'Business as Usual'

From the Tracy Press:

[C]rooked real estate agents were so common that to get targeted for prosecution, lenders and agents had to go the extra mile in duping buyers. “When I started out, everyone was doing that, those stated-income loans,” said Susan Wilson, who sells homes for Corral Hollow Real Estate in Tracy. “It’s really discouraging, because no one does them now, but the same people who did them are still selling homes.” She said that realization makes her consider leaving the business. “I just don’t want to be in a line of work where things like that could happen — where peoples’ lives are falling apart because of this industry,” she said.
...
“When we started out, that’s what we were taught,” Wilson said. “Even the veterans, with decades behind them, said this is the way to do it. No one said it was wrong — and when you’re new, how do you know?” In fact, victims of brokers and agents who helped people procure homes they couldn’t afford wonder why the people who misled them are still free. “It’s like business as usual,” Wilson said. “I wonder when, or if, it’s going to catch up with them.”

From News10:

What was expected to be a flood of foreclosures is turning out to be a trickle. Michael Lyon of Lyon Real Estate agreed..."It's becoming a seller's market. I didn't think I would be saying this for years." Lyon predicts that instead of seeing a wave of foreclosures sweep in over the next few months, it will likely now be a steady stream over the next few years.

From Rocklin & Roseville Today:

The greater Sacramento area housing market has improved, but it has not yet fully corrected itself. The first-time tax credit needs to be extended and if possible expanded in order to build upon the progress the market has made. Any uncertainty about the future of the credit has the power to dampen consumer demand. The best way to assure continued housing activity in Sacramento and around the country is to extend the credit and do it quickly. I urge you, even if you are not a potential first-time home buyer to contact your congressperson and ask them to support the extension of the credit.

Sacramento's RealtyCrack Addiction

New York Times - Sacramento economy's addiction to realtycrack among nation's highest

From the Sacramento Business Journal:

An upswing in home prices and a surprising rebound in consumer confidence this week have economists buoyant about a possible turnaround in the national economy. But for Sacramento? Not so much. Sacramentans’ mortgage debt, the weakness of the commercial real estate market and a bleak outlook for California overall have tempered any bright spots for the local economy.
...
“We predict things to get a little worse over the next 12 months,” said Ryan Sharp, director of The Center for Strategic Economic Research in Sacramento, which forecasts the region’s economy. “Sacramento isn’t going to outperform California.”
...
Ezra Becker, director of consulting and strategy for TransUnion’s financial services group...said Sacramentans’ mortgage problems are affecting spending habits. “A lot of people took pay cuts, they were laid off or had to make other adjustments,” he said.

From the Sacramento Bee:

A major credit reporting company predicts mortgage delinquency rates will continue rising in the Sacramento area – with 12 percent of homeowners falling at least two months behind on their payments by year's end. That's nearly twice the national projection and a dramatic jump from just two years ago, when less than 2 percent percent of area homeowners' notes were delinquent.
...
Double-digit percentage unemployment and unpaid furlough days are increasingly catching up with homeowners who have "safe" fixed-rate loans, rather than the subprime loans that initially sparked the housing crisis. Mike Himes, director of NeighborWorks Homeownership Center in Sacramento, which counsels struggling and first-time homeowners, said his office is seeing more clients facing growing debt and making choices between house payments and other expenses. His clientele includes a growing number of state workers whose paychecks have been pared by unpaid furloughs. "There's a lot of money borrowed to stay in the house and keep up with living expenses," Himes said. "This is becoming more and more of a problem."

Sacramento Foreclosure 'Surge' Dead Ahead?

From CNN Money: Buy foreclosures now - before it's too late

In many markets, if you want to buy a repossessed property, you better come with your best offer first -- and fast. You've heard of speed dating? It's got nothin' on foreclosure buying these days. In many places, anyone who wants to buy a foreclosure better act fast, or they're going to come away with bupkus.
...
The hot spots for this fast-paced foreclosure activity are former bubble markets where foreclosures soared -- places like California cities Sacramento, Riverside and San Bernardino. In Sacramento, for example, the inventory is down to less than 30 days, making it a cut-throat market.
...
The trend is causing intense agita for buyers. "People feel like they're getting left out," said [Caesar] Dias, the agent in Stockton.

From News10:

Declining home values might also be in our future, especially homes priced at $300,000 and up. Jim Waters, a regional director for Lyon Real Estate, said there are more than 20,000 foreclosed homes waiting to be released by lenders just in the Sacramento region.

"We're going to see a good surge, probably in the middle to latter part of September or the end of the 3rd quarter, and that surge will run all the way through the end of the year and all of next year, from what they're telling us," said Waters, who talks regularly with banking executives.

When asked if the economy will see as many foreclosures in the coming year as the past two years, Waters replied, "More, more."

From the Sacramento Bee:

In Sacramento "we have a lot more decompressing to do," added Sanjay Varshney, dean of the College of Business Administration at California State University, Sacramento. "Normally, I would have said we would have defined a bottom, too, later this year or early next year. I think for us the challenge is the government layoffs have just begun. "We might be looking at our cycle to be pushed out compared to the national cycle," he said.

Sacramento Foreclosures via Google Maps

View Larger Map

Hat tip: Lansner on Real Estate

Also: Defaults starting to tag wealthier Sacramento-area ZIP Codes

Foreclosure Stats for June; MLS Sales Go Negative

Year-over-year change
NOD: 6.9%
NTS: -26.0%

From ForeclosureRadar:

[California] Notices of Trustee Sale dropped...with the timing of the drop indicating that it was in response to the California Foreclosure Prevention Act. This law was widely believed to have little or no impact on foreclosure filings, as it exempted the majority of large lenders that operate in the state. “A number of lenders appear to have self-imposed California’s latest foreclosure moratorium on themselves, despite having received an exemption from it,” says Sean O’Toole, founder and CEO of ForeclosureRadar. “Given the number of exempt lenders it was quite surprising to see Notice of Trustee Sale filings drop by nearly 50 percent the day the new law went into effect.”
...
Notice of Trustee Sale filings were climbing late in the month so it remains unlikely this law will have any longterm impact on foreclosure activity.

