"New But Blighted Fields of Dreams"

From the Modesto Bee:

The signs are painted over. The models are empty. All building has stopped at the three Falling Leaf subdivisions in Modesto's Village I. With less than half of the planned 314 homes complete, developer William Lyon Homes has quit construction. Empty lots growing weeds remain. Falling Leaf apparently is the latest victim of the housing market downturn plaguing the Northern San Joaquin Valley.
...
Falling Leaf repeatedly cut prices. Example: Its smallest house, a 1,620-square-foot plan, was priced at $379,000 in August 2006, then dropped to $329,990 by February 2007 and dropped again to $269,900 in April 2007. By last month, the development drastically sliced prices on its remaining inventory to about $100 per square foot.

From the Modesto Bee:

Modesto home builder Harinder Singh Toor hadn't planned on being a landlord, but he's become one because he hasn't been able to sell what he's built. Now he rents out eight custom homes, some as large as 5,400 square feet. "I built this house to sell, but I haven't gotten a single bite on it in a year," Toor said about the empty five-bedroom, four-bath house on North Canyon Drive. He had hoped to sell it for $1.2 million, but he'll settle for $3,000 a month in rent, even though that will cover only about half of his carrying costs.

From the McCook Daily Gazette:

The sign proclaimed "House for Sale (bank owned)." The construction looked recent and maybe a little ticky tacky but the place was obviously abandoned, with lawn, landscaping shrubs and trees dying from drought. A house, or three, down the block was not even completed but abandoned mid-construction. The current housing financial crisis is vividly on display in and around Merced, California. It was enlightening to drive through the new but blighted fields of dreams in the town that used to be our home some 35 years ago.
...
I asked my host, Jim Glidden, what happened to the people that purchased and then abandoned all the new housing...The speculators from San Jose and other affluent areas simply abandoned their investments. The poor souls who purchased a home to live in are emotionally as well as financially strapped and either leave to rent if their job is still available or just hang on by the skin of their teeth.

From the LA Times:

[Sean] O'Toole, 40, founded the website ForeclosureRadar.com last year. The site, he said, lists every default, auction and foreclosure in California...Rather than join the rush of those mining for gold in distressed real estate, O'Toole has set himself up as Levi Strauss once did. Instead of selling jeans to prospectors, though, he is selling foreclosure data to would-be buyers.
...
[In 2002] rather than compete with thousands of speculators flipping new homes, he scoured property records to find distressed houses. Over the next few years he bought and sold 152 such properties...He's stopped buying foreclosed houses because his time and money are tied up in the website, O'Toole said. But he also said he "doesn't want to catch a falling knife" as house prices plummet. Although the foreclosure explosion is fueling his business, foreclosure sales have turned into a speculator's market, O'Toole said.

From the Daily Democrat:

Yolo County officials released their 2008-09 recommended budget Friday, which included layoffs, hiring freezes and other hard-line cost-saving elements to keep even during the lean years predicted to come. "This is probably the most difficult budget for Yolo County in more than a decade," County Administrator Sharon Jensen stated in her budget letter to the Board of Supervisors. "The economy in California is still reeling from the massive shockwaves of the sub-prime mortgage crisis and its effects on housing values, the bond market and the consumer economy." As a result, the report stated the county will have to use $8.3 million of its reserve funds to keep afloat, leaving only $8 million left for a rainy day. In addition, the county's recommended budget proposed the elimination of 118 positions or six percent of the county's total workforce.

From the Sacramento Bee:

The collapsing housing market is squeezing all local governments, but Sacramento County is feeling a special pinch. Today, county supervisors will begin deliberating on a budget that could affect almost every resident in this county. Supervisors face a $123.7 million shortfall, and so they are considering cuts to medical clinics, senior centers, youth programs (to keep kids out of gangs), domestic violence counseling, probation services and many other programs.

From News10:

Cali Krystal of Sacramento said she came to EDD to discuss her efforts to seek work...The former state office technician moved from Santa Barbara to Sacramento in December. "The cost of living was really high in Santa Barbara," said Krystal. "I thought I'd relocate back to Sacramento where a lot of state jobs are here." But her job search has fallen victim to California's tough economic times. "I've been looking for work with the state since January," she explained. "Before they did the state budget cuts, I was being called for interviews back to back. Then once the [budget reduction] bill got signed, it all just stopped."

From the Modesto Bee:

United Way of Stanislaus County warned its partner agencies that a downturn in charitable donations will result in funding delays of up to six months. Overall giving, said Tom Ciccarelli, United Way president and chief executive officer, is down about 9 percent.
...
"I've been a CEO for a long time," Ciccarelli said, "and I've never seen an economy like this. What scares me is (the) 'perfect storm' of factors." With food and gas prices climbing, and the bottom falling out of the housing market, Ciccarelli said, more people are worried about hanging on to their jobs and paying their bills.
...
At the same time, Ciccarelli said, more people are turning to United Way and its partner agencies for help. "In this economy," he said, "we're seeing, and will continue to see, an increased demand for services. "All my life, I've pretty much been a 'half-full glass' kind of guy. But this is different. We really need to get out front and plan to weather this perfect storm."

