The World's Smallest Violin

From the Wall Street Journal:

Once one of the world's most-visible housing experts, Mr. Lereah is disconnected from his old life. The former chief economist for the National Association of Realtors says the group's top executives won't return his phone calls. He says he wasn't invited to the association's 100th birthday bash last May.
...
Mr. Lereah, who says he left NAR voluntarily, says he was pressured by executives to issue optimistic forecasts -- then was left to shoulder the blame when things went sour. "I was there for seven years doing everything they wanted me to," he said, looking out his window to his tree-filled yard in this Washington suburb. Mr. Lereah now works at home, trying to rebuild his career and saddled with a sagging portfolio of real-estate investments.
...
In April 2007, Mr. Lereah left NAR, and after working about a year on a start-up venture, took some time off for a few months. He cruised around on his 29-foot sport-fishing boat and played golf at the country club...He has started his own company, Reecon Advisors, that puts out a weekly newsletter on the housing market and provides consulting services..."He's starting to make some money off it now, not much," says Mrs. Lereah. "We have an expensive lifestyle: a big house, a housekeeper once a week, college tuitions, the country club."

Looters

From Rocklin & Roseville Today:

“They don’t care and who cares about the bank” is what he said to me when I recently talked with a neighbor of a bank owned home who had helped himself to a screen door to replace the one that was broken at his house.

This kind of theft and much more is happening throughout the Sacramento real estate market on homes that have been left vacant due to foreclosure. Before the bank can take control, these home are being visited by normally honest neighbors who are carting away landscaping, fixtures and anything they can get their hands on.
...
By the way the same person who helped himself to a screen door also mows and waters the lawn of the vacant house so it won’t make the neighborhood look bad.

From Bloomberg (hat tip Calculated Risk):

A U.S. Securities and Exchange Commission investigation into credit-rating companies found the firms improperly managed conflicts of interest and violated internal procedures in granting top rankings to mortgage bonds.
...
The SEC report describes an e-mail in which an analyst refers to the market for collateralized debt obligations as a "monster." "Let's hope we are all wealthy and retired by the time this house of cards falters," said the e-mail, which was sent Dec. 15, 2006, to another analyst at the same firm.

"The housing optimists have systematically misjudged the market"

From the Sacramento Bee:

The carpet was filthy, and the walls needed paint. The backyard was a mass of dead grass. And that was before vandals threw a rock through a back window, climbed inside and wrecked the kitchen cabinets. That happened two days before the close of escrow. For banks, this is what making home loans has come to. Such scenes of destruction are commonplace. Lenders have dealt with the chaotic wake of an estimated 20,000 or more foreclosures in the Sacramento region over the past 18 months.
...
But there is a plus to this abundance of damage. It's proving a mini-boom for a niche sector of the construction trade known as "repo contractors."

From the Sacramento Bee:

The price of the two-story, 3,800-square-foot house for sale on Aspen Grove Lane in Elk Grove stands out even in a down market. The five-bedroom, three-bath home in a gated community is listed at $387,000 "as-is" or $437,000 with repairs. The low price – and the need for repairs – stems from the house's use as an indoor marijuana farm. Last fall, police hauled out 865 plants.

From the Sacramento Business Journal:

The economy is slowing and credit is tight. This should be prime time for Small Business Administration lending. Instead, the SBA is reporting declines in lending in the region and nationwide.
...
Some banks that pushed hard in SBA locally last year have also slowed down. Bank of America made 130 loans in the district by May of federal fiscal year 2007. So far in this fiscal year, the bank’s SBA loans have declined by two-thirds, to 43 loans...Other active lenders include Capital One Bank and Washington Mutual Bank. Through May of fiscal 2007, Capital One Bank made 84 loans. This fiscal year, the bank has only made 29 loans, down 65 percent. Washington Mutual is down 68 percent over the same period last year, making 62 loans last year through May and 20 loans so far in fiscal 2008.

From the Long Beach Press-Telegram:

When she arrived in Congress last fall, Rep. Laura Richardson sought out a vehicle that would match her newfound status. She settled on a 2007 Lincoln Town Car - the choice of many representatives who lease their vehicles at taxpayers' expense. But hers was distinct: At $1,300 a month, it was the most expensive car in the House of Representives.

Richardson, a Democrat who represents Carson, has since become known for defaulting on two home loans and losing a third house in an upscale neighborhood in Sacramento at a foreclosure auction.

From BusinessWeek:

[T]he housing optimists have systematically misjudged the market. Some became convinced that the huge runup was justified by fundamentals such as population growth, rising incomes, and land scarcity. And because sharp national housing price declines are so rare in U.S. history, analysts assumed that prices would, at worst, flatten out for a few years.

What they forgot was that markets can overshoot on the downside just as easily as on the upside, with both financial and psychological forces feeding the decline. On the financial side, adjustable-rate mortgages are continuing to reset upward from their cheap introductory rates, making it more difficult for homeowners to afford their loans. What's more, each month of price declines pushes more homeowners underwater on their mortgages, making it impossible for them to refinance into more affordable loans. It doesn't help, either, that as the economy weakens, larger numbers of homeowners are finding themselves out of work.

'Still Foreclosing On More Than We're Selling'

From the Sacramento Bee:

Since January, banks in the region have foreclosed on 10,224 homes, according to the Web site Foreclosures.com, based in Fair Oaks. At the same time only about half the number – 5,448 – of repossessed homes were sold, DataQuick reported. "The sales numbers are great, and if we can keep on that track we could have just a slight decline in value," said Scott Thompson, a partner in Mortgage Resolution Services in Carmichael. "But we're still foreclosing on more than we're selling, and that's the troubling part."
...
Absentee owners, typically investors seeking rental properties, accounted for an estimated 19 percent of all sales. At one point near the peak of the boom, investor share reached almost 27 percent.

Stats by county
Stats by zip [xls] via Home Front

From the Sacramento Bee:

...Mark Zandi, chief economist of the financial research firm Moody's Economy.com, says the massive inventory of repossessed homes flooding the real estate market and pushing down home prices won't even peak before the end of 2009.
...
Q: The end of 2009? Will it really take that long for bank-owned inventory to peak?

A: Given the continuing surge in foreclosure starts, and the fact that the average amount of time a loan remains in the foreclosure process is about a year – and then that it takes about six months to be sold – that would strongly argue it will not be before the end of 2009 that the inventory of (bank-owned houses) peaks.

