House has folded under the weight of a foreclosure-saturated housing market and the national credit crisis. Chapter 11 bankruptcy of Pegasus MH Ventures I LLC forced parent company Pegasus Development to cancel plans to build a business park on 140 acres of land along Interstate 580 and near the Alameda, Contra Costa and San Joaquin county lines.

From the Sacramento News & Review:

In Folsom, home of the prison, the factory outlets and the historic downtown, the local economy will be the incoming city council’s No. 1 priority. As the election approaches, evidence of the downturn is everywhere you go in this city of 70,000 people just east of Sacramento. Reality is setting in, and it’s looking grim.

The number of foreclosed homes is growing, and property-tax revenues are shrinking. Several commercial areas in town continue to thrive, but elsewhere businesses have disappeared, leaving gaping holes in silent strip malls. Vast swaths of new commercial development lie vacant. The housing bubble has burst, the boom is over, yet the ideal of perpetual growth lives on. An enormous new shopping center continues to rise north of Highway 50. Plans for residential and commercial development south of the highway are proceeding...The city faces its bleakest budget crisis in years, and the city council will have to figure out how to fill all those empty businesses and homes....

Half-Filled Developments - "Advertisement for a Failing Housing Market"

From KCRA:

A new Centex Homes development in Rancho Cordova is in limbo because of a dreary housing market, the developer confirmed Thursday. The 13 homes currently under construction in the Cypress at Kavala Ranch development will be finished, but none of the other lots will be developed for now.

From Bloomberg:

When Quinn Cuthbertson looks around his new neighborhood in El Dorado Hills, California, he sees rows of empty homes and barren hillsides. A promised new school and a clubhouse haven't materialized. Cuthbertson paid $460,000 for a four-bedroom house in this northern California town named for the mythical golden city. He now suspects his neighbor spent $45,000 less. Nearby, 87 of 98 Toll Brothers Inc. home sites are undeveloped.
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"Half-filled developments are an advertisement for a failing housing market," said Retsinas, a former assistant secretary for housing at the U.S. Department of Housing and Urban Development. "It also has a spillover effect on the surrounding community."
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Brent Sease, who bought a five-bedroom home built by Miami-based Lennar in El Dorado Hills, said a park and school that were supposed to be constructed are at least two years from being completed. Across the street, red tags that say "Available" are pasted on two houses. "That's the thing I'm concerned about," said Sease, a software manager with three daughters. "It's going to be a while before they put all that in, because they're not selling homes."

From Folsom Telegraph:

Quick, where’s the foreclosure rate higher – upper-middle class Folsom or low-upper class El Dorado Hills?

It’s higher in suave El Dorado Hills, significantly higher – by 50 percent...That might reflect the fact that EDH housing prices tend to outstrip income more than they do in Folsom, according to Money Magazine. El Dorado Hills’s median income of $116,406 amounts to 17 percent of the median home price of $672,335. Folsom’s $94,180 median income accounts for 19 percent of the city’s $490,000 median home price.

From KCRA:

Placer County SPCS animal shelter leader Leilani Vierra said she has 20 animals in her shelter as a result of people suffering from foreclosures, and the numbers are growing...Now we are seeing an animal a day at our shelter, if not more, as a result of people losing their home," Vierra said.

Wells Fargo labels Sacramento area counties as "severely distressed markets" (via Blown Mortgage).

From the Wall Street Journal:

Sgt. First Class Nicklaus Skaggs is among those looking to walk away. Mr. Skaggs bought his home in April 2005 shortly after returning to California from a one-year tour of duty in Baghdad. The $455,000 three-bedroom home he and his wife purchased in Vacaville, about one hour northeast of San Francisco, is worth an estimated $285,000 today, well below the $453,000 he owes on his mortgage. The monthly mortgage payment, which jumped after its interest rate increased, is now $4,000, up from $2,980 when he bought the house.

Mr. Skaggs expects to be redeployed to Iraq again later this year. But he can't sell his home, since there are few buyers, and he can't refinance because lenders require a large down payment he doesn't have. Now, the 18-year Army veteran has decided to walk away from his mortgage. He hopes in a few years lenders see his decision as a unique situation created by the housing meltdown. "I don't think that house is going to recover in value any time soon," said the 40-year-old. "I'd just be throwing the money away."