Of note this month, June MLS sales were down year-over-year for the first time since January 2008.



Also worth a look (hat tip readers):
Sacramento: 70 Percent Distressed Sales in June
Economists say recovery is on the way, but it will take awhile
13%+ Sacramento Regional Unemployment Rate Likely in 2010 [pdf]
Industry searches high and low for signs of hope
Delta town struggles to hang on with 25 percent out of work
Sacramento asking prices flatlining
Movin' on Up: Mortgage defaults spread as even 'safe' borrowers falter
High-end Immunity Alert: East Sacramento tops for reduced-priced listings
Rare East Sac Million Dollar Bank Repo For Sale
Low sales for high-end
Beyond ZIndex: Zillow adds charts of sold price per sqft, median sold price, list price and more. Some of the data goes back 10 years and can be segregated by metro, county, city, and neighborhood as well as by home type and configuration. (Note: data lags several months)

Repo Flood or Trickle?

From the Sacramento Bee:

More than 20,000 troubled homes are growing into a massive "phantom" inventory that could potentially be unloaded onto an already fragile housing market.
...
[ForeclosureRadar's Sean] O'Toole, for one, believes big banks may continue to foreclose more slowly, and will "dribble out" their accumulated repo properties in hopes of a market change. "I talk to them," he said. "It's like, 'If we don't foreclose, we see the market heat up again. You get a certain number of people who believe it's a bottom and the prices come back. Then we don't need to foreclose. These people can sell and get out from under them and we end up OK.' " Dribbling them out slowly would keep prices stable, he said. But it also would prolong the housing correction.
...
Field Check's [Mark] Hanson doesn't buy O'Toole's theory, even as they work off the same data. He predicts a flood of cheap repo inventory on the market this summer. "The government and bank-specific moratoriums and modification initiatives have held back the massive wave of foreclosures," he said, "kicking the can down the road. But there is only so high the floodwaters can build before breaking the dam."

Yet even a torrent of repo inventory on the market won't pull median prices – now at $160,000 for existing Sacramento County homes – any lower, he said. That's because more higher-priced homes are in the foreclosure process and will tug the median upward in coming months. "It does not mean the market is getting better," he said.

Sacramento Real Estate Market Charts - April 2009

After steadily declining this spring, average price per square foot rose 1.8% from March. According to TrendGraphix, that was the first monthly increase in Sacramento County since April 2007. Prices are still below January levels and down 23.1% from last year.

Turning to median price, the Sacramento Association of Realtors reports the median price in Sacramento County (and West Sacramento) fell 29.5% in April. That was the first year-over-year decline since March 2008 not to reach at least -30%.




So far, no "spring bounce" for median price as measured by the MLS. The median for single-family homes has been essentially flat since February. Unlike the previous three years, the median price has remained below January levels.




The median price is now at April 2001 levels.

Sales in April were 17% higher than the previous year. That was the smallest year-over-year increase since March 2008.




Looking at the historical record, sales remain at relatively high levels. While the inevitable spring bounce between February and March was the weakest in at least 9 years, that is not surprising considering the record sales of January and February.

Here's a look at the percentage of MLS sales which were bank-owned. At its peak in January 2009, REO sales made up three-fourths of total MLS sales. That proportion has dropped off in the last few months as REO inventory has shrunk, presumably due to legislative tinkering and private foreclosure moratoriums.

Finally, here's an update on Sacramento County's foreclosure statistics from ForeclosureRadar.

NY Times: Signs of Recovery in Sacramento's Housing Market

From the New York Times:

Is this what a bottom looks like? This city was among the first in the nation to fall victim to the real estate collapse. Now it seems to be in the earliest stages of a recovery, a hopeful sign for an economy mired in trouble and anxiety.

The Times cites increased sales to investors and first-time buyers, reduced inventory, and stabilizing prices as signs of recovery.

“It’s fragile, and it could easily be fleeting,” said an MDA DataQuick analyst, Andrew LePage. “But history suggests this is how things might look six months before prices bottom out.”...No one in Sacramento is predicting that local housing prices, which have been cut in half from their mid-2005 peak, are going to reclaim much of that ground anytime soon. Instead, this is what passes for wild-eyed optimism: a belief that things have finally stopped getting worse. “A period of price stagnation would boost a lot of spirits,” Mr. LePage said.
...
“[Upcoming wave of foreclosures]...will stall any progress toward stability,” said Michael Lyon, chief executive of Lyon Real Estate. “The prospects for a recovery are fool’s gold.” Mr. Lyon expects further price declines and slowing sales. But David Berson, the chief economist for the mortgage insurer PMI, argues that such bleakness from the people whose livelihood is selling houses is itself a positive sign. “Things are awful at the bottom, and we’re at the bottom,” Mr. Berson said. “No question about it. But the trend going forward should be higher sales, and that will eventually affect prices.”

Have we hit bottom? Please vote in the poll on the right. Add your opinion in the comments below.

From the Sacramento Bee:

Nearly four years into California's housing downturn, close to 24,000 Sacramento-area homes and apartments are vacant, a number that climbed 40 percent in the past year, according to a Bee analysis of federal data. Roughly a third, or about 7,200, of the six-county region's vacant homes have been empty longer than a year. About 3,500 have been empty longer than two years.
...
Reasons vary for the surge of vacant dwellings. Area real estate agents and others Monday cited recent foreclosure moratoriums and banks increasingly sitting on large numbers of repossessed homes. Apartment communities also report rising vacancies as 11.3 percent regional unemployment forces renters to double up or move back in with family members.

ACORN to the rescue

"Protesters disrupted several foreclosure auctions Tuesday on the Sacramento County Courthouse steps, winning a temporary cancellation of one and sending an unidentified auctioneer to the hospital with chest pains. Bidders on dozens of foreclosed Sacramento-area homes, all declining to provide their names, called the ACORN protest the first major disruption of an established auction schedule that plays out every weekday at the courthouse...."

More from the Sacramento Bee.

