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

From Time:

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

From the Stockton Record:

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

From News10:

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

From the Sacramento Business Journal:

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

From Home Front:

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

From the Sacramento Business Journal:

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

From the Sacramento Bee:

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

From the Sacramento Business Journal:

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

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

From Inman News:

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

From the Modesto Bee:

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

From the Press Democrat:

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

From the Appeal Democrat:

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

From the Sacramento Bee:

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

"An MSM Confession"

From the Sacramento Bee:

Sacramento-area real estate market befuddled the experts

Home Front spent time in the electronic library this week, looking at how experts misjudged the extent of this decline as the housing market began to wobble and shift in 2005 and 2006, even 2007. We aren't trying to pick on analysts who were then swimming in uncharted waters after a long, euphoric boom. The Bee's real estate coverage, too, had its overly sunny moments.
~~~
We feature a lot of real estate experts who misjudged the extent of the downturn - and note that our own coverage was sometimes overly rosy, too, as a result.
...
It had occurred to me a couple times as I researched today's column that there were early people saying we were going over a cliff with this housing boom. They were mostly bloggers and not mainstream "experts," predicting this was a disaster soon to unfold. Therefore, in the process that often leads to these kind of business stories, they seemed to have less weight than someone who sold houses for a living or financed them. (There's an MSM confession for you).

But many of these seers proved correct.

From the Sacramento Bee:

"One bright note is that the (housing) sector that led the economy into this morass is about to turn the corner, perhaps as soon as this summer, and will start to lead us out," said Scott Anderson, senior economist at Wells Fargo & Co.

It's still too early to declare real estate's revival...But 2008 could also be seen as the year Sacramento-area real estate began to show signs of stabilizing, and the idea that housing might help establish a foundation for the economy here is something experts are starting to debate. Prices and inventory are down and sales are up, even as foreclosures continue. Mortgage rates have fallen to their lowest levels in at least 37 years. The correction has been enormously painful, but there are believers who contend Sacramento will be among the first U.S. markets to recover.

From the Sacramento Bee's Bob Shallit:

We anticipate the capital region will endure higher unemployment (perhaps hitting 10 percent), more hard times in housing, a grim market for commercial real estate and perhaps a bank failure or two...Builders and buyers will continue struggling in 2009, but by midyear we see home prices bottoming out, foreclosures dropping and sales picking up, spurred by declining interest rates.

From Rocklin & Roseville Today:

I believe we will start to see some stability in the Sacramento housing market. I am not suggesting that we don’t still have some downward pressure on prices but I think we will see, in some areas and in some price ranges, price stability and even some upward movement. I believe we will see buyer’s who took a wait and see posture in 2008 return to the market. At the same time, if we learned anything from our experiences in 2008, we must be mindful that there are likely to be some additional surprises along the way.

From Home Front:

[In 2008] Dunmore Homes went out of business. Then John Reynen of Reynen & Bardis Communities filed for personal bankruptcy protection. So did C.C. Meyers, owner of Winchester Country Club. And then so did Christo Bardis of R&B. I doubt ever in their wildest imaginings did they imagine it would all some day come to this...Crossing familiar names off my list of real estate industry sources as they disappeared into unemployment. Sacramento County's median price falling back below $200,000. (On the other hand I talked with a lot of happy new homeowners this year. That was the really cool side of the free-falling home prices).

From the Modesto Bee:

The housing slump will enter its fourth year in January, but Chad Costa sees reason for hope. The Modesto real estate agent said plenty of people will benefit from the reduced prices and mortgage rates. "I think what has to be identified here is that the affordability is back," said Costa, who specializes in selling property that has gone through foreclosure. "That's the upside of this, and you don't hear a lot about that."

From the Appeal Democrat:

A huge tide of home foreclosures rippled through the nation in 2008, and few communities were battered as badly as the Mid-Valley. Defaults left hundreds of houses from Yuba City to Linda to Wheatland — built and bought in anticipation of profiting from a decade of soaring real estate prices — empty as owners seduced by adjustable-rate mortgages were caught between suddenly higher payments and plunging values for their homes.

From the Sacramento Business Journal:

Sacramento on Monday announced it has laid off eight workers in the city’s development services department due to falling revenue.

From the Appeal Democrat:

About 70 workers at Kbi Norcal on Rancho Road in south Yuba County are slated to lose their jobs in the next few months, according to an announcement Monday from the lumber and wall panel plant’s parent company, Building Materials Holding Corporation. BMHC executives...have said they will shut down the Rancho Road plant some time during the first quarter of 2009.

From the Sacramento Business Journal:

Grubb & Ellis Co. on Monday released its 2009 global forecast that predicts a troublesome year for commercial real estate in the U.S., including Greater Sacramento. “Several forces contributed to the decrease in Sacramento’s investment market in 2008, primarily the unavailability of credit, and this will linger through the coming year,” said Robert Dean, executive vice president and managing director of Grubb & Ellis’ Sacramento office...“The depth and duration of the local residential recession has virtually assured retail’s struggle,” Dean added.

From the Wall Street Journal:

The commercial market "is going to be ugly for the next 12 to 24 months," said Michael Restuccia, chairman of the San Joaquin County (Calif.) Employees' Retirement Association. "Not just bad, but ugly."

From the Sacramento Bee:

Commercial real estate is in trouble...Brokers such as [Boyd] Cahill are suffering along with their clients. For a while, they were uneasily holding ground while colleagues in residential real estate were seeing their livelihoods melt away as home sales plummeted. Then the bad economy got drastically worse and the commercial business crashed
...
As "the toughest year" of his career closes, Cahill said the first half of 2009 doesn't look much better. He thinks more retailers will file for bankruptcy protection, adding to vacancies and making it even more competitive to land the few tenants looking for space. The shakeout will strike commercial brokerage firms, too, Cahill said. His company just closed its Sacramento office and pulled staff to Roseville.

From the Stockton Record:

Foreclosures continue to dominate the existing home-sales market, making up nearly nine out of 10 purchases...[M]edian home selling prices in the city [of Stockton] dropped as low as $130,000 for November - down more than half from $265,000 the previous November.

Lela Nelson of Lela Nelson Realty said December business was hopping as more first-time buyers and investors jumped into the market as ever-dropping prices combined with historically low mortgage rates. In more than 30 years in the real estate business, she said, she has never seen a better combination of low prices and interest rates for buyers.

From the Stockton Record:

