This just in from First American CoreLogic: a report on foreclosure activity, showing that almost 10 percent of mortgages in El Dorado, Placer, Sacramento and Yolo counties are 90 days or more delinquent. That's up from 6.7 percent a year ago.
This just in from First American CoreLogic: a report on foreclosure activity, showing that almost 10 percent of mortgages in El Dorado, Placer, Sacramento and Yolo counties are 90 days or more delinquent. That's up from 6.7 percent a year ago.
A colleague at work was telling me that North End Lofts, a downtown Sacramento housing boom project that went bust and into foreclosure, has filled up owners and become an anchor to its Mansion Flats district. I went out to check and got lucky, running into the site manager, Frank Sherman. He and Cory Smith were finishing the interior of the last of 11 units sold by the bank at cut-rate prices, reportedly in the low $300,000s. Prices were originally $460,000 they were telling me.
The nice part of this story: it's an urban infill project that went from good to bad to worse and finally back to good again. One of the new occupants hailed from Portland and said she had worked in the Pearl District, where new loft housing like this led to a renaissance in the gritty industrial district. 14th and C streets in Sacramento is kind of rough urban country, too. But now there's a new loft housing in the mix - and it's fully occupied. Here's a video of the exterior.
The state was sued today over those hundreds of millions of dollars of IOUs it's been issuing since early July.
Nancy Baird, a small-business owner from the San Luis Obispo area, filed a class-action suit against State Controller John Chiang and State Treasurer Bill Lockyer, saying the IOUs are unconstitutional.
The suit, filed in U.S. District Court in San Francisco, demands that the state stop issuing any more IOUs and immediately redeem the notes issued so far. Even though Gov. Arnold Schwarzenegger signed the new budget agreement into law Tuesday, the state has said it will keep issuing the IOUs for the time being because of cash shortages.
Baird says she was stuck with $27,752 in IOUs for embroidered shirts she produced for a California National Guard youth camp.
More than $1.1 billion worth of IOUs have been issued so far to state vendors, taxpayers who are owed refunds, and local governments that use state money to deliver various social services.
Tom Dresslar, a spokesman for Lockyer, said the treasurer understands vendors' frustration but the IOUs are legal.
Meanwhile, the city of Sacramento said today it has bought $2.5 million worth of IOUs. The city set aside $10 million to buy IOUs from city residents and businesses.
The company that runs Thunder Valley casino filed for bankruptcy protection today.
Station Casinos Inc. of Las Vegas, which has run Thunder Valley since it opened, filed for Chapter 11 protection in U.S. Bankruptcy Court in Reno.
Doug Elmets, a spokesman for Thunder Valley and its owners, the United Auburn Indian Community, said the Lincoln-area casino won't be affected by the bankruptcy.
"Their financial situation has no bearing at all on the success of Thunder Valley," he said.
But the bankruptcy is indicative of the slump hitting the gambling industry. Thunder Valley laid off nearly 100 workers in May, for instance, while Red Hawk Casino in Shingle Springs reduced employment shortly after it opened last December.
In the wake of last week's MDA DataQuick stats showing 4,448 Second Quarter foreclosures and 10,682 mortgage defaults in Amador, El Dorado, Nevada, Placer, Sacramento, Sutter, Yolo and Yuba counties we got statistics for both at the regional ZIP Code level.
What you'll see here is that foreclosures and defaults are reaching into more affluent areas such as Roseville, Auburn and Granite Bay that were once immune to a problem largely confined to risky subprime lending. It's not that the numbers have skyrocketed - it's that they are up pretty significantly from the same time last year. The theory is that rising unemployment and loss of incomes is banging on the door of wealthier neighborhoods now.
On the contrary, some of the hardest-hit ZIP Codes since the market began imploding in early 2007 are showing signs of declining or leveling off of defaults and foreclosures.
There's lots to learn about your neighborhood in the MDA DataQuick stats that follow here.
Here are defaults and foreclosures by ZIP Code. It's an EXCEL chart. You can click between the tabs for defaults and foreclosures, which are called here trustees deeds.
