Report: Sacramento Headed for Double-Digit Unemployment in 2009

From the Sacramento Bee:

A new forecast says unemployment will hit 10 percent in Sacramento this year [a rate worse than anything from the 1990s recession]. That's the most striking finding from the premiere issue of the Sacramento Business Review....The review also says the Sacramento region can expect to lose 14,500 jobs in the first quarter of 2009 alone. By contrast, the region lost 12,700 jobs in the 12 months ending in November.

From the Sacramento Business Review report [pdf]:

Construction...has become the largest production input in Sacramento since 2000 and hit its peak in 2005. Currently, construction contributes to 56% of Sacramento’s goods production input. We view this larger exposure to real estate as one reason the region was hit particularly hard by the housing collapse, partially offset by the larger exposure to the relatively stable government sector...By the end of 2005 - coinciding with the peak of the residential market - 26% of all jobs in the region were real estate related. Since that time the real estate sector has steadily lost jobs and now represents only 22% of overall employment.
...
While this U.S. recession officially began in December 2007, we believe the Sacramento region felt the economic effects earlier given the region’s large exposure to housing price declines, and the collapse in construction and in real-estate related financing activities. Using unemployment and taxable sales as a gauge, Sacramento was likely in its own local “recession” as early as 2Q07. Given our negative outlook, we would be looking closer to the end of 2009 or early 2010 for a local recovery and job growth to return, but we also believe there is a greater risk that a recovery occurs later than this rather than earlier.
...
While a recovery is at least a year (or two) away, it is likely we will reach or approach the bottom of the [real estate] downturn by the end of 2009. The local residential market is further along in the cycle than most the rest of the country, having already incurred a significant correction in pricing. As such, we expect the Sacramento region to be one of the first markets to recover. However, whether we reach the bottom soon and how long we remain there is dependent on how quickly the credit markets thaw and the depth and duration of the current economic recession.

From Housingpredictor.com:

[I]n the state's capitol of Sacramento, which has been one of the states harshest hit areas, the increase in foreclosure sales is also helping to boost the ailing home market. The real estate crisis is forecast to deflate home values in Sacramento another 15.7% by year's end.

From News10:

City employees in Lincoln are bracing for layoff notices that could come as early as Friday, according to Mayor Spencer Short..."I think everyone saw the slowdown coming but it was just a sudden collapse because of the mortgage crisis and everything else," said Short.

From the SF Chron:

"My policy prescription: Let them get foreclosed on," [economist Christopher Thornberg] said. "The home market is not going to recover, on the building or appreciation side, until two things happen: a) all these people with dodgy mortgages who bought things they couldn't afford get shoved out and b) all those homes get absorbed. The fastest way to do both of those things is to let prices fall."

'I don't think any of us are guaranteed anything anymore'

Recently foreclosed homes made up 61.4% of all resales in Sacramento County during the second quarter. That was the 6th highest rate in California, according to DataQuick (via Jon Lansner's blog). The usual suspects: Merced, San Joaquin, and Stanislaus captured the first three spots, with Yuba at #4.

Sacramento Bee housing reporter Jim Wasserman appeared on CNBC.

From the Sacramento Bee:

Unlike an elite city like San Francisco, Sacramento's growth has been fueled by an influx of educated, family-oriented residents – the populations that have been fleeing such high-priced places where the housing supply is constrained.
...
The fact Sacramento has fared far better than these cities over the past 15 years suggests the region's recent problems lie not in a lack of downtown condos and nightlife, but with a housing market that, as in much of California, has been totally out of whack. Once a consistently affordable locale, by the mid-1990s Sacramento's housing prices jumped almost nine times income growth, an unsustainable pace seen in a few areas such as Riverside, Miami and Los Angeles.

As a result, the refugees from the coastal counties who had been coming to Sacramento for affordable housing stopped arriving. Net migration to the region, more than 36,000 in 2001, fell to less than 1,000 in 2006.

From the Sacramento Business Journal:

“In the past 12 months, I have seen builders slash their staffs by more than 50 percent and consolidate operations in one office,” said Angel Ahumada, founder of recruiting firm Integrity International. “Before the builders had offices everywhere — Sacramento, Central Valley and the Bay Area. The current trend is to have one office run all three.”

From the Sacramento Bee:

Californians – spooked by negative economic news and the tens of billions of dollars they've lost to rising gas prices and disappearing home equity – are ratcheting down their spending. It's true even for those who've avoided foreclosure or a pink slip. Tim Einer, a software trainer in Lincoln, considers himself upper middle class but has seen his home equity fall by $225,000. He traded his Jaguar for a fuel-efficient Chevy, scrapped a European vacation and stocks up at Target whenever possible. "I have worries all the time – you just see how the economy is," Einer said. "I don't think any of us are guaranteed anything anymore."
...
The falling real estate market has been doubly burdensome for Meredith Wharton, a Folsom real estate agent. Not only is she "working twice as hard for half the reward," she and her husband, Mark, have had to adjust to the decline in their own home equity. Because they both live mainly on commission income, they frequently use their home equity line of credit to smooth out fluctuations in their paychecks. But their available credit was recently cut in half, to $50,000, reducing their financial cushion.