Community Bank of San Joaquin has become only the second locally based bank during the current economic downdraft to receive a warning from state and federal regulators.
...
[P]roblem loans were made before 2007 to builders. In other words, they were made to exactly the kind of borrowers you would expect to be doing business with such a bank, and they were seeking loans when business, especially real estate, was booming...In fairness, no one saw this coming, certainly not the kind of downdraft we've experienced. And with San Joaquin County being the nation's foreclosure capital, the real estate market collapsed here with unprecedented speed and severity.

From the New York Times:

[T]he ultimate symbol of suburban success has become one more reminder of the economic meltdown, with builders going under, pools going to seed and skaters finding a surplus of deserted pools in which to perfect their acrobatic aerials. In these boom times for skaters, Mr. Peacock travels with a gas-powered pump, five-gallon buckets, shovels and a push broom, risking trespassing charges in the pursuit of emptying forlorn pools and turning them into de facto skate parks.
...
California officials estimate that there are tens of thousands of abandoned pools in the state, with as many as 5,000 in places like Sacramento County, where a building boom in the capital’s suburbs has gone bust.

Over 10,000 Jobs Lost in Sacramento Region, Unemployment Jumps to 7.9%

From the Sacramento Business Journal:

California and the Sacramento region’s jobless rates both increased a half-percentage point, reaching the highest levels since 1994....The Sacramento area’s jobless rate increased to 7.9 percent, from 7.4 perent in September and 5.5 percent a year ago, according to the state report.

From the Sacramento Bee:

[T]he Sacramento region has lost 10,200 jobs in a year, a 1.1 percent decline. The state has lost 101,300 jobs in a year, a 0.7 percent drop.

Interactive Map: Unemployment by County

From News10:

Stacy Brown of Sacramento hasn't missed any [house] payments, but said she's worried about the months ahead. "Our hours are being cut due to the budget, so I see my salary decreasing so I just want to try to keep ahead of the game," she said. She was among dozens waiting up to three hours to meet with their lenders.

From News10:

Mike Lyon of TrendGraphix said to get ready for another 10 percent price drop over the next four months. It could very well dip to 2001 pricing, he said.
...
Lyon predicted the median home price will bounce above $200,000 in the coming months but says that won't be because home prices are increasing. Instead, he expects foreclosures on larger move-up homes to increase, especially in newer subdivisions in the foothills. He believes those homes will have foreclosure pricing in the $300,000 range and up, thereby increasing the median price of homes in the area.

From the News-Review:

Ray Davis won’t ever refute a moniker bestowed upon him — “the eternal optimist” — because the chief executive officer of Umpqua Bank sees signs of financial recovery, even in these troubled economic times. Take the housing market in Sacramento, Calif., for example, where the average selling time for a home went from 18 months in September 2007 to now less than five months, Davis said...“People are bidding on foreclosures which says we’re hitting bottom in Sacramento,” he said....

From the Sacramento Bee:

Bank repossessions again accounted for the majority of home purchases, especially in Sacramento County, the largest sector of the region's real estate market. DataQuick said two-thirds of the county's sales involved bank repos. "The bad news is there's a lot of foreclosures in the market. The good news is they're selling," said Pat Shea, Sacramento regional manager for Prudential California Realty. "Teachers, policemen, nurses – they can all buy houses now."

Interactive Map: Sacramento Home Price Trends By Community

From the Appeal Democrat:

Yuba County's $175,000 median price in October was 34.5 percent below a year ago, MDA DataQuick reported Thursday...Median prices in the county have fallen 50.2 percent since their November 2005 high of $351,500...Sutter County's October median price was $183,000, down 29.7 percent from the same time last year....Median home prices are now 46 percent below their December 2005 peak of $339,000.

From the Modesto Bee:

Stanislaus County homes sold for a median $161,500 last month....Home prices have dropped a staggering 59.2 percent below the $396,000 peak hit in December 2005...Merced County is even worse. Median-priced homes there sold for $136,750 last month....Merced prices have plunged 64.3 percent since peaking at $382,750 in December 2005...San Joaquin County home values...are 55.7 percent below their November 2005 peak of $451,500.

"It's impossible to say when the bottom will hit," said John Knight, professor of finance and real estate at the University of the Pacific. "I never anticipated such a huge drop in housing prices so quickly."
...
[F]or "prudent consumers who waited to buy," [basically ignoring everything the UOP folks have said for the last three years] Knight said, "there are some tremendous opportunities now. Prices really cannot go much lower ... because it's becoming less expensive to own than to rent. That provides kind of a floor to housing prices."

Calling Market Bottom (Again)

From the Sacramento Bee:

"Sacramento is well into the first phase of the housing stabilization process, which starts with sales recovering on a year-over-year basis," [DataQuick's Andrew LePage] said.
...
Discounted foreclosures were 65.8 percent of September sales in Sacramento County, according to MDA DataQuick. Foreclosures were half of sales in the Los Angeles region and 42 percent of those in the Bay Area during September, the firm said.

DataQuick sales/price stats by county
ADDED: by zip [pdf]

From the Appeal Democrat:

Local median prices were down last month compared with September 2007, declining 31.5 percent in Sutter County, and 36.8 percent in Yuba County. Both counties were well under the $200,000 mark — the only counties in the Sacramento region in that range — coming in at $190,000 in Sutter County and $175,000 in Yuba County.

From the Modesto Bee:

The clearance sale in real estate continued last month, with another jump in the number of homes sold and a continuing drop in prices. Stanislaus County's median sale price was $179,000 in September, down 40 percent from a year earlier, MDA DataQuick reported Tuesday...In Merced and San Joaquin counties, the number of sales also soared last month compared with a year earlier. Each had a 47 percent drop in the median price, to $140,000 in Merced and $191,500 in San Joaquin.
...
Craig Lewis, president and chief executive officer at Prudential California Realty in Modesto, said the foreclosure wave appears to be waning. He said prices could bottom out in three or four months. "The next 90 days is the best time to buy in the last 10 years," he said.

Bottom out in three of four months? How can that be when prices bottomed out back in June 2007?

Craig Lewis, president of Prudential California Realty...said [Stanislaus County] median home prices have fallen from $414,000 in 2005 to $359,000 now, and it takes nearly three months to sell the typical home. "First-time home buyers have the ability to buy now, but … they're sitting back and waiting because they think the price will go down more," Lewis said. He doesn't agree. "I certainly feel we're at the bottom of the market."

From CNBC:

[What] strikes me is the positively bewildered expressions on the faces of the chief economists of both associations. These poor guys are tasked with telling everyone when its all going to get better, and the fact of the matter is they just don't know. Don't get me wrong, these are supersmart guys, number crunchers with decades in the business, but as NAHBs David Seiders said, the risk in housing right now is just so high that it makes forecasting extremely difficult.

From the Wall Street Journal:

[Bill] Knoff's house has traveled the arc of the local market. Built on vacant land in 2002, it sold for $280,000. Its original owner unsuccessfully tried to sell it in 2006 for $450,000. Mr. Knoff bought it out of foreclosure in March of this year for $320,000. Today, based on local sales, he figures the house is worth about $220,000. Mr. Knoff paid nearly half of the purchase price in cash, so most of his equity has been wiped out. But he said he believes in taking responsibility for such choices. "The government can buy up troubled mortgages. But it should kick the people out of their houses," said the 61-year-old information technology manager. "Why should I pay for someone to buy their house?"
