Ryan Jessup: Sacramento Bee's Latest Housing Bubble "Victim"

One of the most disappointing aspects of the media's coverage since the housing bubble burst (besides the blind reliance on "expert" opinion), has been the parade of so-called victims. Is it just me, or has the media struggled mightily in its search for legitimate causalities of the housing bubble fiasco? Are they looking in the wrong places? Is it simply that there is not enough genuine victims?

I pondered these questions as I read an article by Jim Wasserman in Sunday's Sacramento Bee. Among others, the story profiles a man by the name of Ryan Jessup, who "walked away" from his Oak Park house (this site says it was a short sale).

[M]any who can afford their payments have decided it's no longer worth it. They walk, or, as is becoming the trend, park rent-free in the house for months until they get the boot.

It's a question that Ryan Jessup of Sacramento answered a year ago, when he, too, sensed the financial game had turned against him. Early in 2008, the software engineer stopped making payments on his Victorian house in Oak Park. A long habit of playing by the rules, he said, had provided him a good income, a credit score of 804 and a lovely $430,000 house. But when playing by the rules meant riding down the housing market to who knows where, he said, "It came down to morals or survival. I chose survival. It made no sense to stay."
...
Many borrowers like Clawson and Jessup no longer feel so obligated to a financial system they believe overstimulated the housing market, sold them questionable loan products, sometimes by fraud, and then didn't provide help they need in the face of falling home values.
...
Jessup walked away. "I haven't even looked (at the credit score)," he said. "It's like being hit by a train or a bus."
...
Jessup, looking back, has no regrets. He lives with a friend now who has also stopped making payments on a condo bought at the peak of the market in 2005.

What Mr. Wasserman didn't say in the article is that apparently Ryan Jessup has quite the history of touting the virtues of Sacramento real estate in comments at sacbee.com. As the name sounded familiar, I dug through Sacramento Land(ing)'s "save for future use" folder and ran across some quotes by a sacbee.com commenter named "rjessup2mouse." Could rjessup2mouse be Ryan Jessup?

I started to read the article's comments and sure enough, rjessup2mouse, purporting to be Ryan Jessup quickly chimed in on his own story:

rjessup2mouse wrote on 03/08/2009 06:47:04 AM:

Good article Jim - this is a very hotly debated topic right now and weighing on alot of peoples minds. yes the house was actually in a nice neighborhood. Not all of Oak Park is bad... I was extremely choosy of where I bought and wanted to be closer to downtown as I figured the value would hold up better. It did but still fell enough for me to leave. I did not think it would increase in price when I bought it. I am sure alot of people on this board are going to be angry - I figured as much - I am not happy with the way it turned out and I lost alot of $$$ on it. But to me it was better to lose alot then to lose it all (and keep losing). One of the reasons I chose to be a part of the article was for the people who were not speculators or anyone who thought the market would go up forever. Just for normal people who had always played by the rules and then the game changed. Each situation is different and deciding to miss that first payment is a tough one.

Assuming that rjessup2mouse really is Ryan Jessup, let's take a look at how Jessup got to the point of parting with his own bit of Sacramento real estate. Below are some excerpts from comments made by Ryan Jessup over the last few years. Jessup's arguments (and tone) nicely encapsulate the mindset of many, whether "experts" or not, in the face of the housing bubble's implosion.

For those who choose not to wade through the excerpts, here is a summary of Ryan Jessup's assertions over the years:

(1.) Employment is strong
(2.) Population growth is strong
(3.) Home prices will not crash
(4.) It's all about affording the monthly payment
(5.) State government is strong
(6.) The sky is not falling
(7.) This will not be like the .com implosion
(8.) There are a lot of buyers out there (especially in my neighborhood)
(9.) My neighborhood is special/great/different [see green highlights below]
(10.) The economy is strong
(11.) Those who did not buy "missed the boat"
(12.) Real estate is not the stock market
(13.) Real estate is not wildly unaffordable
(14.) People have made millions on real estate
(15.) Construction employment is still going strong
(16.) My industry sources say things are good
(17.) This is nothing like the 1990s (as in not as bad).
(18.) The bottom is near
(19.) Good areas (i.e. where I live) are doing fine
(20.) The worst is behind us
(21.) I bought in 200x, I will be fine
(22.) Subprime will have little impact
(23.) The Bay Area will save us...

Now on to the excerpts. Let's start out with Ryan Jessup's take on the Sacramento Bee's ill-conceived 'No Panic' piece, which was published just as home prices were going negative (yoy).

rjessup2mouse at 7:28 AM PST Tuesday, June 20, 2006 wrote:

To a lot of negative folks - the market will be ok

There are people who write comments in these sections that would LOVE to see housing fall down. So you come up with your doomsday scenarios and facts to support your own theories. Sorry - this article is one of the better ones around. Solid job and population growth in Sacramento will keep from a market crash. Sorry for all you "experts" out there who need to bash the bee and think the market is 53% overvalued. If prices drop 53% here I will buy 20 of them..... I do believe prices will drop a little more and then basically become stagnation for a long time. People who own should not expect appreciation for 5 years at least. Homeowners - just ride out the current downtrend by staying in your house. Homebuyers - maybe wait a couple of months. Or find a homeowner who is panicking and get a bargain.

According to DataQuick, the total home price decline exceeded 53% back in December. Funny, I don't remember any recent reports of software engineers buying 20 homes at a time. Also note Jessup's advice for homeowners to ride out the downturn.

rjessup2mouse at 9:24 AM PST Thursday, June 22, 2006 wrote:

...I also agree there seems to be alot of negativity. Those generally come from people with a vested interest in seeing the market fall. Everyone tried to talk me out of buying in 2002 - saying that it was better to rent and the sky will fall. All I can say is I know a TON of friends that sure hate renting and I am sure glad I didn't listen to the naysayers. It really all comes down to the monthly payment and can you afford it...If you are in the house for the long haul - you will be fine if you lock in a good rate and price isn't as important...


rjessup2mouse at 2:45 PM PST Wednesday, June 28, 2006 wrote:

Prices will fall some but they won't crash
But I am suprised that there is a 42% chance that they won't decline. Prices will decline some but won't crash as incomes need to catch up. The State of California is Sacramento's main employer and the state is in hiring mode and doing well. There seems to be quite a few positions open.


rjessup2mouse at 9:13 AM PST Thursday, June 29, 2006 wrote:

...Prices will fall a little and then stagnate for a long while. There seems to be a vicious negative tone to the people who have an interest in the market and sky falling. I think you will see a pretty large difference in the .com drop and a housing drop. Wether you have money or not - there are people (alot) that have $ to buy houses and the region is not short of buyers . Plus the economy here is strong. People are simply waiting to see if they can get a better deal by holding off some. This combined with homeowners panicking to get the the best price now before any drop - that is why you see so many homes on the market. Prices have gotten high but they won't fall overnight (like stocks) and won't change much on even a yearly basis. I think the largest correction might happen in the next 3 months. Like I have said before - buyers - wait a little to get a better deal - homeowners - don't panic and remember why you bought your house (to live in) and ride out the real estate game in sac.


rjessup2mouse at 7:57 AM PST Wednesday, July 12, 2006 wrote:

I agree prices are falling - I never said anything otherwise. I just don't believe the extreme view of the market falling apart. Extreme views rarely happen and are more based on theories and in cases such as this thread - hopes of someone who has a vested interest. Alot of people want to focus on the negative and ignore positive. There are too many things in Sacramento's favor for housing to fall apart. I totally agree a price correction is currently happening. I think a 8-10% correction is in order, then basically very little or no appreciation for roughly 5 years.


rjessup2mouse at 1:25 PM PST Tuesday, July 18, 2006 wrote:

markets are dictated by emotion coupled with supply and demand.I think there will be some more slight drops followed by some large stagnation. Can't wait to see all "the sky is falling" comments in this thread shortly.


rjessup2mouse at 10:10 PM PST Wednesday, August 2, 2006 wrote:

no the sky is not falling but there are going to be bouts of depreciation and people that have a difficult time. Sacramento will be ok. People who are looking for massive depreceation are in for a very slow letdown...


rjessup2mouse at 5:01 PM PST Thursday, August 3, 2006 wrote:

jobs are very healthy and growing in sacramento right now. Be thankful as that does have the biggest impact and is a massive cushion against the sky is falling folks...


rjessup2mouse at 8:24 PM PST Wednesday, August 16, 2006 wrote:

people who are waiting for a crash are in for a slow dissappointment. Prices will probably fall a little more and then hold steady for awhile. The regional economy is too strong for a crash. In fact I have seen alot of Pending Sales in my area (East Sac) because some folks are swooping in to pick up $10-20k price drops...