It's been repeated so many times (in the Bee an elsewhere) that it's almost an article of faith: California's onerous business climate chases businesses out of the state.
But the Public Policy Institute of California has argued for the past few years that this is mostly a myth. The San Francisco think tank has studies arguing that California's share of the nation's jobs has held fairly stable (at around 11 percent) throughout the years.
A friend of mine in the biotech business says PPIC is overlooking a crucial point: that California's taxes and red tape consistently keep companies from expanding here. His is a tough argument to prove - how do you measure what you never had? - but an interesting thought.
Anyway, I'd like to call your attention to a new PPIC report that looks at California's socio-economic future. It's a bit of a whopper - 42 pages - so you'll be excused if you skim through it. But I have faith that Home Fronters will give it a look.
You can find the report at this link at PPIC's Web site. Happy reading.
New car sales in California fell 42.9 percent in the second quarter compared to a year earlier.
But the California New Car Dealers Association, which compiled the data, said today that rate of decline seems to be easing. The association predicted a 20 percent dip in the second half of 2009, followed by gains in sales in 2010.
"I think we have hit bottom, but it could be a slow climb out," said the association's chairman, Gary Shipman, in a press release. Shipman is a Toyota, Subaru and Mazda dealer in Santa Cruz.
Vehicle sales have now fallen 43.3 percent for the first six months of the year.
The news for Florida builders is far far worse, as this just-arrived report shows. It says the residential construction industry in the Sunshine State is at a "standstill."
CalPERS and a joint venture partner are spending more than $1 billion to buy a big collection of U.S. shopping centers.
The partnership, known as Global Retail Investors, is buying a majority stake in the portfolio from Australia's Macquarie CountryWide Trust. The deal values the shopping centers at a total of $1.73 billion. Four years ago, CalPERS and its partner, Maryland investment firm First Washington Realty Inc., sold essentially the same portfolio of centers to Macquarie for $2.7 billion.
The portfolio spans 17 states and Washington, D.C. It includes 16 shopping centers in California, including two in greater Sacramento: Stanford Ranch Village in Rocklin and Auburn Village in Auburn.
CalPERS official Ted Eliopoulos called the investment an example "positive opportunities" that come "out of the distress in the marketplace."
Not a big shock here, but the vacancy rate in the Sacramento-area industrial real estate market keeps creeping up.
A report out today by Garrick Brown, research guy at Colliers International real estate, said the vacancy rate rose to 11.5 percent in the second quarter, up from 10.9 percent in the first quarter.
Not a huge leap, and not a huge percentage. But Brown warns that the rate will likely hit 13.5 percent or 14 percent next summer before things get better.
One other thing: Brown says the vacancy rate doesn't tell the whole story. There's also a "shadow vacancy" problem of tenants who are occupying space but not paying rent, he says.
The city of Sacramento is in the IOU business.
The Sacramento City Council voted Tuesday night to purchase up to $10 million worth of California registered warrants from city residents and businesses.
City officials called it a service to the citizenry - and a way to make a little extra cash. The notes will earn a 3.75 percent annualized interest rate, payable Oct. 2.
Mayor Kevin Johnson called the purchase program an "innovative, creative idea."
The program starts Thursday morning. IOU recipients have to present the notes at the city treasurer's office on the third floor of the old City Hall at 915 I St., along with a voided bank check, Social Security number and a photo ID. The "IOU window" will be open from 9 a.m. to noon.
The city will wire the money to recipients' bank accounts.
Unlike some private investors, who are offering 80 to 90 cents on the dollar, the city will pay full face value for the notes.
MDA DataQuick just minutes ago posted itsnews release on Q2 foreclosure activity in California and many area counties - showing a statewide decline in notices of default and a slight rise in foreclosures over the first quarter of 2009.
Regionally: 10,682 notices of default in the second quarter in Amador, El Dorado, Nevada, Placer, Sacramento, Sutter, Yolo and Yuba counties. That is down from 11,049 last quarter and up only slightly from 10,457 in the second quarter of 2008.
The bad news for homeowners is that home prices in Sacramento, Placer, El Dorado and Yolo counties declined 16.9 percent from May 2008 to May 2009. The good news is that's a big improvement over April, when year-over-year declines were 19.5 percent.
