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.
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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.
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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.

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.
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[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.
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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.

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.
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“[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.
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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.

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.
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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.
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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

"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.
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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."

'One more sad cry in a horrible storm'

From the Sacramento Bee:

Sacramento's economy stands to lose around $1 billion over the next 18 months because of layoffs and unpaid furloughs imposed on state workers by Gov. Arnold Schwarzenegger..."The purchasing power of the state worker in Sacramento is huge," said Teresa Halleck, president of the Golden 1 Credit Union. "The last thing any one of us wants to see is further impact to the local economy."
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"It seems like one more sad cry in a horrible storm," said Mike Lyon of Lyon Real Estate in Sacramento. Although it won't devastate the housing market, the cut in payroll will make a dent, he said. Some homebuyers probably will have deals fall through or won't qualify for a mortgage, he said.

From Bloomberg:

If you were searching for pockets of optimism in the U.S. housing market, where would you look? Easy guesses would be to avoid Detroit, Cleveland or any cities with domestic automobile plants or troubled manufacturers. Then there are the foreclosure gulches of Central and Southern California, which include the Modesto, Stockton, Bakersfield, Riverside and Sacramento areas. Those cities will take a long time to recover. Too many homes there were sold at bubble prices to people with dodgy finances.

From the Sacramento Bee:

In the wake of a prolonged California housing slump, nearly one-third of the state's homeowners with a mortgage will find it impossible to refinance, according to Irvine-based First American CoreLogic. In Rancho Cordova's Sunrise-Douglas area, almost nine in 10 homeowners of ZIP code 95742 fit into that category, said the firm. That's because the ZIP code consists almost entirely of new homes sold and financed at near-market highs. Falling values have erased their equity.

Elsewhere, thousands spent part of their home equity gains during the boom. All are now "under water," industry shorthand for owing too much to refinance. Analysts call the condition a major contributor to the state's foreclosure crisis.

From the Sacramento Bee:

The city of Sacramento is poised to approve a huge new shopping center just a few miles from the Elk Grove shopping center where construction has stalled. City Council members are scheduled to vote Tuesday on Delta Shores, a new community with about 5,000 housing units and 1.3 million square feet of retail – the equivalent of an Arden Fair mall.
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[A]t least one retail expert suggested the city could be making a mistake. "If they were starting to build it today, it would be foolhardy, and in 2010 it could be foolhardy," said George Whalin, head of Retail Management Consultants in San Marcos. "I don't know anybody who is looking to build anything new," Whalin added. "The mall guys, the shopping center guys, all the discussions now are how do we pull back, how do we stop projects that are on the drawing boards."

In December, Sacramento median home price dropped to $180,000 according to SAR [pdf], a decline of 55% since peak.

Average Buyer has a handy chart of equity destruction by zip code. Price declines from peak range from 18% to 76%.

Sacramento Real Estate Statistics notices that so far in 2009, Sacramento home inventory is on the rise à la 2007.

DataQuick: Sacramento Unsold Repo Inventory Increasing

From Bloomberg:

Home prices fell in four out of every five U.S. cities in the third quarter, a record spurred by distressed foreclosure sales across the country. The median price of a U.S. home declined 9 percent from a year earlier....

The steepest price declines were all in California. The area surrounding San Bernardino had a 39 percent fall in its median home price to $227,200. Sacramento saw a 37 percent decline to $212,000, and San Diego had a 36 percent drop to $377,300. The U.S. median is $200,500.

From CNN Money:

"We're clearly seeing a broadening, as well as a deepening of the declines," [Mike] Larson [a real estate analyst at Weiss Research] said. "That indicates we've moved past the time when price drops were fed by bursting of real estate bubbles to one in which the broad economic downturn, marked by job losses, is taking hold."

From the Sacramento Business Journal:

Homebuyers snatched up repossessed homes at an impressive clip this year, but that doesn’t mean the Sacramento region’s housing troubles are easing. That’s because lenders might be foreclosing on homes faster than they can sell them.
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[T]he inventory of foreclosed homes isn’t dropping. The backlog of unsold repossessed homes has actually grown in the past year, to about 5,000. That number includes homes repossessed over a two-year span prior to Aug. 1 that didn’t sell by Oct. 20 (allowing a reasonable period to spruce up and market them for sale). The backlog has increased from about 3,300 at the same time last year, DataQuick said.
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Not all repossessed homes make it quickly to market. Only about 3,100 foreclosed homes were listed for sale through MetroList as of the end of October, even though the backlog of unsold foreclosures is 5,081 homes. Those homes will eventually make their way to the market.
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At least one national bank is looking to rent some of its repossessed homes rather than sell them. HomePointe Property Management, a Sacramento company that typically manages rental properties, just signed a contract to rent out “a handful” of foreclosed properties throughout the region.

From the Sacramento Bee (hat tip patient renter):

Sacramento County's lowest-income neighborhoods continue to take the toughest, most destabilizing punches of the region's two-year foreclosure crisis, says a new report from the Sacramento Housing and Redevelopment Agency. And it's getting worse. "Foreclosures are continuing to increase," said Joel Riphagen, SHRA redevelopment analyst.
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Now, many of the region's lowest-income neighborhoods have seen huge spikes in sales as home prices have fallen. Investors are snapping up homes formerly occupied by owners with intent of renting them.

From the Sacramento Business Journal:

I think they [lenders] had continued to underestimate the problem up until very recently. The other part of it is, I go in with a reasonable approach. What I’m hearing from people I know at lending institutions is that the number of people asking for modifications, some sort of help, is somewhere around 80 percent of their customers, but the number of people who actually qualify for that help is closer to 30 to 35 percent.
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Some people with a fixed-rate mortgage read about modifications being available, so they would like to see their interest rate modified downward. There’s not much the bank can do for those people.

From the CVBT:

Residents of the Central Valley are frustrated and angry that so little impact has been seen from the Wall Street bailout, says U.S. Rep. Dennis Cardoza, D-Merced, who is criticizing Treasury Secretary Henry Paulson of foot dragging.
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Mr. Cardoza says he “reluctantly” supported the $700 billion banker bailout only after guarantees were included in the legislation that taxpayers would be protected and the foreclosure crisis would be averted.

From the CVBT:

The thousands of homes lost to foreclosure and the resulting depression of home prices are beginning to make California bit more affordable...The Sacramento region and Stanislaus County were the second- and third most-affordable metro areas in California with 59.9 percent and 59.7 percent affordability, respectively.
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The building industry argues that today’s relatively high affordability levels are likely to be a short-lived phenomenon after the market correction is completed as underlying demographic trends point to rising prices in the future once the large supply of foreclosed homes is sold. “The increase in affordability is great news for people who are looking and who qualify to buy a home in the current market, and we definitely encourage those people to do so and take advantage of the low prices while they last,” says Robert Rivinius, CBIA’s president and CEO.