rjessup2mouse at 7:34 AM PST Thursday, August 17, 2006 wrote:

NoNewArena sounds like a reasonable voice


rjessup2mouse at 9:15 AM PST Thursday, August 17, 2006 wrote:

The people who want housing prices to crash are people who have an agenda. So they try and add fuel to the fire and get joyful of a families demise, just be glad you are not them. There is alot of jealousy over missing the boat and not making $ while others made a lot of money. yeah - prices may fall a little - it isn't going to crash - and the local economy is strong - and mortgage rates are falling. There are alot of buffers. I am already seeing some Pending sales in my neighborhood finally. Buyers wanted to see 10k -20k price drops. People seem to forget there are alot of buyers. And simple math - owning your own home over the long run saves $$. It seems as if its a big game/stock market right now. When prices do a hit a bottom - I bet they spring back up pretty good as people pull inventory out because their houses are making money again and buyers pent up demand comes in pretty quickly.


rjessup2mouse at 12:59 PM PST Thursday, August 17, 2006 wrote:

Be funny when the price bottom hits to see how fast the mentality turns again. Sacramento housing will not fall 25% - thats too steep a decline with so many buyers out there.


rjessup2mouse at 9:05 AM PST Friday, August 18, 2006 wrote:

No the market will not tank - sorry for people who want it too its simple math. what you would be paying for rent principle tax write off = Sacramento is not as overpriced as you would think. sorry andersb - the local economy does matter and the housing market is NOT the stock market. They are both assets but they ACT VERY DIFFERENT. People need to realize that the underlying factors that make them different but I will let you figure that out yourself. I am blown away by the hositlity of people on these postings with their number twisting to try and persuade that the housing market is going to fall 50%. Yes - the market is dropping right now and may drop a little more. But I bet it won't even drop 10% more. But there are alot more factors than simple hope it tanks so you can make a buck by getting a cheaper house. Seems some areas are already starting to rebound (midtown, east sac and med center area)...There are A LOT of buyers out there.


rjessup2mouse at 11:48 AM PST Friday, August 18, 2006 wrote:

...There are too many good things about Sacramento for the market to tfall alot. People have been saying the Bay Area is totally unafforadable and overpriced for about 25 years. that doesn't mean that it was going to drop. Just because some people don't have money - doesn't mean it isn't out there. Don't get me wrong - I probably will not buy in the next 2-3 months or so to see what happens. The market is not good- except maybe closer to downtown - that seems to be showing some suprising strength the last couple of months as prices dropped some and inventory is lower.

rjessup2mouse at 12:43 PM PST Friday, August 18, 2006 wrote:

...People have made MILLIONS on real estate. I don't believe i know ANY wealthy renters but I know a TON of wealthy homeowners...


rjessup2mouse at 8:38 AM PST Thursday, August 31, 2006 wrote:

...Currently I don't believe prices are really that much higher than they should be. I am sure alot of people would disagree with that and probably about 90% of folks on this forum(most people on this forum have a vested interest in wanting prices to come down)...I believe housing will fall maybe a little more and then hold steady for a long time. Just my personal opinion but my track record for being correct has made a lot of $ for people.


rjessup2mouse at 8:46 AM PST Thursday, August 31, 2006 wrote:

I see you are a doomsdayer. Yes - even though the state is adding many jobs and employment is very strong in sacramento its going to all fall apart because....housing employment is down? ummm hate to tell you that construction employment is doing REALLY well right now. All of my construction sources say there is more work then they have folks right now. And comparing the 90's bust to today is comparing apples and oranges. But these housing forums are full of it. Some people on these forums need to get up in the morning and drink a little reality.


rjessup2mouse at 9:25 AM PST Wednesday, September 20, 2006 wrote:

Home prices are close to bottom...Some really good deals are out there. Good areas seem to be closer to downtown...


rjessup2mouse at 12:07 PM PST Sunday, September 24, 2006 wrote:

Thinking a 40% decline huh? your in for a big let down. And heck - that 40% you said was modest. why not bottom at 75%?? you should be able to pick up a 2000 sq foot for around $150k soon right? if you wait long enought maybe at $125k? Some people are absolutely nuts - how do you possibly think it could decline by that? how?


rjessup2mouse at 7:32 AM PST Sunday, October 1, 2006 wrote:

East Sac, Med Center, Midtown and Land Park have been selling alot lately. Closer to downtown seems to have gotten hot(relativly) in the last month and a half actually.


rjessup2mouse at 11:00 AM PST Wednesday, October 18, 2006 wrote:

...I disagree that prices will drop much further though...I think prices by far have gone through the worst of it now.


rjessup2mouse at 7:23 AM PST Thursday, October 19, 2006 wrote:

...and no - I bought in 2002 - I am fine...


rjessup2mouse at 8:57 AM PST Saturday, December 16, 2006 wrote:

...[Y]ou paint a pretty bleak picture of downtown. I think there are plenty of beautiful areas in downtown, east sac , med center and such.


rjessup2mouse at 7:41 AM PST Friday, December 22, 2006 wrote:

Have to completely disagree with Mr.Lyon's assessment on 10% decline for sacramento. Most "experts" predict 3.5%. His is by far the biggesst drop prediction I have read about. This last year seems to have come in about 8.2%. I thought it would have been 10% this last year so it was almost 2% better than i even expected. So is Mr. Lyon saying that this year should be worse than last? Why is he the only one saying this?


rjessup2mouse at 10:25 AM PST Friday, December 22, 2006 wrote:

I have no number crunching but I would have to say that I predicted a 10% drop for the year last year (I was off by 2% )and I will predict a 3-4% drop this year. But I am no expert - I just listen to people who are in the industry and what they see happening.


rjessup2mouse at 9:07 AM PST Sunday, December 31, 2006 wrote:

...Smart money right now is saying that sac is going to do 0 to -3% for the year....


rjessup2mouse at 1:08 PM PST Friday, January 5, 2007 wrote:

people are so negative that have an agenda or a vested interest. The bee has covered stories that make housing look bad and they cover stories that make housing look good. Are you some of the same folks that said it would be down 20% this last year? I remember those predictions a year ago. Looks like Sac was down 8.2%. Some areas in Sac were worse than that and some areas less. But just hoping/waiting for the bottom to fall out is not going to make it happen. California Real Estate is and always will be a good investment long term. The worst is over. That doesn't mean it is bottom but I believe by far the worst is behind.


rjessup2mouse at 10:01 AM PST Wednesday, January 17, 2007 wrote:

Oak Park is changing and I have seen investor interest in it. Next to it - The med center area - is a really good place to have a home and rather safe. Remember - not all of Oak Park is considered "bad".


rjessup2mouse at 8:22 AM PST Wednesday, March 14, 2007 wrote:

...I am not to worried about the subprime headlines of right now. It will have some impact I am sure but not much. Just like everyone was saying the housing market would already be down 35%...


rjessup2mouse at 8:41 PM PST Wednesday, April 4, 2007 wrote:

I think Med center area is already pretty nice.


rjessup2mouse at 1:02 PM PST Thursday, April 5, 2007 wrote:

kindof what I have been saying - Dowtown and Midtown are solid
the suburbs and sub divisions have taken a large hit while closer to downtown has been fairly steady. The houses closer to downtown are bouncing back quicker because people are realizing that you can't make these homes anymore and therefore have good price stability. There will only be less - never more of these homes.


rjessup2mouse at 8:20 AM PST Friday, April 13, 2007 wrote:

funny to see the gloomers again :-) - always makes me chuckle to see the 40% drop again predicted/wanted by home buyers. I am sorry for the doom and gloomers - your not going to get anywhere near that price drop. Not even close. Housing I think is going to take a small hit again - with negative publicity being the bigger culprit than what will actually shake out with the subprime situation. People tend to forget that we are tied to the bay area home prices and that the local job market is plenty strong. I am no real estate agent or optimist - just a realist. For the past few years my predictions have been pretty close - and i would predict possibly another 2-4% drop...


rjessup2mouse at 12:53 PM PST Friday, April 13, 2007 wrote:

...my finances are fine are yours? do you own a house or have you ever? I didn't think so. WIll you? and do the math - its not that tricky - fairly simple actually. As far as predictions - I am sorry to say that it has been fairly accurate. I do appreciate how emotional you are over it - I believe you probably one of the "its going to drop by about 30%" correct? Makes me laugh.


rjessup2mouse at 12:59 PM PST Friday, April 13, 2007 wrote:

isn't it funny? I have been seeing these posts for 2 years now - the predictions by most of the gloomers have been that the market would have dropped 25% as of now. It has not. I think I said 7 - 15% from the start.