80% Off

From the Sacramento Bee:

It's now possible to buy a Sacramento home for less than the price of a Honda Accord. At least two dozen homes in the Sacramento region sold during the last three months for $25,000 or less....In Oak Park and Del Paso Heights...median home prices have fallen 80 percent from their mid-2006 peak to around $60 a square foot.
...
On Tuesday...Deutsche Bank lowered the price on a vacant, 728-square-foot home on 21st Avenue in the heart of Oak Park from $29,000 to $19,000. The house had belonged to the same family for years. An investor purchased it for $197,000, or $270 per square foot, in mid-2005, property records show...Seven months after buying it, the first investor sold the property again to another out-of-town buyer for $255,000, or $350 per square foot. In December, Deutsche Bank foreclosed. Today, the home is selling for $26 per square foot.
...
Most real estate experts expect many more sub-$25,000 homes on the market. They predict more foreclosures, leading to more vacant homes, leading to more desperate banks..."There's a whole lot of inventory that has not been cleared," said [Real estate investor Reggie] Lal, the real estate investor, referring to foreclosures still on the market. The number of homes selling for less than $25,000, he added, is "going to explode."

Related post: Housing Bubble Casualties: Professionals 'Suckered' into Oak Park

ForeclosureRadar: Sacramento Defaults Hit New High

'Who would have thought?'

From the Sacramento Bee:

Gov. Arnold Schwarzenegger will send layoff warnings to at least 20,000 state workers Friday unless he reaches a budget agreement with legislative leaders that precludes the need for such cuts, his office announced Tuesday. The Republican governor intends to eliminate 10,000 full-time positions from the state's general fund, either by job cuts, attrition or transfer to positions funded by special revenue streams, according to Schwarzenegger spokesman Aaron McLear.
...
Jason Dickerson, a budget analyst at the nonpartisan Legislative Analyst's Office, said the state has never laid off 10,000 workers before. "It might be possible to lay off 1,000 to 2,000 people, but laying off 10,000 or more employees would be next to impossible without gutting core services," Dickerson said.

From the Sacramento Bee:

Executives at the two local banks that have received shots of federal capital say the money isn't likely to spur much new lending, at least until the economy begins to recover. "It's that old economic spiral thing. … It's really difficult in this environment to find loans that we can underwrite," said Mark Lund, president and chief executive at Auburn-based Community 1st Bank. Last month, the bank received a $2.55 million investment as part of the government's Troubled Asset Relief Program.

From the Sacramento Bee:

Andrea Hawkins, 31, said she was doing well financially, running a mortgage business out of her Elk Grove home until the housing downturn. Now she's struggling to pay her own mortgage each month. "It's scary trying to make ends meet," she said...Now the single mother of four has joined the ranks of those needing assistance.
...
Blake Young, director of Sacramento Food Bank & Family Services,...said his organization served 25 percent more people in 2008 than 2007. Many are larger family groups from the same address. "People are finding it necessary to combine households to make ends meet," he said.

From LA Land:

[L]ooking ahead, the Zillow survey found a surprisingly sunny outlook. Fully 25% of homeowners in the West thought their home will increase in value within six months. That's up from 14% in the third quarter who had such high hopes for their home.

An update on the squatlord story. From News10:

The neighbors were suspicious but the tenants showed police a lease to prove they belonged. But now, the case of mystery tenants moving into a vacant upscale Natomas house in the Westlake subdivision last week has brought arrest warrants for those tenants and their real estate broker.

More here.

From the Tracy Press:

The sinking housing market has taken down an 18-year-old Tracy business that once employed more than 300 people. Piedmont Lumber and Truss...will issue its last paychecks to its 25 or so employees Thursday....

From the OC Register:

National Association of Realtors’ chief economist Lawrence Yun told an Orange County crowd today that he failed to foresee the depth of the housing crash....“What I found out was there was a credit market bubble that led to a housing market bubble. There was not check and balance in the system,” he said.
...
When the bubbles burst, home prices fell by as much as 45% in Stockton, he said...“Who would have thought a tangible asset would fall 45% in one year?” Yun asked.

Certainly not the NAR!

From the CVBT:

Home prices have plunged three and a half times more in San Joaquin County than the nation as a whole, according to a report Tuesday from Integrated Asset Services LLC....San Joaquin County leads the nation with a 51 percent drop in home values compared to the height of the housing bubble – more than any county in the nation, the report says.

From the Stockton Record:

Stockton resident Jorge A. Aragon is shocked at the ever-sinking house prices, hammered down by a predominantly foreclosures market over the past 21/2 years, but he's not looking to buy. He bought a house in 2002 for $220,000 and another in 2007 for $344,000, and now he's working with two banks to try to get loan modifications that will keep them out of foreclosure. Meanwhile, he can only be amazed as people move into his neighborhood into homes such as his at prices running below $100,000.
...
Jerry Abbott, president and co-owner of Grupe Real Estate of Stockton...thinks prices won't sag further. "We're dragging along the bottom."
...
In Stockton, the median sales price of $125,000 last month is a level not seen since 2001, said John Knight, professor of finance and real estate at University of the Pacific's Eberhardt School of Business. "I cannot envision that prices are going to continue to go down," he said. "I think we're either at or near the bottom for selling prices." Now the rents that investors can get for foreclosure homes covers mortgage payments for these lower-priced houses and then some, he said, and that's why the market is clearing out the listings.

From Seeking Alpha:

Having just returned from Sacramento/Stockton to look at defaulted condominium projects, I can tell you it's a solid mess out there. Investors from all over the Bay Area, and indeed the entire country, are making the same drive across Interstate 80 and descending on more or less the same spots. Unfortunately, the smartest investors will tell you they have no idea when it will end or what their exit strategy is, so not much is getting done on any scale.

The unemployment rate in Sacramento/Stockton is now in double digits (and climbing), and most people will have no choice but to relocate in order to find work. Consequently, there are some projects that will simply need to be bulldozed and plowed under.
...
[F]oreclosures not only create additional supply of "shadow" rentals, but home prices in these hard hit areas will eventually drop (if they haven't already) to levels where it will be much cheaper to buy than to rent.

Squatlord Republic?

From the Sacramento Bee:

California saw a 42.5 percent drop in home sales at $1 million or above last year, according to a report Tuesday by market researcher MDA DataQuick...The dropoff was slightly worse in the Sacramento area: 50 percent in Sacramento County and 45 percent in Placer...The high end was battered by the downward price pressure at all levels of the market and was hit by a severe shortage of financing, said DataQuick analyst Andrew LePage.