From the Chico ER:

A government agency that tracks the price of housing and has flagged Butte County repeatedly for high appreciation again indicates falling prices in this market. The Office of Federal Housing Enterprise Oversight listed declines in Butte County house prices for the first quarter of 2008 in a study released last week...The service showed that comparing the first quarters of 2007 and 2008, Butte County's housing prices were down a little more than 7 percent this year...Long-time appraiser Tom Fiscus of Chico has confirmed that his business is down. "I've seen this (slump) three or four times, but never this bad. I've seen the requests (for appraisals) dwindle."

From Bloomberg:

The California Public Employees' Retirement System, the largest U.S. public pension fund, may sell part of its $2 billion in residential land holdings after the investments lost 31 percent last year amid falling home prices and forecasts of further declines. Sacramento-based Calpers hired Morgan Stanley to review seven land deals it made with joint-venture partners and real-estate advisers, said fund spokeswoman Pat Macht.
...
U.S. home prices will fall another 10 percent through the end of next year, with even steeper declines expected in "bubble areas'' in parts of California, Nevada and Arizona where there's already an "overhang of supply,'' Michelle Meyer, economist for Lehman Brothers Holding Inc. in New York, said in an interview.

From the Daily Breeze:

The real estate broker who bought Rep. Laura Richardson's house at a foreclosure sale last month is accusing her of receiving preferential treatment because her lender has issued a notice to rescind the sale. James York, owner of Red Rock Mortgage, said he would file a lawsuit against Richardson and her lender, Washington Mutual, by the end of the week, and has every intention of keeping the house. "I'm just amazed they've done this," York said. "They never would have done this for anybody else."

From The Hill:

The Congressional watchdog group Citizens for Responsibility and Ethics in Washington (CREW) on Tuesday fired a shot at Rep. Laura Richardson (D-Calif.), describing her financial problems as “appalling” and calling her a “deadbeat congresswoman.”...“Rep. Laura Richardson’s appalling financial dealings raise serious questions about her ethics,” Sloan said in a statement. “What kind of responsible adult — much less elected public official — only pays her bills when she’s called out by journalists?

From KCRA:

'The hype about the housing market is running out of gas'

From Inman News:

Tamara Dawn, a real estate broker in Sacramento, Calif., compiled statistics for Sacramento County which show that REO sales and short sales -- which are sales of homes in which the sale price falls short of what the homeowner still owes on the mortgage -- accounted for about 26.3 percent of total sales in the county from May 7 through Nov. 7.

A short sale can assist a homeowner in avoiding foreclosure and can be less costly for a lender than taking ownership of the property. Short-sale transactions can take more effort and time than typical real estate transactions, as they typically require extensive paperwork and can take weeks to receive a decision back from the lender on whether to approve or reject the terms of the sale.

REOs alone accounted for 22.5 percent of total sales in Sacramento County during the May 7-Nov. 7 period, and REO sales accounted for 35.8 percent of total sales in the county from Oct. 7 through Nov. 7.

As of Nov. 7, about 52.7 percent of all pending sales for the previous 30 days in Sacramento County were related to short-sale and REO transactions, while about 46.6 percent of all active listings on Nov. 7 involved short-sale and REO properties.

From the Sacramento Bee:

Hopes for an office tower and high-rise housing at Eighth and I streets downtown have been dashed again. The CIM Group, a Hollywood-based developer, has opted out of its plans to buy the parcel, raze the existing building and build a new one, says Rob Leonard, economic development director for Sacramento County, which owns the site. CIM's move follows a similar decision last year by Texas home builder D.R. Horton to abandon its plans for a 21-story "Library Lofts" project at the same site.

Leonard says CIM's decision was a "sign of the (weakening real estate) market" and an indication that CIM is focusing on other local projects, including a joint venture with CalPERS at the former John Saca high-rise condo site at Third and Capitol Mall.

From the Stockton Record:

A couple of top bidders in a no-minimum-bid auction of foreclosed homes nearly a month ago in Stockton are not only unhappy that banks didn't accept their bids or even negotiate a sale, they haven't gotten back thousands of dollars in deposits. "It was a waste of my time," said Lewis Stallworth Jr., a Stockton man who put in a top bid of $135,000 for a north Stockton house. "I feel like it was almost a scam. There's no use in going to an auction if they're going to act like that."
...
"I'm kind of sorry I got into this, to tell you the truth," [Mel] Schell said. "It's been way too long." Miller said the auction deceptively implied most bids would be accepted. Plus, several weeks after the auction is too long not to hear anything, she said. "It seems like sort of a fiasco," she said.
...
Dave Webb, a Hudson & Marshall partner, said...typically, either deals are to be made within 30 days, or deposits are returned quickly enough....But some of the large banks or asset managers don't move quickly, Webb said.