...
[T]he bottom still may not be in sight. Home prices in California could end down as much as 60% from peak values, according to recent research from both Barclay's PLC and J.P. Morgan Chase & Co. Towns like Los Banos may have further to fall. According to the city and a local title office, roughly 2,000 of 10,000 homes in the town are in the foreclosure process. The city expects that number could grow before the crisis passes.

Interactive map thingy

From the Sacramento Bee:

Ward Smith of J. Smith & Sons Inc., a home-entertainment business in Natomas, said business already was slow because of the soft housing market. Then, when the stock market faltered, things came to a near complete halt. "The phones became eerily quiet for no good reason," he said. "Well, maybe there is a good reason. Everyone's (saying), 'We'll wait and see until we know what's really going on.' "
...
Prominent real estate broker Mike Lyon also knows what it's like when the phones stop ringing. The president of Lyon & Associates said things got very quiet when the stock market went into its downward spiral. "It was kind of like 9/11, to be honest with you," he said.

From the Sacramento Bee:

[CEO Gary] Pruitt said skeptics wrongly assume the vast majority of McClatchy's decline in revenue is due to a permanent migration of business to the Internet. Instead, he said, most of the problem is due to the economic downturn. McClatchy will "return to revenue growth when the economy resumes growing," he said. As evidence, he noted that McClatchy's biggest problems in the past two years have emerged in California and Florida, where the real estate market has crashed the loudest. But now McClatchy's papers in the Carolinas are experiencing somewhat similar declines as economic woes have spread to those states, he said.

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

From the Sacramento Bee (updated link):

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

From the Sacramento Business Journal:

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

From the Sacramento Bee:

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

From the Sacramento Bee:

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

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

Or maybe not.

From the Sacramento Bee:

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

Prices/Sales by County

From the Modesto Bee:

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

From the Appeal Democrat:

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

From the Sacramento Bee:

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

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

From the Sun Post:

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

From the New York Times:

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

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

Sacramento's Population Boom

From Home Front:

Three years after Sacramento became one of the first cities in America to see its real estate market sliding back down the hill, one of the first metros to tell the investment world that all had gone way, way too far this time, the Wall Street fallout is worsening...Did the Wall Street crowd get this housing boom all wrong or what?

From the Sacramento Bee:

The economy's downturn hits home with Paul Petrovich, one of the Sacramento region's most prolific retail developers. Consumers aren't spending as they once did, construction credit has tightened and retailers right now don't have much appetite for opening new stores.
...
Q: How is the credit crunch affecting your business?

No one is immune. The banks are coming to us and saying, "Look, this isn't 2005 or 2006 anymore. We want you to pay down our loan by $2 million, $4 million. In fact, I've had to do that on three projects recently. Developers with sound fundamentals who didn't go buy a jet or live a lavish lifestyle, who have experienced downturns and knew the good times wouldn't last forever, they have the capacity to deal with this. But I don't care how good you are, if things don't eventually get better, there won't be many people left standing.

From the Sacramento Business Journal:

C.C. Myers’ dream of building a luxury golf community north of Auburn has sunk the contractor an estimated $109 million into debt and could cost him his ownership in the renowned company that bears his name. Counting potential liability for construction projects, his liabilities total $309 million, according to documents filed this week in his bankruptcy case. The Chapter 7 bankruptcy liquidation could wipe out a lifetime’s worth of assets for Myers, whose efforts to rebuild roads and bridges have earned him national acclaim. At stake is $45 million in personal property, including his 45 percent ownership of C.C. Myers Inc., valued at $13.5 million, his $5 million Fair Oaks home, a $10 million Lake Tahoe vacation home and land holdings.

From Bloomberg:

U.S. foreclosure filings rose to a record in August as falling home prices made it harder to sell or refinance homes to pay off the mortgage, RealtyTrac Inc. said.
...
California had eight of the 10 metropolitan areas with the highest foreclosure rates, led by Stockton at one in 50 households. Merced, Modesto, Vallejo-Fairfield and Riverside-San Bernardino ranked second through fifth. Bakersfield, Salinas- Monterey and Sacramento, the state capital, ranked eighth through 10th.

From the Sacramento Bee:

"For Sale" signs sprout on suburban lawns, brown and neglected, signaling foreclosures. The bulletin board at the One-Stop county job center features such opportunities as cashier, carwash attendant, karaoke jockey, secret shopper. Empty storefronts are like missing teeth along Marysville's historic downtown district, and a line forms by 10 a.m. at the Olivehurst Recycling Center – cash for cans.
...
From once prosperous new housing developments south of Marysville to stubborn pockets of poverty in nearby Olivehurst, the county of 72,000 is hurting more than almost any other place in California. On the index of human suffering, Yuba County ranks abysmally high. Unemployment: second-highest in California. Foreclosures per capita: No. 10 in the state. Poverty rate: third among the state's 40 largest counties.

From KCRA:

The continuing housing and foreclosure crisis in Northern California has caused a bunny bonanza. The number of rabbits currently arriving at the Sacramento SPCA is double what it normally is at this point in the year, officials said.

GMAC To Close Local Offices

From Home Front:

Regionally, GMAC is closing three offices in Gold River, Yuba City and Stockton and laying off 20 staffers, said GMAC spokeswoman Jeannine Bruin.

From the Merced Sun-Star:

County Bank laid off about 20 employees Tuesday -- the first time in its 31-year history that the bank has been forced to cut back on staffing.
...
County Bank has remained unscathed from foreclosures because it didn't carry any home loans. However, it did lend money to developers, who've been having a hard time paying off construction loans.
...
Though no more layoffs are in the works, [company spokesman Thomas] Smith didn't rule them out. "Are housing values going to decline further?" he asked.

From the Sacramento Real Estate Blog:

The average home that sold in Sacramento County this August fetched $235,367, down 33.1% from last year’s average price of $348,698. The median sale price was down 33%, from $313,500 in August of 2007 to $210,000 in August of 2008.

From the Sacramento Bee:

More than a year after a collapse of two big residential tower projects in downtown Sacramento, a still more ambitious generation of downtown living is coming into view. Much depends on the economy and other variables in the next 20 to 30 years. But serious plans exist for up to 15,000 residential units north of downtown at the railyard and nearby Township 9. If all goes as hoped, the first of these homes, condominiums and townhouses may open in a rebounded housing market – and one also shaped by high-priced gasoline that discourages long commutes.
~~~
[Developer] Suheil Totah believe[s] they'll hit the "market" perfectly, opening a lot of this in 2012. They believe, as do most, that the housing market will be soaring again.