The real news is things are getting worse a lot slower. And that's an improvement for all those homeowners checking Zillow every 15 minutes now for four years on their home values.
It seems that Sacramento, which fell hard and fast in 2008 is easing up. But the Inland Empire of Riverside and San Bernardino counties - which was slower to stumble into the tank - is really getting hit hard now - with prices down almost 30 percent in the past year alone.
That's from First American CoreLogic in this May report on home prices here and nationally.
CalPERS and CalSTRS reported their investment results for the just-ended fiscal year, and the numbers weren't pretty.
The California Public Employees' Retirement System said its portfolio shrank 23.4 percent, a loss of $56.2 billion.
The California State Teachers' Retirement System said its portfolio fell 25 percent, or $43.4 billion.
The results reinforce what's been known for some time: that the two big pension funds took a beating over the last 12 months.
"This result is not a surprise; it is about what we expected given the collapse of the markets across the globe," CalPERS Chief Investment Officer Joseph Dear said in a press release.
CalPERS has said it will demand a higher contribution from state and local governments to shore up its funding position. The higher contribution from the state will start next July and from local governments in 2011, although it isn't known yet how much the fund will demand.
CalSTRS can't demand higher contributions but has begun talking to legislators about that issue.
Employer contributions to CalPERS are based in part on a "funding ratio" that compares assets with pension obligations. The ratio for CalPERS was 92 percent a year ago and has surely fallen below the 80 percent threshold that's considered comfortable. The exact figure won't be known for some time, but CalPERS previously warned that its ratio could fall to 68 percent or so.
CalPERS' investment losses have been public knowledge for months; today's announcement merely marked the end of the fiscal year June 30.
CalPERS' stock portfolio fell 28.5 percent. Its real estate holdings fell 35.8 percent and its private equity holdings dropped 31.4 percent; the real estate and private equity values have been calculated only through March 31.
CalSTRS said its real estate fell 43 percent, private equity 27 percent and global stocks 28 percent.
Both funds said they've tweaked their portfolio allocations in recent months. Both, for instance, have said they'll put less money into the stock market.
The state's budget problems are trickling down to Sacramento's office market. The state said today it has renegotiated leases on 34 office sites around the state, generating $27 million in savings over the next few years.
Fifteen leases in the Sacramento area were renegotiated, saving a total of $7.3 million. Eric Lamoureux, a spokesman for the state Department of General Services, said the state believes it can renegotiate about 200 leases by the time it's through. The renegotiations are a result of Gov. Arnold Schwarzenegger's executive order last month demanding a 15 percent decrease in spending on state contracts and purchases.
In Sacramento, the major savings will occur at two office buildings, at 1325 J St. and 915 L St.
Here's another possible place to cash those state IOUs: Sacramento City Hall. The City Council is expected to vote Tuesday evening on a proposal to pay 100 cents-on-the-dollar for IOUs held by city residents and businesses located in the city.
This isn't about altruism. City officials believe the IOUs are a terrific short-term investment. The notes will pay the annual equivalent of 3.75 percent interest when they're redeemed by the state Oct. 2.
In the financial markets, "I can't find anything out there that even approaches that," said John Colville, the city's senior investment officer.
The proposal calls for the city to purchase up to $10 million in IOUs using short-term investment cash.
The state has issued hundreds of millions of dollars in IOUs since July 2. It's not known when the the practice will stop, given that legislative leaders are close to making a budget deal with Gov. Arnold Schwarzenegger.
A fledgling secondary market for IOUs has popped up on the Internet and on Wall Street, with investors offering 80 to 95 cents on the dollar. The city will offer full face value, "not like a lot of these people on Craigslist," Colville said.
CalPERS' investment losses in the housing market have generated a lot of news in the past year. Now the big pension fund is having problems with commercial real estate. The San Jose Mercury News reports here about three big East Bay office towers along I-80 going into default, jeopardizing investments by CalPERS and others.
The paper estimates that CalPERS put $50 million into the building.
