Home Front

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

September 30, 2009
Gasoline usage goes back up, finally

In an inkling that the California economy might be turning around, state officials said today that gasoline consumption increased slightly in the second quarter.

It was the first quarterly increase in three years, according to figures released by the state Board of Equalization.

The increase was slight - 0.45 percent - but could be a sign of an improving economy.

September 24, 2009
CalPERS fires back, electronically

Criticized for its recent investment losses, CalPERS is starting a new Web site, www.Calpersresponds.com, to deal with questions and concerns about the pension fund's financial health in the wake of the market meltdown.

"We thought it would be a good time to lay out the issues and put out some clarity," said spokesman Clark McKinley.

CalPERS lost $56 billion in the latest fiscal year. Although the fund has recouped some of its losses in recent months, some elected officials have called its viability into question. The fund has warned that it will impose rate hikes on the state and local governments starting next summer. To tamp down costs, Gov. Arnold Schwarzenegger is urging the Legislature to reduce pension benefits for newly-hired workers.

 

September 24, 2009
How Sacramento shrank in '08

While much of the rest of the country struggled with almost non-existent economic growth in 2008, the Sacramento region went backwards.

The regional economy shrank by 0.6 percent, when adjusted for inflation, according to figures released today by the U.S. Bureau of Economic Analysis. By contrast, the economy of all U.S. metropolitan areas grew by 0.8 percent.

The numbers provide fresh evidence of the toll of the recession - and the devastating impact of the real estate crash. The big contributors to Sacramento's economic turmoil last year were the financial services and construction sectors, according to the BEA.

When inflation is ignored, Sacramento's economy actually grew by about 1.4 percent, to $93.65 billion. The region's economy was the 32nd largest in the country.

Several other California regions also performed poorly last year, not surprisingly. The Inland Empire's economy fell 1.3 percent in inflation-adjusted dollars. Stockton was down 0.3 percent and Redding fell 2.4 percent. But some regional economies grow, including Fresno's (1 percent) and Chico's (2 percent).

In 2007, Sacramento's economy shrank by 0.3 percent when adjusted for inflation.

 

September 18, 2009
California unemployment: 12.2 percent

The state's unemployment rate rose three-tenths of a point in August, to 12.2 percent, state officials said today.

Sacramento-area unemployment hit 12 percent, up slightly from a revised 11.9 percent the month before, the state Employment Development Department said.

But there was some good news: Payroll jobs fell statewide by only 12,300, suggesting an easing of the recession. That was only one third as many jobs as were lost in July, and the lowest toll in more than a year.

The Sacramento region lost 1,700 jobs during the month, or about one-fourth the job loss recorded in July.

"This moderation (in job loss) looks to me like we're going to have job growth pretty quickly here in California," said Howard Roth, chief economist at the state Department of Finance.

But he added that the August jobs report got a seasonal boost of sorts: With the school year starting so early in many districts, education payrolls swelled more than usual.

And even as layoffs taper off, the unemployment rate will keep going up for a while as Californians resume looking for work, he said.

"I think we're on the road to recovery," said Stephen Levy of the Center for Continuing Study of the California Economy. But he acknowledged that continued job loss, however small, will leave many Californians skeptical that the situation is improving. "There's a reason people don't think the recession is ending," he said.

Michael Bernick, a former director of the EDD, said that although layoffs are slowing, "there's been no uptick in terms of hiring."  

September 18, 2009
Those were the days
 It has been a long four years since August 2005, when median home sales prices crested in Sacramento County and then started rolling backward.

 Here's a restrospective published this morning in The Bee about where we were and where we are.


September 17, 2009
Region's home sales are falling again

 The new MDA DataQuick numbers are in for the capital region, showing 3,375 sales of new and existing homes during August.

 Here is a full first online version on the Web.

And here's a look at capital-area sales and prices by ZIP Code.

August regional highlights for new and existing homes combined:

  • Sacramento County: 2,061 sales with a median price of $180,000. That's down 14.3 percent from August 2008.
  • Placer County: 554 sales with a median price of $305,000. That's down 7.6 percent from the same time last year.
  • Yolo County: 209 sales with a median price of $260,000. It's down 16.7 percent from August 2008.
  • El Dorado County: 183 sales at a median price of $310,000. That is 20.5 percent lower than the same time last year.
  • Yuba County: 116 sales with a median price of $155,000. It's down 12.9 percent from a year earlier.
  • Nevada County: 129 sales with a median price of $325,500. That's 20 percent less than August 2008.
  • Sutter County: 93 sales with a median price of $165,000. It's down 13.2 percent from August 2008.
  • Amador County: 30 sales at a median price of $200,000. That's down 23.1 percent from August 2008.
Looking for comparisons?
Here's a bigger statewide picture with August MDA DataQuick reports from the nine-county Bay Area and from the six-county Los Angeles region.