I find the final two comments, made in January 2008, particularly interesting given that Jessup purportedly stopped paying his Oak Park mortgage in early 2008.

rjessup2mouse at 11:33 AM PST Friday, January 18, 2008 wrote:

a little advice - the really good deals
If you want a bargain and something thats gonna retain its value. Buy where a bunch of houses are NOT for sale and try and scoop up a bank repo. Some downtown and surrounding areas have it- just gotta find the right pockets of places.

0 out of 3 people found this comment helpful.


rjessup2mouse at 1:46 PM PST Saturday, January 19, 2008 wrote:

time to buy or at least look pretty hard
you folks that are sitting should be looking right now.

1 out of 5 people found this comment helpful.

Over 10,000 Jobs Lost in Sacramento Region, Unemployment Jumps to 7.9%

From the Sacramento Business Journal:

California and the Sacramento region’s jobless rates both increased a half-percentage point, reaching the highest levels since 1994....The Sacramento area’s jobless rate increased to 7.9 percent, from 7.4 perent in September and 5.5 percent a year ago, according to the state report.

From the Sacramento Bee:

[T]he Sacramento region has lost 10,200 jobs in a year, a 1.1 percent decline. The state has lost 101,300 jobs in a year, a 0.7 percent drop.

Interactive Map: Unemployment by County

From News10:

Stacy Brown of Sacramento hasn't missed any [house] payments, but said she's worried about the months ahead. "Our hours are being cut due to the budget, so I see my salary decreasing so I just want to try to keep ahead of the game," she said. She was among dozens waiting up to three hours to meet with their lenders.

From News10:

Mike Lyon of TrendGraphix said to get ready for another 10 percent price drop over the next four months. It could very well dip to 2001 pricing, he said.
...
Lyon predicted the median home price will bounce above $200,000 in the coming months but says that won't be because home prices are increasing. Instead, he expects foreclosures on larger move-up homes to increase, especially in newer subdivisions in the foothills. He believes those homes will have foreclosure pricing in the $300,000 range and up, thereby increasing the median price of homes in the area.

From the News-Review:

Ray Davis won’t ever refute a moniker bestowed upon him — “the eternal optimist” — because the chief executive officer of Umpqua Bank sees signs of financial recovery, even in these troubled economic times. Take the housing market in Sacramento, Calif., for example, where the average selling time for a home went from 18 months in September 2007 to now less than five months, Davis said...“People are bidding on foreclosures which says we’re hitting bottom in Sacramento,” he said....

From the Sacramento Bee:

Bank repossessions again accounted for the majority of home purchases, especially in Sacramento County, the largest sector of the region's real estate market. DataQuick said two-thirds of the county's sales involved bank repos. "The bad news is there's a lot of foreclosures in the market. The good news is they're selling," said Pat Shea, Sacramento regional manager for Prudential California Realty. "Teachers, policemen, nurses – they can all buy houses now."

Interactive Map: Sacramento Home Price Trends By Community

From the Appeal Democrat:

Yuba County's $175,000 median price in October was 34.5 percent below a year ago, MDA DataQuick reported Thursday...Median prices in the county have fallen 50.2 percent since their November 2005 high of $351,500...Sutter County's October median price was $183,000, down 29.7 percent from the same time last year....Median home prices are now 46 percent below their December 2005 peak of $339,000.

From the Modesto Bee:

Stanislaus County homes sold for a median $161,500 last month....Home prices have dropped a staggering 59.2 percent below the $396,000 peak hit in December 2005...Merced County is even worse. Median-priced homes there sold for $136,750 last month....Merced prices have plunged 64.3 percent since peaking at $382,750 in December 2005...San Joaquin County home values...are 55.7 percent below their November 2005 peak of $451,500.

"It's impossible to say when the bottom will hit," said John Knight, professor of finance and real estate at the University of the Pacific. "I never anticipated such a huge drop in housing prices so quickly."
...
[F]or "prudent consumers who waited to buy," [basically ignoring everything the UOP folks have said for the last three years] Knight said, "there are some tremendous opportunities now. Prices really cannot go much lower ... because it's becoming less expensive to own than to rent. That provides kind of a floor to housing prices."

Calling Market Bottom (Again)

From the Sacramento Bee:

"Sacramento is well into the first phase of the housing stabilization process, which starts with sales recovering on a year-over-year basis," [DataQuick's Andrew LePage] said.
...
Discounted foreclosures were 65.8 percent of September sales in Sacramento County, according to MDA DataQuick. Foreclosures were half of sales in the Los Angeles region and 42 percent of those in the Bay Area during September, the firm said.

DataQuick sales/price stats by county
ADDED: by zip [pdf]

From the Appeal Democrat:

Local median prices were down last month compared with September 2007, declining 31.5 percent in Sutter County, and 36.8 percent in Yuba County. Both counties were well under the $200,000 mark — the only counties in the Sacramento region in that range — coming in at $190,000 in Sutter County and $175,000 in Yuba County.

From the Modesto Bee:

The clearance sale in real estate continued last month, with another jump in the number of homes sold and a continuing drop in prices. Stanislaus County's median sale price was $179,000 in September, down 40 percent from a year earlier, MDA DataQuick reported Tuesday...In Merced and San Joaquin counties, the number of sales also soared last month compared with a year earlier. Each had a 47 percent drop in the median price, to $140,000 in Merced and $191,500 in San Joaquin.
...
Craig Lewis, president and chief executive officer at Prudential California Realty in Modesto, said the foreclosure wave appears to be waning. He said prices could bottom out in three or four months. "The next 90 days is the best time to buy in the last 10 years," he said.

Bottom out in three of four months? How can that be when prices bottomed out back in June 2007?

Craig Lewis, president of Prudential California Realty...said [Stanislaus County] median home prices have fallen from $414,000 in 2005 to $359,000 now, and it takes nearly three months to sell the typical home. "First-time home buyers have the ability to buy now, but … they're sitting back and waiting because they think the price will go down more," Lewis said. He doesn't agree. "I certainly feel we're at the bottom of the market."

From CNBC:

[What] strikes me is the positively bewildered expressions on the faces of the chief economists of both associations. These poor guys are tasked with telling everyone when its all going to get better, and the fact of the matter is they just don't know. Don't get me wrong, these are supersmart guys, number crunchers with decades in the business, but as NAHBs David Seiders said, the risk in housing right now is just so high that it makes forecasting extremely difficult.

From the Wall Street Journal:

[Bill] Knoff's house has traveled the arc of the local market. Built on vacant land in 2002, it sold for $280,000. Its original owner unsuccessfully tried to sell it in 2006 for $450,000. Mr. Knoff bought it out of foreclosure in March of this year for $320,000. Today, based on local sales, he figures the house is worth about $220,000. Mr. Knoff paid nearly half of the purchase price in cash, so most of his equity has been wiped out. But he said he believes in taking responsibility for such choices. "The government can buy up troubled mortgages. But it should kick the people out of their houses," said the 61-year-old information technology manager. "Why should I pay for someone to buy their house?"
...
[T]he bottom still may not be in sight. Home prices in California could end down as much as 60% from peak values, according to recent research from both Barclay's PLC and J.P. Morgan Chase & Co. Towns like Los Banos may have further to fall. According to the city and a local title office, roughly 2,000 of 10,000 homes in the town are in the foreclosure process. The city expects that number could grow before the crisis passes.

Interactive map thingy

From the Sacramento Bee:

Ward Smith of J. Smith & Sons Inc., a home-entertainment business in Natomas, said business already was slow because of the soft housing market. Then, when the stock market faltered, things came to a near complete halt. "The phones became eerily quiet for no good reason," he said. "Well, maybe there is a good reason. Everyone's (saying), 'We'll wait and see until we know what's really going on.' "
...
Prominent real estate broker Mike Lyon also knows what it's like when the phones stop ringing. The president of Lyon & Associates said things got very quiet when the stock market went into its downward spiral. "It was kind of like 9/11, to be honest with you," he said.

From the Sacramento Bee:

[CEO Gary] Pruitt said skeptics wrongly assume the vast majority of McClatchy's decline in revenue is due to a permanent migration of business to the Internet. Instead, he said, most of the problem is due to the economic downturn. McClatchy will "return to revenue growth when the economy resumes growing," he said. As evidence, he noted that McClatchy's biggest problems in the past two years have emerged in California and Florida, where the real estate market has crashed the loudest. But now McClatchy's papers in the Carolinas are experiencing somewhat similar declines as economic woes have spread to those states, he said.

"Some Unsolicited Advice"

From the Sacramento Business Journal:

IndyMac Federal Bank has let go 128 employees from its offices in Rancho Cordova, a figure 70 percent higher than previously reported. Many of the employees have been off work since July, when federal regulators took control of failed IndyMac Bancorp Inc. Some employees were able to work through Friday, closing out files and shutting down the office.