From the Redding Record Searchlight (hat tip Suzanne):

The nation's largest savings and loan closed its Redding office on Hemsted Drive on Monday. Washington Mutual's home loan center in Redding had four employees. One will be retained by the company, spokesman Greg Kischner said Tuesday. The company also closed its home loan centers in Chico and Yuba City, which had 11 employees between them, four of whom will stay on with Washington Mutual.
...
This is at least the second reported home loan business in Redding to close since September. National City Mortgage, also citing woes in the housing market, closed Sept. 26. The Churn Creek Road office had five employees.
...
In Shasta County, Benchmark Real Estate Mortgage, First Mortgage Corp., Frost Financial Mortgage, Santa Cruz Mortgage and Mission Hills Mortgage have closed.

From the Anderson Valley Post (hat tip Suzanne):

The Vineyards housing development in Anderson has lain relatively dormant for several months. The plan by developer Sanderson Communities entails 2,500 acres to contain 5,500 units in the hills behind Wal-Mart on Rhonda Road. No construction that requires building inspections has been done at The Vineyards since July.
...
Roger White, vice president of development at Sanderson Communities...said that houses on 95 lots would be ready for construction by March, but only a few houses would actually be built until the housing market improves. “The hype about the housing market is running out of gas,” White said. “People are still having babies and are still interested in this area.”

From the LA Times:

Gov. Arnold Schwarzenegger told social service advocates Tuesday that the state's anticipated budget shortfall -- already feared to be the worst since he took office -- has widened to $14 billion, according to people at the meetings.

That new figure indicates that the state's fiscal fortunes are declining even more rapidly than many leaders had expected. Less than a month ago, the Legislature's chief budget analyst calculated that California is on track to come up $10 billion short by June 2009, when the state ends its next fiscal year.

A $14-billion budget gap would translate to more than 12% of the state's budget if spending continues to rise as projected. Legislative Analyst Elizabeth Hill last month urged legislators to consider getting rid of state programs created in recent years, abolishing tax breaks, raising taxes and reducing benefits for the recipients of government programs.

"It's Hard To Be Optimistic"

From the Sacramento Business Journal:

Sales of existing homes in California will keep falling in 2008, but at a slower pace, while median home prices across the state will decline for the first time since 1996, the California Association of Realtors said in its 2008 forecast released Wednesday... The projected 2008 sales figure would be the state's lowest since 1985....
...
Across California, the median home price is expected to creep up 3.5 percent to $576,000 in 2007, then turn down in 2008, losing a projected 4 percent to $553,000. That shift has already hit the Sacramento market, where the median price of $332,510 in August was down 15.7 percent from the peak price of $394,450 in August 2005.

The recent housing construction boom in affordable markets such as the Central Valley and high desert is contributing to softness in the resale market, exacerbated by fallout from tighter loan underwriting and defaults in the subprime mortgage market, the group said.

From the Central Valley Business Times:

Central Valley cities are among the most likely in the nation to see further home price drops within the next two years, according to figures compiled by PMI Mortgage Insurance Co., the Walnut Creek-based subsidiary of PMI Group Inc. There is a 62.3 percent chance of price declines in Stockton, says PMI. That’s the third highest in the nation, it says, exceeded only by Salinas at 63.9 percent and Naples, Fla., at 66.1 percent.
...
PMI’s list of Central Valley cities’ likelihood of price declines by this time in 2009:

• Bakersfield: 56.4 percent
• Chico: 41.8 percent
• Fresno: 48.1 percent
• Hanford-Corcoran: 41.2 percent
• Madera: 42.1 percent
• Merced: 59.3 percent
• Modesto: 57.0 percent
• Sacramento: 52.2 percent
• Stockton: 62.3 percent
• Visalia-Porterville: 53.3 percent

PMI Report [pdf]

From TheSteet.com

Downey Financial dropped 4% in early trading after the savings and loan warned that rising loan losses will lead to a loss for the third quarter.
...
"We are clearly disappointed with our third-quarter results," said Daniel Rosenthal, Downey's president and CEO. "The continued weakening and uncertainty relative to the housing market, coupled with third-quarter disruption in the secondary mortgage markets, unfavorably impacted our borrowers and the value of their loan collateral. This has been particularly true in certain geographic areas such as the greater Sacramento and Stockton areas of Northern California and San Diego county. As a result, single family loan delinquencies, as well as losses from foreclosures, rose significantly during the third quarter and led to this quarter's large increase to the allowance for losses."

From CBS News (hat tip spacebar):

What I witnessed on the steps of the County Courthouse in Stockton, California struck me as strange and sad and worrying…particularly if you think the worst is over in America’s mortgage meltdown.