From the Modesto Bee:

While low-priced existing homes are selling well, new houses are hardly selling at all. Only 68 new homes sold during May throughout Stanislaus County, which was a drop of nearly 45 percent compared with 2007. Melo said his agents handle sales in Atwater's Meadow View subdivision, which hasn't sold a single home in 45 days. It has 17 finished houses sitting empty. "It's hard for the new home builders to compete with the prices on all those bank-owned houses," Melo said.

NAR: Sacramento is the Biggest Loser

From Bloomberg:

The median price for a single-family home in the U.S. dropped 7.7 percent in the first quarter, the biggest decline in at least 29 years, as values tumbled in two-thirds of U.S. cities, the National Association of Realtors said...The biggest declines were in Sacramento, the capital of California, which had a 29 percent drop, followed by the metropolitan area around Riverside and San Bernardino, with a decline of 28 percent.

From the NAR's October 2005 Sacramento "Anti-Bubble Report" (shockingly, the report is no longer available on nar.org!):

With home prices rising strongly in most parts of the country, there has been widespread media coverage on the possibility of a housing market bust. A thorough analysis of the Sacramento-Arden-Arcade-Roseville metro market, as detailed below, reveals that there is little danger of this. In fact, the local housing market is in excellent shape with a potential for significant housing equity gains, particularly for homebuyers who plan to remain in their house for the long run...Housing equity will most likely continue to accumulate to local homeowners.
...
Price declines in the local market are unlikely according to our stress test. The local housing market will experience a price decline of 5% only under extreme unlikely scenarios. For example, mortgage rates rising to 7.8% in combination with 25,000 job losses could lead to a price decline.
...
Home price declines are very rare. In fact, the national median home price has not declined since the Great Depression of the 1930s...There have been few times when local prices declined. In nearly all these cases, the price declines were accompanied by sharp prolonged job losses. It is difficult to foresee a price decline in a job creating economy.

So will the NAR be wrong twice? Can Sacramento home prices bounce back in the face of a recession?

From the CVBT:

More than 1,000 homes per day were sold in foreclosure auctions in California last month, according to ForeclosureRadar Inc....Sacramento County had 1,653 homes auctioned in April. That is one sale for every 838 residents, sixth highest in California. The number is 217 percent higher than April 2007.

From the Wall Street Journal:

Here's another consequence of the troubled housing market: Some homeowners associations are running low on cash.
...
One estimate puts the delinquency rate on dues at less than 5% in many markets -- higher than normal, though still not enough to threaten basic services....Elsewhere, the rate is much higher. At Spanos Park East in Stockton, Calif., owners of about 25% of the development's 1,500 single-family homes have been delinquent in paying their quarterly dues, according to Adrianne Bretao, a manager at M&C Associations Management Services, which helps to manage the community association. As a result, the association has put off expanding a patio area in the clubhouse and swimming pool this year, says Denise Laven, the association's president.

"It's frustrating," Mrs. Laven says. "We're seeing the people not paying the fees, so we know it's our money that has to pay for everything. And our dues will go up next year because we set them annually."

'Basically We're in Uncharted Territory'

From the Sacramento Bee:

California's severe housing downturn claimed another fixture of the Sacramento-area homebuilding industry Wednesday when John D. Reynen, co-founder of Reynen & Bardis Communities, filed for personal bankruptcy protection...It's the second major bankruptcy-protection filing involving a privately owned land developer and builder in the capital region.
...
The company, formed more than 30 years ago, has largely shut down homebuilding and recently laid off about half of its 180 employees.

Press release available via Home Front.

From the Sacramento Bee:

During the first three months of the year, banks repossessed a record-shattering 5,278 homes in the Sacramento region, La Jolla-based DataQuick Information Systems said Tuesday. Put another way: The area's first-quarter foreclosures already are half of last year's entire total.
...
The latest foreclosure count shows that for all the initiatives by government and nonprofit and private sectors to keep people in their houses, the telling trend remains a sustained, dramatic rise in home losses and loan defaults. The forecast is for more of the same in the months ahead.
...
"We expect foreclosure rates in Sacramento to rise as long as house prices are declining," said Mark Fleming, chief economist of Santa Ana-based First American CoreLogic. Fleming said 6.1 percent of mortgages in El Dorado, Placer, Sacramento and Yolo counties are 90 days late. A year ago it was 2.1 percent.

Here's a look at notice of default filings for Sacramento County.



2008 Q1: 6,898 (up 113.3% YoY)
1997 Q1: 2,441 (1990s Peak)

From the Appeal Democrat:

Yuba County saw the highest total number of the three counties with 357 notices recorded, an increase of 136.4 percent...Colusa default notices quadrupled to 81. Sutter County defaults zoomed by 195.6 percent to reach 337 notices.

Kory Hamman, a broker who handles foreclosure sales for Hamman Real Estate, of Gridley, said the trend is toward more foreclosures. And it shows no signs of easing soon. "We're seeing more foreclosure activity, and we don't see it slowing down," said Hamman.

From the Stockton Record:

In San Joaquin County, lenders sent out 4,657 notices of default - the first step in the foreclosure process - to homeowners in January through March, up from 3,746 in the final three months of last year. That's a 170 percent first-quarter jump from 1,721 default notices in the first three months of 2007...[T]he number of homes actually repossessed during the first quarter in San Joaquin County nearly topped 2,500, more than a fivefold increase from 440 a year ago.
...
Cameron Pannabecker, owner of Cal-Pro Mortgage Inc. in Stockton and a member of the board of directors of the California Association of Mortgage Brokers, said...he doesn't know any experts not projecting that the number of default notices will continue to double or triple last year's numbers quarter over quarter.

From the Sacramento Bee:

Like the hundreds of others in this Cal Expo exhibition hall, this young Yuba City couple were looking for a home at a bargain price for their three children at a two-day auction of foreclosed homes in Sacramento.

Some bargain hunters are like [Francisco] Cervantes, novices grasping at their chance for the house they've always wanted in a market they have been priced out of for years. Countless other shoppers are investors looking to one day realize a tidy profit in a capitalist economy that rewards good timing.
...
Armand Sarcomo and his wife, Rachel, were eyeing a ranch-style home on five acres listed in the Yuba County community of Browns Valley..."We're looking for a second home," said the 28-year-old union sheet metal worker. "It's a good investment. We're a young family trying to move up and take advantage of the market."