From the New York Times:

The first wave of Americans to default on their home mortgages appears to be cresting, but a second, far larger one is quickly building. Homeowners with good credit are falling behind on their payments in growing numbers, even as the problems with mortgages made to people with weak, or subprime, credit are showing their first, tentative signs of leveling off after two years of spiraling defaults.
...
“Subprime was the tip of the iceberg,” said Thomas H. Atteberry, president of First Pacific Advisors, a investment firm in Los Angeles that trades mortgage securities. “Prime will be far bigger in its impact.”

From the Sacramento Business Journal:

Aggressive belt-tightening efforts by lenders and a dismal economy put the squeeze on the commercial investment property market in the Sacramento region during the past year. Investors plowed almost $5 billion into Sacramento office buildings, shopping centers, apartment buildings and warehouses in June 2006 to June 2007, fueled by a seemingly endless supply of “cheap” money. But in the past 12 months, investment has declined to about $2.1 billion, a 58 percent drop from the peak, according to figures from brokerage CB Richard Ellis.

“It’s a weird time right now,” said Jon Wilcox, a senior associate at CB Richard Ellis who exclusively represents investors looking to purchase income-producing property. “Nobody can find a price point yet. ... (Investors) can sense blood in the water. They’re going in and offering 10 (percent) to 15 percent lower than the asking price.” He said foreclosures that have driven housing prices down might start hitting investment property soon.

"Approaching Bottom in Sacramento" or More "Wishful Thinking"?

From the Sacramento Bee:

[T]here's no doubt the steep drop in home values – median prices in Sacramento County are almost 28 percent below last year's figures – and relatively low interest rates have sparked interest. [DataQuick's Andrew] LePage said investor buys accounted for 18.6 percent of February closings in Sacramento County. That's up significantly from 12.7 percent in November and December. [The high for investor buys was May 2004 when they accounted for 25 percent of sales.]
...
Overall, sales remained weak, though real estate broker Tom Zipp of Citrus Heights said Thursday that rising investor activity "traditionally signals the bottom part of the market."

DQ stats by county (All Homes & Existing SFH/Condos/New Homes)
DQ stats by zip code

From the SacBee's Home Front blog:

I heard 17 months ago at a local builders conference that the eyes of the nation were on Sacramento and Washington D.C., seeking signs that the first markets into the tank would be the first to lead the way out. That turned out to be wishful thinking. Nine months ago again I heard Sacramento-area home builders say we were already scraping along the bottom. That, too, was a little premature. Now again there is a lot of buzz in the real estate industry that we're approaching bottom in Sacramento. Maybe we are.

From the Sacramento Bee:

If you see a stretch limousine cruising your Placer County neighborhood Saturday, it won't be for prom night. It will be one of the first limo foreclosure tours in the United States, prowling Rocklin, Roseville and Lincoln.

From the Sacramento Business Journal:

Two of Sacramento's top builders have unloaded 250 acres approved for new homes in Rancho Cordova for 16 cents on the dollar -- the first major land sell-off in the capital area since housing sales collapsed last year. The buyers are Ron Alvarado and Charles Somers, land developers themselves and partners in a large janitorial and building maintenance company. They bought the property last month from Pulte Homes and Centex Homes at a steeply discounted price of $8 million, according to multiple real estate sources who spoke about the deal on condition of anonymity.
...
At the height of the local housing boom, $8 million would have fetched less than 20 acres of land approved for new homes as prices had escalated to $600,000 an acre in some areas. Builders and developers are still waiting for a new benchmark on what land is worth in today's economy. The buyers in this deal, Alvarado and Somers, paid $32,000 an acre.

From the Sacramento Business Journal:

SAFE Credit Union has "assumed the worst" after enduring a horrible fourth quarter, moving a hefty $21 million to its reserves for loan losses this year with the dismal economy and the hard-hit housing market. The aggressive additions to reserves pushed the area's second-largest locally based credit union to a $5 million loss for 2007. And the credit union plans to add $1 million to its reserves every month of this year. The credit union experienced a rapid deterioration of consumer loans in the fourth quarter, said Henry Wirz, chief executive officer of SAFE. "It was a very sudden change."
...
What was surprising was how many of the borrowers had excellent credit when they applied for credit, he said. "They are prime borrowers, yet in our portfolio they are becoming a higher portion of delinquencies."

Sacramento Housing Affordability Increases...to 2004 Levels

The good news (from a buyer perspective): Homes are becoming more affordable as prices plummet. From the the Sacramento Bee:

There's a flip side to the Sacramento-area housing downturn that has would-be buyers cheering: Sacramento is getting more affordable. Falling sales prices between last summer and the end of 2007 triggered a nice jump in affordability in El Dorado, Placer, Sacramento and Yolo counties, according to an index compiled this week by the National Association of Home Builders and Wells Fargo & Co. 27.2 percent of homes sold in October, November and December were affordable to households earning the region's median income of $67,200.