An agent for lenders stood on the courthouse steps, his hands full of official documents. He was preparing to auction several houses with mortgages in default. He’s there almost every day at 10 AM. On this day, at least, he had a lonely job: there was nobody there but me…and I wasn’t there to buy. Still, the agent read aloud what he was legally required to read and declared the bidding open. The first house up had an opening bid set at $465,000. Less than two years earlier a buyer had paid $620,000 for the same house. But now, even with a $155,000 discount, nobody was interested.
...
In one subdivision I drove through in Stockton, four houses in a row were all in foreclosure. The houses are easy to find. Often the lawns have turned brown. Plants in the garden have died. Mail is piled up at the door. There may still be a “For Sale” sign on the lawn but it may be broken or blown over and nobody has done anything about it. The lender that now owns the house seems to have given up on selling it anytime soon.
...
If they can keep up their mortgage payments and the market turns around in the near future it may all turn out fine. But on a block with two or three houses with the brown lawns of foreclosure, it’s hard to be optimistic that the real estate boom is going to return anytime soon.

Current Sacramento Housing 'Recession is the Worst One Ever'

UPDATE - From Inman News:

Wendy Shapiro, a resident in Roseville, Calif., said she purchased multiple investment properties after selling her home in San Francisco and moving out to the Sacramento area. "I bought a fourplex in Red Bluff; I had $500,000 in the bank and a 700-plus credit score," she said. But her real estate investments have become a money pit. "Unfortunately, I put all my eggs in one basket. Now my daughter is going to college and I don't know if I'll be able to keep her there."

Shapiro, a nurse, said she had planned to gradually sell off the properties for a profit, but now she is faced with a decision on which properties to "walk away from," she said. "I am a single mom here working my butt off, and I thought I was doing the right thing."

Rental prices have dropped substantially in areas where she owns property, Shapiro said, as many investment properties are competing for rental income. "Rents have dropped everywhere because people who couldn't sell houses are now trying to rent them. I can't even sell one house," she said. Buyers are on the fence these days, she said, and the credit crunch isn't helping out with sales.

"It's just hell. Will I be able to sleep at night knowing I just walked away from $400,000 to $500,000 ... and all my time?" she said.

From the Sacramento Bee:

About a year ago, Susan McDonald began to see dead lawns, weeds and vacant houses in her new Elk Grove neighborhood built nearly overnight during the housing boom. The blighted scenes seemed an ominous indicator, a housing downturn tightening its grip on her suburban surroundings. Months later, as that downturn continues to deepen across the Sacramento region, thousands more empty homes and their unkempt lawns have become the ugly face of rising foreclosures and bank repossessions.
...
Many real estate agents estimate that about 40 percent of the 10,000 single-family houses for sale in Sacramento County are empty. In the short run, that poses aesthetic problems for many neighborhoods. In the long run, so many empty houses are also likely to prolong the housing recovery, analysts say.
...
Thousands more owners will face difficulty in coming months as their adjustable-rate loans reset to higher payments. At the same time, many investors, who represented one in every four sales in Sacramento County at the peak of the boom in 2004, are still trying to sell their empty properties..."There are so many new homes here and so many investors from the Bay Area," McDonald says. "When we pull up the owner's names, nine times out of 10 they live in the Bay Area..."From 2001 to 2005 we had just a flood of people from the Bay Area. That was when the market was really hot," she says. "Now everybody is losing their shirts and renting or walking away."

From the Sacramento Business Journal:

On the list of big-city status symbols that Sacramento can't quite seem to land, add the condominium tower. The most ambitious project to date, John Saca's 53-story twin Towers on Capitol Mall, died in June when the California Public Employees' Retirement System bought out Saca's interests...BCN Development's 38-story Aura project at 6th Street and Capitol Mall is technically still alive, but stalled.
...
Don't feel too bad, though. In cities where condo towers have been a hot trend, the condo markets are becoming glutted thanks to overbuilding. Sacramento may have dodged a bullet.

From the Stockton Record:

Soon after the City Council celebrated its adoption last month of a plan to build homes downtown - City Manager Gordon Palmer said it "set a vision" for the city core - it became clear even strident civic action could not match the force of the housing market's collapse.

Following the plan's adoption, Grupe Investment Co. Inc. President Kevin Huber confirmed the postponement of downtown's most-ballyhooed housing project, the construction of more than 150 condominiums and townhouses on the south bank of the Stockton Deep Water Channel.

It was a significant setback for City Hall. Since announcing the project last year and predicting that homes could be built this year or next - or, later, in 2009 - civic boosters have pointed to it as proof developers could build and people would live in the city core.

Not in this market, Huber said. "It's hard to say when we would start at this point," he said. Before the council adopted its housing plan, it came out last month that Stockton's foreclosure rate is among the highest in the nation. Houses sit vacant, and home sales have slumped. The market is "as difficult as I've seen it," Huber said. To start a housing project here at the moment would be unwise, he said.