From the Sacramento Business Journal:

The rough and tumble economy did not spare Sacramento-area banks in the third quarter despite the more cautious nature of community-owned banks. Only three of 11 area banks earned more through the first three quarters of the year than they did during the same nine-month period in 2007...In the aggregate, locally based banks earned $12.9 million through the first nine months, down 52.6 percent from earnings for the same period last year.
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In a normal market, people pay off a home-equity loan because they could otherwise lose their home. In the current market, people have already lost their home, and there is little or nothing for the bank that made the equity loan to recover.

From the Manteca Bulletin:

Closing schools to weather the deepening budget crisis is among 100 ideas being scrutinized by Manteca Unified...The double whammy of declining enrollment due to the foreclosure crisis coupled with the state's mid-year deficit projection that has ballooned to $28 billion has opened the door to such a move.

From CBS13:

No too long ago, Elk Grove was booming with growth. In fact, it was fastest growing city in the country at one time. Tonight, it's forced to pay the price for the nation's faltering economy. The city took a big hit today with another dealership closure. Customers who bought at Elk Grove Saturn came back for a tune-up today to find their dealership closed.

From the Sacramento Bee:

AAA said gas fell another penny in Sacramento on Monday to $2.24 a gallon, the cheapest it's been since May 2004...If prices hold, that translates into savings of more than $2.5 billion a month across the state. But that's more than offset by the fallout from the housing crash. So-called "equity extractions" in California – the dollars generated by home equity loans, refinancing or outright sales – have fallen by $41 billion this year, according to researcher MDA DataQuick.

Not surprisingly, Californians aren't suddenly reopening their wallets. "We're doing the same things that we did when gas was almost $5," said Marty Walter of Orangevale during a stop at a Union 76 station in Roseville on Monday. "We're getting into the pattern of saving – let's not do anything unless we have to." Cori Brown, pumping $15 worth of fuel into her 1996 Ford Explorer at a Chevron station on Richards Boulevard, feels the pinch. Until food and rent decline as much as gas, "it doesn't make a whole lot of difference," she said. "This is a depression, and I'm living through it."

Sacramento Home Buyers "Still Face An Elevated Risk of Being 'Upside Down'" in 2012

From Inman News:

Purchase a home in 67 of the nation's 100 largest metropolitan areas and you should be able to build positive equity by 2012, according to a new study comparing ownership and rental costs. The report from the Center for Economic and Policy Research concluded that prospects for building equity by 2012 have improved somewhat in 36 cities, compared with an analysis performed in the spring. In many markets, declines in house prices and modest increases in rents are helping return rent-to-price ratios closer to historical levels, the report found.

But the report identified 33 bubble markets areas where home buyers still face an elevated risk of being "upside down," or owing more than their home is worth, four years from now. One-third of those markets were in California, including San Jose, San Francisco, Los Angeles, Sacramento, San Diego, Fresno, Stockton, Bakersfield, Modesto and Riverside.

From the CEPR report [pdf]:

Given the remaining mismatch between home prices and rent levels in most bubble markets, we argue it is still unwise for policy makers to attempt to directly intervene in housing markets to maintain what are historically unprecedented high home prices. Policies that encourage occupancy, discourage vacancy, and maintain employment to stabilize hard hit communities are likely to be the best approach to assuring prices do not fall any further than is necessary to reestablish a stable housing market.

From the Wall Street Journal:

Lower home prices are luring some buyers back into the U.S. housing market, but foreclosures and a weakening economy are likely to keep downward pressure on prices for at least another year, economists say. A quarterly Wall Street Journal survey of housing data in 28 major metro areas shows that the glut of unsold homes listed for sale is shrinking in most of them. In many cases, sales have been stimulated by investors who are grabbing what they see as bargains on homes that can be turned into rentals. Metro areas with the biggest drops in for-sale signs include Sacramento and Orange County in California and the Virginia suburbs of Washington, D.C.
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Housing analysts caution that many homes that aren't currently listed for sale may hit the market in the next year or two. This looming supply includes pending foreclosures and homes temporarily taken off the market while their owners await stronger demand. With banks chopping prices on foreclosed homes, other sellers "are giving up and taking their homes off of the market," says Michael Lyon, president of Trendgraphix Inc., a research firm in Sacramento.

From the Sacramento Bee:

[A]s auto sales erode, local governments are feeling the squeeze. "Car sales are certainly our biggest contributor to the general fund," said Roseville Treasurer Russ Branson. "Sales taxes overall are down. Property taxes are flat. So all we can do is control expenses." Roseville, home to one of the region's big auto malls, depended on car and truck sales for about 7 percent of its general fund money last year, Branson said. Local vehicle sales dropped 15 percent for the fiscal year that ended in June, according to city statistics. That ripped $1.4 million from the city's coffers and represented a $146.5 million drain on the economy, Branson said.
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Employment at car dealers in the four-county Sacramento region has fallen by 8 percent in the last year to 12,700, according to the state Employment Development Department.
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There are a few reasons to hope a rebound is coming, experts said. The housing market may be close to a bottom – sales over the past few months are up, even though prices continue to fall.

From the Modesto Bee:

With declining home prices, tightening credit and the collapse of several major financial institutions, experts say now may not be the best time to think about leaving your job, even if it's one you hate.
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Suck it up and recommit yourself, said Lee Merchant, a psychology professor at Modesto Junior College. You can do that by assessing where you are in dealing with the fact that quitting will hurt you more than help you in this economy. "Are you in denial? Ask yourself if you have job options or not, because the job market is really bad," Merchant said.

From News10:

Usually you can spot the foreclosure homes through abandoned yards and newspapers in the driveway. One home in Lathrop is identifiable by its missing garage door...The garage door has been torn from the foundation, as has a regular door leading from the garage to the side yard.

"Empty Homes Have Turned into Giant Bird Houses"

Housing Bust Consequence #867. From CBS 13:

A local neighborhood is going to the birds. With so many vacant homes, it's a problem that can develop in any neighborhood. Birds are now taking over empty homes and bringing with them a lot of noise and mess. Birds have taken over two vacant homes on Coop Drive in Elk Grove, turning what was a quiet neighborhood into a nightmare...Empty homes have turned into giant bird houses.

From the Sacramento Business Journal:

Home sales, likely fueled by hundreds of foreclosed homes on the market, soared in Sacramento and California in September as the median price of homes sold in the state capital dipped below $200,000 for the first time in years [according to the California Association of Realtors]. The median price of a home selling in Greater Sacramento last month was $195,900, down 11.3 percent from August and 39.8 percent lower than a year ago. Sales, meanwhile, were up 8 percent over August and 186 percent higher than a year ago.