The bad news? Affordability is only back to 2004 levels:

The new eligible buyer percentage for Sacramento was the best since 27.4 percent in the first quarter of 2004...[I]t doesn't take much to remember better days from 10 years ago. In the first quarter of 1998, 70 percent of area homes were affordable for people earning at least the median income, according to the home builders and Wells Fargo.

The last time affordability was this low (aside from 2004) was in 1991, at the front-end of the 1990s housing bust. Between 1993 and 2000, the index remained above 50%.

Here's a look at the index since 1995. You can download the data here.

From the Sacramento Bee:

Dozens of Rancho Murieta homeowners have been left with cracked walls and listing foundations after local builder Reynen & Bardis said it can no longer afford to fix their defective houses. Thirty-six residents have hired a law firm and begun filing lawsuits against the company, already reeling from the real estate downturn.
...
Francis Furtado, president of Reynen & Bardis' home building division, said the firm doesn't intend to abandon the Rancho Murieta residents. For the moment, it can't afford further repairs. "We are in a very tough market," he said. "There's no profit in home building. There's no profit in land development. Our income shut off. We had to hunker down. Our intention is to go back in, but right now the finances aren't there."
...
Since the bottom fell out of the land market, the firm has faced mounting pressure from creditors. It has shut down home building and recently furloughed 89 of its 180 employees.
...
The firm's problems have left Lynn and his neighbors with more than cracking walls. Their gated neighborhood is now filled with vacant and rental homes owned by Reynen & Bardis, which is now trying to unload them "as is" at bargain prices...Residents say the flood of cheap houses makes it harder for anyone else to sell, should they decide to get out.

From the Lincoln News Messenger (hat tip HBB):

The effects of a deepening national housing slump are hitting close to home. Even Gladding, McBean, one of Placer County’s oldest businesses and a Lincoln institution since 1875, is feeling the market’s pinch. “I’ve been here since 1991, and this is the most significant downturn in our market I’ve seen in that time,” said Bill Padavona, general manager and vice president of Gladding, McBean.

Padavona said the clay company has seen a 60 percent to 70 percent decline in products tied to home construction, such as sewer pipes and roof tiles. Though Gladding, McBean provides products throughout the West Coast, the market is especially bad in Northern California, where “the market has slowed to a near standstill,” Padavona said. Since the downturn began, the company has laid off 100 of its 235 employees.
...
That’s bad news as well for another Lincoln company, lumber supplier Sierra Pacific Industries. "It’s had a dramatic downward impact on lumber prices," said Mark Pawlicki, a spokesman for the Redding-based business. "Prices today go back to about 1992, the last time we had a housing recession."

Fire Escape?

From KCRA (hat tips - Spacebar & SacramentoCrash):

Across the country, fire investigators are looking at some homeowners in foreclosure as potential arsonists...Sacramento fire investigator Steve Johnson said spite, revenge and pyromania are a few reasons for arson. But firefighters are adding desperation to that list. "Nationally, we've been told foreclosed homes have been set on fire," Johnson said. "People are thinking this is the easy way out."
...
"That sign in the front yard is always going to be in the back of our head going, 'I need to really concentrate on why is this an accidental fire? To make it look like an accidental fire? And in retrospect, they are trying to burn their house down to pay it off?'" Johnson said.

From the Tri-Valley Herald:

An early morning house fire gutted a Tracy home Wednesday morning, a few hours before bank and police officials arrived to post an eviction notice on the foreclosed property.
...
While conducting the investigation, Bramell said representatives from the bank and the San Joaquin County Sheriff's Office arrived at the scene to post an eviction notice. A document posted in the window, dated Feb. 20, 2008, said the family was being ordered to leave the home, which is currently owned by World Savings Bank. Bramell called the notice an "area of interest" for the investigation, which is still ongoing and being completed in conjunction with the Tracy Police Department.

From the Sacramento Business Journal:

GMAC LLC is going to be closing its regional business center in Roseville by the end of the year...The Roseville center has 56 employees....

From the Sacramento Business Journal:

"There has been a significant slowdown in new loan activity within the region, coupled with regional fallout from the subprime mortgage debacle," said David Kaiser, chief executive officer, in a news release. "While Granite Community Bank did not directly participate in the subprime mortgage industry, the region's economy and many of our clients have been impacted."

From the SF Chronicle:

Vallejo is on the brink of a dubious distinction - becoming the first city in California to declare bankruptcy. The fiscal crisis, which comes more than three years after the state took over the city's debt-ridden public schools, is a result of snowballing police and firefighter salaries and overtime expenses coupled with plummeting tax revenue from the weak housing market, officials say.
...
Since the federal government allowed municipalities to declare Chapter 9 bankruptcy during the Depression, fewer than 500 cities have taken the action, according to federal court data.

From the Tri-Valley Herald:

Continuing struggles in the real estate market have affected municipal bonds in the past month. As a result, Manteca officials are taking measures to keep the city's redevelopment bond money intact. Over the past 30 days, the credit rating for the city's $50.7 million variable rate bonds has been downgraded twice, Finance Director Suzanne Mallory said, adding the credit downgrades didn't have anything to do with local problems.