Home Prices Still Higher Than In 2007 2006 2005 2004 2003

Sacramento Bee: Five-year price picture isn't all doom and gloom

The bottom may have fallen out of Sacramento home prices, but most owners are better off than five years ago, says a new federal analysis of the nation's home prices. Home prices remain 22 percent higher in El Dorado, Placer, Sacramento and Yolo counties than in 2003, according to the Office of Federal Housing Enterprise Oversight.

From CNBC:

The economy will never recover if housing doesn’t find its footing first. But when will that happen? Cramer said he expects a bottom by the third quarter of 2009.
...
[E]ven these horrible areas – Bradenton in Florida and the Central Valley in California – are bottoming. The first to fall is usually the first to return, Cramer said.

From Forbes:

Central California is the epicenter. Among the top 10 debt capitals are six of California's major inland urban centers--not a good sign for the state's economic recovery...Housing price declines are the culprit, economists say. In California, prices in Modesto, Merced and Stockton fell between 41% and 45% after peaking in early 2006, the sharpest decline anywhere. The declines "have taken out the economy" in these cities, says Mark Zandi, chief economist at Moody's Investor Services' economy.com.

From the Appeal Democrat:

A West Coast furniture retailer with a long history in Yuba-Sutter announced Tuesday it plans to close after almost nine decades in business. McMahan's Furniture said it will shut all 15 of its stores, including Yuba City, within the next few months.
...
The company, which has been in business for 89 years, cited a slump in the home furnishings business that has been ongoing for two years. "McMahan's has experienced downturns before and always managed to rebound; however, this decline dating back to late 2006 has been considerably longer and deeper than anything (McMahan's) previously experienced," the company said.

From the Voice of San Diego:

"People are saying the reason prices are falling are because of all of the foreclosures, but the foreclosures are happening because the prices are falling," [Chris] Thornberg [founding partner at Beacon Economics] said. "They've got it backwards. The prices are falling because they're too freakin' high."

50% Off Peak For Stockton & Modesto Metros; Merced Down Nearly 60%

From the Modesto Bee:

This spring, median-income families could afford about half the homes sold in Stanislaus, Merced and San Joaquin counties. Compare that with three years ago, when the region's families could afford only about 3 percent of the homes sold. That's the upside of the housing downturn.

The downside is that home prices keep declining: July's median sales price plummeted to $190,000 in Stanislaus County. That's less than half what houses were selling for in December 2005, when prices peaked at $396,000.
...
San Joaquin's median sales price fell to $220,500 in July [down 51.2% from the $451,500 peak]. Merced's median fell to $155,000 [down -59.5% from the $382,750 peak].

From the Sacramento Business Journal:

The sharp fall in median home price in Greater Sacramento has helped drive up affordability....About 55.7 percent of all homes for sale in the four-county metro area were priced so that a family making the median income in the region could afford them, according to the National Association of Home Builders/Wells Fargo Housing Opportunity Index. That was the highest affordability rating among any California market in the study, and was even better than the U.S. figure of 55 percent for the second quarter of 2008.

From the Appeal Democrat:

In Yuba County, sales in July climbed 43.3 percent above a year earlier. The $183,500 median price was down 33 percent from the same period last year. In Sutter County, sales jumped almost 26 percent while prices were off 30 percent from July 2007, at $203,000.

From the Sacramento Bee:

The cosmetic surgery industry is in need of a lift. Soaring unemployment, high gas prices and the mortgage crisis have left consumers with less discretionary income. For plastic surgeons, that means fewer patients are coming in for elective procedures.
...
"Now financing (companies) are becoming more difficult in who they approve," said [Dr. Shahriar] Mabourakh [of the Folsom Plastic Surgery & Laser Center]. The Folsom doctor started seeing a decrease in calls from prospective patients in December.

Sacramento Unemployment Breaches 7%

Source: EDD [pdf]

From the Sacramento Business Journal:

The unemployment rate in the four-county Sacramento area hit 7.3 percent in July, up a half-point in just one month and sharply higher than the July 2007 jobless figure of 5.6 percent...The Sacramento metropolitan area last saw a jobless rate this high when it hit 7.4 percent in January 1996, as the region was coming out of a recession.
...
[W]age and salary employment dropped by 9,700 jobs from June to July....[T]he area was also down 1 percent -- 9,100 jobs -- from July 2007 to July 2008, with 5,100 construction jobs disappearing.

From KCRA:

Beefed-up code enforcement of bank-owned homes is leading to more violations and liens being placed on foreclosed properties, officials said. Some of these fines can be up to thousands of dollars.

The problem for taxpayers, KCRA 3 has learned, is that multiple banks -- instead of paying those fees to fix the properties -- are dropping sale prices as much as 50 percent to get the property out of their hands. "What they (code enforcement agencies) are doing is not forcing the bank to fix it up," said Mike Lyon of Lyon Real Estate. "They are forcing the bank to give it away."

From the LA Times:

First Rep. Laura Richardson was having problems making house payments, defaulting six times over eight years. Then after a bank foreclosed on her Sacramento house and sold it at auction in May, the Long Beach Democrat made such a stink that Washington Mutual, in an unusual move, grabbed it back and returned it to her.

This week, in the latest chapter in the housing saga, the Code Enforcement Department in Sacramento declared her home a "public nuisance." The city has threatened to fine her as much as $5,000 a month if she doesn't fix it up.

Neighbors in the upper-middle-class neighborhood complain that the sprinklers are never turned on and the grass and plants are dead or dying. The gate is broken, and windows are covered with brown paper. "I would call it an eyesore," said Peter Thomsen, a retired bank executive who lives nearby.