From the Sacramento Bee:

Jennifer Harris, executive director of the Home Loan Counseling Center of Sacramento, a nonprofit loan counseling agency...said there's also a rising new class of people now "just willing to walk away." "For us, it's a new thing to deal with," she said. "People are calling and saying, 'My values have dropped. Why shouldn't I walk away?' "
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[A]n abundance of trouble for struggling homeowners has been a blessing for buyers priced out during the housing boom. Foreclosure resales have driven prices down by a third or more the past year. Sacramento County median prices for resale homes – where half cost more and half less – have fallen by 37 percent in the past year to $190,000, the lowest in more than six years [per DataQuick].

From the Appeal Democrat:

The housing boom kept on busting during July, August and September as foreclosures jumped sharply compared with a year ago, according to figures released by a real estate information firm Thursday. Sutter County foreclosures increased five-fold during the third quarter of 2008 compared with the same period a year ago, totaling 291 homes, according to figures from MDA DataQuick.
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The glut of inventory from foreclosures plus short sales is causing downward pressure on home prices, said David Burrow, president of the Sutter-Yuba Association of Realtors. He said the inventory of homes has been accumulating beyond the number sold..."We're actually accumulating them faster than they're selling them," said Burrow, a Realtor who is with Keller Williams Realty Yuba Sutter.

From the California Progress Report:

Yesterday’s Sacramento Bee had a story which indicated at least 7,600 Sacramento-area residential foreclosures and the number may grow. I live in the Pocket Area and there are signs of foreclosures there and this is the most stable or one of the most stable parts of Sacramento County.

From the Redding Record Searchlight:

Alan Nevin, chief economist for the California Building Industry Association, said building smaller homes will work only if the buyer can't get the larger home for the same price. In foreclosure-ravaged areas such as Merced, Stockton and Riverside, prices are falling rapidly. "They've declined so far that it doesn't make much difference how small a new house is — builders can't beat the foreclosed price," Nevin said.

From the Sacramento Bee:

"Everyone is getting hit by this because they're short of money," said Joe Ortiz, who just got a $2,700 property tax bill. "It's really outrageous." Many homeowners, like Ortiz, had assumed their property taxes would fall in the wake of the housing crisis – a small measure of relief in the face of tumbling stock prices, shaky pensions and general economic fear.

From the Sacramento Bee:

Turns out, the bottom falling out of the housing industry is a good thing for districts such as San Juan Unified School District....The district broke ground this week on a $4.3 million gym at Mesa Verde High School would have cost about 25 percent more to build just a few years ago, said Don Myers, the district's senior director of facilities and planning...[B]ecause of the downturn in the economy for the last year now, as well as the downturn in housing market, we've actually gotten a very good price (on the gym construction)."

From the Sacramento Bee:

Edible Events owner Margie Tose, who specializes in corporate catering, said she began fielding calls for holiday parties as early as August. "But then, all of a sudden, it just stopped," Tose said, attributing the drop in calls to the flailing economy. "I think they'll still do something, but they'll scale back. These past couple of weeks have been scary, but once things settle down, I think they'll start calling, probably around November."

From the Sacramento Bee:

In his 36 years behind the counter, [Jim] Relles, longtime owner of Relles Florist in Sacramento's midtown, has seen economic good times and tougher ones. He harbors no illusions this year. "These are probably the worst economic times in my existence of running a business," he said. And it's shown at the cash register.

Relles' August sales were off 30 percent compared with last year, he said. September was better – sales were only 4 percent off the year-previous numbers, he said. Then the financial crisis reached a head, scattering would-be shoppers. "Then we had October come, when everything started to crumble. Everything came to a screeching halt," Relles said. He's already cut back on ordering Christmas items, anticipating as much as a 40 percent drop in sales from the year-ago holiday season.

From USA Today:

Stockton, a boom-and-bust town hit early and hard by the nation's foreclosure crisis, is digging out of the financial excesses of its past...But the city's hangover is likely to be a doozy...Some blocks have been so depopulated that even the Saturday afternoon jingle of an ice cream truck is greeted with silence....In September, the city's unemployment rate hit 12.4% vs. 8% for the same month two years earlier, when construction and finance jobs were plentiful...School enrollment is down 7% from 2006 in a district heavily affected by foreclosures and population dips...
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During Stockton's boom years of 2003, 2004 and 2005, home builders constructed almost 8,000 homes in the city — an amount equal to 11% of its single-family-home inventory.
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Homeowner Deramous was caught in the frenzy. She and her husband relocated to Stockton from the Bay Area in 2000, buying a 2,400-square-foot home for $176,000. As home values soared, so did their spirits. The house appraised for $500,000 in 2006. They refinanced, took money out for a new car, vacations and other expenses. Now, they owe more than $300,000, and the house "is probably worth $176,000 again," Deramous says. "It was foolish of us," she says. "My parents never took money out." Deramous hopes their lender will lower their payments.
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Manuel Leighton...bought the home in 1998...Near the peak of the market, the house was appraised for $465,000. He and his wife refinanced three times in almost six years, each time taking out cash to pay for a pool that never got built. Now, Leighton laments the loss of his better judgment and that he owes $390,000 on a house worth far less. A house next door recently sold at auction for $265,000, he says. "That hurts me," he says. "I'm going to call my lender and see if they'll redo my loan. If they can't, I may end up walking."

Flippers.gov

From the Sacramento Bee:

The federal government soon will send Sacramento city and county nearly $32 million to help fix up foreclosed properties -- a tool to prevent deterioration in neighborhoods hard hit by the housing crisis. Sacramento received one of the largest allocations in the nation....

City and county officials today detailed a plan that includes paying developers to buy foreclosed properties, restore them and either rent or sell them. In an effort to spend the money more quickly, the county and city also would become real estate flippers. About 40 percent of the money would be used by SHRA [Sacramento Housing and Redevelopment Agency] to buy and restore properties then sell them directly to buyers.

From the Sacramento Bee:

The supply of competing single-family house rentals is still growing, says Janet Regan, a broker with Citrus Heights-based Horizon Properties, who manages 450 rental homes for clients. Investors are buying bank repos and renting them out, she says. Homeowners who left the region but can't sell their homes are renting theirs, too. "They don't have them on the market because the market is horrendous," Regan says.

From the Modesto Bee:

Apartments, of course, aren't the only rental option for Modesto families these days. There are thousands of rental houses in the city, and their numbers are increasing daily as investors scoop up bargain-priced foreclosed properties. "We have a flood of investment homes on the rental market now," said [Debra] Clover, whose company manages more than 300 of them.
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Many of the families who had been living in those [foreclosed] homes have left the county, Clover said. "When these people -- especially those who were commuting to the Bay Area -- lose their houses, they don't stay here to rent. They move closer to their jobs," Clover said.