September 17, 2009
California goes after the rating agencies, again

California Attorney General Jerry Brown today said he'll subpoena Wall Street's big rating agencies - Moody's, Standard & Poor's and Fitch - over their alleged role in last fall's financial market meltdown.

Brown's move comes two months after the California Public Employees' Retirement System sued the three agencies in San Francisco Superior Court, blaming them for a $1 billion investment loss.

Brown said the three gave "stellar ratings to shaky assets," including mortgage-backed securities whose collapse helped trigger huge losses in the stock market.

Spokesmen for the three firms weren't immediately available for comment.

The three agencies have come under considerable criticism in the past year over the glowing ratings they assigned to subprime mortgage-backed securities and other risky investments. Earlier this month a federal judge, rejecting arguments by Moody's and S&P, ruled that investors have the right to sue them over their ratings.

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September 16, 2009
$10M in stimulus funds for empty downtown senior high-rise

 Federal stimulus funding is bringing $10 million to restore an empty residential high-rise at 7th and I streets in downtown Sacramento.

"We were high-fiving each other. It's not every day you get $10 million in a competitive grant project," said Nick Chhotu, director of public housing at the Sacramento Housing and Redevelopment Agency. The money is headed toward a thorough facelift for the 12-story Riverview Apartments owned by SHRA. It's a senior complex built in the late 1970s at 626 I St. The building has been empty two years.

Plans are to start construction late next year after getting up to $6 million more in federal funds. The building, with 108 rooms for people 62 and older, needs new windows, a new electrical system and new plumbing, a job that will run well into 2011, said Chhotu.

The Public Housing Capital funds are provided through the American Recovery and Reinvestment Act of 2009. The agency said Sacramento's $10 million is among the largest grants nationally, and one of two on the West Coast. The other: Seattle.

Here is the building:

 

September 15, 2009
Pulte sweeps Sacramento region in J.D. Power awards
Michigan-based Pulte Homes and two subsidiaries swept the top three rankings for customer satisfaction in the Sacramento region as part of a J.D. Power and Associates study announced Tuesday.

The study ranked Pulte Homes first in the region based on factors of worksmanship and materials, price and location, home readiness and sales, warranty and customer service staff. Pulte subsidiary Del Webb won second place with respondents praising the firm's local design centers and recreational facilities. Third place went to Centex Homes, which last month completed a merger with Pulte.

Combined, the three entities are the largest new home seller in the capital area, accounting for 17 percent of sales this year, according to industry consultant Hanley Wood Market Intelligence.

In a statement Tuesday, Chris Cady, Pulte Sacramento division president, said the recognition for quality provides "vital competitive advantage for a builder when customers have a wealth of choices."

Arizona-based Taylor Morrison Homes ranked highest in the Sacramento region in J.D. Power's survey for new home quality. Pulte ranked second. Third went to Miami-based homebuilder Lennar Inc.

To be included in the studies, builders had to have closed escrow on 150 homes during 2008 in Colusa, El Dorado, Placer, Sacramento, Sutter, Yolo and Yuba counties.

J.D. Power said Sacramento ranked among the highest markets in the nation for customer satisfaction. 
September 15, 2009
Median prices rise 4th straight month in Southern California
MDA DataQuick begins its tour of August real estate price and sales history this morning with this report from the six-county Los Angeles region. We expect reports for the Bay Area and Sacramento later this week.
September 15, 2009
Recession nearly over, UOP says

The recession in California will end in the fourth quarter, economist Jeff Michael of the University of the Pacific said today.

But Michael said the recovery won't be swift.

"Although the recession is technically ending, we anticipate a sluggish start to the recovery that will make it feel like a recession in California for another year," Michael said in a prepared statement.

Unemployment, currently 11.9 percent statewide, will peak at 12.6 percent next spring and will remain above 12 percent through all of 2010, he said.

Michael, director of UOP's Business Forecasting Center, said foreclosures and public-sector job losses will continue to hurt the economy over the next year.  

September 15, 2009
Hanley Wood's 209 Housing Forecast: seeing a little light now
Costa Mesa-based Hanley Wood Market Intelligence held its annual Sacramento housing forecast this morning at the Doubletree - telling about 75-80 members of the region's struggling home building industry that the signals are still mixed - and projections call for 3,400 home sales in El Dorado, Placer, Sacramento, Sutter, Yolo and Yuba counties this year. (Comparing that to a different category - housing permits issued by local governments over the year to start homes - that has to be the fewest since the late 1960s in this region).