From Housing Wire:

The nation’s worst-performing counties continue to be centered in hard-hit California, CoreLogic’s data show: Sacramento County has seen prices fall 26.12 percent from June of last year, while Santa Barbara County has seen prices fall 25.54 percent; San Bernardino, 25.41 percent. In the past three months, San Bernardino has seen prices fall 7.46 percent, the second worst such showing nationwide (the worst performer was Calif.’s Sutter County, which saw a 7.87 price decline).

From the Sacramento Bee:

Existing home sales kept climbing in Sacramento County and West Sacramento during July, with homes repossessed by banks accounting for 70 percent of escrow closings, according to the Sacramento Association of Realtors. Prices continued to fall.

From the Stockton Record:

In a hot foreclosure sales market, the latest trend taking shape is investors bundling their cash to buy bundles of homes...Terry Hull Sr., a Stockton real estate developer and co-owner of a family-owned property-management firm, said he is organizing a group of as many as 50 local investors to pool enough money to buy 25 to 30 houses...Twenty investors already have bought in at $25,000 per share, he said.

The buyer of one share is Bob A. Sullivan, a semi-retired owner and broker of a Stockton real estate firm. He said he expects to no less than double or triple his investment. "What I like the best is the timing to buy," he said. "Prices are really depressed right now. In my mind, there's no question that prices will go up again considerably. Whether it's one year or five years, I don't know. I don't see any downside."

'The lenders still just have their heads in the sand'

From the Modesto Bee:

A record-breaking 3,000 homes were lost to foreclosure during July in the Northern San Joaquin Valley, pushing the 12-month foreclosure total to more than 20,000 homes. Mortgage defaults on those properties cost lenders about $1.1 billion in July, according to statistics released Tuesday by ForeclosureRadar....

"We're going to see even more foreclosures this month," predicted Sean O'Toole, founder of ForeclosureRadar, which tracks every California foreclosure. "The lenders still just have their heads in the sand." O'Toole said mortgage companies continue to be unrealistic in dealing with borrowers because they haven't accepted how bad the real estate market is in places like the Northern San Joaquin Valley.

From the Appeal Democrat:

Roughly three quarters of Yuba-Sutter homes purchased in the last five years are worth less than their mortgages, said Zillow.com, an Internet home-value provider.

And the last year has continued to be brutal to area homeowners. Zillow.com's median home value estimate for the second quarter sagged by 23.4 percent for the Yuba City metropolitan area compared with a year ago. Nationwide estimates dropped 9.9 percent for the same period.

"Obviously, Yuba City isn't doing that wonderful, comparatively," said Zillow spokeswoman Sarah Mann.

From the Stockton Record:

Sales of existing homes - mostly foreclosures - in San Joaquin County continued to rise in July for the sixth consecutive month. A total of 1,036 single-family home sales closed last month, up nearly fourfold from the previous July, according to figures from the latest Coldwell Banker Grupe-TrendGraphix monthly sales report, based on Multiple Listing Service data.
...
This while the median selling price countywide continued to drop, from $220,000 in June to $215,000 last month. That continuous slippage back to selling prices not seen since spring 2002 is driving sales, real estate brokers said.

From the Financial Times:

Subprime mortgage defaults are soaring in the northern Californian city of Merced and angry local officials are placing much of the blame for the rout on property speculators from the nearby San Francisco bay area..."There should be a special place in hell for those people," James Marshall, Merced city manager, says of the speculators.

From the Merced Sun-Star:

Merced Councilwoman Michele Gabriault-Acosta, a residential Realtor, hadn't read the Financial Times piece, but said such stories could keep people from moving to Merced. "It doesn't help matters," said Gabriault-Acosta. "People look at that and they automatically think negatively of the city." Gabriault-Acosta said her real estate clients routinely mention negative news coverage they've read about Merced.

She likened reports of Merced's housing bust to coverage of the downturn Detroit experienced in the 1980s during the collapse of the American auto industry. "You start to second-guess whether it's somewhere you really want to move to and bring your family to," she said.

"The Complete Opposite of the American Dream"

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

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

From Home Front:

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

From Bloomberg:

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

From the CVBT:

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

From the CVBT:

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

From the Guardian:

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

From the Sacramento Business Journal:

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

From the Fresno Bee via the Modesto Bee:

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

From the Modesto Bee:

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

From the Sacramento Bee:

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

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

From Home Front:

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

Stockton's "Butterfly Effect"

From Home Front:

Like many in real estate...Jeff Johnson, who runs the Citrus Heights branch of a national mortgage lender, Platinum Home Mortgage...says that the elimination of down payment assistance...will keep thousands of would-be buyers out of the market. He believes that just as the sales here have started to rise, this federal decision is going to slow them down again..."We're really going to be in trouble."

One reader's response:

Mr. Johnson's comment "We're really going to be in trouble" shows his narcissistic view of the real estate market--it's all about me. If buyers can't get free money or bad loans, I'm not going to make $500,000 this year like I did last year. What people need is low home prices, not gimmicks to get into an expensive home. The market shouldn't be about people in the business making lots of money, it should be about people not in the business being able to afford a home. It's the mentality of people in the business thinking they need to make more that leads to less people owning homes. How about if we prohibit investment in single family homes, support more use of the Internet and less use of real estate agents and mortgage brokers, require a reasonable down payment to ensure buyer commitment, and let the market work in a sensible way, then maybe people who are responsible would be able to own a home.

From the Sacramento Bee:

On paper, the Silvertip Estates development in Orangevale may seem like a great deal for home buyers. The 32 single-family homes on a four-acre lot near the corner of Greenback Lane and Almond Avenue range from about 1,700 to 2,000 square feet and start in the low $400,000s, according to the development's Web site. Homes were slated to be available this spring, it said.

But call the number listed and you'll find it has been disconnected. Drive by the project site, and all you'll find is weeds. Silvertip Estates is one of several developments planned by Fair Oaks-based developer Sixells LLC that has become a casualty of the housing downturn...[T]he once prominent development company now finds itself sputtering along in a dismal economic climate.
...
[Sixwell project manager Jim] Franklin denied recent reports that the company was going out of business. "There's no plan to shut the doors and no plan for filing for bankruptcy," he said. But without any work to do, he wondered if – by default – it already was. "When you're not doing any business, are you out of business?" he asked.

From the Sacramento Bee (hat tip Jeff):

Increased costs prompted Lowe's Home Improvement Warehouse to pull out of a proposed store in Rocklin, according to a spokeswoman. Property owner and developer Paul Petrovich, however, said architectural details added by the Planning Commission killed the deal. "The amount of money that was added onto their building as a result of the Planning Commission busted the budget, in addition to the tougher economy," Petrovich said.