From the Stockton Record:

Hank Klor, a Stockton-based tax and financial adviser, spoke to a 49-year-old single mother who owes nearly $250,000 on two mortgage loans, recently had her income drop by a third and can't make her paycheck stretch over all the necessities anymore. With her home worth only $140,000 to $150,000 because of falling prices, refinancing seems impossible. She might seek to have her loans modified, get the lender to agree take a loss on a short sale or, Klor said he told her, "You need to look at the possibility you may have to walk away from your home."

From the Sacramento Business Journal:

Year-over-year, the capital region lost an estimated 9,800 jobs, or 1.1 percent of the total. There were 3,700 fewer construction jobs; 3,700 fewer retail trade jobs; 2,900 fewer leisure and hospitality jobs; 2,200 fewer financial jobs; 1,300 fewer government jobs and 1,000 fewer manufacturing jobs than in September 2007, when the local jobless rate was 5.4 percent.

From the Stockton Record:

Hayward-based department store chain Mervyns LLC is expected to announce today that it is filing for Chapter 7 bankruptcy protection, a move that means shutting the doors of its 175 retail outlets, including two in San Joaquin County.
~~~
[N]ine are in the greater Sacramento area....

MLS Inventory "Not a Realistic Picture of the Market"

From the Sacramento Bee:

The number of for-sale signs in El Dorado, Placer, Sacramento and Yolo counties fell in September to a 19-month low of 11,022, Sacramento property researcher TrendGraphix reported [pdf] Monday. The newest tally is down from 11,369 in August – and off sharply from a record high of 16,081 homes for sale in September 2007.

From the Sacramento Business Journal:

[T]here might not be a quick end to those foreclosures, said Mike Lyon, chief executive at Lyon Real Estate. He offered a grim forecast that foreclosed homes might clog the market for an additional four years, a result of adjustable-rate mortgages resetting at much higher rates, further erosion of homeowners’ equity and surrenders by “early adopter” investors who have bought within the past year.

He said at current buying levels there’s about an eight-month supply of owner-occupied resale homes on the market, while there’s less than a two-month supply of bank-owned homes listed. That doesn’t tell the entire story, however, as there’s a large backlog of foreclosed homes that haven’t yet been put to market, he said. So while the inventory of homes for sale is down compared with last year, it’s not a realistic picture of the market.

From the Sacramento Bee:

[Robert] Shiller offers no sunny forecast. The Yale finance professor, and creator of the Case-Shiller Index that tracks home prices, says the subprime crisis that appeared last year may be "the first act of a long and complex tragedy." "We may well experience several years of a bad economy, as occurred, for example, after the profligate mortgage lending booms in both Sweden and Mexico in the early 1990s," Shiller writes. "There could even be another 'lost decade,' like that suffered by Mexico in the 1980s after its spending spree during the oil price boom, or by Japan in the 1990s after the bursting of the 1980s bubble in its stock and housing markets."
...
[Shiller:] I think we've learned some very elementary lessons. Don't think that because something didn't happen for the last 30 years it won't happen. It's amazing how people thought home prices can only go up. One thing people haven't learned very well is home prices can stay down for 30 years, too. I'm not saying it will. It certainly can happen. Most people still think this is just a temporary interruption and real estate prices are going to soar soon. The real estate market is not cheap yet. It's not to where this bubble started (in late 1998).
...
[Shiller's] book is at its best when explaining how so few in authority imagined what has come to pass. Schiller says they were filled with same housing boom faith held by the public.

From Florida Today:

"I wish I wasn't upside-down on my house. But I am," said economist Sean Snaith, who bought his Orlando-area home in 2006 when he joined the University of Central Florida faculty as director of the Institute for Economic Competitiveness. "But I'm fine. I'm not going anywhere."

From the Mercury News:

Dave Cantrell considered loading the U-Haul in the middle of the night and leaving while his neighbors were asleep. He couldn't bear to face them. He had become a community leader here, rallying his neighbors to stand up to the builder that was planning to auction off one-third of their new Paseo West subdivision at 40 percent discounts.
...
As much as he worried about his neighbors, Cantrell never thought he would become a casualty of the housing crunch. He was a retired Navy man with a solid pension. He had a job in construction management and, with his impressive work ethic, was making $250,000 a year, plus a hefty bonus. His credit rating was in the 700s. So in 2006, he bought a $670,000 house, then spent $100,000 to add a pool and miniature golf course in the back. It seemed sensible enough at the time.
...
In March, just five months after the auction, he lost his construction job. He kept up his mortgage payments for a couple of months, but it became obvious that no matter how many résumés he sent out, he wasn't getting any offers. He stopped paying his mortgage and he and his wife, Darleada, moved north...His grown daughter and son-in-law, who live in the tiny town of Seabeck, Wash., took them in. The Cantrells have been married for 34 years and now live in the one-bedroom, 985-square-foot apartment over a garage. He hasn't lived this way since he was a teenager.

'You have a lot of sellers waiting for a healthier market'

From the Sacramento Bee (updated link):

Sacramento-area unemployment went up two-tenths of a point, to 7.4 percent, largely due to a massive decline in state government jobs. Unemployment hasn't been this high in Sacramento since January 1996.

From the Sacramento Business Journal:

The metro area lost more than 4,000 government jobs from the previous month, and others sectors lost jobs that typically grow during August, the latest data from the Employment Development Department showed Friday. The Sacramento region fell to an estimated 903,800 wage and salary jobs, down 4,500 in a month and 9,900 from August 2007.

From the Sacramento Bee:

"I've never seen anything as concerning as this," said George Hudak, a 74-year-old retiree in El Dorado Hills. "I don't know whether it's a self-fulfilling prophecy or what, and I think a good deal of the panic out there is a result of what's being publicized on TV and in print. "It just seems that since the housing market started going to hell, everything I read every day in the business section of the Sacramento Bee was bad stuff. And I don't know how much of that resulted in things getting worse."
...
Russ Fehr, Sacramento's city treasurer, said news is bad in just about every aspect of municipal finance -- from revenue generation to funding projects to investments. "I'm afraid, I truly am," Fehr said. "It wakes me up at four in the morning."

From the Sacramento Bee:

Today, there are almost 5,000 fewer homes for sale [on the MLS] than in August 2007. That's when the region set its newest inventory record of 16,262 for-sale signs. Analysts say it's not just sales that have done the trimming. It's the determination of sellers to wait out this market. "To me that speaks of the number of people who don't want to compete with foreclosures," said Andrew LePage, analyst with MDA DataQuick. "You have a lot of sellers waiting for a healthier market, hoping for one in the not-too-distant future," he said.

Last year, real estate agents feared inventory might reach a disastrous 25,000 this year. They got lucky so far instead.

Or maybe not.

From the Sacramento Bee:

Investors again made a big splash in the market. One in five escrows closing last month in Sacramento County were by investors, said Andrew LePage, an MDA DataQuick analyst.

Prices/Sales by County

From the Modesto Bee:

Merced County homes sold for a median $150,000 in August. That's down 47 percent in one year and 60.8 percent from the December 2005 peak...Stanislaus County median sales prices fell to $185,000 in August. That's a one-year drop of 41.3 percent. Even more depressing, it's 53.3 percent below what homes were selling for at the building boom's December 2005 peak...San Joaquin homes sold for a median $207,000 in August. That's down 44.1 percent in one year and 54.8 percent from the November 2005 peak.

From the Appeal Democrat:

Figures released Thursday by MDA DataQuick showed median price declines of more than 30 percent for homes in Yuba and Sutter counties for August compared with August 2007. Sutter County's home price dipped below $200,000 to a median $190,000 last month — well below the $275,000 figure reported for August 2007. MDA DataQuick figures showed homes in Yuba County dropped to $178,000 in August. That's down from $274,000 for August 2007.

From the Sacramento Bee:

The turmoil washing over Wall Street has created waves that reach all the way to Sacramento's locally owned banks and credit unions. Money flowing into conservative havens favored by smaller players has cheapened the value of investments such as government-backed securities. Commercial real estate loans are losing value. Credit remains tight. "All banks are struggling to some extent with credit issues," said Anker Christensen, chief financial officer of Sacramento-based River City Bank. "No one is untouched."

Still, bank executives and finance experts agree that smaller players are generally in better shape than big banks right now...[O]fficials with River City and El Dorado Savings said that they've seen an uptick in new accounts recently, although they wouldn't disclose details. Both attribute the business to disenchantment with their bigger rivals.

From the Sun Post:

A six-story office complex and bank headquarters that was supposed to dominate Manteca’s skyline has been set back at least two years due to troubles in the real estate market and financial industry. The Oak Valley Community Bank has decided to pause construction on its 96-foot-tall office building at 1455 Moffat Blvd. until the local real estate market picks up, the bank’s Executive Vice President Rick McCarty said this week.

From the New York Times:

Many Americans are discovering an unfortunate twist to the housing crisis: even after selling a home and moving away, they might have to keep paying on it for years, even decades.
...
[B]anks are agreeing to let some short sales go through. But instead of writing off the unpaid portion of the debt, they want homeowners to sign a note promising to pay some or all of the balance due. This was the situation confronting Mike and Linda Kelly, who needed to sell their house in the foreclosure-plagued Central Valley of California when Mr. Kelly got a new job 75 miles away.

The Kellys owe $300,000 on their house...but the best offer they could get gave the bank $220,000. CitiMortgage said it would approve a sale at that price, but at the last minute told the Kellys they needed to pay $166 a month for the next 20 years, a total of $40,000. “When you are ready to participate in the loss, feel free to call me,” a Citi loss mitigation specialist, April Easter, wrote to them in an e-mail message.

'The speed at which this thing fell apart was just unheard of'

From the Press Democrat:

Exchange Bank, one of the most visible companies in Sonoma County, is navigating through turbulent times. The Santa Rosa bank has suffered losses in two of the past three quarters -- its first in at least 50 years, according to bank officials -- and its stock has lost half its value over the past two years.
...
The bank opened its first office outside Sonoma County, a lending branch in Sacramento, as Sonoma County builders moved into the Central Valley and scrambled to develop subdivisions....Bank officials defended their lending standards and the decision to expand into the Sacramento area. "The speed at which this thing fell apart was just unheard of," [Exchange Bank's veteran Chairman C. William] Reinking said.

From Rocklin & Roseville Today:

I personally believe we have not seen the bottom yet in terms of price but increased sales volume and inventory coming down will get us there in the next 18 months. I don’t think declining prices will be very dramatic during that period but we still have a tranche of “loan resets” coming which may spike up foreclosures and unemployment increasing will not help. The key element in stabilizing prices is seeing the supply and demand start to equalize.
...
HousingTracker indicates that there are still 14,721 homes on the market. This is down over 21 percent from the same time last year but the rate of decline has slowed considerably and, in my opinion, it will take an inventory level south of 10,000 to stop the decline in prices.

From the Associated Press (via the Union Tribune - hat tip: Sold in '05):

As if the housing market wasn't scary enough, the record-setting surge in foreclosures could be distorting some of the closely watched housing data used to gauge the market's health. The foreclosure glut is making listings of homes for sale a less reliable indicator, because much of the distressed inventory might be left out.
...
"The wave of foreclosures is unprecedented, making it difficult to analyze, difficult to gauge how large it will get or how bad it will make things," Deutsche Bank analyst Nishu Sood said in an interview. Sood, in a recent report, lays out a case for why the surge in foreclosures isn't being fully reflected in the resale inventory levels, as measured by the real-estate databases known as multiple listing services, or MLS. In nine of the 33 markets Sood examined, distressed inventory is significantly higher than what is found in the MLS listings.

This is most pronounced in what have been deemed “bubble” real estate markets, which saw the biggest gains during the home buying boom and are experiencing the largest declines since the pullback began more than two years ago. For instance, in Sacramento, the foreclosed inventory was 31,219 units, or more than twice the 14,913 units on the MLS listings.
...
Sood attributes that gap largely to bank-owned foreclosed homes that aren't always captured in the MLS listings. He calls that the “shadow inventory,” and says the behind-the-scenes glut of properties wreaks havoc on housing-related statistics.

From the Sacramento Bee:

...[D]istricts, hit hard by the housing market crash and declining student enrollment, will struggle to keep afloat. "We tried to maintain the same programs we had the prior year, that was a strong desire for us, but still it's difficult to cut $2.9 million from a $40 million budget and not have some things felt," said Scott Leaman, superintendent of Western Placer Unified...Staff reductions will be felt in custodial services, kindergarten classes and front offices.
...
In San Juan Unified, four counseling positions have been left vacant, and the equivalent of three full-time vice principal positions have been cut.

From the Sacramento News & Review:

We’re in the third year of a pronounced downturn in the housing market. And not coincidentally, Foothill Theatre Company (one of the region’s few professional theater companies) is in serious financial peril. Other performing-arts groups are also feeling the pinch.
...
It’s probably going to be two (maybe three) years before things get better. So hold on tight, because performing-arts groups—which are linked to the local economy at multiple levels—are going to face some tough sledding before the economic picture starts to improve.

From the Daily Breeze:

Rep. Laura Richardson caught a break on Wednesday when code enforcement officers decided not to bill her for boarding up the garage door on her vacant Sacramento home. The city decided it would be too much trouble to determine who owned the property last month, when code enforcement officers were called out to deal with a "public nuisance."
...