From the Modesto Bee:

Home prices in most Northern San Joaquin Valley cities have dropped significantly more than those elsewhere in California. Newman has suffered one of the state's largest declines in home values: The median March sales price was $177,250, down nearly 54 percent from last year...Stanislaus County homes sold for a median $232,163 last month, which was 33.5 percent less than March 2007....San Joaquin County homes sold for a median $265,000 last month, which was 36.1 percent less than March 2007....

From the Associated Press:

An influential economist who long predicted the housing market bubble cautioned Tuesday that the slump in the U.S. housing market could cause prices to fall more than they did in the Great Depression....Yale University economist Robert Shiller, pioneer of the widely watched Standard & Poor's/Case-Shiller home price index, said there's a good chance housing prices will fall further than the 30 percent drop in the historic depression of the 1930s. Home prices nationwide already have dropped 15 percent since their peak in 2006, he said.
...
"Basically we're in uncharted territory," Shiller said. "It seems we have developed a speculative culture about housing that never existed on a national basis before."

Canary in the Global Coal Mine?

From the Associated Press:

A growing majority say they won't buy a home anytime soon, the latest sign of increasing pessimism about the nation's housing crisis, a poll showed Monday...Sixty percent said they definitely won't buy a home in the next two years, up from 53 percent who said so in an AP-AOL poll in September 2006. At the same time, just 11 percent are certain or very likely to buy soon, down from 15 percent two years ago.
...
The growing reluctance to dip into the housing market seems to stem partly from worry that housing prices will continue falling....Expectations for rising prices are highest in the South, with Westerners likeliest to predict they will drop.
...
Daniel Gallego, a warehouse worker in Stockton, Calif., said he may have to sell his home at a big loss. He said rising gasoline and other costs have made his adjustable rate mortgage unaffordable. Because he doesn't expect his home's value to recover soon, he said he may be better off moving now, before his rates rise. "We may have to move in with my wife's parents or my parents," said Gallego, 30, who has two young children. "I could pay off some debt, then we could rent, and maybe buy another house in a few years."

From the International Herald Tribune (hat tip smf):

The collapse of the housing bubble in the United States is mutating into a global phenomenon, with real estate prices down from the Irish countryside and the Spanish coast to Baltic seaports and even in parts of India. This synchronized global slowdown, which has become increasingly stark in recent months, is hobbling economic growth worldwide, affecting not just homes, but also jobs.

In Ireland, Spain, Britain and elsewhere, housing markets that soared over the past decade are falling back to earth. Experts predict that some countries, like Ireland, will face an even more wrenching adjustment than the United States, with the possibility that the downturn could turn into wholesale collapse.

To some extent, the world's problems are a result of American contagion. As home financing and credit tighten in response to the crisis that began in the U.S. subprime market, analysts worry that other countries could suffer the mortgage defaults and foreclosures that have afflicted California, Florida and other states.

Flashback: California's New Canary in the Coal Mine
Flashback: "Loans to Sacramento Trailer-Home Buyers...Trigger a Global Credit Crisis"

From the Sacramento Bee:

Folsom home builder consultant Greg Paquin reported last week that area builders opened 2008 with their fewest sales since possibly the early 1990s. That's nothing to sing about in a region that has seen sales and prices slide for the better part of 33 months. But here's the bright spot: Paquin sees in the new numbers some signals of a market approaching bottom.

Throughout the housing downturn, his predictions about the number of homes that will be built in a given year in the region have tracked pretty close to reality.

Maybe next time Wasserman can ask Paquin about how his sales predictions have held up.

"It is what happens with the overall economy that is important right now"

From the Sacramento Business Journal:

More than 300 individual lenders, some who risked their retirement accounts, are expected to auction 338 acres in the Placer Vineyards development Wednesday in hopes of recouping some of the $51 million they're owed by a now-defunct company that bought the property in a complex deal. It's one of the largest foreclosures in the region so far -- an offshoot of a Las Vegas company's bankruptcy and a symptom of the hard-hit housing market.

The property is owned by the defunct Placer County Land Investors LLC, which raised $31 million to buy the land in 2004 through individual lenders who signed on for a minimum of $50,000 each. As a group of individual investors they are allowed to foreclose on the property and auction the land. Those primary lenders had hoped to earn double-digit returns but find themselves trying to wring whatever value they can from the property. More than 100 secondary lenders who agreed to take a subordinate position when they loaned a total of $6.2 million for the land purchase would receive nothing from a foreclosure, said Gerald Gordon, a Las Vegas attorney.

From the Sacramento Bee:

New statistics show regional home building off to a slow start in 2008, with 798 new-home sales in El Dorado, Placer, Sacramento, Sutter, Yolo and Yuba counties. That's 57.7 percent fewer sales than in the same months of 2007, according to Hanley Wood.

From CNN Money (hat tip Housing Chronicles):

Demand for new homes may not return to normal levels until next decade, according to the latest outlook from the National Association of Home Builders. "Traditionally when housing has been in a recession, it recovers very quickly. We don't see that happening this time," said Jerry Howard, CEO of the builders' trade group. "It could be 2010 before we see sustainable, long-term stability in the home building sector."

From Wachovia Economics Group [pdf] (via FxStreet.com):

Home prices will bottom out about the same time foreclosures top out, which we believe will be in the first half of 2009. Efforts by Congress to stem the tide of foreclosures are likely to be modestly successful at best. A very large proportion of foreclosures, which we estimate to be around 40 percent, are on homes purchased by investors and speculators. There is little Congress or the lending community can do to prevent these borrowers from going under, which will result in sharply higher foreclosures and price declines in investor-laden markets, such as Florida, Arizona, Nevada and California’s Central Valley.

From the Associated Press:

Driving around depressed developments ringed by almond orchards, John Pedrozo, a Merced County supervisor who represents Planada, could not contain his distress. "I've lived here 50 years and I've never seen anything like it," said Pedrozo, who grew up on a dairy farm. "Businesses are closing, people going bankrupt. And the empty houses are vandalized." A common problem, he said, is that on weekends, vacant, foreclosed houses are crashed for wild parties and trashed.
...
Merced County, population 246,000, underwent a housing boom over the past few years that saw developments spring up on what used to be farmland, said Rep. Dennis Cardoza, a Democrat from Merced. Now, in towns like Atwater, housing values have dropped as much as 50 percent, the congressman said. "The impact on these small towns and cities is huge," Cardoza said. "In my district, I believe we are already in a recession."

