Home Front

A blog about the economy and the Sacramento-area real estate market.

October 24, 2008
Friday's World Wide Web of housing

A couple interesting reports here that people have forwarded today:

Are Baby Boomers and their offspring going to use less housing instead of more? And if so, that's not good news for the housing industry. The Boomer Consumer Blog offers a perspective on Boomer Sociology and Housing Demand.

"As children live longer with their Boomer parents, as more single Boomer women merge households to economize on housing expenses, as Boomer households morph into new forms, demand for housing could remain depressed for years."

And this from USA TODAY about Stockton digging out of the foreclosure crisis.

When will that city to the south of us be known again for something other than foreclosures? Not today. Not yet. Here's a line from the USA TODAY story:

"But the city's hangover is likely to be a doozy. Its experience mirrors that of other U.S. cities devastated by foreclosures and underscores that recovery from the national mortgage and credit crisis will be painful for many people but filled with opportunity for some."

October 23, 2008
California and Sacramento foreclosures: still going up

MDA DataQuick shows no leveling off of foreclosures during July, August and September in its newest quarterly statistics.

The news is grim almost everywhere:

  • 79,511 foreclosures statewide in the third quarter. That's more than 190,000 the first nine months of this year - and nearly 275,000 since the beginning of 2007.
  • More than 7,700 new foreclosures in the eight-county Sacramento region (Amador, El Dorado, Nevada, Placer, Sacramento, Sutter, Yolo and Yuba counties). That brings the 2008 tally to more than 19,000. Since the beginning of Jan. 2007, that's more than 29,000 capital-area households that have been displaced by foreclosure. 

You'll note that the news release [says defaults are falling. That's not because fewer people are having problems, though. It's due to a new state law that requires lenders to spend more time contacting troubled borrowers before starting the foreclosure process.

Here is our online story on the newest quarterly numbers.

The region's third-quarter foreclosures by county:
Amador: 46
El Dorado: 243
Nevada: 119
Placer: 766
Sacramento: 5,643
Sutter: 291
Yolo: 364
Yuba: 297.



October 22, 2008
Wall Street Journal looks at rising California sales

Here is a good read about the amazing sales rebound this year in California through the eyes of The Wall Street Journal.

 It says our sales are rising fast, even as they're still falling across much of the nation.

The story is anchored in Merced County's Los Banos, and has everything you ever wanted to read about the state's housing mrket -  including a debate about whether homeowners themselves should be rescued or keep letting the market do its thing.



October 20, 2008
First time ever: Protests greet Mortgage Bankers in S.F.

Ouch! Mortgage bankers have never been the most popular people on the planet, but the stars aligned badly for them this year to have their conference in San Francisco.

 Not suprisingly, according to the Housing Wire, they've attracted a band of 100 protesters for their convention which starts today. First time such a thing has happened.

Says the story:

"Jail bankers! Let them rot!" echoed throughout the streets as protest leaders on a megaphone continually railed against the nation's financial crisis; and the commotion clearly left at least some attendees rattled an unwilling to attend the actual show. We spoke with more than a few exhibitors who said they were escorted into the building by security via a side entrance, and who felt that the protest would hurt attendance at the show.

October 20, 2008
New housing sector down 221,000 jobs since 2005

There is a new study out detailing the massive losses to the homebuilding industry in Califronia since the market began going south in late 2005.

"The declines are staggering," said Ryan Sharp, director of the Sacramento Regional Research Institute. 

The report is 43 pages.  The news release with a syonpis is here.

October 20, 2008
September in Southern California: foreclosures half of all sales

Existing homes sales jumped dramatically from August in the six-county Southern California metropolis - Los Angeles, Orange, Riverside, San Bernardino, San Diego and Ventura counties. MDA DataQuick of La Jolla, in the first of its postings on the state's markets this week, has  the details here.

October 20, 2008
A silver lining to the housing, economic downturn

 I always enjoy Joel Kotkin's takes on California and the U.S in good times and bad. He has an interesting perspective in the Washington Post on how communities might strengthen as a result of all this accumulated chaos. He calls it "localism." It's worth reading.

October 17, 2008
Have you checked Zillow lately?
...Apparently, not enough.