In a statement, Richardson, D-Long Beach, disavowed any responsibility for the current upkeep of the home, because she said it still has not been transferred back to her...Richardson's statement conflicts with available public records, which state that she has had the title to the property since June 2.

"The Complete Opposite of the American Dream"

Excellent post by Max over at SacRealStats about Sacramento's shadow inventory.

The Sacramento Bee has a fancy interactive graph of Sacramento home prices back to 1990.

From Home Front:

Four in 10 homeowners who bought houses in El Dorado, Placer, Sacramento and Yolo counties since 2003 now owe more than their homes are worth, according to the online real estate firm Zillow.com.

From Bloomberg:

In four of the state's metropolitan areas -- Stockton, Modesto, Merced and Vallejo-Fairfield -- the number of homeowners whose mortgage debts exceeded the values of their properties topped 90 percent, Zillow said. In five more California areas -- the Inland Empire (Riverside-San Bernardino), Bakersfield, Yuba City, El Centro and Madera -- the percentages were more than 80 percent.

From the CVBT:

Tops in California for foreclosure sales per capita in July [per ForeclosureRadar] was Merced County at one foreclosure for every 409 residents, a jump of 305 percent compared to July 2007. Second is Stanislaus County, with one foreclosed home for every 488 residents, a 287 percent year-over-year increase. San Joaquin County is in third, with one for every 491 residents, an increase of 204 percent...Other Central Valley counties making the top ten for July are Yuba, with one foreclosure action for every 541 residents, an increase of 169 percent, and Sacramento, with one for every 704 residents, a 156 percent year-over-year increase.

From the CVBT:

The Central Valley inland seaport city of Stockton is adrift in an ocean of red ink when it comes to home sales, according to a report from Zillow.com, a Seattle, Wash.-based online real estate information company. While U.S. home values dropped nearly 10 percent in the second quarter compared to the same period a year earlier, home values in Stockton plunged 38.2 percent. Zillow says 63.4 percent of the homes that sold in Stockton in the second quarter sold at a loss.
...
Stockton’s median home value was put at $216,100, down 38.2 percent in a year and down 47.6 percent from the market’s peak, Zillow says.

From the Guardian:

The stellar increase in house prices was inflated first, fastest and furthest in California. So it is not surprising, now that the bubble has burst and the market is in freefall, that places like Stockton are suffering more than most...But the city is far more significant in the big picture of California's troubled economy than many realise. The problems facing this part-old, part-new city are being duplicated all over the state, causing an economic ripple effect that could push America's biggest economy to the brink of collapse.

From the Sacramento Business Journal:

Even a signature project such as the L Street Lofts in midtown Sacramento isn’t immune from the effects of the housing downturn. The top-floor penthouses that overlook the city were snapped up quickly to the delight of developer Sotiris Kolokotronis, including one loft bought by Kings basketball player Kevin Martin. About half of the 92 units, however, are still empty since the lofts opened for sales late last year. Kolokotronis and partner Resmark Equity Partners LLC are now in dispute over the project, according to sources familiar with the situation.

From the Fresno Bee via the Modesto Bee:

Merced-based County Bank's parent company reported Monday that it lost $12 million in the second quarter of 2008 as it increased its provisions for bad loans tied to the region's declining real estate market.
...
Key to the 41-branch bank's increasing loan-loss reserves is its "exposure to real estate declining rather dramatically in the Central Valley," Richard Cupp, the newly appointed chief executive and president of the company, said in a Monday conference call with reporters.

From the Modesto Bee:

City Council members Monday advanced a package of proposals meant to provide relief for cash-strapped builders in a down housing market.

From the Sacramento Bee:

A lot of what I'm seeing is people who were looking to upgrade their homes, and were told by real estate agents, as well as mortgage brokers, they would be able to refinance in a few years. They were told that home prices would go up, that they really didn't need to be too concerned about these adjustable-rate loan issues. And there are a fair number of people who didn't have a financial savvy about them, and believed on an $80,000 income they could afford a half-million-dollar house.

I was an economics major in college. The rule I was taught was multiply your income by three, and that's the most expensive house you can afford. Everybody seems to have ignored that rule, which worked so long for so many people. Not just consumers, but brokers and real estate agents ignored that, as well. They believed multiples of five, six and seven were going to be sustainable.

From Home Front:

This afternoon came a call from Sacramento, a woman looking for help for her sister who lives in Vacaville. Their loan payment went from about $2,000 a month to $3,200 or so, she said. She said the loan was from Washington Mutual, which makes me suspect Option ARM. That's where the payment that most people make doesn't even cover all the interest. The loan gets bigger. She was looking for some kind of phone number for help. I sent her to that HOPE NOW hotline, 888-995- HOPE. It was another sad story of two hard-working people, a Spanish-speaking mom and dad, who got "snookered" by a loan they didn't understand. Now they're having to figure they might end back up in an apartment with the kids. The complete opposite of the American Dream.

Stockton Agent: 70% of Foreclosures Are "Walk Aways"

From the BBC News:

Professor Nouriel Roubini of New York University, one of the first economists to warn of the dangers of the American house price boom, believes the number of people positively choosing to walk away is growing rapidly. "This is becoming a tsunami of voluntary defaults," Professor Roubini says.
...
In the city of Stockton - the foreclosure, or repossession, capital of the US for 2007 - estate agent Kevin Morgan sells repossessed houses on behalf of the banks that now own them. According to him, walking away has become commonplace. "I would say it's probably 70% of the volume of our foreclosures right now," he says.

From the Stockton Record:

A north Stockton Linens 'n Things store is among 57 stores that will be closing in the next several months nationally as the home furnishings and bedding retailer continues through bankruptcy reorganization.
...
Steve Carrigan, economic development director for Stockton, said Linens 'n Things is a victim of the economy but that there have been relatively few retail closings in Stockton. "This probably isn't the end, but hopefully, we're getting near the end of this bad-news cycle," he said. "In that sense, we've been very fortunate. We've just about weathered the storm."

From the Modesto Bee:

President Bush is expected to sign housing bailout legislation this week that could give Northern San Joaquin Valley agencies perhaps $120 million to buy foreclosed homes. Details of how the $4 billion federal program would work are sketchy, but local real estate experts predict that the new government venture could do more harm than good.
...
"It's a joke. It won't even make a dent," [ForeclosureRadar's Sean] O'Toole said. "It's a complete government boondoggle." During the past year, O'Toole said lenders foreclosed on nearly $6.8 billion worth of home loans in San Joaquin, Stanislaus and Merced counties. So giving local government $120 million to buy those homes "is meaningless."

Modesto real estate leaders don't see much merit in the plan, either. "It's not going to help solve any problems at all," said Mike Zagaris, president of PMZ Real Estate. "It's an act by politicians who are trying to get re-elected. It has little to do with helping people and will only, in the end, contribute to our national budget deficit."