From Mr. Mortgage:

For some reason, as purchase volume is rising sharply Mortgage Insurance volume is plummetting. This is a strange phenomenon. First time home buyers and current renters are not the 20% down crowd but investors/speculators are. For one reason, because most non-owner occupied loan programs require more down payment but many speculators also put more down to try to avoid detection if they are calling the purchase a ‘primary residence’ or ’second/vaction’ home.

We know that 45% of all home purchases in the State of CA were from the foreclosure stock and similar numbers hold true in other bubble states around the nation. The largest sales increases are coming directly from the subprime epicenters such as the Central Valley, Sacramento and the Inland Empire. Could speculators be once again in control of the real estate market? For their sake and ours when these buyers find themselves deeply underwater and amidst plummetting rents in the near future, I hope I am wrong. But the MI readings may show otherwise.

They think they are ’investors’, but I call them ’speculators’ because if they really looked at the micro aspects of the market...they would see they are trying to catch a falling knife. This first group of speculators are likely the old-school real estate folk who feel that if you buy at replacement cost plus land value you can’t go wrong. They can.

I personally know a few of these gamblers with offers out on a dozen homes at any time in the Central Valley. Funny, they have been doing this since last year year and every month prices still fall. They don’t seem to get angry but just keep putting in more offers thinking the values are getting even better. That’s subjective. If rents are falling, mortgage rates rising and underwriting guidelines tightening, then homes are becoming even more expensive even if it is not reflected in the price…yet.

From the Sacramento Bee:

Foreclosures are still rising in the region, meaning the supply of bank-repossessed homes will grow for at least another year. But are the number of defaults finally beginning to level off?

Yes, says Alexis McGee, president of Foreclosures.com, a Fair Oaks Web site for real estate investors. McGee's numbers from Sacramento County show that defaults peaked in April and flattened out in May, June and July.
...
"It looks very stable on the pre-foreclosure front to me," she said. "It does not look like things are getting worse." If so, that's an indicator of some stabilization in this battered real estate market. But it's not a certainty. Even McGee hedges a bit, given the tricks that short-term numbers can play.

Interesting that McGee recently pulled foreclosure statistics off her website.

Over the last few months, I've been wondering why Dennis Wyatt, managing editor of the Manteca Bulletin, seemed to be hawking real estate almost daily from the pages of his newspaper. (For example, is this a news article or an ad for Florsheim Homes?) Today's article helps explain why:

Six months ago today I made a major positive change in my life. I became a homeowner once again.

And a word to the wise for the rest of you bubble sitters:

Now for some unsolicited advice. If you think you want to own a home, don't wait for prices to drop...This is arguably a once in a lifetime opportunity. Do not squander the opportunity by dragging your feet.

From Home Front:

I know the tidal wave is coming, a wave of foreclosures, REOs, and auctions that will likely dwarf the subprime reset. So, I am completely shocked at the number of realty-related talking heads who are staring blank eyed at the masses with giant car-salesmen smiles on their faces saying, "We are almost at the end, the end is in sight, the housing market is stabilizing, etc.." And here is the punch line we all heard 5 years ago, "This is the best time to buy!"

'Consumers and Lenders Got Caught Up in Something Artificial'

From the Sacramento Business Journal:

Add one more casualty from the housing downturn: homeowners associations. They need a steady flow of monthly dues, which can slow down when a member loses a house or condominium to foreclosure, or even when family budgets get tight.
...
Some associations are no longer getting dues from 30 percent or even half of their units...The Wild Wings Homeowners Association has seen a 30 percent drop in the amount of dues being paid, said board member Jordan Durbin. The development has 337 freestanding homes about five miles west of Woodland. Far less than 30 percent of the homes are in foreclosure, but even some residents who aren't facing foreclosure don't send in the checks. "Money is pretty tight for a lot of families," Durbin said.
...
"I've been doing this now for 21 years, and I've never seen delinquencies to this magnitude," said Jay Michael Jr., president of Michael and Sons, a property management company that manages units in the Sacramento area on behalf of homeowners associations.

From the Sacramento Business Journal:

With Sacramento's gloomy distinction of having one of the highest foreclosure rates in the country, it's no surprise that many of the new housing developments that were started last year have stalled. Visually jarring sites such as Elk Grove's Laguna Ridge development, which was to encompass 8,000 homes crowned by an ultra-modern civic center, have seen construction slow to a crawl with only a handful of homes completed.
...
[I]t's not simply a sluggish economy and too much inventory that's keeping the new-home market slow. Complicated legal twists and turns along with horror stories of mechanics' liens and bankrupt developers have many potential homeowners watching their backs and thinking twice before buying.

From the Sacramento Bee:

In greater Sacramento, housing starts in March fell 66 percent from a year ago, the California Building Industry said...[Association economist Alan] Nevin said the construction slump is being worsened by the flood of repossessed homes that lenders are unloading at steep discounts. About half the home sales in the Sacramento area this year are repossessed properties, and the median sale price in Sacramento County of all homes has fallen 36 percent since the 2005 peak. Nevin said inland California is experiencing the worst of the construction downturn...[H]e visited Sacramento recently and found the relative absence of construction activity appalling. "Placer's still chugging along a little bit. But you look at Natomas and some of the other areas, it's brutal," he said.

From the Sacramento Business Journal:

A Sacramento couple is in the market for a three-bedroom, two-bathroom home that they could move into soon. They set their price limit at $300,000 for about 1,500 square feet and rule out fixer-uppers. They view houses over the next few months, make offers on several and enter a contract on one. Meanwhile, they continue to look at other houses to try to find a better deal.

Why would they keep looking after they were already in contract? Because the Sacramento real estate market is putting buyers in the driver's seat, and they know it. They have hundreds of homes to choose from, and they are taking their time looking, making sure they find the right home at the right price. And they have no problem breaking their contract if they find a better deal, said Tracey Saizan of Keller Williams Realty in Elk Grove.

"Buyers are pretty darn particular today; they really are wanting the moon and the stars. They know it's a buyer's market, and they're milking it," she said.

From the Modesto Bee:

Court clerk Richard Heltzel said the Eastern District had 2,501 [bankruptcy] filings in March, putting it on pace for more than 30,000 filings in 2008...Under worst-case projections, filings could top 40,000, which would be the highest ever.
...
[Attorney Ann Marie] Friend said that she's seeing 10 to 12 new clients a day who plan to file for bankruptcy. "And we're just one office," she added. She and other attorneys said that many clients were hit both ways by the housing meltdown, because they worked in jobs tied to real estate, such as electricians and mortgage lenders.

But other professions also are affected, said attorneys Scott Mitchell and Tamie Cummins, who opened an office in Modesto 2½ years ago. Mitchell said he's seen small-business owners, fitness trainers and other non-real estate-related workers filing for bankruptcies, with incomes and backgrounds of all kinds.
...
Mitchell said housing is driving his busy schedule, with some clients showing him figures for loans that are staggering. "These people made $50,000 to $60,000 a year, and they borrowed $500,000 with an adjustable rate, at the top of the market," he said. "I think both consumers and lenders got caught up in something artificial."

The Business Journal interviews the new president of the Sacramento Association of Realtors. Some excerpts:

...it's a good time to buy....

...it's a good time to buy.

More...

Sacramento's Faux Economy Unmasked: Bald Tires on Beemers

From the Sacramento Bee:

That economic downturn bug that's going around? Local tire sellers have caught it. "My sales are off 20 percent," said Ahad Parvez, owner of A&A Tires on Watt Avenue in Sacramento. "Business is terrible. This is the worst it's ever been – and I've been selling tires for 20 years."

Local tire retailers are in a jam. Construction firms that used to wear out tires running between jobs during the home building boom haven't been driving as much since the bubble collapsed. Meanwhile, wary consumers are tapping the brakes on spending, especially higher-end tire and wheel purchases that give shop owners the most profit.
...
As the economy has slowed, consumers have found more ways to save on tires. "I'm seeing more tires come in bald than ever," said A&A Tire owner Parvez. "Scary." Cunnington said that he also has seen a jump in the number of unsafe tires that roll into his shop, sometimes on expensive cars like Mercedes or BMWs.

From the Sacramento Bee:

As the spring real estate season begins, all the normal market rules have changed, frustrating not only sellers but also a smaller crowd of real estate agents. The 24,944 agents and brokers working now in Amador, El Dorado, Nevada, Placer, Sacramento, Sutter, Yolo and Yuba counties today are 1,240 fewer than the same time last year, says the state. The Sacramento Association of Realtors says its membership has dropped by 12.6 percent over the past year. In Placer County, the Realtors association is down 7 percent from a year ago and 16 percent off its September 2005 high.
...
"The level of frustration in the real estate profession is as high as I've ever seen it," said Howell Ellerman, a business and real estate professor at Folsom Lake College.