  Inman News is reporting that Zillow is laying off 25 percent of its workforce.
  Could it be that Zillow arrived and became well known just in time for millions to be afraid of knowing what their home values are?

 Save the economy. To the keyboards, everyone.

October 16, 2008
The sound of no foreclosures whatsoever

Sometimes the absence of news is what the news really is. Buried deep in today's RealFacts announcement of continued flat average rents across the Sacramention region are a couple of lines that just jumped out at me:

"Today's headlines are about the troubles on Wall Street that were triggered by the subprime mortgage crisis. How has this loan crisis affected large apartment complexes? To date there have been almost no foreclosures on apartment buildings thanks to the stability of rents and occupancy."

I called Caroline Latham, owner of Real Facts, a Novato-based researcher that tracks the apartment industry nationally, and asked her why apartments aren't being foreclosed upon. (We'll have more on this subject in Friday's Home Front column) 

 Latham said: "There are reasons for that. One is the standards for lending on investment real estate are somewhat different and have been  for quite awhile compared to residential real estate.

 "The standard of investment lending was you have to put at least 20 percent down. None of this nothing down. You had to be able to show it was going to cash flow enough money to pay off the loans. There were stricter standards."

It's not a breakthrough concept by any means. Just simple common sense. And the apartment sector now never makes headlines for repossessions and renters getting spilled into the street. As I am saying in the lead off to tomrorow's column: Here's to 800 square feet of serenity - two bedrooms, one bath and a plant on the deck. 


October 16, 2008
California Association of Realtors: a turnaround later next year

Every year about this time the California Association of Realtors issues its forecast for the coming year. Here is CAR's newest look into the crystal ball for 2009.

Highlights: Prices down and sales up.

Here is an excerpt:

"The current uncertainty about the financial system and economy is likely to persist over the next several weeks, and could extend into next year," said C.A.R. President William E. Brown. "Our forecast assumes that the financial system will begin to show signs of stabilization late in 2008 and into early 2009.

"We expect that the economy will be at its weakest period over the next three quarters through the second quarter of 2009, with recessionary economic conditions throughout that time period, before we begin to see a turnaround in the second half of next year," he said. "Going forward, a great deal depends on the state of the financial system in general and the real estate finance situation in particular, as well as the flow of distressed sales through the market. We expect sales of distressed properties to peak in early 2009 - a critical factor in the housing market that directly impacts the timeframe for stabilization in the median price.

"Looking ahead, home prices and favorable interest rates in 2009 will contribute to gains in affordability," Brown said. "However, we need to move through the current financial crisis and restore the flow of credit so that qualified buyers are able to take advantage of improved affordability and successfully purchase homes."


October 16, 2008
September sales strong in Sacramento and Placer counties

Sacramento County and the city of West Sacramento reported 2,020 closed escrows in September - up 8 percent over August - the Sacramento Association of Realtors  announced this morning.

SAR says it's the first month since August 2005 that escrows have topped the 2,000 mark. The Realtors group also noted that the median price for its region - Sacramento County and West Sacramento - fell below $200,000 to $194,950.

 That's the lowest median since May 2002. The reason: discounted foreclosure properties.

70 percent of all September closings were bank repos.

Zero in on more  September details here.  Here, too, is a really up-close look by ZIP Code.

Placer County is also reporting a September sales increase above August, with 424 closed escrows. Its new median price - where half sold for more and half for less - is $314,450.

For all the details, check out this link from the Placer County Association of Realtors












October 15, 2008
Builder Christo Bardis files for personal BK protection

For the third time in six months a major Sacramento-area land developer and home builder has filed for personal bankruptcy protection. This time it is Christo Bardis, cofounder of Sacramento-based Reynen & Bardis Communities.

Bardis claims liabilities between $100 million and $500 million and assets of $10 million to $50 million. His attorneys filed the Chapter 11 request in U.S. Bankruptcy Court in Sacramento about 4 p.m.

His filing comes after a similar filing last April by his long-time partner John D. Reynen.

And it's jsut weeks after famed California highway builder C.C. Myers filed for personal bankruptcy protection regarding his Winchester Country Club near Auburn.

October 14, 2008
Huge drop in mortgage defaults, but don't break out party hats

 There's a new buzz in real estate circles about a huge September drop in California's mortgage defaults. But unfortunately, it's nothing to celebrate.