To be fair, CalPERS' partner in this venture, Hines, has done well by CalPERS in the 11 years they've invested together. CalPERS has earned a 16 percent rate of return investing in office projects with Hines, according to CalPERS records. That's as of last Dec. 31.
One of the nation's major business lenders, CIT Group Inc., was scrambling to line up financing this week after failing to persuade the federal government to step in to prevent the firm from filing for bankruptcy.
CIT is one of the nation's largest lenders to clothing retailers and manufacturing firms. Typically, CIT provides cash up front and in return takes possession of the borrower's receivables. If you are a customer of CIT, and are having problems because of CIT's cash crisis, we'd like to hear from you. Please contact reporter Dale Kasler at DKasler@Sacbee.com, or (916) 321-1066.
Citibank today gave the state another one-week breather on accepting its IOUs.
Citi is one of only two significant banks - the other is Bank of the West - still accepting the notes. The largest banks, including Wells Fargo, Bank of America and Chase, stopped taking the IOUs last Friday. That's forced some vendors and other IOU recipients to scramble for cash.
"With the state so close to reaching an agreement, we believe the right course of action is to stand by our customers by providing them with all the resources they need to run their households and their businesses," said Citi California President Rebecca Macieira-Kaufmann in a press release. "We will continue to evaluate the budget situation and monitor our position daily as the negotiations progress."
Citi has about 6 percent of the state's banking market.
California unemployment clocked in at 11.6 percent in June, officials said today. Another 66,500 jobs disappeared during the month.
The statewide unemployment rate was actually unchanged from a month earlier. The rate for May was originally reported at 11.5 percent, but that was revised upward a tenth of a point. But the continued job loss showed the state remains firmly in the grip of a nasty recession. In the past year, some 766,300 jobs have been lost.
Sacramento area unemployment jumped a half point to 11.6 percent. The four-county region lost 400 jobs, with significant losses recorded in the professional and business services sector. That covers everyone from architects to temp workers.
In the past year, the region has lost 46,100 jobs, or 5.1 percent of the total.
Californai's unemployment was the sixth highest in the nation. Michigan's was highest, at 15.2 percent.
A New York investment firm said today it is officially opening trading in California IOUs today.
SecondMarket Inc., which creates markets for hard-to-sell financial instruments, said it is opening an electronic market for California's registered warrants. The state has issued several hundred million so far, and plans to issue a total of $2.8 billion this month, as it struggles with a cash shortage.
The firm says hedge funds and other investors have expressed interest in buying the interest-bearing IOUs. Trading is conducted at the firm's Web site, www.secondmarket.com. Trading is free for sellers, but buyers will pay the "standard transaction fee," the firm said.
While it's not clear what price the notes will bear, a search on Craigslist shows that buyers are offering 80 to 95 cents on the dollar.
Local governments and private vendors are the main recipients of the IOUs. Taxpayers expecting refunds from the state are also getting the notes.
The secondary market took flight after most major banks stopped accepting the IOUs last Friday. The Securities and Exchange Commission has declared that the notes are investment securities and recommends that sellers use a registered broker-dealer.
Maybe it's easy for economist Sung Won Sohn to be optimistic about the recession coming to a close. Sohn, who's been tracking the California economy for years, has a second job, as vice chairman of the Forever 21 clothing chain, one of the few retail success stories out there.
Dropping by the Bee this week, the Korean American economist noted that Forever 21 is dipping into the Asian market with a just-opened store in Japan. He said his job with Forever 21 "gives me a very good window into what's happening with the consumers."
His view: While the economy is still in sad shape, a Depression has been averted and things should start improving sometime next year. Easy money policies by the Fed are helping. The financial markets have stabilized. The federal stimulus plan hasn't flooded the economy with cash yet, but it did create a psychological boost and will start to boost the economy significantly in 2010.
Problems still abound, he said. Unemployment will keep rising well into next year. The credit markets are still somewhat frozen, though not as badly as they were. Commercial real estate is just starting to run into serious headwinds. The spring rally in the stock market probably created more optimism than was truly justified.
"We're doing better but we're not out of the woods yet," he said.
Right on cue, the stock market shot up sharply this morning, thanks in part to a solid earnings report and forecast from Intel Corp.