Realtor Julie Jalone in Roseville & Rocklin Today:

It is true we are starting to see some subtle shifts in the Sacramento real estate market. But the only thing dramatic is the anecdotal comments of other Realtors who are saying there is increased activity.
...
What I remain concerned about is the rate of foreclosures we are seeing in the Sacramento area...I don’t see any solutions to this trend and suspect our rate of foreclosure to continue to outpace the rest of the country through 2008.
...
Watching the housing market is interesting but it is what happens with the overall economy that is important right now. Our Sacramento economy is tied to construction and government and neither is a strong driving force right now.
...
I learned my lesson with some previous overly optimistic predictions for our local real estate market. Right now I am being cautious and want to see the foreclosure numbers come down before I start to smile.

From Sacramento State [pdf] (hat tip Home Front):

Sacramento area residents are very pessimistic about the region's current housing market. Only three percent of area residents think the housing market will take six months to recover, and 17 percent say it will take a year. The majority (51%), however, believe it will take two to three years for the market to recover, and 24 percent even claim the housing slump will last at least four years of more. Close examination indicates that regardless of county of residence, homeownership status, race, age, political party affiliation, the overwhelming majority think it will take at least two years before the regional housing market recovers.
...
Currently, sixty-three percent of area residents believe 2008 is a good time to buy a house in the Sacramento region; 47 percent say now is a good time and 16 percent claim six months from now would also be a good time. Only 30 percent of residents think that the best time to buy a house in Sacramento is at least a year from now....

From Calculated Risk - Housing Bust Duration:

It might be reasonable to expect that the dynamics of the current bust will be similar to the previous bust. After another year (or two) of rapidly falling prices, it's very likely that real prices will continue to fall - but at a slower pace. During the last few years of the bust, real prices will be flat or decline slowly - and the conventional wisdom will be that homes are a poor investment.

The Los Angeles bust took 86 months in real terms from peak to trough (about 7 years) using the Case-Shiller index. If the Composite 20 bust takes a similar amount of time, the real price bottom will happen in early 2013 or so. (But prices would be close in 2010).

From the Federal Reserve Bank of SF (hat tip Calculated Risk):

To the extent that the subprime meltdown is tied to declining house prices rather than interest rate resets, other borrowers, including prime borrowers, also could be affected. Indeed, while default rates for the latter loans are lower than for subprime loans, delinquency rates among all categories are highly correlated with house price declines across regions of the country. More formal statistical analysis confirms that differences in house-price change account for most of the regional differences in delinquency rates, whether borrowers are prime or nonprime, or whether loans have fixed or variable rates.

This analysis underscores the importance of house-price movements both to future developments in the housing sector and also to the ultimate magnitude of credit losses that are likely to be realized by leveraged financial institutions on their holdings of mortgage-backed securities and other housing-related loans. Looking ahead, it seems likely that the period of house price declines will not be over very soon, since some models of the fundamental value of houses suggest that prices are still too high, and futures markets for house prices indicate further declines this year.

"The only answer is for the government to get out of the way"

From the Appeal Democrat:

Our View: Stimulus plan is like giving drink to an alcoholic

When home prices soared as the result of cheap and easy credit, not many people considered that a crisis. It was fun for homeowners to stand around the proverbial water cooler and boast about the price of the house down the street. Well, prices have since fallen to the lowest levels since 2004.
...
What goes up often comes down. But there's more than a market phenomenon going on here. Federal monetary policy has a direct effect on lending practices, and the government is getting actively involved now. That, in particular, should be reason for worry.
...
The only answer is for the government to get out of the way and let the market self-correct. That may mean allowing prices to fall to levels they need to be so that buyers can afford them. For most people, that's not as much fun to watch, but that's the real solution.

From the Inman News Blog:

In looking at markets that may see a temporary increase in the $417,000 conforming loan limit, I ran a table yesterday that relied on median home price data from the third quarter 2007. Running the numbers again today with preliminary fourth quarter numbers from NAR highlights a potentially serious problem. All 19 metropolitan statistical areas (MSAs) identified as places that might see an increase in the conforming loan limit are declining markets...Sacramento now looks like it won't see an increase at all, based on the new fourth quarter numbers.

From the Boston Globe:

Cesar Dias, an agent from Stockton, Calif., who appeared on "60 Minutes" and is credited with starting a national trend, said foreclosure tours accomplish twin goals of moving properties and drumming up prospective buyers in lean times. "We knew we couldn't sit with our hands crossed hoping for the best," said Dias, who is working on tours in Dallas and San Diego; Las Vegas and Phoenix may be next.

From the Atlantic Monthly (hat tip Gwynster):

Strange days are upon the residents of many a suburban cul-de-sac. Once-tidy yards have become overgrown, as the houses they front have gone vacant. Signs of physical and social disorder are spreading.
...
In the Franklin Reserve neighborhood of Elk Grove, California, south of Sacramento, the houses are nicer than those at Windy Ridge—many once sold for well over $500,000—but the phenomenon is the same. At the height of the boom, 10,000 new homes were built there in just four years. Now many are empty; renters of dubious character occupy others. Graffiti, broken windows, and other markers of decay have multiplied. Susan McDonald, president of the local residents’ association and an executive at a local bank, told the Associated Press, "There’s been gang activity. Things have really been changing, the last few years."

Foreclosures.com: Sacramento County REOs Top 1,000 in December

December 2006 REOs: 283
December 2007 REOs: 1,155
Change: 308.1%

Total 2006 REOs: 1,326
Total 2007 REOs: 8,155
Change: 515.0%

December 2006 Pre-foreclosures: 1,052
December 2007 Pre-foreclosures: 2,380
Change: 126.2%

Total 2006 Pre-foreclosures: 10,505
Total 2007 Pre-foreclosures: 19,453
Change: 85.2%

More statistics at Foreclosures.com

From the Modesto Bee (video):

Monday was a record-breaking day for foreclosures in California. A staggering 5,238 properties were scheduled to be sold in auctions on courthouse steps across the state, including 145 in Stanislaus County. "This is the single largest day ever for foreclosures," said Sean O'Toole, owner of ForeclosureRadar, which tracks mortgage defaults throughout the state. By comparison, 400 to 500 auctions a day were scheduled statewide a year ago, O'Toole said. That average rose to about 2,500 per day by the end of 2007, but he said there's never been nearly as many auctions as happened Monday.
...
In Stanislaus County, for instance, about twice as many properties were scheduled for auction as normal, said David Absher, president of Dual Arch International, which does most of the foreclosure auctions in the county. Absher said that during the past six months, typically 60 to 80 auctions were scheduled a day, but "the volume is mounting."
...
Although an abundance of homes in all price ranges are facing foreclosure in the Northern San Joaquin Valley, fewer and fewer bids are being made at foreclosure auctions, Absher said. "No one wants to buy this stuff because they don't know where the housing market's going," Absher said. "When the prices are continuing to slide down, how do you know you're getting a good deal?"