From the Sacramento Business Journal:

Eva Garcia has been selling real estate in Sacramento for 44 years...."I think this recession is the worst one ever, worse than the one in the '90s, because of the fraud on the part of too many lenders. But we're OK. We have a steady flow of customers. Some of our customers are the children of people we sold homes to a generation ago. We advise people not to sell now unless they absolutely have to. "

From the Chico Enterprise Record:

People are asking "When is the housing market going to recover?" What they usually mean is, "When are prices going to start going up again?" This is the wrong way to look at the trend. The current period of stagnant sales and dropping prices is the recovery. It's the last few years that have been unhealthy. Things got so bad that the market contracted that dread malady, the bubble.

At the height of the bubble, ordinary, everyday Chico houses were selling for $300,000. That's just plain madness in a community where $50,000 a year incomes are the norm.
...
The deflating of the bubble ought to teach us that what goes up what must come down. But we will never learn. It won't be long before we've embarked on a mad dash after another supposed source of riches.

"Caught Off-Guard"

From Dow Jones (hat tip HBB):

Wells Fargo & Co. (WFC) said second-quarter profits rose 9%, boosted by continued loan and deposit growth, but some of its big regional-banking peers struggled...The one major blemish was a rise in losses on home-equity loans. Wells Fargo attributed the trend to depressed home prices in some markets, especially the Midwest and California's Central Valley. Wells executives acknowledged they were caught off-guard by the severity of the losses, which they predicted would continue through the rest of the year. They said they are tightening their underwriting standards and putting a greater emphasis on loan collections.

From The Union:

The number of defaulted properties in Nevada County has doubled in the past year, according to figures from the county recorder’s office. Since January lenders have issued 253 notices of default in the county. That’s up from last year, when lenders issued 124 notices during the same time period, according to recorded documents.

In the county, 282 homes are in some phase of foreclosure, bank ownership or sale, according to RealtyTrac, an online marketplace at www.realtytrac.com for foreclosure properties.
...
Placer County has 3,086 homes in some phase of foreclosure, bank ownership or sale, and Yuba County has 567 such listings, according to RealtyTrac.
...
The troubled property owners are not exclusively first-time buyers or young families. In some cases, owners of upscale homes “got in over their heads” and had to foreclose on their property, according to Realtor Cheryl Rellstab.
...
Foreclosure notices in The Union classifieds have grown by four times and 18-20 notices a month are not uncommon this summer, compared with five notices last year. Most of the foreclosure properties come after two to three years of ownership.
...
Interest-only loans are tools to get some buyers into a home and have been used effectively by a number of people, [John] Taber [a commercial and residential loan officer with Delta Home Loans] said. Those who neglected to do their homework before they invested are the ones hurting now, Taber said. “If you take a chain saw out and don’t know how to use it, you’ll be without a hand,” Taber said.

From the Chico Enterprise Record:

A recently released national housing report says there's nearly a 47 percent chance that Butte County housing prices will decline over the next two years.
...
While price appreciation may be good for those interested in turning real estate profits, it doesn't make for a good environment for homeownership, said PMI spokeswoman Stephanie Corns. She noted other indicators say Butte County is struggling with housing affordability. "Income hasn't kept up with home prices," said Corns, making it difficult for many people to get into the market.
...
Chico Association of Realtors President Kym Campbell said the Chico market has experienced price drops, but believes that trend has slowed. Campbell noted that as prices drop, sales activity has revved up. She sees prices remaining stable over the next few months rather than rising.
...
Campbell acknowledged the swings the market has taken in Chico, saying properties have stayed on the market longer, and that sellers have switched agents, thinking it would make a difference.

They've also dropped prices in order to create interest in their properties. Realtor Bill Campbell — Kym Campbell's husband — mentioned a house that had been listed at more than $1 million, but the seller dropped that to $975,000.

"We have seen some major price reductions. Not that the houses aren't worth the money. The market just won't bear it," he said.

'Concern Has Turned to Panic' in Chico

From KNVN 24:

If you own a home in the North State, you probably know that home prices are dropping. But just how much, and how far will they drop?

In part one of an Action News special report "Bursting Bubble," we talk with homeowners who say selling their home is becoming a very tough task. For nearly four months Claudia Sigona and her partner, Deanne, have tried to sell their home. It's a newer model 22 hundred square foot house with all of the amenities -- plus a pool. they've gotten a lot of looks, but no offers. Sigona says "it's a really nice house. the market just seems to be a little slow right now. we've had to reduce the price a couple of times, but we're hopeful."