From the Sacramento Bee:

The big white bus rolled up to a dozen empty houses in Elk Grove, where last year something went badly wrong for those who lived inside them. Saturday, their swimming pools were green, the electricity off and pieces of a child's puzzle lay scattered across one upstairs hallway. The houses were the main attractions of a new phenomenon to rock this housing market: the foreclosure bus tour.
...
"Oh, so that's what's going on," said a surprised Dena Ruiz in her 1990s neighborhood. "We've been here six years and we make our (mortgage) payments." She pointed toward several houses on the street in financial distress and lamented the collective effect on her home's value. "Our house was worth $450,000 2 1/2 years ago, and now it's worth $340,000, if not $240,000," she said. "They just keep dipping."
...
[Lori] Mode, who plans another foreclosure bus tour March 29 in Elk Grove, said she was sorry there weren't more first-time buyers on the $20 tour. She said, "They don't know what they're missing in this market."

From the Sacramento Business Journal:

Kimball Hill, the Sacramento region's 24th-largest builder last year, might be one of the most honest about its financial position, but it is likely not the only one with serious doubts about viability. Looking at the Greater Sacramento market, there simply isn't enough business to go around. New-home sales fell to 7,500 last year, less than half of what they were in the boom in 2004, despite plummeting prices.

With thousands of foreclosures, the median price for resale homes dropped 23 percent in a matter of 10 months to $285,000 as of December, according to the California Association of Realtors. [Make that down 29% in 10 months as of January.] And brokers are predicting that land will be sold at pennies on the dollar as some firms struggle to stay afloat.

From the Sacramento Bee:

Sacramento County's financial officials got a huge shock last month. Their monthly interest payment on a single bond increased by more than $500,000. The hit is fallout from continuing turmoil in the nation's credit markets and specifically nervousness affecting a class of variable-rate bonds called auction-rate securities...The rising bond costs here show just how widespread the ripples are from a crisis tied partly to the collapse of the housing market.

From the Stockton Record:

When did it all change for the housing market? I've had plenty of discussions in and out of the office about the timing of events that led to the decline that caused Stockton to become the nation's foreclosure capital.
...
Just like the stock market, fear and greed have driven the housing market. It's fear you'd be priced out of the housing market forever without doing something. It's the greed of those making big money through commissions or fees.

From Bloomberg (hat tip New Jersey Real Estate Report):

With no bottom in sight for the U.S. housing market, buyers are in game-show mode. There are plenty of deals out there, yet you have to make some decisions if you are buying a new home. Choices flash in front of you as if a host is badgering you to decide your next move. Do you wait for prices to fall further? Or do you buy now and take the builder's incentives or their financing?
...
Whether you are looking in Florida, Southern California, Las Vegas, Phoenix or Ohio, one variable continues to taint several areas. Until the government can stem the number of foreclosed properties due to come on the market -- an estimated 2 million -- it's a good time to hold off.

Prices are going to fall a lot more than Freddie Mac's forecast 12 percent in the most overpriced areas, which may experience 50 percent declines or more. Patience is a virtue in this market. It will also net you a better deal if you can turn off your game-show impulses.

'Price is King'

From the Chicago Daily Herald:

Kimball Hill Inc. today warned it might become the latest Chicago-area victim of the national housing crisis. The Rolling Meadows-based homebuilder said in a filing today it has "substantial doubts about whether we will be able to continue as a going concern."

If it does file bankruptcy it will be the area's second major homebuilder to do so in recent months, following Warrenville-based homebuilder Neumann Homes last fall. Kimball Hill has developments in 12 markets, including in Dallas, Ft. Worth, Houston, Las Vegas, Sacramento and southwest Florida.

From the Sacramento Business Journal:

Sales of previously occupied homes in the four-county Sacramento area fell to 1,179 homes in December, down almost 18 percent compared with the 1,430 homes sold during the same month last year, according to real estate analyst Trendgraphix...Sacramento County's median home price dropped to $282,000, from $300,000 in November.

From the Stockton Record:

Existing-home sales are picking up momentum in San Joaquin County. Pending sales jumped from 392 in November to 459 last month countywide, a 17 percent increase, according to figures from the latest Coldwell Banker Grupe-TrendGraphix sales report, based on Multiple Listing Service data.
...
Meanwhile, the median selling price continued to slip, falling to $293,000, the first time the countywide median has been less than $300,000 since April 2004, when the median selling price stood at $290,000. "Price is king," said Jerry Abbott, president and co-owner of Coldwell Banker Grupe, Stockton. Foreclosures are accounting for about 70 percent of the monthly sales, he said, and investors are accounting for about half the buyers.

From Roseville & Rocklin Today:

[N]o one knows for sure what will happen in the real estate market, here, California and beyond. In the Sacramento area, I believe we still have some pain to go through with the mortgage loan crisis and the general tightening of credit but hopefully most of that will be sorted out by mid-year. There are clearly buyers out there in our market and many of them appear to be watching very closely trying to time their purchase with what they believe is the bottom of the market...If there is any kind of firming of prices and some media coverage about “recovery” we may see a flood of buyers. Unfortunately for sellers that may not happen in 2008.

"Prices Are Still Too High for Potential Buyers" v. Consumer "Mental Disorder"

From the Sacramento Bee:

Dean Wehrli, vice president of the Sullivan Group Real Estate Advisors in Elk Grove: Foreclosures soar; buyers wait; credit tightens. The picture for Sacramento's residential market in 2008 doesn't look good...[P]rices are still too high for potential buyers. Consequently, prices will continue to regress in the second half of this decade to the place they should have been had we not been so frenzied in the first place. If we are waiting for equilibrium – when buyers hold as much "power" as sellers – then we will still be waiting by the end of 2008.
...
David Lyons, labor market consultant at the state Employment Development Department: The economic slowdown will translate into a weak labor market in the Sacramento region, with overall job losses outweighing those sectors still hiring. The regional economy is in for a very slow start to the year. The region generated a net gain in jobs in 2007, but the growth rate slowed to a crawl by year's end. As of November, the region had added just 6,600 net jobs in the past 12 months – a gain of 0.7 percent. It marked the first time the annual growth rate was below 1 percent since 1993. And 2008 is looking bleaker. It's very likely we're going to be in negative territory.
...
Dan Lankford, managing director of Wavepoint Ventures, an early stage investment company with offices in El Dorado Hills and Menlo Park: Most economists agree that the U.S. economy will slow in 2008. The Sacramento region will likely feel a more pronounced tapering off, given the boom of the last several years and the large role that real estate plays in the local economy.

From the Sacramento Business Journal:

Dean Wherli, a vice president with real estate adviser The Sullivan Group, offered a scenario last month during a presentation at an Urban Land Institute event that said if new-home prices around the region had appreciated at a more moderate rate -- say 6 percent instead of the fast-rising prices between 2000 and 2005 -- the price for a newly constructed home at the end of 2007 should have been about $319,000. Instead, the current median price is $385,990. The higher price means that, despite the deep discounts by new-home builders, the region's overall prices are still about 17 percent more than they should have been under the moderate-growth scenario. Wherli said if prices were to hold throughout 2008, by the end of the year they'd still be about 12 percent above the moderate-growth scenario.

Prices, however, seem unlikely to hold. Discounts are drawing a trickle of new buyers, so homebuilders are likely to continue to offer price reductions to lure more buyers.

From the Real Estate News blog:

Our local real estate market has already corrected itself from its past excesses. The median selling price for a county home is $100,000 less than two years ago...Since we all understand the financially successful concept of buying low and selling high, why is it that buyers aren’t?

Consumers are suffering from a mental disorder called media-itice. The affliction resulting from four years of being propagandized by the major media and the economic press about the collapse of the real estate, mortgage and credit markets. Beginning in 2003, consumers have been told that the real estate market was: popping, sinking, bursting, plunging, free-falling, imploding, exploding, collapsing and in total meltdown....Is it any wonder that potential homebuyers are put off from buying a home? Yes, there are some problems but isn’t all the hoopla over a small percentage of troubled homeowners a little too much?

Legislative changes in the mortgage, appraisal and credit industries, insuring market exuberance won’t happen again, will not change consumer immediate attitude toward real estate as a long-term investment and it will do nothing to perk up the county’s housing market. What our current local market needs is a stimulus that will attract homebuyers to El Dorado County.