From the Sacramento Bee:

The nation's foreclosure crisis has sparked scams nationwide, emboldened squatters and homeless advocates and led to numerous federal indictments. But this?

Sacramento police were in one of the city's most affluent neighborhoods Tuesday investigating a scheme with a twist: claims that the house involved is under the protection of a sovereign republic and that trespass could be met with "self defense" and "justifiable homicide." The bizarre case unfolded Tuesday in a gated West Natomas neighborhood that boasts million-dollar homes and some of the city's most prominent residents – think members of the Maloof family.

From News10:

The mortgage industry insider who admitted on his company Web site that he had been involved in massive mortgage fraud was charged Thursday with multiple felonies. The complaint was sworn by an IRS agent who said Christopher Warren, 27, fled the country on a private jet on Monday, the same day he replaced the home page of the Triduanum Financial Web site with a seven-page essay outlining his crimes and asking for forgiveness.

From the Sacramento Bee:

As soon as they default on a mortgage – or before – the calls begin. Often, the firms seek $1,500 to $4,000 upfront to help them out of jams with housing-boom loans...."It's similar to after a hurricane hits," said Tom Pool, spokesman for the California Department of Real Estate. "The bogus contractors come and collect money for repairs and don't do anything. These people are on their last dollar, anyway, and these loan-modification companies are having them draw on their credit cards with false promises."
...
Pool said DRE has shifted staffers to investigate 250 cases of loan-modification offenses. Many involve former real estate agents.

From News10:

John Laing Homes has shut down construction on its northern California projects according to company insiders...At the height of the housing boom, the company employed 165 people in the Sacramento area according to insiders. By the time the final layoffs came, the staff numbered 31.

Another report from CBS 13.

From the Stockton Record:

Kevin Huber, president of Stockton-based Grupe Co., said foreclosures have significantly affected development and home building in both the short and medium term, because foreclosures are selling well below what it costs to develop and build new homes. "Nobody's going to start a new home knowing you're going to lose money," he said. There's probably 18 months to two years more of foreclosures dominating the marketplace before home builders can compete again in a "normal" market, he said.

From the Sacramento Business Journal:

Sacramento ranks No. 9 on a list released Thursday of the metropolitan markets with the largest potential for distressed retail real estate assets. Madison Marquette, which owns 20 million square feet of retail and mixed-use properties across the country, compiled the list with its own research along with that of CoStar, a commercial real estate information company.

From the Sacramento Bee:

The city of Sacramento sent layoff notices Thursday morning to 24 employees within its development services department. Four supervisors - including the city's chief building official - were among those to receive layoff notices.

"The [Stockton] Man Who Started the Global Recession"

From Time:

Some communicable diseases can be traced back to what medical researchers call "patient zero", the first carrier of an illness and often someone who has no symptoms...The global recession has a "patient zero", a single person who set off the series of events which may lead the economy into its greatest downturn since The Great Depression and, by some estimates, push 50 million people around the world out of jobs this year, according to The International Labour Organisation. "Patient zero" bought a house in Stockton, California, in 2003 after getting a subprime mortgage. He defaulted on that mortgage 39 months later.

From the Stockton Record:

Tonight Stockton will get another dose of national attention as a foreclosure hot spot in yet another round in the TV spotlight. This time, though, say the producers of the "Deals on the Bus" series by Discovery's TLC channel,...will show a new real estate trend: People riding in tour buses in the quest to buy nice yet affordable homes in communities hard hit by the housing downturn. "It's kind of like speed dating for homes," said executive producer Carlos Ortiz of Actual Reality Pictures, an independent Los Angeles-based film company that has filmed such reality-genre programming as "Flip That House" for TLC.

From News10:

The managing broker behind a failed mortgage operation posted a rambling essay on the company's Web site describing his years of fraudulent activity and asking for forgiveness. The seven-page essay by Christopher Warren, 27, replaced the home page of Triduanum Financial which abruptly closed its doors last month.
...
Warren said WTL Financial faked credit scores and W-2s to peddle loans to investors who failed to scrutinize the files. "I made over $2.25 million, all of which was spent on 24 cars, five houses and drugs," he wrote.

From the Sacramento Business Journal:

A custom homebuilder that had been among the region’s top in revenue before the housing downturn is preparing to file for bankruptcy as it’s being investigated for fraud and other complaints. The Contractors State License Board has referred two complaint violations against Ultimate Development Inc. of El Dorado Hills to law enforcement agencies for investigation.
...
“The recession has essentially shut down residential construction and there are virtually no credit opportunities available anymore,” he [owner Kevin Javaheri] said.

From Home Front:

The Construction Industry Research Board and California Building Industry Association now reports 65,380 construction starts in 2008. It's the lowest since CIRB began keeping records in 1954 in the Eisenhower Administration.
...
It's so low that even in the lowest point of the 1990s recession - 1993 - with Southern California base closings, a defense industry imploding in the wake of the cold war ending, with job losses from San Diego to Eureka, builders still planted 84,656 houses on California soil. That's 19,276 houses more than last year.

From the Sacramento Business Journal:

The worst period in the construction industry was in 1990 and ’91, and we’re fast approaching that now. The only reason we’re not already as bad now as then is that voters approved some infrastructure bonds and that money is still available and working. As a consequence, our picture is not as bleak as, say, homebuilders. But if the state doesn’t come up with a plan by Feb. 1 and it runs out of money, our industry, and the state, could be worse off than it was in 1990 and ’91.

From the Sacramento Bee:

Fighting to avoid a bankruptcy filing and apparently unable to finish the job, the developer of the long-delayed Elk Grove Promenade shopping mall is seeking investors to bring the project across the finish line...The mall has become something of a poster boy for the Sacramento area's hard-hit commercial real estate market...The mall's opening has been postponed three times, the victim of a poor economy and Elk Grove's disastrous housing market.

From the Sacramento Business Journal:

For Ike’s Landscaping, business started spiraling downward halfway through 2008...Although Ike’s had a strong first half in 2008, [president Eric] Aichwalder said, “We’ll be down to 20 employees in the next few months.” Ike’s employed 133 last year.