Around the couple's corner is Jensen Park, brand new homes with all of the frills. Twelve houses in the development still sit -- and on this day anyway, not one person came to this open house. Greg Melton is another frustrated seller in Chico. "At this point concern has turned to panic." Melton knows the feeling. he expected a quick sale. that was five months ago. Melton says "I don't understand. it's a nice neighborhood, great location, cul de sac, park on both sides. I thought it would sell a lot faster than it did." Melton and his real estate agent had the house sold, but the deal fell through when the buyer was unable to sell his house. In the interim, Melton bought a new house...so now he has two mortgages and the selling price of this one has gone down.

Many home sellers we spoke to say they are panicking that they'll never sell their house for what they paid for it. These people decline to be interviewed on camera, embarrassed at the financial predicament they find themselves in.

Sherry Payne is a Chico Real Estate Agent. "I think the last I heard we had about 800 houses on the market." Payne has sold real estate in chico for 28 years. She estimates prices have dropped 20 percent from last year's peak. further declines could be coming. Payne says "what has happened also is the fact that because they've come down they're getting lower offers, even lower than the prices they've leveled off to. so they've reduced the prices quite a bit."

Frank Hill is a flipper. Over the last ten years, he's bought and sold homes for profit. But after he sells this Canyon Gates estate, his flipping days will take a recess. "I think that just everybody is in a holding pattern to see how far and how low the prices of these homes are going to go." Frank has priced his gorgeous house below others in the neighborhood. His $579,000 dollar asking price includes $25,000 worth of furniture. "We thought as an added incentive in this quote "hard market" we would include the furniture too and maybe stimulate a buyer that way." Even so, veteran Chico realtor Sherry Payne says buyers are few and far between these days.

Hat tip: The Housing Bubble blog

Prices Hit the Valley Floor?

From the Chico Enterprise Record:

A study released this week by an East Coast economic research group reported housing prices will drop dramatically in Butte County by 2008. The study by Moody's Economy.com in West Chester, Pa. notes that housing prices in the Chico Metropolitan Statistical Area -- basically Butte County -- will drop by 12.6 percent by the second quarter of 2008 from the 2004 fourth-quarter price...

A softening in the Chico market isn't a surprise, according to 2007 Chico Association of Realtors President Kym Campbell of W.M. Campbell Real Estate. Campbell said she's seen dropping prices and longer stays on the market, but she's not sure about the size of the drop predicted by Moody's. "I think there's more inventory. Sellers have been reacting to the great market."

From the Redding Record Searchlight:

Redding ranked 16th on a list of the top 30 U.S. metropolitan markets expected to suffer the sharpest declines in home prices, according to a forecast released this week by Moody’s Economy.com, a West Chester, Pa.-based research firm...

Redding’s median price for a home is forecast to fall by 11.8 percent. "That’s about right," Ron Largent, agent/owner of Keller Williams Realty in Redding, said Thursday. He thinks prices could fall "another 10 percent" from where they were a month ago before leveling out...

Home sales slowed and prices fell in Shasta County in August. The median sales price was $245,000 compared with $269,000 in July and $285,000 a year ago, according to Dataquick...

One reason Redding’s prices are softening is the cooling ardor of investors. A year ago, Redding led the nation in the percentage of homes sold to investors — 22 percent — according to LoanPerformance, a San Francisco-based mortgage research firm. Through May of this year, 15.4 percent of homes were bought by investors. That was still nearly double the national average of 8.9 percent.

The forecast of a price decline "sounds like old news, or at least we’re right at the end of it," said Greg Lloyd, broker/owner of Real Estate Center in Redding. Lloyd is also president of the Shasta Association of Realtors. "We probably peaked out very early this year and I would suspect we have hit the valley floor as we speak.

Price Decline Central

An update on yesterday's post. A look at Moody's Economy.com's press release shows the Central Valley to be well represented:

Metropolitan Areas That Will Suffer House Price Declines

% House Price Decline

#3 Merced: -16.1%
#4 Stockton: -15.7%
#9 Chico: -12.6%
#10 Fresno: -12.5%
#14 Redding: -11.8%
#18 Bakersfield: -11.1%
#22 Sacramento: -9.9%
#33 Visalia: -7.3%
#55 Yuba City: -2.6%
#60: Madera: -1.8%

The study predicts a price trough for Sacramento in the second quarter of 2008.

Update: 'Now it's payback time.'

From News 10:

An economic research firm predicts the first national decline in home prices since the Great Depression, and several northern California cities lead the way...The report's authors actually use the word "crash" to describe the forecast for several northern California markets, including Sacramento, Stockton, Vallejo, Redding, Chico, Merced and Fresno...

The report's authors lay much of the blame for the falling values on out-of-area investors who drove up prices in recent years to levels that can't be sustained by the local economies. "Prices in places like Stockton, Merced and Sacramento were pushed artificially high by investors," said Celia Chen, Moody's Director of Housing Economics. "And so now it's payback time."