A rise in the number of people choosing to default on their mortgages would represent a significant departure from past behavior of American homeowners, who during past housing downturns tended to walk away only as a last resort....What's different now, analysts and economists say, is that home prices have fallen so far so quickly that some homeowners in weak markets are concluding that house prices won't recover anytime soon, and therefore they are throwing good money after bad.

From KCRA:

Doug Heisch works for the Baldwin Company in Sacramento, an auto repossession agency...Heisch said the last four months have been quite a bit busier than normal. Owner Mike Baldwin's seen a 15 to 20 percent increase in repossessions this past year. Baldwin said it's obviously the downturn in the housing market, construction trade, real estate, loans, mortgages that they are seeing borrowers and consumers falling victim to repossessions.

From the Sacramento Business Journal:

Budget problems mean the city of Sacramento is "facing elimination of approximately 500 positions" in the coming year, according to a report to the City Council released Friday, or nearly one out of every 10 city jobs.

From the Sacramento Bee:

Sacramento unemployment rose to its highest level in more than a decade...Sacramento-area unemployment rose a half-point to 6.4 percent, the state's Employment Development Department reported Friday.

'Relying on Luck' in Folsom

From the Central Valley Business Times:

Five of the top ten [California] counties for foreclosures last month were in the Central Valley, led by San Joaquin County with 1,000 homes going on the auction block, a 700 percent increase over the number a year earlier. Stanislaus County is ranked third in the state on a per capita basis with Sacramento County fourth, Yolo County fifth and Merced County seventh, according to the computations by ForeclosureRadar.

From the Central Valley Business Times:

The Stockton metro area in the Central Valley had the nation’s second-highest home foreclosure rate last year among the nation's 100 largest metro areas, says a new report from RealtyTrac Inc. of Irvine, a foreclosure information company. With 4.866 percent of its households entering some stage of foreclosure during the year, Stockton saw a total of 22,184 foreclosure filings on 10,608 properties, up 271 percent from 2006, RealtyTrac says.
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Other California metros with foreclosure rates in the top 20 are Riverside-San Bernardino at No. 4, Sacramento at No. 5, Bakersfield at No. 7, Fresno at No. 14 and Oakland at No. 16.

From the Sacramento Bee:

The city of Sacramento is sending out additional pink slips to 12 workers in its Development Services Department today, for a total of 28 full-time employees this month.
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Development Services, which found itself in the red this year, has taken the first significant hits, said Director Bill Thomas. His department handles building permits, planning and inspections, among other tasks. "When you get a housing slump, we're the first to feel impacts," Thomas said.

From Bloomberg:

When Mary Kamanu paid $409,000 for a house in Folsom, California, she never imagined that three years later it would be worth about 20 percent less and she would have to pay the bank more than $80,000 just to sell the place. "I'm completely upside-down on my mortgage, like a lot of people,'' said Kamanu, who wants to move 12 miles away to live with her fiancé in a suburb of Sacramento. "I know I'm going to have to come up with a big chunk of change.''
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Kamanu refinanced her house in May 2007 and owes $415,000 on her mortgage. Homes in her neighborhood now sell for about $330,000, she said...Kamanu said she doesn't want to put her life on hold until the housing market improves. She's planning a sunset wedding later this year on the beach at Folsom Lake, about half a mile from her property, even as she waits for a buyer.

She said she's willing to sell the three-bedroom, two-bath, 1,272-square foot house fully furnished and include two wide-screen televisions to entice a buyer. The home has a fireplace and a two-car garage. "I'm hearing it might be a year or two before the housing market comes back, and I can't wait that long," said Kamanu, 38. "I'm relying on luck, hoping that someone will come along and fall in love with the house, like I did.''

'I've never seen this many bank-owned properties and so many foreclosures'

From the Sacramento Bee:

Scared by growing numbers of bank-owned houses and for-sale signs in their neighborhoods, a handful of local cities are launching moves to help homeowners threatened with foreclosure. Their initiatives so far are limited to offering advice. Nobody's opening up the checkbook to bail out homeowners.
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"We don't know how far this is going to go," says Jim Lynch, community enhancement manager in Citrus Heights. "We've had housing setbacks over my 35 years, but I've never seen this many bank-owned properties and so many foreclosures."