The bottom line for commercial landscapers is the market’s getting tougher. “Owners are watching all their dollars because tenants are coming to them for reduced rents,” said Ken Reiff, managing partner in the Sacramento office of brokerage NAI BT Commercial.

From Inman News:

[According to Radar Logic] San Francisco had the highest [price] decline, at 36.8 percent year-over-year during the November period, followed by Phoenix (down 34.6 percent) and Sacramento, Calif. (down 32.4 percent).

From the Modesto Bee:

Rental home rents also have become a bargain throughout in the region. "The economy is driving the rental prices down," said Kris Marin, who manages about 250 rental properties in the Northern San Joaquin Valley for Tri-Tal Realty. "There are a lot of vacancies. It's hard to find good, qualified tenants if the rent is too high." So to get homes occupied, Marin said, monthly rents have fallen about $100 for three-bedroom homes and about $200 for four-bedroom homes.
...
Al Nazmi said his family members have purchased more than 20 foreclosed houses during the past 18 months..."Most Modesto investors have run out of cash to buy homes the last three months," said Nazmi, noting how few people attend the daily foreclosure auctions on the county courthouse steps. But out-of-town investors are filling the void: "I have friends in neighboring states who are buying homes in Modesto now." All those investors are turning former owner-occupied houses into rentals. Those homes now compete with apartment complexes for tenants.

From the Press Democrat:

Exchange Bank reported an $18.5 million year-end loss Friday, its first annual loss in at least five decades....The problem loans are concentrated in construction lending, largely among loans made to home builders in the Sacramento region. The bank expanded into the Sacramento area earlier this decade near the peak of the housing market. Now, with housing mired in a deep downturn, many builders are struggling to stay in business and pay off their loans.

From the Appeal Democrat:

Plummeting revenues due to the construction slowdown will lead to layoff notices for eight Yuba County employees and the deletion of 12 vacant positions.
...
[Supervisor Mary Jane] Griego noted the development boom that preceded current conditions and that she said was spurred in part by dramatic increases in housing prices in Placer and Sacramento counties. Those increases helped push development into Yuba County, she said. "We'll never see that again," Griego said of the extraordinary rise in home values in this region and the rest of California. "It was like the stars came together for Yuba County."

From the Sacramento Bee:

The economy is in such wretched shape – finishing 2008 with its worst performance in a quarter century – that some forecasters have begun writing off 2009 as well...Some analysts are rethinking predictions that the recovery would start in late 2009; now they're talking 2010...Two weeks ago, [CSU Sacramento economist] Suzanne O'Keefe said job growth could resume in Sacramento by September. Now she says it probably won't happen until 2010.

High-End Immunity? Not So Much.

From the Sacramento Bee:

Even as new legislation, moratoriums and alternatives such as short sales and loan modifications have slowed foreclosures, another wave could begin this year, many warn, as new categories of risky housing boom loans reset in higher-end neighborhoods. "The last 60 days it's really become palpable. More El Dorado Hills and Sierra Oaks agents are seeing more people request homes for sale with short sales," said Mike Lyon, head of Sacramento-based Lyon Real Estate.
...
Lyon said he recently told the Placer County Association of Realtors it will take another four years to work through the region's housing slump. Partly, he said, that's due to projected waves of resetting Alt-A loans...and so-called pick-a-payment loans, also known as option ARMS...."I think it really gets back to those Alt-A's," he said, explaining rising stresses in capital-area neighborhoods that have considered themselves immune from the housing crisis.

From the Stockton Record:

The [state] law mostly just delayed defaults, said Jerry Abbott, president and co-owner of Grupe Real Estate in Stockton. "It's a pause in the storm," he said. "It's going to be more of the same in 2009."

While most previous foreclosure problems arose from adjustable-rate mortgage resets, he said, a new layer of foreclosure woes is arising from homeowners who have lost work because of the recession.

From the Sacramento Bee:

Strategic Investment Partners...scooped up 187 home lots and 35 unfinished homes, buying half of a repossessed Elk Grove subdivision named Monterey Village. The announcement this week...is a new sign of money looking beyond the capital region's housing bust to better days.

From the Stockton Record:

...[D]emand for apartments in San Joaquin County has been getting softer in the recession....[According to RealFacts] average apartment rents in the county slipped by 0.6 percent....

Randy Thomas, a Sperry Van Ness commercial real estate broker in Stockton who specializes in the Northern California apartments market, said the apartment rental market is getting softer because of the increasing number of "shadow" properties - rental houses - out there.
...
[A]n increase in the number of foreclosure properties converted to rentals has slowed demand for apartments [Norbert Huston, a Stockton real estate broker] said. "It's very hard for us right now to raise rents when the market has softened," he said.
...
While the decline in rents and occupancy is good news for renters, it's less welcome news to those who have invested in rentals as income properties....

From News10:

[Sanjay] Varshney [dean of the College of Business Administration at Sacramento State University] said the severity of the recession has been unexpected with the "complete collapse of the financial system" occurring in less than two months.
...
He said at the core of the collapse is an astonishing level of dishonesty, from financial institutions and the real estate industry, to homeowners taking out loans they knew they couldn't afford.

Sacramento Unemployment Hits 8.7%; Rental Occupancy Drops

From the Sacramento Bee:

Greater Sacramento unemployment jumped to 8.7 percent, up from 8.1 percent a month earlier...The region has now lost 22,400 jobs in the past year, or 2.4 percent of its employment base.

From the Sacramento Business Journal:

The highest local jobless rate was in Yolo County, at 9.8 percent. The county has a labor force of 99,900 with 9,800 unemployed last month. The county had a 9 percent unemployment rate in November.

From the Sacramento Bee:

Unaccounted for [in the employment numbers is]...the growing numbers of workers who have had to settle for less of a job than they wanted. "The pain in the economy is much greater than the jobless numbers would indicate," said economist Sung Won Sohn of California State University, Channel Islands...Jenny Beard, owner of the Express Employment Professionals office in Roseville, said the number of former full-time workers seeking part-time work is undeniably up. "I'm positive of that," she said. "We're seeing many candidates who just want to keep themselves employed."