From the Sacramento Business Journal:

The state's estimated $14.5 billion shortfall could hit Sacramento disproportionately hard if jobs around the Capitol are trimmed. Sacramento's loss of 7,200 construction jobs during the past year was mitigated by 6,000 new hires in government. Given the decline in sales-tax revenue and building fees that have hit all cities and counties, the region can't rely on government for economic growth this year.
...
Sacramento's core jobs are in financial services, construction and government, and none of them look especially strong in the coming year. Housing looks the weakest, with experts predicting further erosion in prices and even fewer sales than the estimated 7,500 new homes built and sold in 2007, down more than 50 percent from the peak years. Sales of existing homes aren't expected to recover this year either, with more foreclosures likely as another wave of adjustable-rate mortgages resets to higher rates. More than 14,000 existing homes were for sale in November 2007, 18 percent higher than a year ago, though down from the record high of 15,302 in September.

From the Sacramento Business Journal:

Sacramento's reliance on government, service, construction and financial service industries for growth in the office market could make for a lean year. With the construction industry taking a huge hit, there has been a ripple into the office market that those in the industry are hoping doesn't build into a wave. That means lease rates are stabilizing and concessions are rising. The region's office vacancy rate inched higher in the third quarter to 15.2 percent for nongovernment buildings larger than 5,000 square feet.

From the Sacramento Business Journal:

A stakeholder in Sacramento's Reynen & Bardis Communities Inc. has accused the builder of making just two monthly payments before defaulting on $19.8 million in obligations it took on this summer. The lawsuit brings the company among the ranks of other local builders struggling through the housing slump who have faced defaults and ended up in court as the market turns against them.

'Would you ruin the economy just to be moral?'

From the Sacramento Bee:

Almost from the start when struggling Dunmore Homes announced in September it was selling its assets to a loan consultant, rumors started in the home building industry that the deal involved an unconventional sales price and had something to do with a big tax refund. The gossip was on the money. The newly sold company filed for Chapter 11 bankruptcy protection in November. Now, documents filed in U.S. Bankruptcy Court in New York show that Sid Dunmore sold his Granite Bay firm to Sacramento-based loan consultant Michael Kane for $500. And there is an expectation that Sid Dunmore will receive an $11.2 million federal tax refund from selling the company his late father founded in 1953.

From the Wall Street Journal's Developments blog:

Median household income in the Sacramento metropolitan area, measured earlier in 2007 by the American Communities Survey, is $56,950. Realistically, if you don’t want to spend more than 33% of your take-home pay on a mortgage and you earn the median, you should pay no more than about $1,570 towards your mortgage and taxes. That caps your mortgage loan at $240,000 (which still leaves you a modest $150 a month to put toward taxes) at a 5.85% interest rate (this week’s going rate for a 30-year fixed). But the median single-family home price in the third quarter was $375,400 in Sacramento. That’s a $135,000 gap. What’s more, the median income to sales price ratio balloons to 6.6 in this equation. There’s nothing affordable about that.

You’d need to have a median income of at least $70,000 — or nearly 25% more than the median — and a 20% down payment to buy the same home in the Sacramento area. This situation plays out in dozens of pockets of the country every day, even as housing prices soften.

From the Modesto Bee:

Levitz is the second Northern San Joaquin Valley home retail store to announce this week that it's closing. On Tuesday, the owners of Youngdale's, a Turlock store that specialized in home appliances, announced they would close within the next month.

From the Redding Record Searchlight (hat tip Suzanne):

Chalk up another casualty to the housing slowdown. 84 Lumber closed its Redding store Wednesday after less than five years in business. The store catered to professional contractors and had five employees.

From the Sacramento Bee:

Q: Will this give a lift to the Sacramento-area real estate market?

A: ...Carey Covey, a Sacramento real estate agent who sells homes repossessed by banks, had one word when asked if the Bush plan will help here: "No." Covey's opinion: "There is a very small percentage of people who are going to be eligible."

Alan Wagner, president-elect of the Sacramento Association of Realtors, worries that borrowers with good credit who got in over their heads still account for more area foreclosures than subprime borrowers. Still, he called the move a "step in the right direction."

Q: Is this a bailout for irresponsible borrowers who took out loans they couldn't afford?

A: There are many who believe that's the case. Bush argued Thursday that no taxpayer funds are involved in this initiative. But many who bought their homes by saving their money, using down payments and getting fixed-rate loans believe a new generation of careless buyers is being rewarded for being foolish.

Lincoln retiree Steven Smith sums up the argument: "My wife and I drive 10-year-old cars, have zero credit card debt, and when we put new flooring in the house, we paid cash. That's what you do. You don't habitually live beyond your means and expect to have a good outcome."

Others, however, contend many borrowers were duped by mortgage lenders who took advantage of their inexperience. They say loan agents inflated their incomes on their applications without their knowledge and told them not to worry: They could refinance into a better loan when the value of their house appreciated – as it certainly would.

From the LA Times:

Ed Skebe of Manhattan Beach would agree that even if some people were duped by shady mortgage brokers or loan officers, many knew they couldn't afford the homes they bought and rolled the dice anyway in hopes that the boom had enough life left to shower them with profits. "They hurt everyone. They drove the prices up," said Skebe, a 61-year-old program manager at an air-freight company, who said the booming housing market prevented him from trading up to a larger home. "It's hard for me to believe that someone didn't realize they couldn't afford a $600,000 home."

From the Vacaville Reporter:

Tim Kearns, owner of Fairfield-based First Priority Financial, said he's seen more adjustable rate mortgages written in the past few years than were necessary. He believes that while the relief plan will help some property owners, it may hurt the housing market overall. "The backlash is that lenders and investors alike will likely be much more skittish about investing in adjustable rate loans in the future," he said.
...
The average client doesn't go into foreclosure because they don't understand their loan, according to Kearns. "Most people had an assumption that the future was going to be better. They knew the loan would get a lot more pricey. But they thought that would be OK, because hey, real estate always goes up in value. And that's the misnomer they were told."

From the Washington Post:

The agreement has sparked bitterness and anger among those who either sat out the housing boom or endured friends' snickers when they stuck with a traditional mortgage and a smaller house. To some who watched prices rise out of their reach or who moved to cheaper cities, the agreement looks like a penalty for those who didn't gamble. "What about those of us who played by the rules? Can we get six months of free gasoline? Isn't there something for the rest of us?" asked Tim MacKinnon.

From the SF Chronicle:

Despite the fact that the value of his 1955 bungalow has fallen $50,000 to $75,000 from its peak two years ago, Sacramento resident Gene Totten would rather see the housing market correct itself further on its own than see the government step in to halt the freefall. "When you're buying a house, it's a big deal, a big decision, and you need to read the fine print and know what you're getting yourself into," said Totten, an operations manager at a construction company. "I wouldn't consider myself a fiscal conservative politically, but this is tinkering with the free market."
...
GU Krueger, economist with Irvine's IHP Capital Partners, one of the nation's largest investors in residential development,...brushed aside concerns that the plan rewards irresponsible behavior by both lenders and borrowers. "Now's not the time to be prudent. It's too late for that," he said. "We're all morally outraged over what's happening. But would you ruin the economy just to be moral? What's the point in that?"

Mike Lyon: 'No one has seen this before'

From the Sacramento Bee:

A persistent housing slump that has relentlessly driven down home prices has now wiped out at least three years of home equity gains across much of the Sacramento region...For buyers, who have driven home sellers and much of the real estate industry mad by patiently remaining on the fence, it's fresh proof of a market getting ever more warm and friendly.

That's especially true in suburban neighborhoods with plenty of new construction. "I've got two sets of buyers looking at property in Lincoln, 2,943 square feet listed for $325,000," said Viki Benbow, a Coldwell Banker real estate agent. "It's like $106 or $107 a square foot. Those houses three years ago were selling in the mid-$500,000s."
...
DataQuick estimated that 27.6 percent of the region's existing home sales in October involved foreclosure properties. It was 35.9 percent in Sacramento County.
...
October ended with 15,716 homes still on the market in El Dorado, Placer, Sacramento and Yolo counties, according to Sacramento-based TrendGraphix....The number does not include foreclosures that have taken place but aren't yet on the market. DataQuick said 65 percent of homes that went into foreclosure between Aug. 1, 2006, and July 31 have not been sold yet.

In the first nine months of 2007, more than 6,500 homeowners have lost their residences to foreclosure in the eight-county region. That wild card concerns Lyon Real Estate's Michael Lyon. "No one has seen this before," he told a gathering of area home builders earlier this month.

October Home Sales by County
October Home Sales by Zip

From the Sacramento Bee:

Last week came another move in the continuing downsizing of the region's building industry. Arizona-based Meritage Homes closed a Sacramento division it opened in the late 1990s. The builder laid off about a dozen people and merged its operation into the Concord-based East Bay division, said Bay Area region president Dennis Welsch.
...
On another front, Lennar Corp. is halting sales at its 75-home Ironcrest project in West Roseville, said Sacramento division president Jeff Panasiti.