 Bankers are now having to cope with recently-passed SB1137, which requires new steps and a longer process before taking a borrower into default.

A September report on defaults from Foreclosure Radar provides the details of what it says is a 61 percent drop in notices of default - issued when borrowers fall two or three monthly payments behind.

Some day such a drop will be the greatest of news for all of us. But not today yet.


October 13, 2008
Lucky Citrus Heights woman wins a free new home
Count Jennifer Draa among the winners. She beat out 600,000 other entrants, presumably across California and the United States, to win a house of her choice to be built in Lincoln.

The Sacramento division of Arizona-based Taylor Morrison Homes made the announcement Monday.
Draa is a single mother who lives with her elderly mother in a condo in Citrus Heights. She's a state employee, a dispatcher with the California Department of Fish and Game. Under the contest rules she gets to pick a floor plan for a house to be built in Lincoln Crossings. Taylor-Morrison said Monday it will start the home next month for a February move-in date.

Meanwhile Draa is also off to Disneyland late this week for a four-day vacation and a $20,000 shopping spree at an Orange County home furnishings store. It's all part of a huge contest run out of Disneyland all summer - the Innoventions Dream Home.

How's that for lucky?

October 13, 2008
September sales steady in Sacramento; prices still falling

It's much the same old drumbeat in this  new release about September sales from Sacramento-based TrendGraphix.

Sales held steady, prices fell and bank repos dominated the game in the region.

The number of for-sale signs in the region keep falling, too, as buyers snap up the discounted foreclosure properties. TrendGraphix reports 11,022 homes for sale in El Dorado, Placer, Sacramento and Yolo counties. That's down from 11,369 in August - and way down from a record high of 16,081 a year earlier. More September reports are expected from area associations of Realtors and from DataQuick in days ahead.

The big question is what's happening now. We're hearing scattered reports of big slowdowns in area escrow closings as the Wall Street financial solution spooks would-be buyers.


October 13, 2008
Video postscript to Sunday's story on Diablo Grande
I was stunned when I first saw Diablo Grande, the giant residential project in the hills west of Patterson, three weeks ago today. I had no idea it was so big, and so far along.

 Colleague Dale Kasler and I had motored up into the rolling landscape off Interstate 5 to research our Sunday story on luxury San Joaquin Valley projects hitting hard times. The story tells how big dreams and golf-course communities at Diablo Grande at Patterson and others in Fresno and Bakersfield sunk their developers into bankruptcy.
Why? The Valley economy won't support these huge dreams of the really good life. And they all hit the market just before the housing bust.

 Diablo Grande, however, near Patterson, is the one that's well off the ground and may succeed in the long run. It's the last place on earth you'd expect to see a development like this, with a major golf course, a posh clubhouse and a scattering of regular and luxury homes. It is seriously in the middle of nowhere.

But I was struck by comments of all the people we talked with: they WANT that. Most were from the Bay Area. They make what I think of as horrendous commutes. One homeowner who runs a car dealership in San Jose said he's putting 1,300 miles a week on his cars. They drive nine miles to a Save Mart for food and to Modesto for the mall. But in this car-crazy state no one seemed to mind.
 They all said this, instead: "Listen."
 And they were right. You can hardly hear a thing. The stars at night are unbelievable, people said. Of course the newcomers who bought at foreclosure prices were a lot happier than the pioneers who have lost value since buying in 2005. But all like the setting where they live.

Diablo Grande reminded me of what the Bay Area might look like if there was no Greenbelt Alliance. You can't develop hillsides there like they did in this project. Whether that's right or wrong depends on your point of view.
Anyway, Diablo Grande has a new owner now, a big Mexican firm that runs resorts. So we'll see what develops in years ahead. Meanwhile here is a panoramic video I shot of the landscape from high up near the luxury houses. All you can hear is the wind.

October 10, 2008
LIBOR rates next worry for Sacramento ARMs

One of the great advantages this year for people with subprime adjustable-rate loans is that an esoteric index called the LIBOR - the London Interbank Offered Rate - has lowered its interest rates. That matters because most subprime ARM resets are tied to the LIBOR, an interest rate that banks use when loaning one another money. It means rate resets haven't been as severe as feared.