Rancho Cordova, home to 175 foreclosures since January, plans a December workshop looking at solutions for homeowners in default...Folsom officials also have begun talking with Neighborworks. The city has seen 90 foreclosures since the start of the year, according to Foreclosures.com....Sacramento, with 1,740 foreclosures since Jan. 1, has ramped up code enforcement efforts to deal with vacant housing.
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[Reed] Flory [Rancho Cordova's housing services administrator] said the city is especially concerned about its new Sunrise Douglas subdivisions, south of Highway 50...[M]any of the homes there came onto the market in 2005 and 2006. Those were peak buying years for borrowers now facing adjustable-rate mortgage resets and falling home values. Rancho Cordova City Councilman Ken Cooley recently counted 79 homes for sale in Anatolia and fears some may be "fire sales" by troubled borrowers.

From the Sacramento Business Journal:

One of every nine property tax bills have been reduced compared to last year's assessed value in Sacramento County, the latest sign of a slumping housing market.

From the LA Times:

Gov. Arnold Schwarzenegger on Monday ordered all state departments to draft plans for deep spending cuts after receiving word that California's budget is plunging further into the red -- largely because of the troubled housing market. State officials have warned the governor that the likely deficit for next year has jumped from a few billion dollars to as much as $10 billion, threatening to wipe out the progress Schwarzenegger has claimed in getting the state's accounts in order.

In response, Schwarzenegger's finance department has ordered agency directors to formulate plans to cut budgets by 10% for the spending blueprint the governor will unveil in January, according to administration officials who spoke on condition of anonymity. That would mean substantial cuts in all state programs, including education, transportation and healthcare, the officials said.

From the Appeal Democrat:

Yuba County officials and a developer on Monday cited a weak housing market as one reason for delaying – and possibly scaling back – plans for Woodbury, a major development east of Highway 70 and south of Erle Road. The Sacramento developer, Reynen & Bardis Communities, has not renewed options to buy some of the 1,600 acres planned for Woodbury, which would include 6,250 homes, as well as stores, parks and schools, said Randy Margo, assistant county administrator.

From the Modesto Bee:

Engineering firms are feeling the slowdown in Northern San Joaquin Valley real estate just as much as other businesses. Officials with Modesto's Mid-Valley Engineering said they've cut 19 employees in the past few months, and other firms indicate they're also feeling the effects of a business slowdown. "We're paring down some because of market conditions," said Bob Lawson, chief financial officer at Mid-Valley, which has about 150 employees...Lawson and directors at other engineering companies said their slack is directly related to the dramatic downturn in real estate in the region.

Mike Lyon's North State BIA presentation [pdf]

Empty Houses, Full Shelters

From CBS 5 (and video):

In the Central Valley community of Manteca, police have a new job: patrolling hundreds of foreclosed houses left empty and abandoned. They are half million dollar houses, often bought with nothing down, turned into suburban blight. To get a firsthand look, CBS News correspondent John Blackstone rode along on patrol with Manteca Police officer Rex Osborn, who explained, "you make one right-hand turn and immediately this is what we see - dead grass, bushes are dying, trees are dying. The next thing you know you have squatters in the house..."
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But for neighbors the problem that really bites is fast-falling house prices. ust-retired Corky Hine retired wanted to sell for $400,000. Now his home is worth $339,000 and his real-estate agent still can't get anybody to look. "I already dropped it $60,000 (from the original appraisal price,)" Hine said. "She said 'There's like 500 homes for sale within a two-mile radius of mine, and 150 of them are in foreclosure within a mile or something.'"
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"You can’t give these houses away," Osborn said. And neighborhoods are left with the wounds of a mortgage meltdown: the houses nobody wants.

From News 10 (also video) (hat tip Max):

Roughly 10,000 homes in the Sacramento region are in some stage of foreclosure. That means thousands of homeowners, often with their children, are in a fix to find some place to live. Shelters in the area are showing the first signs that some in search of a new roof over their heads will be luckier than others.
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St. John's is limited in what it can handle. It's already at capacity, and the shelter is now turning away 55 women and children each day. That's more than twice the 25 a day it had been turning away during the first half of the year. "Though you can't tie anything directly to the economy and the foreclosure rate, something has to be there because we've never seen an increase like this so rapidly and so dramatically," said [director Michelle] Steeb, who adds a third of the women have jobs.

From M&C:

Newlywed Sheila Haller had her doubts when she and her husband plunked down 425,000 dollars in early 2006 to buy a nice, three-bedroom home in the fast-growing California town of Folson in the arid foothills outside the state capital of Sacramento. 'It seemed too much like that TV show Pleasantville, cookie-cutter homes with no character,' Haller said.