From the Sacramento Bee:

Sacramento-area rental occupancy dropped nearly a percentage point – 0.7 percent – in the fourth quarter of 2008 compared with the year-previous quarter, according to a survey released Wednesday by Novato-based rental industry analyst RealFacts...About 93 percent of area rental properties were occupied, one of the lowest occupancy rates in the state....
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One local analyst cited a "cacophony" of factors contributing to the drop, from overbuilding, to single-family homes turning to rentals in a disastrous housing market, to a struggling economy.

From Home Front:

Here at The Bee, we do a ton of stories on the housing market, but don't often enough explore the world of apartments that house an estimated 35 percent of the region's population...The bottom line right now: the apartment industry is slumping, too. Sales prices are falling, a few have fallen into foreclosure and buyers are waiting on the sidelines to see if prices fall more, the two said. There's still more supply than demand, which has lessened investor interest, too, in apartments.

From the Placer Herald:

Placer County’s foreclosure rate continued to gain steam in 2008, according to a year-end analysis of government records. And experts say to expect more of the same in 2009. The number of foreclosures in the just-ended period was up more than 110 percent from a year ago, with 2,552 residential properties being taken over, compared to 1,193.
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Homes in all segments of the market – from “starter” homes to area mansions – showed up on county default rolls last year en masse, experts say. “It’s pretty much going after all of them,” said Ben Herb, president of the Placer County Association of Realtors. “Even the houses that are a million-plus have been going into foreclosure.”

From CBS13:

Loan consultant, Robert Turrietta, say that one particular foreclosed home in Sacramento's Oak Park neighborhood lost almost 75 percent of its value. "This particular home transferred a couple of years ago for around $200,000 and just recently sold and closed escrow for $39,000," Turrietta explains. Turrietta says while home prices fall, nearly half of the buyers applying for a loan are getting denied.

Related Post: Housing Bubble Casualties: Professionals 'Suckered' into Oak Park

From the Sacramento Bee:

Most of Sacramento's local banks bet small on the real-estate boom and, as a rule, they haven't been badly hurt by the bust. But according to federal filings, most local lenders have a larger stake in the commercial real estate market, where vacancies – and loan defaults – are expected to soar this year as more businesses fold.
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[Colliers International's Garrick] Brown anticipates 5 percent to 6 percent of the region's commercial real estate properties will go into foreclosure in the next two years. That's similar to the rate of home foreclosures locally in 2007-8, according to data from foreclosures.com.

Merced breaks the -50% YoY mark. From the Modesto Bee:

Stanislaus County's median sale price was $157,500 in December,...44 percent below the $281,250 in December 2007 and 60 percent off the $396,000 in December 2005, when the bubble was at its biggest...[YoY price declines:] 51.8 percent in Merced [and] 47.5 percent in San Joaquin.
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Richard Green, director of the University of Southern California's Lusk Center for Real Estate, said the market is being hammered by tight credit, expectations of further price declines and job losses. "If you see the unemployment rate turn around, that's when you'll start to see housing prices bottom and start turning in the other direction," Green said. "Until that happens, I'm pretty gloomy."

From the Sacramento Bee:

Sacramento County is about to announce a mid-year budget shortfall of $42.3 million....As a result the county at the Feb. 10 Board of supervisors meeting will propose getting rid of almost 200 positions on top of almost $30 million in cuts, according to an official, not authorized to speak on the budget, who had been briefed on the situation.

From CBS13:

With a skyrocketing foreclosure rate and plummeting sales taxes, Stockton has to cut $30 million from their $180 million general fund...[O]fficials say layoffs are inevitable.

From CBS13:

The recession is leaving some doctor's offices empty. More women are putting motherhood on hold and recent reports show contraceptive sales are through the roof. The data runs about two years behind, we won't know for sure until 2011, but it appears that with the economic slowdown has come something of a pregnant pause.

"Serious Trouble" Ahead

From News10:

A big presence in the Northern California home-building industry says it could be shutting down some projects. John Laing Homes spokeswoman Linda Mamet confirmed to News10 Wednesday the homebuilder is "reviewing operations based on market conditions and will determine whether sales will continue. Some offices may be closed. It is not clear on whether all or part of the Sacramento area operations will be closed."
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Sacramento real estate consultant Jake Allen says the company appears to be in serious trouble. "I think it's a very sobering sign of the times, when we see a large, national builder like John Laing Homes that is essentially on the ropes at this point in time and looks like fighting for their life."

From the CVBT:

There’s a smidgen of good news for the Central Valley in the latest PMI Mortgage Insurance Co.’s “risk index.” The region, where the mortgage meltdown started more than a year ago, is surpassed by many Florida cities that PMI estimates will have the risk of lower house prices two years from now. Still, virtually every metropolitan area in the Central Valley is ranked at better than a 90 percent likelihood of further price declines.
...
Merced (High) 95.4
Modesto (High) 96.5
Sacramento (High) 96.3
Stockton (High) 96.6

From the CVBT

The Stockton metropolitan area in the Central Valley led the nation in 2008 in per capita foreclosures, according to a report from RealtyTrac Inc. of Irvine, a foreclosure information company. Stockton’s foreclosure rate last year was nearly double that of 2007, says RealtyTrac, up 99.16 percent. There were 21,127 homes in some level of foreclosure in Stockton last year, or 9.46 percent of all homes.
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Sacramento was ninth, says RealtyTrac, with 39,876 homes foreclosed or 5.20 percent of all units.

From CNN Money:

[RealtyTrac's Rick] Sharga thinks that as many as 70% of the bank-owned homes listed on RealtyTrac's site have not yet been posted on multiple listings services (MLS), the industry databases of homes for sale. Those homes are less likely to be sold because most real estate agents won't know they're available. "Either banks are overwhelmed and can't get the houses on the MLS quickly, or they're deliberately slowing down so they don't have to take markdowns to actual home values on their books," Sharga said. Either way, it has the effect of underestimating the foreclosure inventory problem.

From the Sacramento Bee:

Facing a projected $8.6 million shortfall in the current fiscal year alone, the city of Folsom on Tuesday took the first step toward effectively throwing out the current budget and adopting a new 18-month spending plan that would take the city through June 30, 2010. The proposed plan calls for the elimination of 55 positions – including 39 layoffs – and service cuts. Folsom joins other area municipalities looking to cut because of the recession.