Now that's going to become a problem for people, according to this report by Inman News. It says lots of rates are about to reset - to the higher monthly payments that get people into trouble.

  "America's homeowners are going to get uncomfortably familiar with 'LIBOR' starting next month," Citigroup analysts said.



October 9, 2008
An earful about the Bank of America/Countrywide settlement
 My phone has rung off the hook since Tuesday's story about Bank of America agreeing to rewrite $8.7 billion worth of mortgages originated by Countrywide Financial Corp., the ailing lender it bought for pennies on the dollar in July.

 I think it's up now to about 20 callers on the line at various times asking how they can find out more, learn if they're eligible and get on a list for help. The problem is I can't offer a number since Bank of America hasn't provided one. It just says it is staffing an office now that will start on Dec. 1 to identify who needs help and who will get it.

  This all stems from a legal settlement with Calif. Attorney General Jerry Brown and other attorneys general alleging that Countrywide used fraud and deception in originating risky loans that earned it huge commissions.

  What an earful I've had since. People from Sacramento, Stockton, Dixon and even Los Angeles, pouring our tales of sleepless nights and loans that are consuming their savings and that of their relatives trying to keep them above water. Some have called on behalf of their kids or a neighbor. I have referred some of them to non profit loan counselors. A couple of the callers have been small-time investors who bought a rental and don't qualify for any help. Always, there is this great weariness, this fear on the line. These people are worn down.

A lot of people think everyone who  got in over their heads with a bad loan should go down with the ship, lose the house, let the market flush them out. There's a case for that, sure. It seems to be the outcome that's happening most often.

But it's sure hard imagining yourself in these peoples' shoes. These are real people who regret not looking at the details of loan papers set in front of them. They could kick themselves. Why didn't they see it? They have pick-a-payment Option ARMS that are getting bigger. They have resets that costing them more of the check every month. One guy said his wife died last year and her Social Security was part of the income stream for his mortgage. In the background was his television set. He was babysitting the grandkids. He said the Countrywide loan is taking 43 percent of his income.

 Bottom line, I can't tell who is innocent or guilty, who should have been smarter or who foolishly refinanced to buy a boat and other toys. I don't know how this is going to work out for all these people. I just know a lot of people read the story and suddenly realized they might have an out, after all. Always, on the line, you can hear the fear and the shame and the embarrassment. I hope for a lot of them they get to some kind of happy ending.

 I know I've heard just a fraction of all the loan trouble that is swirling now through Sacramento.  Have to run. Here's another call.
October 9, 2008
Chicago's Cook Co. Sheriff says no to foreclosure evictions

 Cook County Sheriff Tom Dart has gained world fame for declaring that he will not evict renters from foreclosed properties. There is lots of blogging going on about this, too.



October 8, 2008
CBIA Chairman Ray Becker dies at 59

This arrived seconds ago from California Building Industry Association spokesman John Frith about the sudden death of BIA Chairman Ray Becker:

Since many of you interviewed him during the past year, I thought I would let you know that CBIA's Chairman, Ray Becker, died Tuesday at home at age 59. Ray was a veteran of California's development struggles, having worked for Lennar in Riverside County for many years before taking on the job of shepherding DMB Associates' master planned community near Hollister through the entitlement process four years ago. Funeral arrangements are pending.

We have created a tribute page on our Web site http://www.cbia.org/go/cbia/about-cbia/tribute-to-ray-becker/ and his official bio is also posted http://www.cbia.org/go/cbia/about-cbia/cbia-leadership/

From a PR person's standpoint, Ray was a gem to work with. He was knowledgeable, articulate, and non-confrontational. He understood the constraints the media work under and was willing to educate reporters and editors about our industry and the challenges it faces. For that and many other reasons, he will be missed.

We will also post his obit once it becomes available.

John Frith
Vice President/Public Affairs

October 8, 2008
John McCain's plan to buy and renegotiate mortgages

Last night's presidential debate flushed out a new $300 billion plan by Sen. John McCain to buy and renegotiate mortgages with homeowners. 

Here is an AP story this morning with a few more details.