It's little wonder the ball room is full of shell-shocked building industry types looking for any kind of good news at all. I took notes of both speakers and will offer somewhat of a transcript here of what was said about the national home building scene first, and then the regional scene. The forum was sponsored by the Propane Education and Research Council.

(Check back a little later, we are expecting to be able to upload a PowerPoint here to go along with this)


Boyce Thompson, editorial director of Hanley Wood's fleet of builder magazines, and editor of Big Builder Magazine, in particular, offered this national overview. (He, by the way, visited with principals of Sacramento's Township 9 infill project and toured downtown's successful Sutter Brownstones infill project).
 
8:06 a.m. Thompson: This is like the third or fourth time I've been here. My forecast is going to be decidedly optimistic here today. People are talking about W-shaped recovery..We've fallen so far there's nowhere to go but up. We've already started up. I just feel like things are going to get better.
 Sacramento has received a lot of national press. Your land market is coming back, with lots of bids on land and that's one of the tell-tale signs of beginning recovery. I have a way more positive presentation this year..The last three years I have been negative about the housing market.  Nationally, our fortunes are all tied to the national financial markets. We're going to see an uneven market..Some are beginning to recover. Others are still getting worse. Chicago, of all places, still seems to be getting worse.

The recovery is going to be slow. Housing starts usually bounce back in the first two quarters after recession, don't think it will be so much this time. We are kind of dragging along the bottom, and it looks like we're having a little bit of a W-shaped recovery, where it bounces down and up and down.

Headwinds: We still have all that unsold inventory. We've got 2.2 million extra (new and built) homes that we need to burn through. And the existing home inventory remains too high. A lot of people believe this is the single biggest problem in the market. There are too many existing homes for sale. Nationally, we have a nine months supply, compared to a usual average of 6.4 months.

We expect to get double-digit unemployment by end of year nationally. But the housing market always comes back while job losses are increasing....You still have 80 percent of households in decent shape. It's not going to take a lot of people to move that metric forward.. It's the reason the market rebounds before the economy in general does.

The foreclosure problems: The problem is the foreclosure problem is spreading from subprime to prime. There is the danger of anther flood of foreclosures from Alt-A and Option ARM loans. But there are so many government programs now to help people with these loans. It's hard to tell what will happen. I'm going to punt on that one.

Consumer confidence has improved.Mortgage rates are still incredibly low. We expect mortgage rates to stay in the low "fives" for the next two years as the Fed continues its policies...The other good news is the banks have loosened up somewhat. Over 70 percent in 2008 had seriously tightened credit; now they're starting to loosen somewhat and builders have found other sources of liquidity, too, somewhat.
 
Some market are going to recover before others..Texas, the Carolinas haven't had rampant price inflation so they haven't had corresponding deflation.Texas and Washington, D.C., have had strong job growth. The healthiest top 10 new home markets nationally are Austin, San Antonio, Washington, D.C., Houston, Oklahoma City, Baton Rouge, Tulsa, Salt Lake City, Dallas Fort Worth and Olympia, WA..

There are four Texas markets in top 10. Baltimore, too, is a place where sales are actually up year over year. It's an affordable market. New home sales are up 8.4 percent from January through July this year compared to last year.

Compare that to the Central Valley of California. Sales are down 48 percent from the same time last year. But at least that rate of decline is slowing now.

New home sales in Sacramento's six-county region are down 43.7 percent this year so far from the same time last year. Riverside-San Bernardino is down just 28 percent from last year. That's amazing.
 
There;s nobody who doesn't see the market coming back next year. Even Economist Mark Zandi of Moodys, who is usually a bear, thinks the market will come back in second half of 2010 and be strong in 2011. On the single-family home side, the National Association of Home Builders predicts 2010 will be better than 2008 again.

And for all the trauma there are still successful projects out there that sell eight to 10 homes a month.Most are aimed at at first-time buyers.They target tax credits. The old rules of real estate still apply: a great project in a place where people really want to live. That still works.
Transit-oriented development through this downturn has always done better than the rest.

All these projects were green. Well, it's not so much green, but energy efficiency. There's a lot of  marketing going around green. You may think people don't really care about it, but what's the harm, it seems to be working for people.