From the Lincoln News Messenger:

The Western Placer Unified School District is exploring California’s financial hardship program as a means to fund future schools. Cathy Allen, the district’s assistant superintendent of facilities and maintenance, presented trustees with a crash course in State Allocation Board funding opportunities at a Tuesday school board meeting. The program is available for districts that, despite levying maximum developer fees and exhausting opportunities for local debt capacity, are still unable to fund facility projects.

“We’re just looking at all the options and this is one,” Allen said. “We’re still collecting developer fees, but we have to be concerned about the foreclosures and how that affects the tax amounts (the district collects).” A downturn in the housing market led Western Placer to shelve proposed new facilities, including Twelve Bridges High School.

From ABC News:

It's a tactic called "re-listing," which is legal and more common than you think. "Re-listing is just refreshing the home on the market," [Minnesota realtor Joe] Niece explained, "making the home look like it just came on the market."
...
Across the country in Sacramento, California, the problem got so bad that Michael Lyon, CEO of Lyon Real Estate, blew the whistle after he noticed that one third of all "new" listings were re-listings. "This is just silliness," he said. "I'm sorry, but you can't pull the wool over the buyer's eyes."

Lyon forced his regional listing service to set a new standard. "We let people see all the previous listings, period, there are no secrets," he said. "We want the buyer to know everything about all the times it was listed, so we can allow them to truly investigate the home." The Sacramento listing service also requires a material change in the house if it is to be re-listed.

Multiple Burns From Sacramento Housing Market's "Record-Breaking Collapse"

From CBS 13:

This is a new and troubling twist on what's becoming a record-breaking collapse in the housing market. Melanie Brown's family leased this home in Lincoln, after trying to short sell their own place to avoid defaulting on their subprime mortgage...So she says it came as a surprise when she learned now this house they were leasing in Lincoln was on the market for a short sale of it's own.
...
And she discovered her family isn't alone. "We looked down the block and there's two-other homes with the same for sale sign, the same realtor listed."...These three-homes were bought by a group of bay area investors a year ago. Those investors have apparently decided to short sell them, or walk away if they can't.
...
[R]ealtors, mortgage brokers and property managers say they're seeing families like the Browns getting burned two, and even three-times by the collapsing market."

From the Sacramento Bee:

The FBI is investigating a suspected "foreclosure rescue" fraud that may have cost as many as 256 homeowners title to their property and stripped them of their equity. The alleged scam includes at least seven Sacramento homeowners and 61 statewide, and the probe is based in the Sacramento FBI office, according to court documents, interviews and an Internal Revenue Service search warrant obtained by The Bee.
...
The Sacramento FBI office is working the case as it continues to sort through 2,000 reports of suspected mortgage fraud from 2007 – a fourfold increase over the 500 similar reports in 2005.

From the Sacramento Bee:

The state budget deficit has increased to about $16 billion, primarily due to continuing problems in the housing market and high energy prices, according to an independent budget analysis released Wednesday.
~~~
Gov. Arnold Schwarzenegger on Tuesday ordered additional cuts across the state bureaucracy that will slow down state hiring and nonessential service contracts – a move he said could save the cash-strapped state $100 million by June 30.

The governor ordered all agency secretaries and department directors to immediately begin reducing their current budgets by 1.5 percent by cutting nonessential services and activities. The order, which takes effect immediately, directs secretaries and directors to find savings, whether it's on personnel, travel or equipment.

From the Inman News Blog:

Inman News contacted the City of Stockton/San Joaquin County Animal Shelter to find out if the shelter has seen an increase in pets and if there may be a link to foreclosures....

A police staffer at the shelter directed the call to Connie Cochran, Stockton's public information officer, who said that the city is no longer researching "foreclosure-related issues for the media ... because we've spent so much time. We feel our time is better spent addressing issues within our community."
...
Maybe foreclosures have created a real problem there for the animal shelter, and maybe they haven't. The city wouldn't tell us. Foreclosure, Cochran continued, "really is a national crisis. We don't own it." The city apparently isn't owning up to it, either.

Mike Lyon: 'No one has seen this before'

From the Sacramento Bee:

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

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

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

October Home Sales by County
October Home Sales by Zip

From the Sacramento Bee:

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

From the Modesto Bee:

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

Got Graffiti?

Another photo of the infamous Lincoln Crossing development. Read Sittin' Out This One's story at the water cooler.

Lincoln Repos

Thanks to Jeff for sending in these photos.

'If it's a buyer's market, who's buying?'

From the Sacramento Bee:

It was two years ago this month that some housing experts began seeing the first signs that the Sacramento region's housing boom had begun to peak. "The bell has tolled," said Lyon Real Estate owner Mike Lyon in August 2005, declaring that the era of skyrocketing home values and sales may have hit its high-water mark. Ever since, the ride for Sacramento's housing market has been bumpy and it got no better last month....Lyon today believes "this real estate market is going to be lackluster until around the end of 2009."
...
Sacramento, Placer and Solano counties in July showed some of the state's biggest year-over-year median sales price declines. Prices fell a record 10 percent from last year in Sacramento County, 8.5 percent in Placer County and 9.8 percent in Solano County.
...
July 2007 ended with a record inventory of 15,927 houses for sale in El Dorado, Placer, Sacramento and Yolo counties, reported the Sacramento property research firm TrendGraphix.
...
Rocklin real estate agent Maxine Sunada toured a client through existing homes on Alder Creek Court in Lincoln. There, six of the street's 18 houses -- built in 2004 and originally priced in the $500,000s -- were for sale. Many had dead lawns and two bore signs saying "bank repo."

DataQuick stats by county
DataQuick stats by zip code

From the News10 (also video):

The last thing the sagging real estate industry needs is would-be homebuyers who can't get a loan. The subprime mortgage meltdown is now spreading to other sectors of the market, including buyers with solid credit.
...
Try telling prospective homebuyer Brandon Robinson it's a buyer's market. "Who's buying? If it's a buyer's market, who's buying?" he wants to know. Robinson was in contract to buy a bank-owned triplex in downtown Sacramento and planned to live in one of the units. But even with a 10 percent cash down payment and a solid credit score he could not find a lender.
...
"No, this is not an isolated story," said real estate agent Michael Long who lost three solid deals in a single week because the buyers couldn't get financing. "Of all the things to happen, that would be the worst thing to happen for our market in Sacramento...."

Meanwhile, the Sacramento housing market makes another Forbes list, this time as the 3rd "worst" housing market in the country. Recently Forbes rated Sacramento as the 3rd riskiest and 6th least affordable housing market in the nation.

From the Stockton Record:

Washington Mutual has put its downtown Stockton building up for sale...The Seattle-based company said the move to try to sell the property isn't a reflection of the decline in the residential real-estate market. A sale would generate capital for the company, said Washington Mutual spokesman Tim McGarry.

From the Union Tribune:

Selling a home in Nevada County takes more than twice as long as it did two years ago, forcing many real estate agents to look for second jobs as the statewide market slows to the lowest level in 12 years..."What used to take 90 days is now taking 210 days to sell," said Teresa Dietrich-Treco, a Realtor from ERA Cornerstone Realty Group in Nevada County.
...
Since January, 538 homes have sold through the MLS in Nevada County. That's about half the sales of a few years ago, Dietrich-Treco said. "It's really having a huge impact on Realtors. A lot of people are getting second jobs," Dietrich-Treco said.

From the Modesto Bee (via the Merced Sun-Star):

[Stanislaus County Assessor Doug] Harms said home value declines are widespread. "If you bought your house within the last three years, it's probably worth less today," said Harms, whose office is busy reassessing home values to potentially lower property taxes for thousands of homeowners.
...
"We'll probably review every property that (sold) after July 2003," Harms said. "Some people are thrilled when we tell them they're getting a lower property tax bill, but I'm thinking, 'Hey, they just lost $50,000 in the value of their home.'"
...
"Inventory is continuing to go up, but buyers are kind of waiting for prices to hit a bottom," Christiansen said. More than location or condition or anything else, Christiansen said what motivates buyers are low prices.

But home prices still aren't low enough to be affordable for most northern San Joaquin Valley families, according to Darryl Rutherford, a researcher for the California Coalition for Rural Housing. Considering Stanislaus County's median-income family earns about $54,000 a year, Rutherford said median home prices would have to drop to about $185,000 to be affordable.
...