From her small, tidy back garden, you can see what she means. Throughout the area, on hill after hill, earthmovers have cut ribbons of road that have been lined with thousands of new homes and apartments in recent years. 'It was the American dream,' Haller says. 'Everyone was (buying a house) and making money, so we went for it.'
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The housing crash is worst for those unable to afford to stay in their homes. But it has also come as a life-altering shock to those like the Hallers, who are still paying their mortgage but see other houses in their neighbourhood selling for significantly less than they paid. 'It's definitely wrenching,' she said. 'We worked so hard to get a downpayment on this house, but now the mortgage is greater than what the house is worth.'

From Realty Times, Market Conditions - Stockton:

The entire Central Valley of California (and, in fact, the entire State, with a very few exceptions) is in the worst real estate downturn in my 30+ year career.
THERE, I'VE SAID IT!
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First: This is not a time to play or test the market. If you don't HAVE to sell...absolutely...don't list it now and, if it is listed... get it off the market.
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Second: If you know you will have to sell in the next five years...SELL NOW..as in... TODAY! Everyday you wait your equity is melting away with the market. So, if you're retiring and moving in 3 years...SELL TODAY! If you're taking over your Dad's business in Iowa in 2009...SELL TODAY! If you have a new home being built due to be finished in six months...SELL TODAY! How serious am I? From 2005 to 2006 we lost 13% value. From August 2006 until now we've lost another 18%! Many of you have lost more than $100,000 and it's getting worse.
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Oh, and if you bought your home with 100% financing with an ARM with Neg/AM thinking you could refinance when the payment went up...think again. You now owe more than the home is worth, so no refi for you.

From Kiplinger's California Letter via the OC Register:

[California] median home prices should slip by 7% [in 2008], with new houses taking a hefty 10%-15% hit. Biggest declines will be in the Central Valley, the Inland Empire and the San Diego area.

From the Sacramento Bee:

Just weeks after lawmakers enacted a state budget amid partisan turmoil, finance officials say revenues are slipping below projections, making it likely that next year's problem will be worse than expected. Based on major tax receipts collected in the first two months of the new fiscal year, California could face a $8.6 billion operating deficit or more in 2008-09 if the state's economy and soft housing market continue at the current pace. That would be 40 percent higher than the $6.1 billion gap officials anticipated in August...State departments have been told to propose no new spending next year unless they cut a like amount from an existing program.
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[T]he soft housing market continues to have a ripple effect on the state treasury [said Stephen Levy, director of the Center for Continuing Study of the California Economy in Palo Alto]. While property tax goes directly to local governments, the money is counted against the state's share of school funding under a complex formula set by Proposition 98. If property taxes local government generates declines, the state shoulders a bigger burden to fund K-14 schools.

Property taxes aren't expected to be as robust this year, particularly in places like Sacramento, as homes stop appreciating and sales weaken. Forecasters recently predicted the housing market won't begin to recover until 2009, and a recession could quickly delay that recovery by more than a year.

There's even a possibility that homeowners in the Central Valley -- where home prices have dropped -- will seek reassessments on their homes in an effort to pay less property tax. "If a house down the block just sold for $100,000 less than yours, you'd want a reassessment," Levy said.

From 'Making Lots of Money' to 'Waiting Tables at Denny's for $8 an Hour'

From the Sacramento Bee (hat tip Cymst & Fanchew):

The downturn in the housing market -- with job losses in the industry really kicking in during 2007 -- is starting to hit the region's breadwinners. "Job growth has slowed down quite a bit in the first months of 2007," said Howard Roth, chief economist at the California Department of Finance. "Construction, home sales -- it's all going down."

Which is not news to Rachel Brandon of Sacramento. She shook an emphatic "no" when asked Tuesday if she is better off than she was in 2005. "My career for the past 10 years was in the mortgage industry," said Brandon, who is 39. "I have a license to do loans. Two years ago I was making lots of money -- I was making deals in my pajamas from home. Now I'm waiting tables at Denny's for $8 an hour."

Still, she's optimistic. "I really like my job at Denny's," she said. "I'm learning quite a bit, and someday I'd like to have my own cafe. But, two years ago if you asked me if I'd be working for $8 an hour today, I'd have said 'God, no way.'"