From the Sacramento Bee:

Lots of developers are putting up "loft" housing in the downtown-midtown area. But Jeff Kraft says his 42-unit condo project at 1600 H St. is the real deal...Now, even though the building looks far from finished, Kraft expects the first units to be ready for occupancy next month. Prices range from $213,000 for a 395-square-foot studio to $699,000 for a two-bedroom, two-bath, 1,249-square-foot unit.

Can Habitat unload them when home sales are tanking and larger high-rise condo projects have flopped? Despite troubles elsewhere, Kraft says midtown is still a residential hot spot. He expects the comparatively low prices for his modest-sized units will bring in buyers. In fact, the project originally was envisioned as a "rent-to-own" complex. Now the emphasis is straight sales. "We just think there's a pent-up demand from people who want to buy," Kraft says.

From the AP via sacbee.com:

Treasury Secretary Henry Paulson said Tuesday the administration was exploring what would be a significant expansion of the program to help at-risk mortgage holders. Paulson, in an interview on CNBC, said the administration was involved in discussions with the mortgage industry to expand a current program to freeze adjustable rate mortgages for five years to include borrowers of loans at prime rates. Currently, the rate freeze only covers a much smaller segment of adjustable rate loans, those made to subprime borrowers. Those are borrowers with weak credit histories. "One thing we will consider with the HOPE NOW alliance is ... maybe expanding this beyond subprime borrowers to other borrowers," Paulson said in the CNBC interview.

From the Federal Reserve Bank of Boston [pdf] (hat tip Paper Economy):

In 2007, residential investment was the laggard among the components of Gross Domestic Product (GDP). Residential investment began declining in the first quarter of 2006, and has continued to decline in each quarter since. It seems all but certain that residential investment also declined in the fourth quarter of 2007 – and many economic forecasts expect residential investment to continue to decline at least through the first half of 2008...Should the forecasts prove to be right, we will have experienced a longer string of back-to-back quarters of declining residential investment than at any other time in the past 50 years...Previous periods where residential investment declined for a year or more were either accompanied by, or closely followed by, an economic downturn.
...
The sharp declines experienced in many regions of the country have occurred despite low real interest rates and, until December, an unemployment rate below 5 percent. This highlights a risk to the housing sector going forward: Since prices have declined substantially even in a relatively benign economic environment, one cannot discount the possibility that they could fall more rapidly should economic performance not remain strong in 2008.

'A Housing Recession Like None Ever Imagined or Experienced'

From Reuters:

Housing markets from Punta Gorda, Florida, to Stockton, California, will crash and suffer price drops of more than 30 percent before the housing crisis is over, a report from Moody's Economy.com said on Thursday...Punta Gorda, Florida, and Stockton, California, are the hardest hit markets in the U.S., with price declines from peak-to-trough forecast at 35.3 percent and 31.6 percent, respectively.
...
These markets have been hard hit due to several reasons, namely the exiting of investors from the areas, a fair amount of subprime mortgage loans causing an increase in foreclosures and overbuilding by home builders, Zandi told Reuters.

Moody's past predictions for Stockton home prices:

• -25% (September 2007)
• -16% (October 2006)

As of October, the median home price in the city of Stockton had dropped 31.4% from peak, according to TrendGraphix. San Joauqin County's median was down 25%.

From Reuters:

There is a "substantial" risk that U.S. home prices will slide for the next three years or more, in a downturn that could be unlike anything seen before on a national level, Morgan Stanley said on Thursday in a report. Price levels of the RPX Index, a derivative index based on home prices in 25 U.S. metropolitan residential property markets [including Sacramento], indicate an expectation that prices will decline for the next three years, with a recovery likely to occur between three and four years from now, Morgan Stanley said.

"The property derivatives market seems to be suggesting that we are in a very different environment, on the heels of market events that could force a housing recession like none ever imagined or experienced," Morgan Stanley analysts said.

"HillaryCare For Housing"

From the Sacramento Bee [updated link]:

The Elk Grove Unified School District may experience declining enrollment next year, said Richard Odegaard, the district's chief financial officer, at Tuesday night's board meeting..."It looks like we might have a double whammy: a declining enrollment district with declining state funds," Odegaard said.
...
[Updated] School officials, who sounded the warning bell at Tuesday night's board meeting, blame the housing slump for the potential decline – the district's first since it formed in 1959. "It's the first time anyone of us can remember 'declining enrollment' being in our vocabulary in this district," board member Priscilla Cox said Tuesday.

From the Modesto Bee:

While the economy sputters along amid falling home prices, higher unemployment and tight credit, one sector of retail is reporting a surge in consumer interest. Employees at thrift stores and secondhand shops say they're seeing more customers these days, as the regular bargain hunters are joined by people who have become more cost conscious.
...
Bob Van Hoffwegen, store manager of Priceless Treasures thrift store in Modesto, says he noticed an uptick in business that has mirrored the surge in home foreclosures and the drop in home sales. "There's been quite a rise since midsummer," Van Hoffwegen said of the store....

From the Stockton Record:

Joe Anfuso, president and chief executive officer of Stockton-based Florsheim Homes, said that although lower interest rates will be a positive force when the residential market settles down, they aren't affecting the new home-sales market at all now. Actually, pricing isn't either, he said. It's "buyers' psychology," which continues to be negative about home buying so long as prices continue to drop, he said. "It's really more the fear of: If I'm buying today, are prices going down tomorrow?" Anfuso said. "There's no sense of urgency."