"For society as a whole, we would be better off if home prices went down further," said Rutherford, though he acknowledged such declines could be financially disastrous for individual homeowners.

Lincoln Crossing - Got Water?

A reader sent in this photo with the following caption:

Lincoln Crossing, Placer County, Sacramento MSA: There are 15-20 abandoned homes with no utilities in the JTS subdivision so a water truck must go around every 2 days and keep the landscaping alive, while the builder tries to sell the last 13 homes to new FBs. The lesson here is that when the builder still has inventory, he cares enough to maintain the lawns!! He just doesn’t care enough to turn on the utilities and pay the water bill!



Got photos? Send them this way.

Population Engine "Has Lost Some of its Steam"

From the Sacramento Bee:

For a while, the pace of growth shot through the roof, but Lincoln, the little city that could, has lost some of its steam -- reflecting a downturn in the region's once-booming housing market.

Lincoln, the state's fastest-growing city per capita last year, has been knocked from its perch atop the heap, tumbling to sixth on the list, according to population estimates released Tuesday by the state Department of Finance.
...
With a population of 37,410, Lincoln posted a still-robust 11 percent increase -- the fastest growth rate of any city in the capital region -- but less than half the 22.6 percent growth from the previous year.

"It's a little bit indicative of the housing market, that's for sure," said Campbell.

Indeed, the softening housing market kept the region's growth at modest rates. Sacramento, the state's seventh most populous city, grew by 2 percent and now has a population of 467,343. Overall, Sacramento County grew by 1.4 percent to nearly 1.41 million.

Elk Grove grew by a healthy 4 percent -- but well below the 7.8 percent of the previous year...Elk Grove's 4 percent growth was a marked shift from the manic population surge of a few years ago. The city grew by 27 percent in 2003. More commuters clogged freeways, and housing construction soared. By the third quarter of 2005, new home prices in the city had jumped to $539,500.

New housing prices have moderated, sales have dropped sharply, and housing construction has slowed to a crawl.

From the Stockton Record:

For the first time this decade, Tracy has essentially stopped growing.

New population estimates released Tuesday by the state Department of Finance showed that Tracy's population gained only 32 people from 2006 to 2007 - marking the end of a run for what had been one of California's fastest-growing cities.

Overall, Tracy's population has increased by more than 41 percent since 2000, but a slump in the housing market combined with recent slow-growth policies within the city have halted that trend.
...
As a whole, San Joaquin County added about 11,400 people last year, bringing the county's total to about 679,600. This is a markedly slower rate of growth than the county had been seeing in recent years; the last time San Joaquin's growth rate was slower was in 1998.

"Can't Bank on the Housing Market"

From the Sacramento Bee:

Lincoln school officials say they must think small -- limiting campus construction and living with fuller schools -- until their rural district pays off a big debt.

Western Placer Unified School District faces a population boom in its community, but a slowed economy has taught trustees that they can't bank on the housing market.

The district owes more than $189 million, a debt largely related to building schools without having sufficient funding. The district relied on certificate of participation bonds -- described as a risky form of financing -- to keep construction projects afloat, assuming money from developers' fees would remain steady.

But the housing market dropped off, leaving the district searching for ways to pay its bills.

"The Day of Reckoning Has Arrived"

From the Sacramento Bee:

The dive in new-home construction around Lincoln has created a monster for a small school district, as developers' fees slow to a trickle and the interest mounts daily on $189 million that the district borrowed to build new schools. The result of the downturn is a "staggering" amount of debt for Western Placer Unified School District -- and the day of reckoning has arrived, according to a report presented to the school board Tuesday night.

For years, the district has struggled to keep up with Lincoln's mushrooming population. Its enrollment, now 5,500 pupils, has grown 45 percent since 2002-03. All that is changing. New home construction dipped precipitously in the past year. Just 1,060 units were completed in 2006, compared with 2,900 the year before, according to Lincoln city officials.

That translates directly into diminishing dollars for the school district, which has a 2006-07 general fund budget of $37 million. So far this year, only $370,000 in developers' fees have materialized of the $2 million anticipated. "Something that popped out and hit me right between the eyes is the huge debt," said private consultant Curt Pollock, the report's author and an expert on school facility financing.
...
"The projections were that we were going to continue with this nice growth, and our projections were wrong," he said..." Had the housing market not dropped off so fast and so dramatically, I don't think we'd be in the situation we're in," [former Superintendent Roger] Yohe said.

From the Auburn Journal:

With a slump in the housing market slowing property tax revenue growth and worker costs rising, Placer County supervisors were warned Tuesday to expect some tough budget decisions in the coming months. Projections are that tax revenue next fiscal year will grow by $7.1 million -- which won't offset the $28 million county budget forecasters say will be needed to sustain operations at current levels.
...
[Therese] Leonard [County Executive Office principal management analyst] also outlined to supervisors that building-related revenues are proving to be the biggest drags on the budget. Real-estate transfer taxes are down this year by $953,000, supplemental property taxes declined $997,000 in the first six months of the fiscal year, and construction permit revenues dropped $507,000.

From the Sacramento Bee:

Born during the Great Depression, the 20 percent down payment traditionally used to buy a house has now joined $1.50 gasoline as ancient history. More than 1 in 5 California homebuyers now finance every cent of their home purchase, says the California Association of Realtors. Seven years ago it was 4.5 percent.
...
In the past, mortgage lenders wanted collateral in the form of 20 percent down. But the housing boom and its spectacular rise in home values largely erased lending risks. That pushed the industry to flood the market with easy money.