From the Manteca Bulletin:

Manteca - and every other community in a similar situation - should be jumping up and down about $3.9 billion in outright federal grants to cities hardest hit by the foreclosure mess to allow them to buy foreclosed homes and rehabilitate them to help create affordable housing, right? Guess again.
...
There are so many things wrong with this as to why it won't work that you don't need to interject philosophy of what government should and shouldn't do into the debate.

From Minyanville:

According to the Journal, metro areas like Sacramento, California, Denver, San Diego and Las Vegas actually reported a decline in housing inventory from a year earlier. Supply is still well above historical averages but, the report argues, if this trend continues it could usher in the end to the real estate slump.
...
Meanwhile, back in a world still loosely based on reality, easing inventory is a result of changing market dynamics, not an imminent bottom. First, in troubled areas like California’s Central Valley and Inland Empire, (east of Los Angeles) Phoenix and Las Vegas, foreclosure and other distressed sales account for almost half the total transactions. As vulture funds and other investors swoop in to purchase delinquent mortgages and abandoned houses, such opportunistic buying has reduced inventory. Small boutique investment firms, big hedge funds and Investment banks...are driving these markets. Some are buying foreclosed homes en masse, while others are snapping up delinquent mortgage at a deep discount. As the new owner of the loan tries to sort things out with the borrower, homes previously for sale come off the market.

The majority of these properties, however, will just end up for sale again: Almost half the delinquent mortgages traded in this market ultimately end up in foreclosure. Investment banks and hedge funds aren’t in the business of owning portfolios of residential real estate, so in a few months they’ll start punting homes at further discounted prices.

'When you put on a super sale, people show up and buy'

From the Sacramento Bee:

[W]ith 12,000-plus "For Sale" signs in the region, the market hasn't yet reached bottom, said ReMax's [Randy] Dunham. At month's end there were 12,606 homes for sale in El Dorado, Placer, Sacramento and Yolo counties, according to Sacramento-based researcher TrendGraphix. The peak in August 2007 was 16,262.
...
"Borrowers are more cautious about what they can afford," said Michele Dillingham, a senior loan consultant at Sacramento-based Vitek Mortgage. "A lot of people are buying at below what they would qualify for. They saw what happened (with foreclosures) and don't want it to happen to them."

DataQuick stats by county
DataQuick stats by zip (or xls)

From Home Front:

Is this sustainable?

I asked veteran Sacramento real estate Carlos Kozlowski of Coldwell banker and his opinion was: yes. Kozlowski believes there is enough pent-up demand to absorb all the thousands of bank repos still to come on the market this year as rising numbers of people continue to lose their homes to foreclosure.

"Prices are not going up. Prices will stay somewhere about where they are until this inventory is absorbed," he said. Then will come the new wave of buyers: the foreclosure refugees allowed back in the market with new federally-backed mortgages. "People who lost homes a year or two ago will be able to buy in 18 months," he said.

From the Daily Democrat:

Yolo County home sales for April almost equaled those of a year earlier, although prices are still nearly 27 percent below last year's figures.
...
It's premature to say that April's numbers signaled a potential housing rebound in California, one of the nation's hottest markets during the boom, said DataQuick analyst Andrew LePage. Uncertainties include whether the economy gets stuck in a recession, whether the credit crunch persists, and if foreclosures continue to rise, he said. "I think we're a ways from seeing much of a rebound in home values," he said. "When you put on a super sale, people show up and buy."

From the Appeal Democrat:

Thousands of local residents will receive cuts to their property taxes this summer as a shrinking housing market pulls home prices far below the heights their owners paid in a once white-hot Central Valley market. Though the reductions will return more money to residents, assessors say it will chip away at already-thin police, fire and school budgets in the 2008-09 fiscal year, which starts July 1.
...
The heaviest blows in Yuba County will be felt in the communities that sprang up or grew quickly in the first half of the decade, according to Brown — especially Plumas Lake, East Linda, the eastern foothills and Wheatland. The Linda Rural Fire District, whose area includes the 5-year-old Plumas Lake, now relies on property taxes for 80 percent of its revenue, he said.

So abrupt is the rollback that Yuba County officials predict a decline in the total value of residential parcels — a county first.

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

From the Sacramento Business Journal:

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

From the Appeal-Democrat:

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

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

From Roseville & Rocklin Today:

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

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

From the Sacramento Business Journal:

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

From the Sacramento Bee:

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

From the Stockton Record:

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

Sacramento Bee: "Bubble Bursts in Elk Grove"

From the Sacramento Bee:

Bubble bursts in Elk Grove

Elk Grove, already mired in an economic slump, may be at the forefront of what's coming to the entire Sacramento region. Already home foreclosures there are up fivefold. Unemployment has climbed. Vacancies at small strip malls are three times the regionwide average, and Laguna Ridge – a big new master-planned development – is largely a ghost town of unsold homes and vacant lots.
...
The downturn calls into question just how strong the boom really was. Rising prices enabled an untold number of residents to tap their home equity to buy sport-utility vehicles and other consumer goods. But others did well just to buy a house. They were wealthy on paper but chronically short of cash.

The Sacramento Natural Foods Co-op found this out the hard way. Preparing to expand, the Co-op looked at demographic studies of Elk Grove and saw nothing but high incomes. The Census Bureau pegged Elk Grove's median family income in 2006 at $81,771, or 25 percent higher than the state's median. But when the Co-op opened in the Elk Grove Marketplace on Bond Road, it found many residents weren't so rich after all. "A lot of these 70,000 new residents down there were young families with mortgages up to their eyeballs," said general manager Paul Cultrera. "The disposable income wasn't there. … It's tied up in mortgages and new furniture." The store closed in January 2007 and gave way to a discount food chain, Grocery Outlet.
...
Because of massive overbuilding and other issues, the vacancy rate at Elk Grove's smaller strip malls – those that frequently cater to independent merchants – has jumped to nearly 35 percent...Garrick Brown, regional research director at Colliers International real estate...said. That's three times the area average. In one stretch along Interstate 5, the vacancy rate is 68 percent, he added.

From the Stockton Record:

The lunch rush used to fill Campesino Café. That hasn't been the case for the past several months. A handful of south side businesses, such as Campesino Café, that cater mostly to Latino immigrant workers are not only seeing the effects of a sluggish economy, but they also say reverse migration has left their business nearly empty of customers, who are fleeing lackluster employment conditions.
...