From the Appeal Democrat:

People still have to eat. But whether they will leave their homes and workplaces to do so is a question that puts local restaurant owners on edge...According to the 2008 Restaurant Growth Index, calculated by Restaurant Business Magazine, Yuba-Sutter residents didn't get out much for eats last year and are doing so even less this year. Scoring, based on local restaurant sucess and demographic measures, pegs the national average at 100. Yuba-Sutter scored 11 in 2008, down from 31 in 2007.
...
Steve Brammer, chief of operations at the Economic Development Corp. in Yuba City, says the restaurant business — like many other types of businesses — is inextricably linked to the housing market. With fewer and fewer residents able to pay their mortgages, the idea of eating out seems more and more extravagant.

The Average Buyer blog notes substantial declines in local airport activity.

From The Independent:

American Dream Realty – Reduced Price! The estate agent hammering the "for sale" placard into the yellowing lawn of a family home in the Weston Ranch district of Stockton, California, this week could hardly have been optimistic. Almost every second home had a similar sign. This suburb, created from nothing 15 years ago, had promised so much to the low-income families who streamed in during the building boom, a roof of their own at last for people deemed "sub-prime borrowers" and – perhaps – a nice profit if house prices continued to defy gravity, as they seemed they would a few years ago.

When the crash came, when the US housing market ran out of sun seekers migrating from the North and speculators hoping to flip their purchases for a quick buck, the surge in foreclosures blighted neighbourhoods. In Stockton, foreclosure capital of the US last year, the lowering of tone has been tangible, in an unpleasant way: residents became alarmed at the number of abandoned swimming pools lying uncleaned, magnets for mosquitoes and disease. Such things don't show up in the statistics, but they are as telling an indicator as the 25 per cent drop in American house prices over the last year alone.

In Weston Ranch as elsewhere, egged on by brokers on fat commissions, during the boom, residents had taken on mortgages they could not afford. Of all the bits of jargon, it is the "Ninja" loan that will stand out as the abiding symbol of the US real estate bubble – "no income, no job, no assets". Now that their cheap "teaser"-rate loans have run out and they can't find credit, they're giving up. Meals lie half finished on dining tables as families bolt the moment the sheriffs arrive to repossess the property. In many cases, owners simply post the keys through the letterbox and walk away rather than continue to pay for a home that is slumping in value.

Even now, it is impossible to know what, precisely, triggered the credit crunch. In the familiar story that is always used to explain chaos theory, the flap of a butterfly's wings in the Amazon rainforest can provoke a tornado on the other side of the globe, because even the tiniest chance alteration in a weather system can be amplified into the most dramatic of outcomes. Nature has always been global; now the globalisation of finance has made similar phenomena possible in economics. In the case of the credit crunch, the butterfly's wings might have been the crack of a real estate auctioneer's gavel a couple of years ago, heard in some corner of California, as a former dream home in Stockton went for a knockdown price as a foreclosure special. Or some casual gossip in a bar that prompted a buyer to pull out of a deal. Or a family break-up that forced a distressed sale. At some point, the momentum behind America's property boom ran out, the moment where reality caught up with the debt delusion. The credit crunch would follow, a trillion-dollar ($1,000,000,000,000) meltdown of banking losses that has left the world's financial system so feeble that banks are too scared even to lend to each other, for fear they will never be repaid.

Related posts:
Loans to Sacramento Trailer-Home Buyers...Trigger a Global Credit Crisis
California's New Canary in the Coal Mine
Placer Pops - YoY Depreciation Era Begins?

I guess Stockton and Sacramento were special after all!

DataQuick: Sacramento Home Prices Plunge Nearly 35% YoY

Another record price drop. From the Sacramento Bee:

Sacramento County...showed a 30.8 percent gain in sales over the same time last year...But those gains cost sellers dearly. Sacramento County's median sales price of $225,000 is almost 35 percent less than the same time last year. The median sales price - where half cost more and half cost less - hasn't been so low since January 2003.

Statistics by county via Home Front

From News10:

Chuck and Donna Rhodes recently bought a home in the Plumas Lake area of Yuba County, 25 miles from Donna's job and 35 miles from Chuck's. At the end of a recent work day, the two were working at home on what to do about the sagging price of their house. "The retirement is what bothers us because this is where the bulk of our money is and we can't retire unless we can sell it for at least what it was paid for and hopefully a little bit of appreciation on top of that," said Donna Rhodes.

From the Appeal Democrat:

Despite a loss of 60 positions, Yuba County's 2008-09 interim budget will grow slightly to fund millions of dollars worth of projects, including road improvements and the general plan update. The Health and Human Services Department and the Community Development and Services Agency will feel the greatest hit, losing a combined 59 positions, seven from layoffs.
...
Yuba County's major blow in revenue came with the downturn in the housing market. The county estimates it will lose between 3 and 6 percent of tax revenue in the next fiscal year.

From USA Today:

Borrowers are turning back to [credit] cards because "the spigot has been turned off on home equity lending," says Mark Lauritano of Global Insight, a research firm. In a recent USA TODAY/Gallup Poll, one in five consumers said they'd been using their credit cards more in the past year. Within this group, 44% are paying for necessities they couldn't otherwise afford.
...
"A lot of the clients we have work in the construction field, and there's not a lot of construction going on," says Diana Navarro, a housing counselor in Sacramento. "They've been using their credit cards for (everyday) expenses."

In Come the Waves: Sacramento Bee to Cut Workforce by 8.1%

From the Sacramento Bee:

The McClatchy Co., battered by declining profits and revenue, announced a 10 percent companywide cut in its work force Monday, including the Sacramento publisher's first-ever across-the-board layoffs. The decision will eliminate 1,400 jobs through a combination of layoffs, voluntary departures and attrition. The Bee, McClatchy's largest paper, announced it will eliminate 86 jobs, 46 by layoffs. The reduction will trim the paper's workforce by 8.1 percent...McClatchy is the largest public company in Sacramento and the third-largest newspaper chain in the country.
...
The economic downturn has been another big blow to publishers, particularly McClatchy. The company gets a third of its revenue from California and Florida, two of the states hit hardest by the crash in the housing market. For instance, The Bee's revenue fell 16.9 percent last year, or about twice as much as the company as a whole, according to Securities and Exchange Commission filings.