From the Irvine Housing Blog (hat tip patrick.net):

Once the pool of buyers is exhausted and the volume of buying declines, prices stop rising, and the belief in future price increases diminishes. When the remaining potential buyers no longer believe in future price increases, the primary motivating factor to purchase is eliminated; Prices fall. The temporary rise and fall of asset prices is the defining characteristic of a bubble.

From National Review:

If you thought Hillary Clinton’s government takeover plan for health care was bad, wait ‘til you see what she has in store for the housing sector. As always with the Clintons, the market is the problem and Big Nanny is the solution. Unfortunately for taxpayers, Hillary has bipartisan company in the Bush administration on this issue. Their election season prescription? Rewarding bad behavior. Punishing responsible behavior. Doing more harm than good.
...
Instead of letting lenders and subprime mortgage-holders suffer the consequences of their actions, politicians and grievance-mongers are riding to the supposed rescue. In a supreme irony, the very same champions of the needy in the Democrat party who complain constantly about the lack of “affordable housing” are now fighting tooth and nail to keep housing prices high.
...
Fiscal conservatives ought to be balking at HillaryCare for housing. But President Bush’s treasury secretary, Hank Paulson, is singing a similar tune...Lawmakers on both sides of the aisle are colluding to protect the reckless and keep home prices high on the backs of prudent taxpayers. Who’ll bail us out from this perversion of the American Dream?

From the L.A. Land blog:

A poll by the LATimes and Bloomberg reports that 58% of those surveyed say sub-prime lenders should freeze interest rates for sub-prime borrowers.

'We really just need to let it wash through'

A look at Sacramento real estate market numbers for November:

• Sacramento Real Estate Statistics Blog
• Sacramento Real Estate Blog
  

From the Wall Street Journal:

A government-led plan to freeze interest rates on certain troubled subprime home loans drew criticism both from investors who foresee losses and from some analysts warning that it will merely prolong the pain of the mortgage crisis...Alan Fournier, a fund manager at Pennant Capital Management LLC, Chatham, N.J., predicted that the plan being pushed by the Treasury Department will prolong the pain of the housing slump. He said it would merely delay inevitable foreclosures for some people who can't afford their homes, while allowing holders of mortgage-backed securities to put off marking down their assets. "This reduces the pressure short-term to bring everything to a clearing price," Mr. Fournier says. "We really just need to let it wash through."

From the New York Times:

The Bush administration’s effort to help at least some people in danger of defaulting on their subprime mortgages could affect only a small share of those who took out such loans during the final two years of the housing bubble, industry analysts said today. Though administration officials have yet to agree on crucial details with mortgage lenders and the securities industry, a broadly similar effort by the state of California is likely to help only about 12 percent of borrowers in the state with adjustable-rate subprime loans, according to estimates by Barclays Research.

Average Buyer posts some suggestions for dealing with the housing mess.

"Why are declining home prices bad news?"

From MarketWatch:

U.S. home prices were falling in every region of the country in September, according to a closely watched index of home prices released Tuesday. Home prices fell in September in all 20 major cities covered by the Case-Shiller price index, even in cities that had been holding up before the August freeze in mortgage markets, Standard & Poor's reported.
...
For the first time in this housing cycle, prices in all 20 cities dropped from the previous month, with the biggest declines in the former bubble cities of Miami, Phoenix, San Diego, Las Vegas, Los Angeles and Tampa. For the 20 cities, prices fell a record 4.9% year-over-year. Meanwhile, prices were down 5.5% year-over-year in the original 10-city index, the largest drop in the 10-city index since 1991.

From the LA Times:

Some analysts, including UC Berkeley professor Kenneth Rosen, believe the severity of the downturn will vary by region. Areas such as the Central Valley and the Inland Empire will be the hardest hit, he said, because these attracted a higher percentage of new buyers with shaky credit, and many of them are now defaulting on their loans. He believes values in these communities could fall by 15%.

Many price measures already show more than a 15% decline for the Central Valley's largest housing market.

But "in areas where there is very little new housing, where it's hard to build and a lot of wealthy people live, there will be little decline or maybe none at all."
...
But others call this wishful thinking, saying low prices eventually work their way to even the most affluent areas. "Every place takes the hit in the long run," said Christopher Thornberg of Beacon Economics, a consulting firm in L.A. If prices in high-end markets do not bend while prices fall in adjacent areas, many buyers will at some point choose the cheaper neighborhood, he said...Such movement eventually drags top-end prices down, he said.

Data gathered by Edward E. Leamer of UCLA's Anderson Forecast back that up. Since 1989, Leamer has tracked housing prices in the 20 least expensive and 20 most expensive ZIP Codes in Los Angeles County. He found that all areas fell by about the same percentage when they hit bottom in the 1990s downturn.

If anyone has historical data about how East Sacramento/Land Park/Davis/yada yada yada fared in the last housing bust, please do share.

From the Sacramento Bee:

Cities' housing nightmare

The deepening housing crisis will cut economic growth by more than 25 percent in 143 U.S. metropolitan areas next year and by more than a third in 65 metro communities, according to a new forecast for the U.S. Conference of Mayors. The new report [pdf] prepared for the mayors by financial forecaster Global Insight warns of cascading problems caused by falling home prices, an expected 1.4 million foreclosures and the pending reset of millions of adjustable-rate mortgages.
...
The cities with the biggest-percentage losses are Myrtle Beach, S.C.; the California cities of Merced, Madera and Napa; and Sarasota-Bradenton, Fla.

From Daniel Weintraub's California Insider blog:

Why are declining home prices bad news? Not only bad news, but a public "nightmare." It is great news when the price of energy, food, transportation, health care and consumer electronics drops. But for some reason it is bad news when the price of shelter drops.
...
So now that housing prices have stopped soaring and in some places are dropping, shouldn't that be good news? Shouldn't we be seeing stories filled with anecdotes about formerly priced-out middle-income families finally getting their chance at the American Dream?...I'd like to hear some of their stories. [dweintraub~at~sacbee~dot~com]

From the Modesto Bee:

Becky Ellis spent nearly 20 years in the mortgage industry, but the recent housing crash proved to be too "depressing" for someone who loves helping other people. "I wanted something cheery," said Ellis, 36, who considered switching to a banking career, but decided to get out of the industry and give retail a shot.
...
This year saw a swell in the number of job applicants for the holiday season, retailers said, a likely result of the housing fallout, economic crunch and rising unemployment figures in the Northern San Joaquin Valley.
...
J.C. Penney hired about 150 seasonal workers this year, a comparable number to last season, said Sarina Pescetti, assistant store manager. The most striking difference she noticed wasn't the number of applicants, but their backgrounds. "We had a variety of people who had worked in the housing industry," Pescetti said.