Sacramento's unemploment rate will hit 13.5 percent by the middle of next year, according to a forecast released today by California State University, Sacramento.
The latest installment of the Sacramento Business Review, a joint venture between the university and the Chartered Financial Analyst Institute, says the region can expect to lose 20,000 jobs over the next year.
A key reason is the state's budget crisis, which will likely mean substantial downsizing in state government. "It's a $26 billion shortfall and we know they are not fixing it using taxes this time," said Sanjay Varshney, dean of the university's College of Business Administration. "No matter how you slice it there's going to be a combination of layoffs and furloughs." The cutbacks in state payrolls will lead to job losses elsewhere in the public and private sectors, he said.
He also said the area's real estate market "really hasn't found a bottom yet. The decline in property values really puts a damper on consumer confidence." In addition, he believes the federal stimulus bill hasn't generated much oomph yet.
The forecast said statewide unemployment could hit 14 percent.
Sacramento unemployment hit 11.1 percent in May; the state figure was 11.5 percent. Figures for June will be released this Friday.
One of the biggest foreclosure prevention events yet for struggling homeowners in the Sacramento region will be held Thursday in Sacramento.
The Sacramento Housing and Redevelopment Agency has scheduled a free six-hour event Thursday, July 16, where homeowners behind on payments or threatened with foreclosure can meet one-on-one with representatives of their mortgage lender.
The event runs from 2 p.m. to 8 p.m. at Jose P. Rizal Community Center, 7320 Florin Mall Drive, Sacramento. (Note: address is 7320, not 7230 as mistakenly reported earlier in the paper).
The official flyer with all the details is here.
Lenders will meet with borrowers on a first-come first-served basis to try and start loan modifications or set up repayment plans for eligible customers.
This is very important: The event is only for those who have primary loans with Fannie Mae, Freddie Mac, JPMorgan Chase, Washington Mutual, EMC, Wells Fargo, Wachovia, ASC, Bank of America, Countrywide, American Mortgage Servicing, Citi, IndyMac, PMI, National City, Aurora and GMAC.
No child care will be offered. For more information call 916-440-1399, extension 1226.
The Valley's hometown department store chain is history.
Liquidation sales begun months ago have concluded. The last four stores closed Sunday, two in Fresno and one each in Clovis and Visalia.
Here's the story in our sister paper, the Fresno Bee.
We've reported in the past few months about job cuts at casinos in the Sacramento area and northern Nevada, from Thunder Valley to Red Hawk to the Horizon at Lake Tahoe.
Here's further evidence of a slump-ridden industry: International Game Technology, a Reno company that makes slots and other gaming devices, laid off 161 workers last week. That includes 55 layoffs in Reno, as reported by the Reno Gazette-Journal.
This follows 200 layoffs in January and another 500 last fall.
The recession has taken a huge bite out of the casino business. Revenue at Nevada casinos fell 8 percent in May, for instance.
Irvine-based real estate auction giant REDC said Monday that it sold 133 capital-area and Northern California homes for $11.5 million at its Saturday auction at the Sacramento Convention Center. That comes out to about $86,000 per house.
Spokesman Rick Weinberg of the Real Estate Disposition Corp. said the lowest price was $30,000 received for a house in Stockton. It original housing boom high: $290,000.
The highest-priced house sold Saturday was a 3,418 square-foot giant in Santa Rosa for $714,286. It last sold for $1.1 million.
Weinberg pointed to a couple of Sacramento examples, too:
3324 Felham Way sold for $126,000, 72 percent off its housing boom high value of $450,000.
6408 Calvine Road sold for $73,500 - also 72 percent less than its original high.
REDC says it's auctioned 19,000 houses nationally so far this year - for $1.3 billion.