From the Folsom Telegraph (hat tip Patski):

Folsom and El Dorado Hills seem somehow insulated from the recent shockwave of declining home sales reverberating through other parts of the Sacramento region.
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Still, potential homebuyers in the area, spurred by the nationwide media blitz in regard to declining home sales, are more apt to take a hard stand in search of a real deal. "Some buyers have the mentality right now that they think they have to lowball on home sale offers," said Jeff Traxler, a realtor for REMAX Gold in El Dorado Hills..."The psychology of the buying public right now is that if they buy something they want a good deal," [Patrick] Hake [of REMAX Gold in Auburn] said. "A lot of people want to negotiate the asking price down. There are a lot of lowball offers going out, but most are being rejected.
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Then there are buyers who believe they can predict when the real estate market will actually bottom out. "There are people trying to time and buy at the perfect moment," Hake said. "The few people who get lucky and do that will probably tell people how smart they are for the rest of their lives. But the truth is, the market could go back up for six months and then go right back down again."

As a general rule, real estate agents are trying to put a positive spin on the situation.
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Although Folsom and El Dorado Hills home sales numbers have declined slightly, there's certainly no widespread panic among realtors in this area. 'It's certainly not a positive thing to see sales numbers go down," Hake said. "I'd much rather see the numbers go up. I'm not making the assertion that the market is increasing in Folsom by any means. I'm just making the assertion the Folsom market is not having as many problems as some of the other areas."

From the El Dorado Hills Telegraph:

Folsom and El Dorado Hills are located in the ninth worst market - the Sacramento metropolitan area - for home foreclosures nationwide, but they've been spared the carnage somewhat...Sacramento County saw 3,840 notices of default filed between April and June 2007, a 184 percent jump compared with the same quarter in 2006, reported DataQuick. El Dorado County, with 222 notices filed, saw a slightly smaller increase of 158 percent. But Jim Foster, who works with JM Morgan Funding in Folsom and lives in El Dorado Hills, said neither area was as hard hit as regions like Elk Grove, Lincoln, and South Sacramento.
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When foreclosures do occur in Folsom, they're mostly among younger couples who financed their house with no payment down and adjustable-rate mortgages - the phenomenon that's rendered fast-growing areas like Elk Grove rife with lost homes...Foster knows of two or three Folsom couples in their 20's who allowed the bank to foreclose on their homes, opting to rent instead. "They weren't even behind on their mortgage," Foster said. "They just figured they could rent a house for half the payment, and twice the square footage."
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El Dorado Hills is a slightly different animal, he said. On his own street, Powers Drive, Foster has watched foreclosures on at least two $1 million-plus homes in the past six months. "A lot of these people were dialed into real estate as mortgage brokers or builders and this industry has taken a big hit," he said. "Some are making one-tenth the money they made before."

From the Merced Sun-Star:

As usual, Merced's poverty rates ranked well above state and national averages, which both held steady at about 13 percent. What's different about this year's data is that Merced County is faring worse than its Central Valley neighbors.
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Simon Weffer, a sociology professor at UC Merced, linked Merced's grimmer poverty picture in part to the recent housing boom and subsequent bust. Merced's building activity and home sales reached record highs in 2005, raising incomes and lowering poverty along the way. Now the slowdown is hitting Merced harder than its Central Valley neighbors. "It's important to realize that what's going on in Merced is not happening in other counties," said Weffer. "Part of it is that the housing market hasn't collapsed as badly in other counties.

'Kind of a Real Estate Bust'

From the Sacramento Business Journal:

San Diego-based sub-prime lender Accredited Home Lenders Holding Co. said Wednesday it is not taking any new loans and it is closing "substantially all" of its 60 lending offices and five support locations as of Sept. 5.

Accredited has retail branch offices in Sacramento, Folsom and Roseville, and it has a centralized retail office in Sacramento.

The moves are part of a restructuring in response to turmoil in the mortgage industry. Those moves will cost 480 people their jobs.

From the Inman Blog:

What a week. Since Friday, banks and mortgage lenders have announced more than 13,000 layoffs.

From the Associated Press (hat tip Sonoma Housing Bubble):

...[M]ore than 25,000 workers nationwide...have lost jobs in the financial services industry since the beginning of the month -- with more than half coming since last Friday. With few exceptions, the cuts are the direct result of woes in the nation's housing market.
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Since the start of the year, more than 40,000 workers have lost their jobs at mortgage lending institutions, according to recent company layoff announcements and data complied by global outplacement firm Challenger, Gray & Christmas Inc. Meanwhile, construction companies have announced nearly 20,000 job cuts this year....

It's an employment collapse that threatens to rival the massive layoffs in the airline industry that followed the Sept. 11, 2001, terrorist attacks, when some 100,000 employees lost their jobs.