NAR: Sacramento Price Decline 2nd Largest in Nation

From Bloomberg:

Prices dropped in 54 of 150 metropolitan areas in the third quarter and the median sales price tumbled 2 percent nationwide, the National Association of Realtors said today.
...
Palm Bay, Florida, had the biggest price decline in the third quarter, tumbling 12.4 percent from a year earlier. Sacramento, California, fell 10.5 percent and Sarasota, Florida, dropped 10.4 percent.

NAR Report [xls]

From the Central Valley Business Times:

Despite hundreds of homes being sold at foreclosure and builder auctions, home prices are still so high that most areas of California and even the Central Valley have some of the least affordable homes in the nation, according to figures compiled for the California Building Industry Association.
...
On a statewide basis, just 12.6 percent of all the homes sold could be afforded by a median-income family, up slightly from 11.7 percent in the second quarter.
...
Merced, which was the nation’s third least affordable area in the spring, is now ranked ninth, with 7.4 percent of its homes “affordable.” Modesto, which was 10th in the second quarter, is 14th in the third quarter, with 9.7 percent of homes priced as affordable. Stockton, which had been 15th, has moved to 22nd least affordable with 11.3 percent of homes in the affordable range, the CBIA says. Sacramento is now 29th in the nation. It had been tied for 25th in the second quarter. The report says 17.2 percent of the homes for sale in Sacramento were affordable in the third quarter.
...
Robert Rivinius, CBIA’s president and CEO, says the fact that affordability has not increased dramatically despite a housing downturn that has lasted over a year is “ample proof” that market corrections alone are not likely to allow the hundreds of thousands of Californians priced out of homeownership to be able to buy their first homes.

Dunless

UPDATE: Another article on Dunmore Homes. From KCRA:

Last May, Jason and Gina Rossow fulfilled their dream of buying their first home in a brand-new subdivision under construction in Elk Grove. "Yeah, we were super excited," said Gina Rossow.

But now across the street are weeds. An entire field is empty with just debris. And around the corner there are unfinished homes. The Rossows' dream is slowly creeping toward nightmare. "We're just confused," Jason Rossow said.

What's causing confusion, concern, and unwelcome news is a closed sign that's on the Dunmore Homes sales office door. All construction was halted last month, and contractors filed roughly $5 million in liens against Dunmore Homes.

"That tells ya it's not a great sign for new home sales," Mike Show of the Sacramento Business Journal said..."People were predicting we'd be out this in a year," he said. "Obviously that's not the case. We're now saying it could be another year to 18 months."

From the Sacramento Business Journal:

After halting construction in August, Dunmore Homes closed the sales office last week at its Monterey Village development in Elk Grove, posting signs saying the move was temporary but leaving no indication when it will reopen. The closures follow the filing of mechanics' liens totaling more than $5 million by contractors working on that project and another in Rocklin.
...
Dunmore officials did not return phone calls seeking comment about the latest events. The company halted all construction in August, but owner Sid Dunmore said in an interview at the time that the company was breaking even. Dunmore Homes sold 66 homes in the Sacramento region during the first seven months of the year, according to Hanley Wood Market Intelligence. That compares with 321 home sales for 2005, according to new-home analyst The Gregory Group.
...
The effects of flagging new-home sales are showing elsewhere as some homebuilders are pulling up stakes or significantly paring down operations. Costa Mesa-based Warmington Homes, which is selling condos in Natomas and single-family homes in Galt, is folding its Sacramento division into the San Ramon office...."As we all know, it's a very difficult time in the market," [Chris] Hanson [vice president of sales and marketing] said. "I don't think you can name a builder that hasn't had layoffs."

Christopherson Homes plans to move from its 8,500-square foot Roseville office, but it's not closing the Sacramento division, said marketing manager Vicki Doyle. Instead, the company is looking for smaller space in Roseville to better fit its pared-down staff. A series of layoffs, including some last week, have cut the division to about half its size of a year ago, she said.

From the Sacramento Bee:

Sacramento-area unemployment was unchanged last month at 5.4 percent but has risen eight-tenths of a point since last year. "The numbers are starting to mount a little bit and look a little more ominous," said David Lyons, labor market consultant at EDD.
...
Greater Sacramento lost 2,000 jobs in August, the second straight monthly decline. About half the cutbacks were in construction and finance. The downsizing in construction was noteworthy because usually the summer building season lasts into September or October. "The house builders definitely made a bit of a call to cut back," Lyons said.

From the Central Valley Business Times:

Doom, gloom, and what happened to our boom?

A dark mood is settling over the golden state as pessimism about California's economic conditions hits its highest point since 2003, according to a survey by the nonpartisan Public Policy Institute of California...A strong majority of residents (59 percent) expect bad economic times in the coming year — a 10-point increase since June (49 percent) and a 20-point increase since January (39 percent).
...
There has been a significant shift in attitude this year —and it is very likely being driven by bad news about the stock and housing markets," says PPIC president and CEO Mark Baldassare. "For so many people, the feeling of overall financial well-being is tied to the value of their homes — something that seems increasingly threatened as they see sales slow, prices dip, and foreclosures rise."

From Reuters:

A record 26 percent of U.S. homeowners say the value of their homes has fallen during the past year, above the previous peak of 24 percent seen in 1992, a survey released on Friday showed. Reflecting the extent of the prolonged housing slump, 21 percent of homeowners polled in September expect the value of their home to decline in the year ahead, up from 18 percent in August, according to the data from Reuters/University of Michigan Surveys of Consumers.
...
Homeowners in the western United States, where some of the most dramatic home appreciation had occurred, have been especially hard hit by the real estate downturn. In the third quarter, 33 percent of homeowners surveyed in the West said their home value fell during the past year, up from 23 percent in the second quarter. Nearly a quarter expect home prices to fall further in the coming year, up from 17 percent in the second quarter, said Reuters/University of Michigan.