From the Modesto Bee:

Median home prices declined in Stanislaus, San Joaquin and Merced counties from October 2006 to last month. In Stanislaus, the median price dropped from $365,000 to $304,250, a decline of 16.6 percent. San Joaquin County prices, where the median was $340,000 last month, declined by 19 percent from $420,000 in 2006, and Merced County fell from $340,000 in October 2006 to $260,000 last month, a drop of 23.5 percent.

At Least the Pot Growers Mow Their Lawns

UPDATE - RealtyTrac's Q3 2007 Metros Report - Sacramento:

• Properties with filings: 9,241
• YoY Change: 408%

From the Associated Press:

Stockton, about 83 miles (133 kilometers) east of San Francisco, had the highest foreclosure rate in the third quarter among the top 100 metro areas, with one foreclosure filing for every 31 households, RealtyTrac said...Stockton had 7,116 foreclosure filings on 4,409 properties during the quarter, an increase of more than 465 percent from the same quarter a year ago, the company said...The California metro areas of Sacramento, Bakersfield and Oakland were also among the top 10 metro areas with the highest foreclosure rates, garnering the sixth, ninth and 10th spots, respectively.

From the Central Valley Business Times:

Your home mortgage may be completely up to date, but if there are foreclosures in your neighborhood, your home’s value is dropping, says a new study by the Center for Responsible Lending. In its new report [pdf], released Tuesday, CRL says the “spillover effect” is impacting 44.5 million homes across the country...Published research … indicates that a foreclosure on a home lowered the price of other nearby single-family homes, on average, by 0.9 percent, the report says.
...
Sacramento and San Joaquin counties in the Central Valley are among the nation’s top counties facing declines in house values and local tax bases due to subprime foreclosure, CRL says. Sacramento County is facing the potential of 9,257 homes being lost of foreclosure due to the subprime mortgage meltdown. In turn, those homes will lower the value of 404,930 homes in Sacramento County, the report estimates. The average drop in home value will be $4,966, the report says. In San Joaquin County, 6,200 homes will plunge into foreclosure in the next two years, impacting the value of 172,395 homes. The average drop in home price will be $7,074, the report says.

From the Associated Press:

California's Central Valley has been hit particularly hard. Thousands of homes were snapped up by San Francisco Bay area speculators who hoped to flip their homes and turn a quick profit. They were caught short when the housing market turned. Many investors and other buyers are now trapped by falling home values and adjustable rate mortgages that are resetting to higher rates. Some speculators have tried to rent their properties. Others simply walked away from the homes they bought just a year or two earlier.
...
In the Franklin Reserve neighborhood of Elk Grove, a suburb south of Sacramento, homeowners are fighting inner-city problems such as gangs, drugs, theft and graffiti. During the boom, the suburb sprouted 10,000 homes in four years, attracting investors from the San Francisco area. Now many houses stand empty, weeds overtaking lawns, signs lining the street: "Bank Repo," "For Rent," "No trespassing—bank owned property." A typical home's value has dropped from about $570,000 to the low $400,000s.
...
Franklin Reserve resident Susan McDonald said two of the homes on her block were turned into indoor marijuana farms. Both caught fire last summer after the pot growers tapped into the city's electric grid with faulty wiring. But McDonald, who has lived in the community for three years and is president of the residents' association, jokes that they make better neighbors than some. "The pot growers, they mow their lawns, they take out their garbage," said McDonald, an executive at a local bank. "There's been gang activity. Things have really been changing the last few years."

From the Elk Grove Citizen:

Foreclosure signs are showing up at a heightened rate around Elk Grove with trustee notices filling the classified ads, but some real estate agents are saying not to fear, the buyers market is here.
...
Team Leader of Keller Williams Realty, Mindy DeMain, said the trend is something buyers can take advantage of and that the state of the housing market isn’t as bad as some may think. “Right now, you can go buy that house that was your dream home three years ago but you couldn’t dare afford it because it was $600,000, $700,000; now it’s $400,000 and you can afford that house,” she said.
...
[Kris] Vogt [branch manager for Coldwell Banker] and DeMain agree on the idea that there is a misconception among some people and even the media that this can’t be a positive time for those interested in buying a home for what it is worth on the market, something that couldn’t be accomplished just last year. “If the first-time buyers don’t start buying soon they are going to miss the bottom,” DeMain said. “Investors are really starting to focus on purchasing and once investors start purchasing the property, the values will start coming up.”
...
With the bottoming out of the market unclear to most forecasters,...longtime Elk Grove real estate agent, Lori Mode, of Keller Williams Realty...predicts that it could happen at the beginning of 2008. “It will level off at some point next year,” she said.

From Reuters:

The U.S. housing market's skid is nowhere near over and could extend for another five or even 10 years, according to one of the most-watched housing economists. Robert Shiller, a Yale University economist and co-developer of Standard and Poor's S&P/Case-Shiller Home Price Indices, told Reuters that declines in home values in the most vulnerable markets could well double the losses recorded thus far.

What's more, Shiller, who is also co-founder and chief economist of the financial firm MacroMarkets LLC, said predictions for a bottom within the next year or so are probably wrong, with price declines in 2008 possibly worse than those seen this year..."The bottom is hard to predict," he said. "I do not see it imminent and it could be five or 10 years too."
...
Areas most vulnerable to home depreciation are those that rose the most during the market's heyday, plus those at the center of the crisis in the subprime mortgage market, Shiller said. California and Florida are high on this list.

From the San Jose Mercury News:

Meanwhile, along with Detroit and Sarasota, Fla., [Lawrence] Yun [economist for the National Association of Realtors] said California's inland counties are among the three worst performing markets in the country. "I am closely monitoring the inland counties of California," including Riverside, San Bernardino and the Sacramento area, he said. Subprime mortgages were used to finance a high percentage of home sales in those areas in recent years. On the other hand, the inland areas are "continuing to create jobs at a respectable pace" he said, which might soften the landing for home prices there in the face of high foreclosure rates.

CBS 5 Video: Manteca Looks At Entering Housing Market

From the Sacramento Bee:

Sheila Bair, chairwoman of the FDIC, proposed last month that lenders simply freeze interest rates on so-called subprime mortgages carried by people who live in the homes they bought and who have been current in their payments so far.
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[W]hile a few people who borrowed more than they could afford would get relief, others who sat out the housing boom because they were more prudent would be penalized. While they saved money for a down payment on their first home, the higher interest rates caused by the bailout would mean higher housing payments for the same-sized loan, further postponing their ability to get into the market.

And that's not all. One of the effects of foreclosures is downward pressure on housing prices. The bubble financed by these easy loans pushed the price of housing out of the reach of many prudent first-time buyers. The current decline, while painful to some, is a correction that eventually will make homes affordable again and bring more people into the market. Freezing interest rates at below-market levels would prop up the price of those homes. That's great for anyone who already owns a house, but it's a blow, again, to those who sat out the boom hoping that they could buy a home when normalcy returned.
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[C]onsumers who simply gambled that the market would continue to soar and that, after a time, they could refinance their unaffordable loans at a fixed rate, are not victims. They are adults who made a bad decision. And they should not be rewarded at the expense of renters who restrained themselves amid the frenzy and are waiting for interest rates and home prices to come back within a range they can afford.

Anderson Auction Sets Minimum Price in Manteca?

From the Tri-Valley Herald:

THE BAR has been set for new home prices here, real estate experts suggest. When Anderson Homes decided to put 34 brand-new homes in the Paseo West subdivision up for auction to clear out inventory, some were worried the results would negatively affect Manteca's already inert housing market.
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Now, real estate agents and developers are saying the auction's strong turnout, coupled with the successful sale of all 34 homes, is encouraging. "It sets the market pricing," said Cindy Foster of Re/Max Executive, adding that the auction made buyers realize $380,000 to $390,000 is the range where housing should be. "There should be a positive affect, because we kind of know where the price point is now," she said. "At the very least, it established a range for those buyers that may have been nervous."

"Since Anderson Homes sold all the homes, it shows that there are buyers out there," said Tom Wilson of Wilson Group Realtors, adding the sales set a "de facto bottom of the market." "Now we can see where the bottom of the prices are and what buyers are willing to pay," he said.

Many prospective consumers have had a "misconception" that the struggling housing market would "drop to $100,000," Foster said. "A lot of people have been sitting on the fence, but this shows that prices aren't going to continue dropping," she said.
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There are somewhere between 1,000 and 1,200 empty homes or a three-year cumulative inventory of foreclosures, resale homes and brand-new homes, said Mike Hakeem, an attorney who addressed the [Manteca city] council on behalf of the developers.