October 5, 2008
About "100" calls to lender, but headed toward the brink

 A pretty hard-hitting piece here today in The Contra Costa Times, a Bay Area story of borrower frustration we've told hundreds of times ourselves the last couple of years here in Sacramento.

"This is a story about dead-end dialing, deaf ears and default notices. It's also about a single dad with a little girl, an ex-bike messenger who grew up late, leapt into homeownership and crashed on the rocks. But his tale of frustration is so familiar now across the Bay Area, it's less about how he got here than why he can't seem to fix it."

October 3, 2008
One for the weekend: Here's to low home prices.....
I have been reading Robert Shiller's new book, "The Subprime Solution," in anticipation of having a phone interview with him on Monday. I want to type out a few lines here for readers about how he looks at home prices. He says low is good and we shouldn't be trying to prop up prices.

Read on: (from page 84)

robert_shillergi03.jpg"There has been a peculiar tendency during this housing bubble (as with other bubbles) to regard price increases as generally good news. When I speak with news reporters of the outlook for declining home prices I am often told that I am a Cassandra.

 "But it is in no way bad news if home prices fall. If home prices go down relative to our incomes, we become wealthier, better able to invest in new homes. Most of us have children or even grandchildren, and they are usually more numerous than we. We care about them and about others in our society, and we want these others to be able to afford homes in the future. Scarcity is not good news - low prices are.

"The idea that public policy should be aimed at validating the real estate myth, preventing a collapse in home prices from ever happening, is an error of the first magnitude. In the short run a sudden drop in home prices may indeed disrupt the economy, producing undesirable systemic effects. But in the long run, the home-price drops are clearly a good thing."
October 2, 2008
Southern California's Pardee Homes surrenders in Natomas

ACW PARDEE HOMES 1.JPG   Sacramento Bee/Anne Chadwick Williams (in June 2007 as Pardee Homes was readying Natomas Meadows for the Los Angeles builder's grand debut in Sacramento).

   Pardee Homes has had the greatest of runs in Southern California, successfully surfing the waves of growth that built Los Angeles and San Diego and all their surroundings.

 But the builder has always seemed cursed in Northern California.

 Last week it sold 637 lots on 100 acres north of downtown Sacramento at its first big project in the capital city: Natomas Meadows. Its third time north of the Tehachapis has again proved to be something like the Boston Red Sox trying for decades to win a World Series.

 Pardee  tried to get in on the 1970s boom near San Jose and withdrew after unsatisfactory results. Thirty years later in 2005 it tried again in Livermore, spending $3 million to convince voters to expand their urban growth boundaries for 2,450 solar-powered homes. They said no. Not just no, but no by 72 percent of the ballots cast. That ended that dream. But by then Pardee had already come into the booming, growth-friendly Sacramento-Stockton market.
   In 2004, the firm plunked down more than $150 million for land and improvements at the very height of the land boom then sweeping the Central Valley. It bought land to build more than 600 homes in Natomas, 1,100 in Rancho Cordova's Sunrise Douglas area and 2,200 homes on the north side of Stockton. It also started up a new Sacramento division.
And then came the downturn. (Cue in the scary music here).

 Pardee built eight model homes at Natomas Meadows as the market was getting worse and worse. It opened them with balloons and fanfare. It touted its long Southern California/Las Vegas reputation as one of the West's top green builders.

The market here in Sacramento then soured so quickly that Pardee decided it couldn't sell at prices good enough to recoup the boom-era price it paid for land. So it fenced off Natomas Meadows and shut it all down.

Last week it sold the unbuilt lots to Granite Bay Development, a relatively new developer run by Clay Loomis, a former engineer and executive with Seattle-based developer/consultant Triad Associates. Loomis said his firm has no debts and cash on its hands, and is looking for other land buying opportunities now in Sacramento and Nevada.

Plans are to sell lots at Natomas Meadows to home builders in two or three years when Natomas gets past its upcoming building moratorium over those levees. By then Loomis thinks the market will be back.

In the meantime, Pardee is still building its 135-unit apartment complex at Natomas Meadows. It's holding onto the land in Rancho Cordova and Stockton to see what the market brings in years to come. But once again, Northern California has proved a tough nut for a company that has built much of Southern California with hardly a hitch.

Someday, meanwhile, those eight model homes will reopen, and  what a party that will be.

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