Here's the regional tally:
Irvine-based Real Estate Disposition Corp. has auctioned 2,045 Sacramento-area foreclosed homes for $272.9 million since mid-2007:
June 23: 107 homes, $26.5 million
Sep. 29: 144 homes, $22.4 million
Sep. 30: 134 homes, $18 million
Feb. 16: 174 homes, $28.7 million
Feb. 17: 125 homes, $23.6 million
April 19: 169 homes, $20.7 million
April 20: 147 homes, $21.6 million
July 12: 197 homes, $23.4 million
Sep. 20: 183 homes, $21.6 million
Dec. 6: 191 homes, $19.1 million
Feb. 14: 179 homes, $18.7 million
April 19: 162 homes, $17.1 million
July 11: 133 homes, $11.5 million
Source: Real Estate Disposition Corp.
Photo courtesy of cocktailnerd.com
The debate over California's IOUs and its budget crisis ultimately boils down to the state's creditworthiness: Will the state default on its obligations? It never has before, and state officials say it won't happen this time, despite a $26 billion deficit.
But....some in the private market aren't so sure. CMA - a London firm that follows the market for credit-default swaps - puts California in some uncomfortable territory when it comes to probability of default. (Credit default swaps are a kind of insurance policy that banks, etc., can buy to protect themselves if a security goes splat).
On its Web site, CMA ranks the top 10 government entities in the world according to their probability of default. California came in ninth, with a 26.75 percent probability. It was just ahead of Romania (24.53 percent) and just behind Lithuania (29.38).
No. 1 on the list is Argentina, at 73.79 percent.
To see the full list, click here and scroll down a bit until you see the "Sovereign Risk Monitor." ,
Here is thenews release.
The summary statistics.
And the regional ZIP Code Report.
There's a lesson in all this about American ingenuity. Or, if you prefer, the insatiable desire to make a buck.
Either way, I'd like to call your attention to our story in today's paper about the emerging secondary market for California IOUs. It seems that there are investors will to pay cash for IOUs - at a discount, of course. The idea is that the investors can collect the full amount, plus interest, when the IOUs mature on or before Oct. 2.
Meanwhile, a state Assembly committee today approved a bill that would let state contractors and suppliers use their IOUs to pay their state tax bills and fees.
As one caller wryly told me this morning, this represents just about the only progress on the budget made by the Legislature lately.
We rode our bikes around the neighborhood tonight for our nation's birthday and saw lots of families and kids in lawn chairs on their driveways and celebrating in the streets just like this:
We got a fair amount of response to our story in Thursday's Bee about how neighboring states are trying to pounce on California's budget problems.
The most intriguing was probably this one: an email from an Irvine man named Joseph Vranich who says he created a consulting firm this week ... to help companies leave California.
And who says California entrepreneurship is dead?
Here's a link to Vranich's blog.
The recession is, uh, still going strong. For all the talk about "green shoots" and "rays of hope," we've still yet to bottom out.
Today's national unemployment report makes that very clear.
The Labor Dept said unemployment rose a tenth of a point, to 9.5 percent, the highest in 26 years. Worse, the economy lost 467,000 jobs, a lot more than expected.
Here's a story by the Associated Press about the job losses and the impact it's having on the stock market.
We tend to hate high oil (and gasoline) prices, and often that's justified. Big spikes in energy prices can hurt the economy. But often the role energy prices play in the economy can be a good deal more complicated.
Oil prices are driven by supply and demand, and low oil prices are often a sign of weak demand. Weak demand usually signifies a weak economy. Like now. So, if you follow that logic, we should root for higher oil prices, right? We should be pleased that oil prices have been climbing lately, right?
Well, not exactly. Like I said, it can get complicated. Analysts say prices are being nudged up by shrinking supplies - not rising demand. And that, of course, is worrisome.
Here's an Associated Press story analyzing why crude is topping $70 a barrel today.
Two of Home Front's favorite topics - economics and baseball - collided recently, and the results weren't pretty. Sony Pictures has just pulled the plug on a movie version of "Moneyball," the bestselling book about Oakland A's general manager Billy Beane. Production was supposed to begin last week in LA, Oakland and Phoenix.
In this account in the New York Times, the movie died in part because of economics. Home video revenue, a huge income source for Hollywood, is in serious decline.
However, this story in the LA Times says much of the blame lies in the dreaded creative differences between Sony and the movie's director, Steven Soderburgh. Either way, it's too bad. I mean, when's the last time you saw a good movie starring the Oakland A's?