From the Sacramento Bee:

On the street level in Sacramento, where unemployment is 6.1 percent, it feels as though hard times are already here. "My sense is that we're in really big trouble," said Alice Strombom, a Sacramento attorney who was pumping gas at $4.64 a gallon the other day at a 76 station on Freeport Boulevard. "I don't have that normal sense that everything's going to be fine." She recently traded her Audi for a Toyota Corolla with much better gas mileage.
...
Two Sacramento dealerships have announced shutdowns in recent months, Paul Blanco Chevrolet and Great Valley Chrysler-Jeep-Mazda-Isuzu. Senator Ford stopped selling new cars.

The slowdown has affected general retailers. Arden Fair's traffic counts are lower than a year ago, while sales volumes are flat. Clothing stores seem to be getting hit hardest, said property manager Tod Strain. "We are feeling it, no doubt about it," Strain said.

From the Appeal Democrat:

Every day Steve Nickless and his crew load up a trailer with mowers and weed trimmers and get to work on lawns. The homes they visit, though, are unoccupied. Nickless, as an employee of BV Home Services, is hired to maintain hundreds of abandoned and foreclosed homes in the Central Valley.
...
The hundreds of vacant properties and the lack of upkeep on those homes caused Yuba County to address the issue through code enforcement...Finding responsible parties, though, may not be easy. "It's going to be difficult," Strang said. "This is a new type of violation we haven't seen before. We've had vacant homes before but not to this level."

Finally: Analyst Predicts 50%+ Decline For Sacramento Housing

From CNNMoney (hat tip Average Buyer):

With home prices plunging by more than 30% in some markets, bargain-hunters are ready to pounce. But it may pay for buyers to wait. Many housing experts say that the worst-hit metro areas have even farther to fall, and could see total drops of as much as 50%.
...
Many erstwhile bubble cities have sustained particularly brutal hits. The median-price of a home in Sacramento, Calif. was down 35% during the three months ended May 31 compared to the same period last year, according to the real estate web site Trulia.com...Smaller cities in California's Central Valley, such as Stockton (-39%), Modesto (-37%) and Bakersfield (-29%), also recorded steep declines.
...
"The housing boom was unprecedented in U.S. history," said Michael Youngblood, a portfolio analyst with FBR Investment Management, "and the correction will be as well."...Youngblood expects that these markets will likely endure total price drops of 50% or more.

Currently, several Sacramento home price measures have crossed the 40% off peak threshold. Compare that with some other famous housing busts:

[P]rices are falling faster and further than in any other post-war housing bust. [Prices are also falling faster than during the Great Depression.] During the bust in Austin, Tex., which started in 1986 and is one of the worst on record, prices fell 25%, according to Local Market Monitor, a financial data provider. And that cycle took four years to bottom out. In other major downturns, prices in Los Angeles fell by 21% during a six-year period in the 1990s, and Honolulu home prices saw a decline of 16% in the five years starting in 1994.

Given the lack of American precedent, it might be a good time to brush up on the history of the housing bubble in Japan (where home prices in the largest six cities fell by 64% over a 13-year period and Tokyo fell by more than 80%).

From Bloomberg:

Almost $70 million of tax-exempt bonds were sold in June 2007 to build roads and sewers for thousands of new homes planned for Elk Grove, California, once the fastest growing city in the U.S. A year later, the lots are largely vacant and the bonds lost 41 percent of their value.

The debt plummeted as construction all but ceased after the biggest developer on the Laguna Ridge project fell behind on the property taxes used to pay interest. Scattered homes sit among tracts overgrown with weeds as housing sales wilt. "It's stopped completely,'' said Onkar Singh, 76, who lives in an adjacent development in the 129,000-person town outside Sacramento. "Everything's vacant."

From the Appeal Democrat:

Nearly 50 employees at the Kbi Norcal Truss plant in Olivehurst will be without jobs next month, victims of the slumping housing market. Mark Kailor, vice president and treasurer of San Francisco-based Building Materials Holding Corp., which owns the Olivehurst plant, said the decision to close the plant was made because of market conditions.
...
"What we have in terms of manufacturing is based on the housing industry; hopefully they will come back when the market turns," [John] Fleming [Yuba County's economic development coordinator] said.

From the Modesto Bee:

Finally there's some good news on the foreclosure front: Northern San Joaquin Valley mortgage default rates seem to be stabilizing. After nearly two years of staggering increases, the number of homes issued notices of default, the first step toward foreclosure, was lower in May than in April or March.
...
"The region definitely is stabilizing. It's stabilizing at a pretty high level, however," said Sean O'Toole, who founded and runs ForeclosureRadar...."The banks still are taking back more inventory than they're able to resell," O'Toole said...He said the three counties were among the first in California to enter the foreclosure crisis. "Now I think you're leading the way out."

From the National Review:

Until this week, that predatory-lending narrative dominated the housing conversation. But in the past few days, three poster children for irresponsible lending and borrowing have taken center stage in the debate over the housing bailout...The first is Rep. Laura Richardson, a California Democrat...The second poster child is Michelle Augustine, another Sacramento homeowner (what’s going on down there?) who was featured Wednesday in a Wall Street Journal article about a phenomenon called "buy and bail."
...
Nowhere in the Journal story does Augustine claim to be a victim of predatory lending. She presumably understood the terms of her mortgage, and she knew her payments would go up. Like many Americans, she probably just assumed that house prices would continue to rise and that she could refinance into a more affordable mortgage once that happened.

Assuming Augustine’s lender had accurate information about her income, it made the same mistaken assumptions about house prices and her ability to pay that she did. Congress wants us to bail these people out. Instead, they deserve each other — and whatever consequences befall them.

More discussion of the legality of "buy and bail" over at the Volokh Conspiracy blog.

'It's Kind of Like Bleeding to Death'

From Bloomberg:

Home prices fell in 23 U.S. metropolitan areas in March, led by Sacramento and San Diego, as rising foreclosures prolonged the housing recession. The price per square foot in Sacramento, California's capital, dropped 31 percent to $160 from a year earlier, according to a report released today by New York-based Radar Logic Inc., a real estate data company.

From Housing Wire:

Most key markets in California saw motivated sales comprise a growing portion of transaction volume, as well. In Oakland, distressed sales were 35 percent of the housing market in March, RadarLogic said; in Sacramento, that number soared to nearly 50 percent.

From the Sacramento Bee:

At the current sales pace, real estate experts say, it will take 13 years to develop and sell all the new homes planned in Yuba County and its neighbor, Sutter County. "That is horrifying. That's like seeing a mouse under the table," says Dean Wehrli, a Sacramento-based home-building industry consultant, addressing a home-builders meeting last week. "My take is that marketplace is going to be hurting for a while."