From the Roseville Press Tribune (hat tip Jeff):

A downturn in property values is showing up on Placer County's assessment rolls, with a drop in assessed values taking a bite out of growth. Placer County Assessor Bruce Dear told the Board of Supervisors at a budget workshop Tuesday that the county's assessment roll increased from $52.3 billion last year to $56.8 billion - an 8.52 percent jump. But the $4.5 billion increase for the year would have been nearly $1 billion more if real estate values hadn't decline, forcing a downward adjustment on about 18,000 mostly residential properties.
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"The market activity in the spring was kind of a real estate bust," he said. "It suggests the numbers will continue to decline significantly in this assessment roll." For a county that had experienced assessed value increases of never less that 12.76 percent a year since 2001, this year's 8.52 percent rise has already spurred county budget officials to warn that the slowdown in property tax revenue could escalate in the next two years.
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Sacramento County discontinued offering medical and dental subsidies retiring after May 31 because of a projected $33 million shortfall. El Dorado County is reducing its workforce by 26 positions through early retirements and layoffs, he [Placer county CEO Tom Miller] said.

'It's a Lot of Work for No Gain'

From USA Today:

Many investors feel like running away from homes

Buying real estate seemed a no-brainer five years ago. Cheap loans were easy to get. Home prices were soaring. Stocks were dead money.

How things have changed.

For-sale signs are sitting ignored in some cities. Interest rates on exotic loans are doubling. Insurance premiums and property taxes are skyrocketing. Wannabe real estate tycoons stuck with properties they can't sell have been turned into landlords, forced to fix toilets and take tenant calls in the middle of the night. Many are "under water" — owing more on the mortgage than they could get by selling.

Meanwhile, stock investors have been celebrating again as broad market indexes march to new highs. And that is prompting some real estate investors to make the switch back to stocks.
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The migration from real estate to stocks is part of the natural swings investors go from loving an investment class to hating it, says Robert Shiller, a Yale professor who studies market movements. Just as investors saw housing as a haven from the bear market for stocks in 2002, they see stocks as their best bet now as some housing markets go from bad to ugly, he says.

[Ken] Winans [president of investment research firm Winans International] and others think the sloshing of money from real estate into stocks is one of the factors fueling the stock market's recovery to record levels. "Inventories (of unsold homes) are up while coinciding with volumes and prices of stocks going up," he says. "Surprising there aren't more people connecting the dots."
...
[W]hile real estate can be lucrative, it often comes with headaches and hidden costs. Those may have been tolerable when home prices were soaring, but now that prices have stabilized or even started to drop, the annoyances are deal killers.

Some investors want to get out but fear they're so far in the hole already that they don't want to take the loss. Janice Burnham, an eBay employee who lives in San Francisco and was included in USA TODAY's 2002 cover story, got fed up with stocks and bought a Silicon Valley home in 2002 and an investment property in Folsom, Calif., near Sacramento two years ago. She paid $353,000 for the investment property.

"Everyone else was making money," she says. "I figured this was the way to make money. I've changed my opinion on that," she says.

Now she figures she would have trouble selling the Folsom home for $320,000, a loss she's trying to avoid by renting the property. But that's not going well, either, because she spends money for upkeep and struggles to find tenants.

"It's a lot of work for no gain," she says.

Portrait of a Soft Landing?

S&P/Case-Shiller Home Price Indices (pdf)

Analyst: 'Significant Further Price Declines Are Likely' for Sacramento

From Reuters:

Andrew Thompson fears his mortgage lender is poised to foreclose on his Folsom. California, home because he will not be able to make his monthly loan payment when it jumps to $3,200 from $2,100. "As of May 1, I'm dead in the water," said Thompson, already behind on payments as the deadline nears for a higher interest rate on his mortgage. "I don't think I'm going to be able to keep it."
...
The turbulence in the industry tracks Thompson's troubles, revealing how risky adjustable-rate mortgages can be for borrower and lender. "It's just hit so hard and so quick," he said in an interview in his home in Folsom, a town just east of Sacramento, California's capital.

Thompson, 36, met his mortgage payments until an accident at work in September...Expecting he would fall behind on payments, Thompson listed his house for sale late last year. It's still on the market.
...
Thompson bought it in 2004 for $289,000 and won praise from neighbors for at least $60,000 worth of renovations...Thompson is resigned to losing money on the house. He has cut its price from $360,000 to $307,000, which would provide enough for him pay off his mortgage and other debt he took on for the house and prevent a default that could mar his credit. "I would have $1,000 left over to move," he said.