From the Wall Street Journal:

When Susan McDonald began seeing an influx of renters in Elk Grove, Calif., just outside of Sacramento, she cofounded a community group, the Franklin Reserve Neighborhood Association. The group writes "good neighbor" letters to problematic tenants and landlords, organizes forums to discuss a variety of issues and holds block parties to encourage residents, both owners and renters, to get to know one another. Local high school students have even cut the grass on unkempt properties. For the most part, the steps have helped, Ms. McDonald adds, and when they haven't, community members have been willing to be even more aggressive.

Elk Grove resident Tim Chan, a Sacramento police officer, called the local police repeatedly to complain about loud parties, piled-up garbage and to report what he suspected was gang activity involving the renters next door. When that didn't work, he wrote a two-page letter, also signed by 21 of his neighbors, to the out-of-town landlord. "All of these items disturb the peace and quiet of our neighborhood and cause discomfort and annoyance to all that live on this street, as well as reducing the quality of life and safety of our children," Mr. Chan wrote. The letter, which was sent to city officials and also threatened legal action, got results: The tenants are gone, and the house is being fixed up.

Ms. McDonald and Mr. Chan both blame the majority of the Elk Grove's problems on absentee landlords, not the tenants. "You don't just rent a property and assume that it's going to be taken care of," Ms. McDonald says. "Come and see if the lawn is being taken care of. Come and talk to the neighbors."

Greenspan: Price Declines Will Be 'Larger Than Most People Expect'

From the Financial Times:

US house prices are likely to fall significantly from their present levels, Alan Greenspan has told the Financial Times, admitting that there was a bubble in the US housing market. In an interview...the former chairman of the Federal Reserve said the decline in house prices "is going to be larger than most people expect".
...
Mr Greenspan said he would expect "as a minimum, large single-digit" percentage declines in US house prices from peak to trough and added that he would not be surprised if the fall was "in double digits".

'Kind of a Real Estate Bust'

From the Sacramento Business Journal:

San Diego-based sub-prime lender Accredited Home Lenders Holding Co. said Wednesday it is not taking any new loans and it is closing "substantially all" of its 60 lending offices and five support locations as of Sept. 5.

Accredited has retail branch offices in Sacramento, Folsom and Roseville, and it has a centralized retail office in Sacramento.

The moves are part of a restructuring in response to turmoil in the mortgage industry. Those moves will cost 480 people their jobs.

From the Inman Blog:

What a week. Since Friday, banks and mortgage lenders have announced more than 13,000 layoffs.

From the Associated Press (hat tip Sonoma Housing Bubble):

...[M]ore than 25,000 workers nationwide...have lost jobs in the financial services industry since the beginning of the month -- with more than half coming since last Friday. With few exceptions, the cuts are the direct result of woes in the nation's housing market.
...
Since the start of the year, more than 40,000 workers have lost their jobs at mortgage lending institutions, according to recent company layoff announcements and data complied by global outplacement firm Challenger, Gray & Christmas Inc. Meanwhile, construction companies have announced nearly 20,000 job cuts this year....

It's an employment collapse that threatens to rival the massive layoffs in the airline industry that followed the Sept. 11, 2001, terrorist attacks, when some 100,000 employees lost their jobs.

From the Roseville Press Tribune (hat tip Jeff):

A downturn in property values is showing up on Placer County's assessment rolls, with a drop in assessed values taking a bite out of growth. Placer County Assessor Bruce Dear told the Board of Supervisors at a budget workshop Tuesday that the county's assessment roll increased from $52.3 billion last year to $56.8 billion - an 8.52 percent jump. But the $4.5 billion increase for the year would have been nearly $1 billion more if real estate values hadn't decline, forcing a downward adjustment on about 18,000 mostly residential properties.
...
"The market activity in the spring was kind of a real estate bust," he said. "It suggests the numbers will continue to decline significantly in this assessment roll." For a county that had experienced assessed value increases of never less that 12.76 percent a year since 2001, this year's 8.52 percent rise has already spurred county budget officials to warn that the slowdown in property tax revenue could escalate in the next two years.
...
Sacramento County discontinued offering medical and dental subsidies retiring after May 31 because of a projected $33 million shortfall. El Dorado County is reducing its workforce by 26 positions through early retirements and layoffs, he [Placer county CEO Tom Miller] said.

Bank Run?

From the LA Times (hat tip Peter Viles):

Anxious customers jammed the phone lines and website of Countrywide Bank and crowded its branch offices to pull out their savings because of concerns about the financial problems of the mortgage lender that owns the bank.
...
At Countrywide Bank offices, in a scene not common since the U.S. savings-and-loan crisis ended in the early '90s, so many people showed up to take out some or all of their money that in some cases they had to leave their names.
...
At a branch near Countrywide's corporate headquarters in Calabasas on Thursday, a flood of spooked customers seeking to withdraw their certificates of deposit and money-market accounts overwhelmed the small staff. The Countrywide employees were forced to resort to taking down names and asking people to wait it out or come back later.
...
Bill Ashmore drove his Porsche Cayenne to Countrywide's Laguna Niguel office and waited half an hour to cash out $500,000, which he then wired to an account at Bank of America. "It's because of the fear of the bankruptcy," said Ashmore, president of Irvine's Impac Mortgage Holdings, which escaped bankruptcy itself recently by shutting down virtually all its lending and laying off hundreds of employees. "It's got my wife totally freaked out," he said. "I just don't want to deal with it. I don't care about losing 90 days' interest, I don't care if it's FDIC-insured -- I just want it out."

"Bankruptcy is the next logical step"

From CNN Money

American Home Mortgage to shut down

American Home Mortgage Investment Corp. plans to close most operations Friday and said nearly 7,000 employees will lose their jobs as the lender becomes one of the biggest casualties of the U.S. housing downturn. Experts said it is likely the Melville, New York-based company will have to seek bankruptcy protection, and no later than Monday.

American Home originated $59 billion in loans last year, and mostly to people with better credit than risky subprime borrowers. About half of those mortgages were adjustable-rate loans, whose defining feature is an interest rate that can be adjusted upward.

American Home's collapse shows how problems in the U.S. mortgage market are broadening, as credit quality issues begin to affect lenders focused on borrowers with decent credit, as opposed to "subprime" borrowers thought to be greater risks.

While American Home focused on borrowers considered good credit risks, it made many loans to people who could not document income or assets.

The company offered many "Alt-A" mortgages, which fall between prime and subprime in quality, as well as adjustable-rate loans. Founded in 1987, the company said it had by 2006 become the 10th largest U.S. retail mortgage lender.