'Chico is a Special Place'

After reading one too many real estate articles over the past year, I've come to the conclusion that everyplace is special and land is scarce everywhere. From the Chico Enterprise Record:

Despite a national study that concluded Chico homes are "extremely overvalued," members of the real estate industry here see a buyers' market. A valuation analysis released Monday by National City Corp. and Global Insight found that homes in Chico are priced nearly 61 percent higher than they should be...

Brewster Beattie, a Realtor with Coldwell Banker in Chico, said calling the market overvalued is subjective. People still gladly move up here from more expensive areas of the state, he said. "I think it's all a little bit relative," he said. Beattie questioned income levels used in the study.

"That's skewed down, I think, because of the student situation," he said, referring to Chico State University. "That's someone in New Jersey that doesn't know the Chico real state market." Even so, the high prices have plateaued, Beattie said, and there is an increasing number of homes on the market. In May 2005, there were 163 homes up for sale in Chico. Now, there are 492. "I think right now the inventory is escalated because people are putting homes on the market too high," he said. "They're not selling. It has turned into a buyers' market."

Carlee Shannon of Preferred Agents Real Estate said the market in Orland is showing a similar trend. There are now more than 90 homes up for sale, whereas a year ago there were only 20 to 25. "I think it's because our prices are too high. I believe it's softening and becoming a buyers' market," Shannon said. "There are so few buyers at this time and so many listings out there, so it influences the seller to be motivated. We're seeing price reductions..."

Steve Bertagna, a Chico city councilor and Chico Valley Mortgage loan specialist, said studies of home values often don't take into account quality of life issues, such as climate and recreational activities that make an area attractive to prospective residents. "Chico is a special place and people know about it," he said. "These things directly or indirectly contribute to home values." He cited a scarcity of land available for development as a cause of high prices here.

"Buyers are Becoming a Precious Commodity" in Chico

A blog called Post Scripts has this rare report on the Chico housing market:

Could Chico home prices be about to fall? If you look at the inventory on MLS you might think so. It's up about 3X over last year with around 277 homes on the market. This week there were more homes offered on the MLS tour than at any time all year. The stock market is jittery and it's taken a beating recently over inflation woes that are leading us ever closer to higher interest rates. Now toss in the sky high gasoline price and it stands that sooner or later this absurdly high $220 per average s.f. price will have to come down. If homes are not selling right now, what choice do sellers have? It's happened many times before and its going to happen again, so the question is not IF, but when?

UPDATE 5/30/06: Condo prices are falling. Home prices have stalled. MLS inventory as of 5/30/06 has risen to over 400 homes and they just aren't selling like they should. Buyers are becoming a precious commodity at local real estate offices, listings that are not priced to sell are used to sell those that are.

As interest rates climb from this point on, there will be more pressure on sellers to lower prices to offset higher finance costs to buyers who are becoming increasingly more selective and more demanding.

And here's a tidbit about the Redding housing market:

Palomar Builders Inc., Redding's largest homebuilder, is being acquired by Premier Homes of Roseville, both companies announced Monday...The Palomar-Premier deal comes at a time when residential real estate is slowing in Shasta County. Housing starts in Redding through April are off 42 percent from last year. Home sales countywide also are down for the year.

Valley Shooting Stars "Fading Fast"

Last week, the Office of Federal Housing Enterprise Oversight released their 1st Quarter house price index report (pdf). You can look at past reports here. Here's how the Sacramento housing market fared:

• quarter change: -0.24%
• 1-year change: 13.18%
• 5-year change: 112.23%
  

As commenter Garth pointed out, Sacramento is one of the few major markets to have a negative quarter change. Now the question is will the markets that shot up the highest also fall the hardest? As the Sacramento Bee explains, the Central Valley markets (along with Florida) dominate the top 25 metro areas with the most appreciation over the last five years.

The housing boom may be fading fast on the long inland plain stretching from Bakersfield to Redding, but its residents now enjoy some of the country's biggest five-year gains in home equity, according to a new federal study.

The 19-county Central Valley, along with Florida, enjoyed the nation's strongest housing appreciation since 2001 through March 31 of this year when measured in percentage gains, says the U.S. Office of Federal Housing Enterprise Oversight.

Ten Central Valley metro areas, including Sacramento, placed among the nation's top 25 cities for rising home values during the past five years, according to the office's newest quarterly report...

Fresno County, with a recent median home price of $310,000, posted the nation's biggest five-year gain of 145 percent, followed by Bakersfield at 142 percent. Sacramento ranked 25th nationally with a 112 percent increase...

"We're not super affordable anymore," said Sharon Telles, president of the Placer County Association of Realtors. "The Sacramento area has always been quite a few steps below the Bay Area or Los Angeles or San Diego. But in the last five years the amount of difference in our prices has lessened."

The federal figures arrive as Sacramento-area housing values already have fallen well below their 2005 peaks and other Valley cities report slowing sales and growing inventory of real estate listings...