The soft housing market has played a huge role in the economic slowdown in San Joaquin County. The housing market slowed job growth in the county from 1.3 percent in the fourth quarter of 2006 to 0.4 percent in the fourth quarter of 2007, according to University of the Pacific's Business Forecasting Center.

From the Sacramento Bee:

Sacramento home builders have tried practically everything to move product in a slow market: lower prices, auctions, luxurious upgrades and so on. Now they're offering cheap money. Working in tandem with lenders, two home builders are offering mortgage financing for new homes at below-market rates.
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John Arvanitis, a Citrus Heights mortgage broker, said interest-rate buydowns are preferable to continued price reductions, which drive down market values for everyone in the community. "You don't want to perpetuate (or) assist in a market crash," said Arvanitis, president of Sunrise Vista Mortgage Co.

From the Sacramento Business Journal:

There are 9,310 bank-owned properties in Sacramento County, according to RealtyTrac Inc., and there are 8,337 more homes in pre-foreclosure, which means the owner is at least two months late making mortgage payments.

News10: Foreclosure Fears Pack Stockton Workshop (video)

Mike Lyon: 'This is Going to Get Ugly'

From the Granite Bay PT:

Michael Lyon, chief executive officer for Lyon Real Estate...told the audience the market has changed drastically. In 2001 about 800 homes were sold throughout Placer County in about a month. "Today there are about 2,460 homes for sale in Placer County and only about 219 are sold each month," he said.

Lyon warned that the market is not expected to get better anytime soon. He predicts more of a downtown by the summer and a second wave of falling prices in the spring of 2009. "This is going to get ugly," he said.

From CBS 13:

Thousands of homes sit empty in Sacramento because of the housing crisis, so it may come as a surprise to learn that Sacramento city leaders want to build 3000 more homes in an area ruled unsafe.

From the Sacramento Bee:

In the fourth quarter, 7.3 percent of the Sacramento region's retail space was vacant, up from 6.3 percent a year earlier. Some of the hardest hit areas – Roseville/Rocklin, Elk Grove and Natomas – were retail hot spots not long ago.

From the Stockton Record:

A total of 3,746 notices of default - the first step in the foreclosure process - were filed countywide in the fourth quarter of 2007, according to the real-estate research firm DataQuick Information Systems of La Jolla. That was a 189.7 percent year-to-year increase, compared with 2,961 default notices in the third quarter, up nearly 230 percent year-to-year.

Jerry Abbott, president and co-owner of Coldwell Banker Grupe, Stockton, said he expects foreclosures to continue streaming in for at least 18 more months, putting enough downward pressure on home prices to shrink prices between 10 percent and 15 percent this year. "We're seeing a steady stream of foreclosure listings," he said. "We're not seeing any let-up in it at all. We've still got a lot in the pipeline. It's going to be a tough two years."

From the Lodi News-Sentinel:

Animal rescue organizations in Lodi have had to deal with animals that have been given up by people whose homes were foreclosed."It's just mind boggling," said Patricia Sherman, president of Lodi Animal Friends Connection. "We've got a lot of them — at least a dozen or so calls in the past two months."

From the Modesto Bee:

Restaurants and furniture stores aren't the only businesses struggling to make a go of it in the Northern San Joaquin Valley these days. The ripple effects from the housing market downturn, credit crunch, inflation jump and unemployment increase are putting the squeeze on consumers of all kinds of goods and services...[I]t's sad to note that Salon DeVille and Day Spa in Modesto has closed its doors...At a time when folks likely are cutting back to save a buck, hair care may be one of the things getting trimmed from family budgets.

Sacramento Land Values Implode

From the Sacramento Bee:

The sheer drop in values the past two years – more than 25 percent for houses and a stunning 80 percent for raw land, according to one estimate – has put the region on national and international investors' radar screens...In the Sacramento suburbs, lots worth $100,000 apiece during the boom would fetch barely $20,000 today,...Jim Radler of Park Place Partners Inc., a Roseville land broker...said. In some parts of greater Sacramento and the Valley, lot prices have reverted to farmland values.

"We are a market that has gotten some notoriety for how quickly and badly we've been hit," said Pete Nixon, a senior vice president and land-sales specialist in the Roseville office of commercial broker CB Richard Ellis. "So this is a market that people are going to look at."
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But there probably won't be a flood of quick deals. Many landowners, reeling from the sticker shock of collapsed prices, are leery of taking big losses. And potential purchasers see Sacramento as a fixer-upper – a long-term rehabilitation project that will take several years to pay off.

From the Sacramento Bee:

The swoon in the housing market appears to be a boon for renters in the Sacramento region. Average rent for 75,786 apartments surveyed in El Dorado, Placer, Sacramento and Yolo counties – $962 in October, November and December – rose just 1.2 percent during 2007, reported RealFacts, a Novato-based apartment industry tracker. That's one of the lowest increases among large apartment complexes in California.
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Experts say the capital region remains oversupplied with new homes and conventional apartment complexes. More people also are renting out homes as they're unable to find buyers during a housing slump.

From the Sacramento Bee:

Brace yourself. Sacramento's rocky financial picture is getting worse and cuts in services are now "inevitable," city budget officials said Friday. Each city department is now analyzing how services would be impacted if they cut their bottom line by 10 percent and by 20 percent, said Russ Fehr, the city's finance director.
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Nearly three-quarters of the city's expenditures are labor. The budget report says, "the primary strategy has been, and will be, a reduction in staffing levels."...If the city were to solve its budget shortfall solely with layoffs, it would have to eliminate 500 to 600 jobs,...Russ Fehr, the city's finance director...said.

From the Sacramento Bee:

"How bad is this housing slump going to get?" said Howard Roth, chief economist at the California Department of Finance. "It's already worse than I expected."
...
At 5.9 percent, Sacramento's unemployment has risen 1.4 percentage points in the past year, with real estate-related industries taking the worst of it. Some 9,600 construction jobs have disappeared from a year ago, a drop of 13.8 percent. The financial sector has lost 3,600 jobs, or 5.5 percent.

From the Stockton Record:

Unemployment in San Joaquin County rose sharply to 9.7 percent in December, leaping from an estimated 7.4 percent rate the year before and the county's highest jobless figure in nearly four years, state officials reported Friday. The unemployment rate, based on a household survey, also rose nearly a full percentage point from 8.8 percent in November. Looking at figures from a separate survey of employer payrolls, a labor market analyst said San Joaquin had lost 1,400 jobs in construction and another 1,000 positions in real estate-related financial activities over the past year.

From the Appeal Democrat:

Builders and developers took out half as many building permits in 2007 than the year before in the rapidly growing areas of Yuba City and Yuba County, indicating that the area's building boom is over. "The real estate boom we had in 2003, 2004, 2005 was unprecedented," said Darin Gale, legislative advocate for the North State Building Industry Association. "We're now below normal. Definitely, that real estate boom is over."