But a sale before foreclosure is uncertain. Seven similar homes within a two-block radius have "for sale" signs on lawns and Folsom has an abundance of new homes for sale.

Meanwhile, analysts see the Sacramento region's inventory of homes on the market rising because of so-called short sales -- home sales at prices less than the owner owes on a mortgage, but conducted with the blessing of lenders who want to avoid a foreclosure.

Deutsche Bank analyst Nishu Sood painted a bleak picture of Sacramento's homes market: "New home inventories remain elevated, while resale inventories are even more worrisome, with significant investor overhang and mounting distressed listings.

"And all of this is before the effects of the subprime situation have begun to be realized in the market. Significant further price declines are likely," Sood wrote.

Anger at Central Pacific Mortgage

UPDATE: Housing Wire

From News10:

Former employees of Folsom-based Central Pacific Mortgage are angry over the lack of warning before this week's layoffs. As News10 first reported Tuesday, Central Pacific Mortgage and its Florida-based division Ivanhoe Mortgage closed their doors Monday saying they had no money to meet Wednesday's payroll.

An estimated 260 people in Folsom, Orlando and in branch operations centers in other parts of the country were told on Monday to clear out their desks by the end of the day...One branch manager from an eastern state who asked not to be identified told News10 he lost $33,000 in commissions.

"The moral thing to do would of been to at least give the little people a fair warning," said one former Ivanhoe employee by email.
...
In a memo to employees on Monday, Central Pacific Mortgage president and CEO John Courson said "there are no words to express my sorrow."
...
News10 attempted to contact Central Pacific Mortgage CEO John Courson. Calls to the company's Folsom headquarters are answered with a recorded announcement. A phone number listed for his home in Rancho Murieta is disconnected.

Courson serves on the board of directors for the Mortgage Bankers Association and was appointed by Governor Schwarzenegger to the board of the California Housing Finance Agency.

One of Courson's former employees was sarcastic in an email message to News10. "I have two small children and now I have no money, no job and no health or dental benefits," wrote the former employee. "Let's give a nice BIG HAND to the MAN for all of his major accomplishments."

Watch the video here. Some snippets that sound like they could have been ripped from Housing Panic:

• "tip of the iceberg"
• "it's like a freight train coming at us at full-bore"
• "it's a house of cards"
• "coming back to bite...the lenders"
• "loans gone bad coming back to haunt the company"
• "going to hurt a lot of would-be homeowners"
• "going to pay for past mistakes"
  
• "the type of risks that's been involved in the industry is far beyond anything I've ever seen"
  
• "sending a shock wave"
• "time to pay the piper"
• "crazy, funny-money loans"
• "those good old days are long gone"

From KCRA (also video):

By all accounts, Central Pacific Mortgage is a reputable business that got caught up in a real estate market that has now turned sour.
...
[Mike] McGee [a past president of the California Mortgage Brokers Association] said over the past few years, companies like Central Pacific Mortgage started offering high-risk mortgages to people with poor credit. Now, with interest rates rising, people are unable to make their payments, banks are foreclosing and Central Pacific Mortgage apparently got caught in the middle.

Folsom Mortgage Lender Goes Belly-Up

From News 10:

Folsom-based Central Pacific Mortgage has abruptly shut down operations, telling employees it can't afford to pay them.

A memo to the staff from the president and CEO John Courson on Monday said the company would cease operations immediately.

"We do not have sufficient cash to fund the February 28th payroll. Employees should remove their personal items from the office at the end of the day," Courson wrote.
...
A recent staff directory indicated there were more than 80 people working in Folsom.

Hat tip: Max.

From their website:

Central Pacific Mortgage (CPM), founded in 1977, is headquartered in Folsom, California. As a mortgage banker, we engage in the business of originating, closing and selling residential mortgage loans. Today, we have over 100 retail and wholesale origination offices across the country. When you join the CPM family, you align yourself with a company that cares about the well-being of you and your staff.

Price Reductions Graph

Zip Realty looks at the percentage of homes on the market where the asking price has been reduced. Coverage of Folsom, Citrus Heights, Roseville, and Natomas.

Folsom Intel Update

"Another 61 employees at Intel Corp.'s Folsom campus will receive layoff notices between now and Sept. 24, bringing the total number of jobs cut here this summer to 191." More from the Sacramento Business Journal.

Folsom Deep Impact?