Fueled by low interest rates and new adjustable rate mortgage products, the Valley's surge in home values also spawned a sustained consumer-spending spree. Homeowners in El Dorado, Placer, Sacramento and Yolo counties alone borrowed and opened equity lines of credit for $21.9 billion from 2002 to 2005, according to DataQuick Information Systems, a La Jolla-based property researcher.

The rankings also confirm how the Central Valley quickly has become one more expensive California region for thousands of would-be homeowners. Employers have reported more problems luring job candidates. Moody's Economy.com recently ranked Stockton, Chico, Redding, Merced and Fresno among the nation's 20 most financially stressed cities for homeowners.

"There is generally a feeling of an improving economy in the region, but if you are working in the Valley and working for Valley wages the impact of this has been to elevate the price of housing out of your reach," said Carol Whiteside, president of the Great Valley Center, a Modesto-based think tank.

Has the Sacramento Housing Market "Gotten Ahead of Itself?"

There seems to be a whole industry dedicated to ranking the most overvalued/riskiest housing markets in the country. Once again Sacramento and other Central Valley cities sit prominently on these lists.

Bankrate.com looked at 10 markets that are most likely to experience a decline.

10 bubble busters -- values expected to decline

Sacramento, Calif. We're not quite sure what Sacramento ever did to anyone, but it showed up on just about everyone's list of has-been markets. Winzer's Local Home Value Ratings rates the market as 59 percent overvalued and Burns Housing Cycle Barometer also lists it as overpriced.

"Sacramento, we think, has topped out," says Gollis of The Concord Group. "There is just so much (housing construction) in the pipeline. It's a steady-as-she goes market and has always had consistent growth, but we think the land market has gotten ahead of itself."

Meanwhile, the latest National City Corp./Global Insight study shows that affordability has continued to decline as mortgage rates have increased. Here's a rundown of some of the most overvalued markets in the country (out of 299 markets):

• #2 Merced: 86.20%
• #4 Stockton: 79.50%
• #5 Madera: 77.00%
• #9 Modesto: 72.30%
• #12 Fresno: 65.40%
• #13 Sacramento: 63.80%
• #15 Bakersfield: 62.40%
• #16 Chico: 62.10%
• #19 Redding: 60.30%
• #30 Visalia: 53.90%

Previous Post: Sacramento Market 61% Overvalued?

What Goes Up, Must Come...Down by 3.8%?

According to the latest housing price forecasts from Fiserv Lending Solutions, a provider of mortgage and consumer lending services, the median home price for the Sacramento housing market is predicted to decline by 3.8% in 2006. That is the 8th worst on a list of 379 metro areas. Other Central Valley metros with negative 2006 forecasts include:

• #5 Stockton: -4.2%
  
• #11 Merced: -3.4%
  
• #15 Modesto: -3.2%
  
• #24 Fresno: -2.3%
  
• #26 Bakersfield: -2.3%
  
• #32 Hanford-Corcoran: -2%
  
• #33 Chico: -2%
  
• #40 Visalia-Porterville: -1.1%

Rural Central Valley: Highest Default Risk in California

From the LA Daily News:

Mortgage lenders in California are more critically scrutinizing loan applications now because of higher default risk resulting from a shift in sales patterns as the real estate market nears the end of its boom cycle, an industry tracker said Monday.

During the second half of 2005, risk levels for new mortgages statewide increased 28.6 percent across California from the prior six months, said San Juan Capistrano-based HomeSmartReports.com.

The risk factor is lowest in coastal Southern California and the Bay Area, the company said. The highest risk factor is in rural Central Valley communities...

The risk is based on a scale of 1, the lowest, to 100, the highest.
At 6.72 the risk is highest in the Hanford and Corcoran area. The lowest is 0.80 in Orange County and San Diego.

The risk factor in the Los Angeles, Long Beach and Glendale area is 1.44, and in Oxnard, Thousand Oaks and Ventura it is 1.12.

The biggest jumps came in the Salinas and Santa Cruz-Watsonville areas, while the trend was down in rural areas north of Sacramento such as Chico and Yuba City, the company said.

Sacramento Market 61% Overvalued?

Sacramento is one of 11 markets nationwide with a greater than 50 percent chance of experiencing price declines, according to the latest PMI U.S. Market Risk Index.

Meanwhile, CNNMoney.com has the latest Housing Market Analysis conducted by National City Corp. The report provides "estimates of what the typical house in these markets should cost by examining the town's population densities, local interest rates, and income levels. It also factors in historical premiums and discounts for each area."

According to the report, the Sacramento housing market is 61% overvalued.

Other Central Valley cities ranking high on the list include:

• Merced (77%)
• Stockton (72%)
• Madera (70%)
• Modesto (67%)
• Chico (59%)
• Fresno (58%)
• Redding (56%)
• Bakersfield (51%)
• Visalia (45%)