The trend raises questions about whether a looser lending standard will affect the market during a downturn. Some fear owners with none of their own money to lose may have fewer qualms about walking away from homes if they get behind on payments. That could aggravate rising foreclosure rates in regions like Sacramento where the housing market has slumped.

From News 10:

There is an ugly secret working its way to the surface in many of the Sacramento region’s most stable and sought-after neighborhoods, where homes are new and the prices high. People living in these communities won’t even utter the "G" word for fear it will drive home values down. That's the result of having the stigma attached of ‘Oh, they have gangs.' But gangs in middle class neighborhoods are more than just a fact -- they are on the rise. It is a perplexing and growing problem that police are finding has little to do with income or race.
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Another huge contribution to the problem is parents who work long hours to pay for their high-priced new homes, leaving their teenaged children unsupervised for long periods of time every day, [Dr. Charles] Scott [a U.C. Davis child psychiatrist] said.

Advertised Price Cuts: $96,000, $103,000, $150,000 -- even $221,000

From the Sacramento Bee:

On a wintry weekday in California's fastest-growing small city, Bryan Petersen steps from a sales office to discuss how eager home builders are to make any kind of deal with people like him. "They're asking $453,000 and offering $60,000 in incentives," he says, standing outside a 2,700-square-foot model where flags of a giant corporate builder whip in the wind. He nods back toward the sales rep and grins. "And she said, 'Make me an offer.'
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It's no surprise in Lincoln to see advertised price cuts on new homes of $96,000, $103,000, $150,000 -- even $221,000. The price-cutting battles reveal how pressures on big public companies to sell extra stock can also impact individual sellers and small-time speculators -- even entire counties. Real estate experts blame Lincoln's price wars for fueling a 55 percent drop in new home sales in Sutter and Yuba counties.

Some analysts, in fact, say it was the slowdown in Lincoln that signaled the end of the housing boom regionally when, in late 2005, it became the area's first market to buckle under the weight of too many new homes similarly sized and priced.
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But the competition among big corporate builders has had a number of collateral effects. Speculators who missed the the window to "flip" their investments now find them nearly impossible to sell.
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For the 510 Lincoln homeowners who had "for sale" signs in their yards in early December, competing against Wall Street home builders like Centex, D.R. Horton and Lennar is difficult. "A lot of investors who got into these homes last year made a big mistake, and I think a lot of them will be forced into bankruptcy," says Henry Ung, an Elk Grove real estate agent who represents two investors and bought an investment home in Lincoln himself. "These investors cannot compete with the builder. It's very tough for us."
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In 2004 and 2005 investors bought up to 17 percent of the homes sold in Lincoln, according to DataQuick Information Systems, a La Jolla-based property researcher. Now, buyers such as Petersen drive past their "for sale" signs because it's cheaper to buy a newly built home.
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At City Hall, officials acknowledge possibilities that 2006's slowdown may cost Lincoln its fastest-growing small city status. But thousands more new houses are still a sure bet, says community development director Rod Campbell.
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Petersen says Lincoln Crossing sales agents tell him "there's been a lot of sales" in December. So far he's not committed. "We're like a lot of people on the sidelines waiting to see what the market is doing," he said.

West Sacramento Prices "Tumbled" 26% in a Year

The Sacramento Business Journal reports on November's CAR & DataQuick stats:

Report: West Sac home prices fall 26 percent in a year

Sacramento-area's median home price plummeted and sales tumbled in November from a year earlier, the latest evidence of a struggling real estate market. Home prices in the four-county region declined 3.9 percent to $365,000 in November compared to a year ago, according to a California Association of Realtors (CAR) report released Thursday. But several markets -- including Elk Grove and West Sacramento -- reported much larger price drops [Keep in mind the city data is from DataQuick and measures combined (all) sales of existing and new homes.]

Existing-home sales fell 24.5 percent last month in the Sacramento area compared to November 2005, according to the closely watched monthly report. The region's sales drop was one of the largest in the state.
...
West Sacramento's median-home price -- meaning half the homes sold for more, half for less -- tumbled 26.2 percent last month to $363,500, easily the largest decline in the region.

Elk Grove, Lincoln and Placerville also endured double-digit percentage declines in median price from a year ago. Placerville fell 14.6 percent to $365,000; Lincoln dropped 13.8 percent to $420,909; and Elk Grove declined 12.9 percent to $428.000. The Realtor group cautioned that communities with small numbers of transactions may see unusually large fluctuations in median prices.

And all four counties reported lower home prices, led by a 16 percent decline in Yolo County. El Dorado County had the smallest drop, down 4.3 percent. Placer and Sacramento counties' median home prices fell 12.6 percent and 8.8 percent, respectively.

CAR report here.
DQNews/DataQuick report here (and archived here).

Housing Bust Catches Lincoln Schools "By Surprise"

From the Sacramento Bee:

The downturn in the housing market around Lincoln hit the Western Placer Unified School District by surprise -- and a much-anticipated new high school has been put on hold as a result. So explained Superintendent Scott Leaman at a district forum Monday night. Nearly 300 parents and residents attended, hoping to learn what went wrong with plans to open Twelve Bridges High School. Because of the housing slowdown, Leaman said the district can't yet say when the new high school will open.
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Leaman said the district's facility financing plan specified using certificates of participation, or COP, bonds, to build schools in a timely manner, rather than waiting for an accumulation of regular funds. The strategy was based on "dramatic growth in Lincoln" for the next several years, he said.