From the LA Times:

It wasn't long ago that Andy Krotik was selling houses to out-of-town investors who would sometimes buy two at a time. Now, Krotik spends his days warily entering abandoned houses, checking for angry holdouts or startled squatters. He wants to make sure the properties are empty and secure so he can sell them for the banks that have repossessed them. "We're experiencing a tsunami of bank-owned properties," said Krotik, who has been selling real estate in this Central Valley town since 1989.

Few places in California flew as high in the real estate boom and crashed as hard as Merced.

From the Associated Press:

Robert Lindsey was not surprised by new data last week that showed new home sales have fallen more than 40 percent from their peak almost three years ago. He can tell from his company's bank account. "We're literally losing money every month," said Lindsey, general manager of Signature Drywall Inc., in Sacramento, which installs drywall in new homes and apartments in the Sacramento and San Francisco areas. In 2005, the firm raked in some $30 million in sales. Last year, sales were less than half that, and this year Lindsey hopes he can make $8 million. "It's kind of like bleeding to death," he said.
...
In California alone, subcontractors have laid off, on average, up to 80 percent of their staff, according to the California Professional Association of Specialty Contractors in Sacramento, which mostly represents firms engaged in new home construction projects...Head hunters say workers have fled California for Utah, Texas and other states where there's a better chance to get work in homebuilding.

From the Sacramento Bee:

Democrat Vicki Cabrera, 47, of Sacramento, who also plans to vote, directly feels the effects of a lagging economy. She lost her job as an administrative assistant for a real estate firm due to the weak Sacramento housing market. "I've never in my life gone without a job. Never," said Cabrera, who had to let go three of her family's five prized Sacramento Kings season tickets and is contemplating selling her sports memorabilia collection.

From the Modesto Bee:

Katina Hearn has been a waitress for almost 20 years, the past two at Skewers Kabob House in Modesto. She's seeing the same trend now that servers experienced during the recession of the early 2000s: people are eating less-expensive dishes and leaving smaller tips. "It really does affect us," Hearn said about the economic downturn. Servers must claim 8 percent in tips for their taxes at the end of each night. But on some nights, that isn't balancing out because people may tip only 5 percent, Hearn said.

From the Sacramento Bee:

Private schools are also seeing some changes with the downturn in the economy. Several in the Sacramento region reported a slight drop in the number of applicants for next year and a small increase in the number of requests for financial aid. "We know that some of our parents who are in development or home construction or sales, we know they've experienced significant downturns in their income," said Stephen Repsher, headmaster of Sacramento Country Day School, where tuition is around $16,000 a year.

From the Lodi News:

Two weeks after Galt City Council members urged the public to help keep up abandoned homes, one of them has been fined $100 for doing just that. Barbara Payne received a citation from the city's Public Works department last week for watering the lawn of an abandoned home next door — a violation of the city's code.

"Even the Models Had Dead Lawns"

From Home Front:

Mostly, it was acres and acres of dead subdivisions that just jumped out at a driver touring this part of the state. In so many places the streets and sidewalks are in, the utility wires are sticking out of the ground, the street signs are up - and it's nothing but weeds almost as far as you can see.
...
In Edgewater: A street of 20 houses built by Roseville's JMC Homes with only one house occupied. In Plumas Lake: a Ryland Homes subdivision called Thoroughbred Acres. Five lovely models and nothing else. Behind it a pile of Ryland flags and poles. I walked up to read the writing on the flags and a jackrabbit ran off. Down Arboga Road, another subdivision by Lakemont Homes. Even the models had dead lawns.

I don't mean to pick on Plumas Lake. But some of it looked like a poster child for the consequences of risky lending. In many neighborhoods there is an overpowering feeling of abandonment and at the very least, neglect. I cannot remember anywhere - not in Lincoln nor Merced - seeing so many unkempt and unmowed lawns.

From the Sacramento Bee (hat tip Jeff):

Sacramento's $58 million shortfall for next fiscal year is only the start of the city's budget woes: The gap between what the city takes in and pays out is forecast to become even wider over the next five years, requiring cumulative cuts of about $200 million, according to city officials.
...
Like the state and other cities across the nation, Sacramento is struggling with the subprime mortgage meltdown and a worsening economy. Russ Fehr, recently named city treasurer, said the budget crisis is caused by low revenue and escalating costs, much of that attributable to negotiated labor contracts. Sales tax revenue is below estimates. He said the downturn of the housing market and rising unemployment are likely to mean a significant slowdown in property and utility users tax revenue.
...
More deficits and more cuts are coming over the next five years, City Manager Ray Kerridge warned in the city's budget overview. "The reductions will be deeper and more difficult since many of the nonessential services are already proposed to be eliminated in 2008-09."

From the Sacramento Business Journal:

Sales of existing homes in the Sacramento area increased 68.5 percent year-over-year in April....The median sales price here was $235,000, about a 35 percent drop from April 2007, CAR reported.

From the Daily Breeze:

Rep. Laura Richardson, who lost her Sacramento home in a recent foreclosure auction, has also defaulted on properties in Long Beach and San Pedro, records show. Richardson, D-Long Beach, was able to bring her payments up to date on the Long Beach home relatively quickly, but the San Pedro property lingered in the foreclosure process for almost eight months, and still has a pending auction date.

In her first interview since the news broke Tuesday that her Sacramento home had been foreclosed, Richardson blamed the foreclosure on a miscommunication by her lender. She offered no apologies for failing to make payments on three separate homes and expressed no regret for failing to pay nearly $9,000 in property taxes.
...
As a member of Congress, Richardson makes $169,300 a year. As a member of the Assembly, she made about $116,000, plus a per diem for living expenses in Sacramento.

From the Associated Press:

She said she is like any other American suffering in the mortgage crisis and wants to testify to Congress about her experience as lawmakers craft a foreclosure-prevention bill.
...
Rather than shy away from voting on mortgage-related bills, Richardson said her experiences could help her craft legislation to make sure others don't experience what she did. For example, she sees a need to add steps to inform property owners before their property can be sold. "We have to ensure that lenders and lendees have the tools with proper timing to resolve this," she said.

More on the House flipper in trouble at Calculated Risk.

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

From the Sacramento Bee:

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

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

From Home Front:

Is this sustainable?

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

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

From the Daily Democrat:

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

From the Appeal Democrat:

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

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