From the Sacramento Bee:

Faced with losing 43 jobs, including a dozen police and firefighter positions, Lincoln's remaining city workers also have been asked to take a two-year pay freeze.

From the Sacramento Bee:

Roseville city officials announced Monday a voluntary employee buyout program to close a nearly $4.5 million budget gap. The city has been freezing positions and cutting costs since March 2007, but another 40 to 50 positions must be eliminated, City Manager Craig Robinson said in a letter to employees.

From the Sacramento Bee:

The city of Sacramento is more than $11 million short of balancing its books, meaning more cutbacks are likely in the coming weeks. Mayor Kevin Johnson said Monday that "the outlook is not good" for a city that already made significant cuts in recent weeks.
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Asked if it is likely city officials will need to make midyear cuts next month – either through layoffs or reductions in services and programs – Johnson said, "I think we will have to."

Fortune on Sacramento Real Estate: 5th-Worst Market in 2009

Fortune Magazine says the Sacramento real estate market will be the 5th-worst market in 2009, with the median home price projected to decline 22%. However, Fortune expects prices to rise in 2010, albeit only 2%. (hat tip DJ)

High jobless rates and low population growth are helping burst the capital city's inflated housing market.

Stockton is #2.

From the Sacramento Bee:

[Average Buyer:] Back then (early 2007) I interviewed several agents. They all said the same thing: "Oh, it's just going to kind of ebb a little bit and go down." I'm thinking, "How can that be?"...That's when I kind of went looking for alternative answers and the experts in the field. That's when I found some of the other regional blogs and found an alternative view.

[Jim Wasserman:] What was that?

[Average Buyer:] They were more bearish on the market. They were saying things which were not mainstream at all at that point. That was the point before Wall Street, before pundits started acknowledging that things were going to happen. I read the Wall Street Journal every day. In August 2007 everyone was saying, "Oh, it's just a little shaky. Things are good now." Then it was spring (2008) and we start losing Bear Stearns. And it was, "Oh, we're over it now and we're into summer." They just keep having this false sense of delusion.

From the Sacramento Business Journal:

Not everybody is a fan of Sacramento’s vacant building ordinance, which was approved in August 2007. “The city is creating a perfect storm for themselves with this new ordinance,” said Bruce Slaton, a real estate agent who works in south Sacramento. “If a house has $20,000 in fees and $30,000 in fines on a property that’s worth $40,000, the deal just doesn’t work,” he said. “The city might end up getting a lot of these handed to them by the banks.”

In some cases, he said, potential sales of foreclosed homes don’t work because the house was cited for violating the city’s dangerous or vacant building codes. “By the time the banks get these homes back from the trustee sale, they’ve got thousands of dollars of fines and fees on them,” which some banks try to pass through to the buyer, Slaton said. “And if the city doesn’t relax some of these fees, it precludes a lot of buyers from doing anything with them.”

From the Sacramento Business Journal:

The Sacramento Metropolitan Statistical Area, which includes Sacramento, Arden-Arcade and the Roseville area, saw its occupancy fall to 93.8 percent in the third quarter compared to 94.3 percent in third-quarter 2007, according to TRI Commercial’s apartment advisory team.

From the Sacramento Bee:

Five Sacramento County ZIP codes had median sales prices below $100,000 in November, according to property researcher MDA DataQuick.

From the Modesto Bee:

"It comes down to just the sheer volume of problem loans in your area," said Rick Sharga, senior vice president of RealtyTrac, which monitors foreclosures nationwide. Sharga predicted the [Northern San Joaquin Valley] region will continue to lead the country in foreclosures through 2009.
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Mike Zagaris, president of Modesto-based PMZ Real Estate...is concerned that many current owners are giving up their homes because they've lost so much equity. "I'm being told by my people in the trenches that the vast majority of those facing foreclosures now have no interest in redoing their loans. They just want out," Zagaris said. "If that's true, there's no stopping these foreclosures."

From the Modesto Bee:

The recession dug deeper into Stanislaus County last month, sending the jobless rate to a nearly 10-year high of 12.4 percent, the state reported Friday. It was the county's highest monthly rate since the 12.8 percent of January 1999 and the worst November since the 12.5 percent in 1997.
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The collapse of the housing market in the past three years bears much of the blame. Real estate agents, builders and people in related businesses have lost jobs. "Those industries, of course, are related to the housing and credit crisis," said Liz Baker, a labor market analyst for the EDD.
...
Still, the overall numbers...are well down from the early and mid-1990s, when unemployment sometimes hit the high teens.

Uh-oh. Last time the media said something was not as bad as the 1990s, all hell broke loose.

From the Modesto Bee:

The Northern San Joaquin Valley has been hit especially hard in the economic downturn because of foreclosures and other fallout from the housing market collapse. Agriculture and related fields have been relatively strong, but even they can be hit by the economy's troubles. Roberts Ferry Nut Co., which sells almonds and other items in Christmas gift packages, has seen a roughly 15 percent drop, co-owner Dan Mallory said. "I just don't think the consumer has the same buying power as before," he said.

From the Associated Press:

Robert Ecker was bored with retirement, so he went back to work as a housing appraiser in Stockton. He trained four other appraisers during the real estate boom — all of them are now out of the business. "Since the real estate market closed down, I grew a beard and now I'm doing this," said Ecker, dressed in the trademark red suit with white trim. "The older kids are asking for clothes now, rather than gifts," he said. "Most of them are asking for one gift."

From Stockton to Miami, from ritzy Las Vegas to gritty Detroit, cities with the worst real estate markets led the U.S. economy into recession. Skidding home prices and soaring foreclosures have magnified the broader woes of unemployment, stock market turmoil and hard-to-get loans. Holiday shoppers are making a list, checking it twice, and then scratching off the nonessentials.

"Rogues in the Real Estate Industry"

From the Sacramento Bee:

You would think people with mortgage problems have enough trouble. But rogues in real estate always find new ways to inflict more. Last year it was foreclosure rescue schemes that robbed desperate people of their homes. Now, it's loan-modification firms taking cash advances from struggling borrowers and disappearing.