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"Facility costs have escalated above the plan's estimated costs," Leaman said. "And the builder slowdown affects our ability to pay for additional (certificates of participation)."

Thanks to the reader who sent in this article. The reader had this to say in an e-mail:

With a sixth grade student that would have attended the new Twelve Bridges High School the first year of completion, I can tell you that I am extremely disappointed. So much, in fact, that after ten years as a resident in Lincoln, I will likely be moving to another location in the eastern valley. I am not alone. I have many friends that are coming to the same conclusion, and are trying to figure out how they can sell their homes in a down market, and as soon as possible, to establish roots in another community.
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Bottom line is... Lincoln is falling apart under the weight of their own success. It wasn't but a couple years back that Lincoln was the fastest growing city in the state! In 2006, they earned an "All American City Award". But all that means nothing when people realize the school system may be worse than the inner-city school systems they moved away from.

Double Digit Soft Landing?

DataQuick's dqnews.com has posted their September numbers for California (archived here). From the Sacramento Business Journal:

All four counties reported lower median home prices, including a 16.5 percent decline in Placer and 15.6 percent in Yolo. Sacramento and El Dorado counties fared relatively better, with price drops of 6.1 percent and 1.8 percent, respectively...

Several area cities reported double-digit price decline, including a 27.1 percent tumble in West Sacramento to $350,000, according to the monthly report. Lincoln and Roseville prices plummeted 18.4 percent and 17.9 percent, respectively.

Only a handful of local cities reported slight increases in home prices, paced by 2 percent in Rancho Cordova and 1.7 percent in El Dorado Hills.

Lincoln BackLogs

A reader sent in an article from the Sacramento Business Journal:

The small city of Lincoln has become the stage for a battle between homebuilders for the dwindling number of homebuyers in the Sacramento region. Five years ago, few builders would look at the city. Today, it has an oversupply of subdivisions -- more than any other city in the six counties...

Today in Lincoln, 16 homebuilders hold 36 subdivisions with more than 2,000 lots -- more new-home communities than any other submarket in the region, said Greg Paquin, owner of The Gregory Group, a Folsom firm that studies the market...

Now Lincoln's builders are pulling out the stops. Their incentives for homebuyers average $24,016 -- more than any submarket but West Sacramento, which averages $31,000 for its 21 projects, Paquin said. Elk Grove's average incentive is $12,851. Besides gifts, builders also have lowered prices, sometimes dramatically. JTS Communities has this year offered homes for $500,000 that had been priced at $650,000 to more than $700,000, said Ian Craig, general counsel for JTS.

From the Tri-Valley Herald:

With older homes in established neighborhoods sitting on the market for upwards of a year, new home builders don't see the lines of buyers waiting for a lottery to purchase homes. So they're getting creative.

Pulte Homes, with subdivisions in Brentwood, Oakley, Mountain House and Tracy, is offering $99,000 in incentives -- from a free pool to no payments for six months to free upgrades -- to entice buyers. They're even offering each home buyer a vacation for two with a destination of choice for closing before Christmas this year...

Ryland Homes is offering 40 percent off mortgage payments for the first year (to commemorate it's 40th anniversary), while another developer had been offering a free Mercedes-Benz with the purchase of a home.

From the Wall Street Journal:

Home builders have a new trick to try to sell you a new home: They will help you get rid of your old one. Faced with falling sales, some builders are helping would-be buyers spruce up their current home by bringing in professionals who advise them on what furniture to get rid of and tell them whether they should rip off the wallpaper... For instance, Pulte Homes Inc. recently started pairing its customers with professional "stagers" who sweep in and do things like remove window coverings and touch up the paint, and covering up to $2,000 of the cost of the service. The program is available in about a dozen markets, including Detroit, Indianapolis, Sacramento, Calif., Tampa, Fla., and Washington, D.C.

Hat tip - Northern New Jersey Real Estate Bubble blog

American Dream Turned Nightmare

From KCRA: "At the Sacramento County Courthouse, it used to be that foreclosure auctions happened once a week. Now, several times a day homeowners are seeing their American dream turn into a nightmare. In Sacramento County during the second quarter of this year, the number of homes going into foreclosure stood at 1,866. That compares to 857 forclosures for the same time last year -- an increase of 118 percent. Elsewhere, foreclosures are up 74 percent in Stanislaus County, 87 percent in San Joaquin County and 116 percent in Placer County."

"Alexis McGee of the investor services agency Foreclosures.com said many homeowners who find themselves falling behind on their mortgage payments should not try to refinance, but rather simply try to sell..."

"So, does this mean the housing bubble has burst? McGee still describes it as a leaking bubble but said her description will change if a year from now foreclosure rates have doubled again."

From the Sacramento Business Journal: "Sacramento-area home prices dipped lower last month, and sales tumbled by almost 45 percent from a year ago, according to a report released Thursday. The region's median home price -- meaning half the homes sold for more, the other half for less -- dropped 2.4 percent to $378,590 in July, compared to the same month a year ago, according to the California Association of Realtors. Home prices also inched 1.5 percent lower from June."

"West Sacramento had the area's largest one-year drop at 16.5 percent, while home prices in Lincoln and Rocklin -- one of the fastest-growing cities in the region -- fell 13.8 percent and 12.5, respectively...Sacramento County's median home price fell 3.4 percent to $367,000 from a year ago, with Orangevale and Fair Oaks posting 5 percent-plus price drops, the largest in the county."

"Placer County's median-home price decreased to $460,000, 7.1 percent lower than a year ago. In addition to Lincoln and Roseville's double-digit price drop, Granite Bay home prices were off 7.4 percent to $735,000, still by far the priciest community in the county. Auburn's median-home price improved 11 percent to $479,000, the only price increase in the county."