The Sacramento Bee reports on Intel's planned layoffs:

Intel Corp. announced a major restructuring Tuesday that will pare about 10 percent of the company's work force over the next year. While details were sketchy, the cuts could hit the 7,000-employee Folsom campus particularly hard. In a press release, Intel said it will layoff of about 10,500 employees out of a workforce of roughly 100,000 over the next year...

The company said the bulk of the cuts to its work force will come from marketing, management and information technology workers. Because Folsom is headquarters for Intel's IT department, employing up to 1,800 workers to manage the company's internal computer networks worldwide, the cuts could hit particularly hard in the Sacramento region. It also has a large contingent of marketing staff.

SacBee Update:

If hundreds of well-paid Intel employees find themselves without jobs over the next several months, it could be a blow to an already shaky real estate market, but the area's economy should be able to absorb the shock, experts said. "We've seen things like this happen before, and we will probably be able to ride it out," said David Lyons, a labor market analyst with the California Employment Development Department. He said people with the skills needed to work at Intel generally are in demand in the region. "All these people are highly skilled and will be very marketable," Lyons said.

Though it was painful for the individuals involved, the economy absorbed at least 2,500 job losses at Hewlett-Packard Co. in Roseville over the past several years, said Barbara Hayes, executive director of the Sacramento Area Commerce and Trade Organization. "Anytime there are layoffs, it's a major blow," Hayes said. "But 10 or 15 years ago this would have had a much more significant impact....(Now) we have the diversity and strength in our base economy to withstand something like this."

The home market, already reeling from a glut of sellers and a shortage of buyers, could be hit hard if a significant number of Intel workers put their homes on the market, said Fred Wilcox, a real estate agent with Remax Gold in Folsom. "Right now the market is pretty loaded with listings," Wilcox said. If motivated sellers unload another passel of homes on the market, it will drive down prices, he said.

Odds & Ends

• DataQuick has released June median price figures for California. Here's how the Sacramento region fared on a year-to-year basis:

El Dorado: -0.10%
Sacramento: -1.33%
Placer: -7.22%
Yolo: 3.70%

• The Sacramento Business Journal looks at Trendgraphix figures for June & the first half of 2006.
• NPR interviews the author of Fortune Magazine's Housing Dead Zones article. Sacramento mentioned. Worth the listen.
• The Sacramento Bee reports that area rents still haven't budged much over the last quarter.
  
• KCRA has an update on the Folsom repartments story. Now toxic mold?

Surrounded by "Repartments"

The Sacramento Bee has this article about condo conversions gone bad.

A national housing trend called "repartments" has hit the Sacramento area, leaving people like Violet Vernon wondering if she'll ever be able to sell her home. The 1,100-square-foot Folsom condominium she bought in January for $318,000 is surrounded by what the Wall Street Journal dubbed repartments.

The owner of the 324-unit Waterford Place, on Natoma Station Drive, sold about 40 units as condominiums and then reverted the rest back to rentals. "The prices in Folsom were out of my range and this represented an opportunity for me to gain home ownership," Vernon said. "My concern now is that I may not be able to sell or refinance. I don't know that I can find a buyer."

Real estate experts report slowing sales this year of single-family homes and condominiums...Three years ago, new condominiums and apartments converted to condos were a bare 2.2 percent of new-housing sales in the six-county Sacramento region -- El Dorado, Placer, Sacramento, Sutter, Yolo and Yuba counties. In 2005, they reached 18 percent, according to Costa Mesa-based housing analyst Hanley Wood Market Intelligence...

Waterford Place, formerly called Lakeridge, was the first, with units going on sale July 16, 2005. When sales slowed to a trickle, the sales office closed in May. Waterford Place executives said they understand residents' concerns and never intended to have rental units in the complex, but that the slowing condominium market prevented them from following through on sales...

Moss said his company is researching what problems, if any, owners may have with refinancing or selling their units. Ross said the challenge is not finding a lender but that the value of the unit often decreases if it is surrounded by rental properties.

Vernon has contacted Prometheus numerous times to no avail. She said the owners should have foreseen a slowdown in condominium sales when they purchased the complex in 2005. "They can always get another investor. I can't," Vernon said. "I don't know if I can rebound from this."

Local Price Reduced Figures

The Zip Realty Real Estate Market Conditions blog has some price reduced figures for some local markets:

• Folsom, CA: 37.8%

• Natomas, CA: 35.4%

• Roseville, CA: 35.0%

• Citrus Heights, CA: 31.5%