Home Front has heard countless stories from struggling borrowers of phone calls offering to mediate with banks for $2,000 to $4,000 or more. Many are so desperate and confused they pay for what they can do themselves or get for free from nonprofit loan-counseling firms. Some say they have paid their advance fees, then can't reach the firm.

The California Department of Real Estate cites an "explosion" of for-profit loan-modification firms as the foreclosure crisis deepens. Former lenders and real estate agents have retooled, and jumped to the newest way to generate income.
~~~
It's just one more example of rogues in the real estate industry who are always adapting to the newest problems people are having. Honestly, this is an industry that is going to have years of an uphill fight to rebuild trust.

From the Modesto Bee:

Foreclosure filings fell nationwide in November, but they spiked dramatically in the Northern San Joaquin Valley, statistics released today by RealtyTrac show. Lenders repossessed 1,641 homes last month in Stanislaus, San Joaquin and Merced counties, and they warned 2,727 additional homeowners that foreclosure was imminent if they didn't pay up.

From the SF Chronicle:

The recession that has already devastated the Central Valley has started to hurt the Bay Area, causing job losses that will continue through 2009 when the economy should begin a slow and weak recovery, according to a bleak forecast issued today. "There is no suggestion in the data that we are near that bottom," was the somber message of the UCLA Anderson Forecast, a quarterly look at the state economy conducted by the university's business school.
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"The inland areas have been hardest hit by the housing downturn and are being hardest hit by the pullback of the retail and the wholesale sectors," he [economist Jerry Nickelsburg] said. "Here you're talking about areas of the East Bay and the Central Valley."

From USA Today (hat tip Jeff):

[H]ome values have fallen so sharply since hitting a historic peak in the spring of 2006 that many Americans are wondering how much more prices can sink. As painful as the decline has been, history suggests home values still may have a long way to drop and may take decades to return to the heights of 2½ years ago. "We will never see these prices again in our lifetime, when you adjust for inflation," says Peter Schiff, president of investment firm Euro Pacific Capital of Darien, Conn. "These were lifetime peaks."

The boom in home prices — fueled by heavily leveraged loans built on low or even no down payments — made it easy to forget that housing values had been remarkably stable for a half-century after World War II, rising at roughly the same pace as income and inflation. Prices soared in most of the country — especially in Arizona, California, Florida and Nevada and metro areas of Washington, D.C., and New York — during a brief period of easy lending, especially from 2002 to 2006. That era's over.

"New Year Bodes Ill for the Central Valley" Economy

From the Sacramento Real Estate blog:

Prices have fallen yet again...Sacramento county is now at $122.69 a square foot, a drop of 34.3% over last November...Median price has also fallen for the same period - here we see a fall of 40.3% year over year. Median price last November was $293,000 and is currently $175,000.

From Sacramento-based Foreclosures.com:

The nation's foreclosure hemorrhage has finally slowed and 2009 should see a significant decline in foreclosures as buyers return, pushing home prices up and fueling a real estate recovery, according to the 2009 Outlook from ForeclosureS.com....

"Recovery is underway. Affordable is back in the housing market," says Alexis McGee, real estate expert, educator, and president of ForeclosureS.com. "In 2009, housing will not only recover, but we'll see buyers leap into this market in droves, depleting our housing oversupply, and actually put higher price pressures on the market. With 4.5% fixed mortgage rates, housing prices lower than they were 'pre-housing bubble', commodity prices lower, tax credits available for homebuyers, and the government eager to stimulate our economy, for the first time in years I can see prices rising again in 2009," adds McGee.

From the CVBT:

The New Year bodes ill for the Central Valley as the global recession deepens, says a new economic analysis by the University of the Pacific. “While home prices are beginning to find a bottom and real estate sales have surged with low prices, the outlook for the agriculture industry, trade, transportation and other key service sectors have weakened substantially in the past three months,” says the report written by Jeff Michael, director of the Business Forecasting Center at the Eberhardt School of Business at Pacific in Stockton.

From the Sacramento Bee:

Get ready for two years of 9 percent unemployment. California and Sacramento's jobless rate will top 9 percent sometime early next year and won't fall below it until early 2011, according to an economic forecast released Tuesday by the University of the Pacific. The higher unemployment is the obvious result of a deepening recession as the economy moves well beyond the initial job losses in construction and mortgage lending. "We're out of the housing thing and into a pretty severe … traditional structure of a recession," said Jeff Michael, director of UOP's Business Forecasting Center.
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Michael said the Sacramento area figures to lose 2 percent of its jobs next year, a significant downturn.

From the Modesto Bee:

In preparation for slower times, Pacific Southwest Container of Modesto has laid off an undisclosed number of employees. The container manufacturer...joins a growing list of San Joaquin Valley companies that have scaled back their staffs to reflect slowing business...[A]s consumer confidence wanes and people buy less, there is less need to make and ship the goods that once flew off store shelves.
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Initially, the decline in the valley housing market triggered job losses in real estate, finance, construction and other, related industries. As the economy continued to slow, the ripple effect has forced other businesses, including The Bee, to trim workers. Jeff Michael said he isn't surprised to hear of Pacific Southwest Container's layoffs. The director of the University of the Pacific's Business Forecasting Center said it is part of a coming wave in the manufacturing sector. Goods that people can put off buying will take a hit, Michael said.

From the Tracy Post:

As a soft housing market and rising food and fuel costs eat away many folks’ disposable income, the ancient art of bartering has become an increasingly common way to get what one wants.
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Out-of-work Tracy carpenter Donald LaMmond, 42, can’t afford Christmas presents this year for his two daughters, ages 7 and 11, so he’s trading his handyman skills for board games and dolls to put under the Christmas tree. The contractor and his real estate agent wife, Kimberly LaMmond, 39, represent a pairing of two of the hardest-hit professions in today’s economy — definitely a source of stress for the couple, who sold their home 2½ years ago for much less than the loan that paid for it. "We’re both learning how to update our resumes, to get back out there," he said. "And we’ve applied to McDonald’s and Wal-Mart, but it’s hard to get out there — other people want those jobs now, too."