'A Bigger Hit Than Anyone Saw Coming'

From About.com:

A few months ago, a borrower came to Fidelity National Title in Sacramento to sign loan documents. She was closing on her dream home. As the escrow officer explained to the borrower that her new PITI mortgage payment would be $2,500 per month, the soon-to-be home owner's jaw fell.

"But I take home only $2,500 per month," the borrower gasped. Apparently nobody explained to the borrower that she would be responsible for paying taxes and insurance. Those liabilities bumped her payment to $2,500 per month.
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A Sacramento man bought a home two years ago by taking out a 2/28 mortgage. After it closed, he called his lender to complain that he did not realize his mortgage payment could go up 2 points on his two-year loan anniversary.

To further complicate the situation, since the value of the home rose after one year of occupancy, the owner refinanced his mortgage into another 2/28 mortgage. He also rolled the costs of the mortgage into his loan and financed them, which increased his mortgage balance.

As the owner watched home prices in his neighborhood fall, he became depressed. It's easy to point fingers at the mortgage lender, but this borrower was advised by his agent not to refinance. His home is now worth less than he originally paid for it. What's worse is he owes 120% more than the value of his home.

From the LA Times:

According to a recent Fox News poll conducted by Opinion Dynamics, there's 70% opposition to a taxpayer sub-prime bailout. "It is amazing all the sympathy we are seeing from politicians for people who knowingly took out loans they couldn't afford, often lying on their applications to do so," commenter "srl" posted at the LA Land blog I write for the Los Angeles Times. "Usually," added "Brian," "when the facts are examined closely, we find people who . . . took a chance that house prices would keep rising, that they could remodel the kitchen, buy the truck and the motorcycle, put it on the credit card and pile that debt into the next refinance. ."
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How can these people oppose helping out their fellow Americans? Easy. Many or most of them saw this crisis coming years ago -- not through any real estate wizardry but by observing the signs that have been in front of us through most of this decade. In large parts of the United States -- and in all of Southern California -- the housing market turned into an obsession, a mania. So when the mortgage industry nearly collapsed this summer, Americans were fully versed in 100% financing, "liar loans," "teaser rates" and "flippers." There was no mystery here, no unforeseen "perfect storm."

And yet now, just as the market is starting to cool and possibly provide buying opportunities, many of these folks -- especially those patiently waiting out the bubble -- find themselves crashing a pity party for the very buyers who priced them out of the market. They are furious that the government appears interested in supporting overextended borrowers and high prices....
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Politicians, by rushing to the defense of recent home buyers, give the appearance of endorsing price stability at historically high levels...Why should government favor today's owners over tomorrow's buyers?

From the Stockton Record:

Donna Kniess and a friend have their three-bedroom, two-bath Clarks Fork Circle home in Spanos Park West up for sale at $389,000 - and the for-sale-by-owner fliers specifically note to agents: "I am not interested in having my home listed with an agent. This allows me to offer a better price to the buyer."

Thus far, the only response has been a deluge of printed information or phone calls from agents who want to list the house, Kniess said...Actually, there has been one other response: Someone pulled the for-sale-by-owner sign out of the front yard Thursday and placed it by the garbage bin in the backyard.
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Longtime real estate agent Kevin Moran of Coldwell Banker Grupe concentrates on foreclosure residential properties. "I saw the writing on the wall," he said. Moran, who has worked in real estate a quarter-century, said he decided to specialize in foreclosure properties this past spring, when it became clear how much the market was slowing for traditional sales.

"It's just a bigger hit than anyone saw coming," he said. He expected about a 30 percent drop in business. Instead, it's down about 70 percent from its heyday in 2005. Moran estimated three out of 10 homes on the market these days are foreclosures and expects that will increase in coming months.

From Newsweek:

When CNW Research asked consumers who were putting off plans to buy new cars why they were doing so, 17.6 percent cited housing issues like falling home equity or rising mortgage payments. That compares with just 2.3 percent in 2005. John Crane, general sales manager at Ron Smith Buick Pontiac GMC Jeep in Merced, Calif., a farming community of 80,000 that has experienced an influx of Bay Area refugees, has seen a tremendous slowdown in the past six to eight months. "People don't have the money to look at cars," he says. "They're having a hard time paying house payments. Now their second mortgages and 1 percent loans are coming up."

Peer Pressure Not to Buy?

From the Sacramento Business Journal:

Rather than drop prices to entice buyers in less time, John Leonard slashed prices on 22 new homes he built in West Sacramento to sell them in a day -- he hopes in less than an hour. Leonard is owner of Leonard Development Co. Inc. of Sacramento, and he's hired a public auction company to sell homes in his River's Side at Washington Square project quickly.

He's not being forced to sell. The project is still current with its loans. But people simply are not buying them. "There isn't permission for people to buy a house. People's peers, parents and family won't let them feel good about buying. Everyone says, 'Wait a little longer and the prices will come down,' " Leonard said. "The carry cost on the project is not insignificant. We decided on the auction to expedite the sales."
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Hundreds of people have toured the homes, but no one is willing to pull the trigger and buy one. Leonard chose to go the auction route to force the issue. "I wanted to take an aggressive approach to make people come out of the woodwork," he said.

From the Modesto Bee:

Sellers are eager to make deals, and buyers are in control, but there's nary a real estate sign in sight.

Welcome to the new and used vehicle market, where many Northern San Joaquin Valley dealers are experiencing the same slowdown seen in housing. What happens in auto sales often follows housing markets, dealers said. And that's especially true now, they said, because fewer people can refinance their home loans and use the money to buy a car or truck. "That was driving the market," said David Hillier, who owns Hillier Ford in Escalon.
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When housing prices were soaring, many homeowners took equity out of their homes, by refinancing or getting a second mortgage. They often would use the money, which is tax deductible, for vehicles and other big-ticket items.
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Edmunds.com spokesman Chintan Talati said consumers are taking a break on buying vehicles, just as they're stepping back on buying houses. "Housing is such a large part of everything," said Talati, adding that vehicle sales have slumped the most in places where housing has slumped the most -- such as California.
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[Jorge] Elizalde [owner of El Tio Auto Sales] said he's also noticed that -- perhaps because so many housing loans have failed -- banks are hesitant to give car loans. So he's financing more loans himself.

Also from the Modesto Bee:

Home sellers are not automatically turning up their noses at offers that come in far below their asking price these days as prices stagnate and the inventory of homes for sale remains elevated. Realtors and other experts in the Northern San Joaquin Valley said they're seeing more offers these days that come in well below the asking price. Sometimes, sellers are accepting them.
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There's a real risk the offer will insult the seller to the point that they'll refuse to counter, Realtors say, and the seller easily could make the assumption that the buyer isn't committed to making a deal..."When you're making the offer, if you justify that offer with outside data, then it's much less likely to be perceived as being an insult or (the buyer) not as serious," he [Jon Boyd, president of the National Association of Exclusive Buyer Agents] added.
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Buyers even may write a letter to the sellers to make their point, as they did when the market was hot and they aimed to stand out from the crowd, [Dick] Gaylord [president-elect of the National Association of Realtors] said. That way, they can detail what they like about the house but express their fear of future dropping values.
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But sellers shouldn't take a low bid as the equivalent of a slap in the face, said Chad Costa, a Modesto Realtor. "The first reaction is to say, 'how insulting,' and I say that it's just how the market is right now," said Costa, with Re-Max Executive.
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Stan Lynam, who recently retired as a Realtor after 22 years, including 10 in Modesto, said sellers who receive several low bids may opt to pull their house off the market. He said a client recently reduced the asking price by as much as 15 percent, and still got few nibbles. So the client decided to wait it out.
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Valley realty experts...acknowledged that what's a low offer now could be right in line six months from now if prices keep falling.

From the Sacramento Bee:

Never mind that many people will be on a final summer road trip or making eggs and bacon at mountain campgrounds this weekend. Real estate agents will be holding open houses over Labor Day weekend, even if foot traffic is less than a regular weekend. Over the three-day Memorial Day weekend in May, agents hoped high gas prices might keep people closer to home and cruising open houses. With gas prices lower now, agents like Mona Gergen, a specialist in Sacramento's Pocket neighborhoods, just hope it's not awfully hot Sunday for traditional 2-4 p.m. showings.
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What's definitely not hot this summer is home prices here (especially if you're selling a house). The nation's gold standard for measuring rising and falling prices lists five Central Valley metro areas and Reno among 10 regions with the most depreciation. The report for April, May and June was released Thursday by the Office of Federal Housing Enterprise Oversight. It measures sales prices of the same houses over time. Once-booming El Dorado, Placer, Sacramento and Yolo counties ranked ninth nationally with a 6 percent decline in home prices from the same time in 2006. Bigger decreases were seen in Yuba and Sutter counties, Modesto, Stockton and Merced, which led the country with an 8.65 percent decline.