Here's some big winners nationally:

  • Mueller row and yard Homes, It's by Catellus in east Austin. Prices start at 269K. It's a five-minute drive from downtown.
  • TLofts in West LA. CityView is the developer. These are lofts near Santa Monica Boulevard, starting at $415K. They sold 13 in first month in July. These are condos and lofts. There are 18 parking spots where you can charge an electric car and that's gotten a lot of media attention.
  • Paradise at Ironwood Crossing, outside of Phoenix. It's in Pinal County and the San Tan Valley. The builder is Fulton Homes. It's selling 21.5 per month. It starts at $115,900 to $148,900. Single family homes.
  • Ivy at Woodbury East. This is in Irvine; The developer is The Irvine Co. and the builder is  William Lyon Homes..sold 21 homes a month in July to mid August. Starting in the mid 300s. Townhomes. A lot of these places have done price cuts to boost sales.
  • Stafford Lakes: Fredericksburg, VA. Builder Centex is selling nine per month, with prices from $255K to $325. They're single-family homes. That's neat success story.

 8:33 a.m. Thompson: We've done a survey of 660 people shopping for new homes in May and June in California, Nevada, Arizona, Texas, Florida and North Carolina.
  Shoppers were pessimistic about the shape of the economy, but they were way more optimistic about the shape of their own personal finances. Only 31 percent saw their personal income situation as not so good or poor. A lot were in the market because they could get a lot for their money.

74 percent said they were not concerned about hitting the bottom of the market, but they  were still very concerned about losing their job or their spouse losing a job. Sixty-six percent were up to somewhat concerned about job losses. So they don't want to stretch their finances too much to buy a home. That's a standard feature of downturns. When it starts rebounding people are really careful about their money. The starter market always comes back first because people feel that's where they can really get their value.

8:41 a.m: The capital regional market with Hanley Wood's Sacramento regional sales manager and analyst Kathryn Boyce:
 
Foreclosures: We're finally down to 11th nationally. We are at least out of the top 10 now. But notices of default are climbing again. Job growth continues to be negative. We're expecting 41,000 lost jobs in the region in 2009. We rank 58th of 75 job markets nationally for jobs. Our unemployment is projected to go to 12.9 percent by year's end.

We're in the middle nationally for population growth. But 27 percent of people coming to the Sacramento area are from the Bay Area. Proximity to the Bay Area is a really good thing for Sacramento. They're still relatively holding on for equity of their houses. It hasn't dropped as much as Sacramento so they're still able to bring some of the equity into Sacramento.

Our housing permit history is way off from 2008 even. We're down 50 percent. Overall, based on year to date we're projecting 3,400 sales for 2009. Sacramento can support about 8,500 sales a year. We stole from the future quite a bit from the hey day when we had our special financing. If they had a pulse we gave them a loan. But now Generation Y is coming in. It's bigger than the Boom generation.
 
 They want to buy a house, but they're not looking for big 4 BR and 4BA homes. And they're holding back on marriage and having children.

Most sales here are in the $200-$300K range followed by $300-$400K. There's an under-abundance of new houses in the $200K and below range. We need to have some houses brought in there. Our median sales price for existing single-family detached homes is $218K. It's $330 for new single-family houses. We have to stay with that median income. There are no more rebates for California and no special financing. We need rebates or to lower prices.

 Our sales rate: we're at a dismal 1.5 houses per month. But we're seeing it increase.
 
We have 1.9 months overall of standing inventory. There's just not that much standing inventory out there anymore. That's a great thing...You have 10 months inventory out there total. We're seeing builders picking up land, we're seeing Tim Lewis, Meritage, Homes by Towne and K. Hovnanian picking up lots. We're hearing now again about paper lots having some value.

Cancellations: We've had a downward trend. There isn't a renters mentality any more. Buyers cant come in without a percentage down. The people walking into these subdivisions are committed buyers. They are actually looking for a house.

Our top 10 builders represent half the sales market and only one is a privately-owned builder, JMC.

8:52 a.m.: The existing home market: Boyce: We now have 34.4 percent affordability for new homes and 78 percent affordability for existing homes. It's a big range there. We're going to be soft until we lower prices.

The notices of default are coming back and we're seeing here what might be another huge wave, depending on who you talk to, that there might be another wave of foreclosures coming.

The gap between the median is huge. It's $189k for single family median for existing.

There are 94,000 lots out there and 18% are finished lots. The bulk of the lots are in Placer, Sacramento and Yuba Counties.
.
Land values: We are having issues with land values. If you add in impact fees from our municipalities it them just right out of whack.. I know the North State Building Industry Association is working with municipalities to lower fees.

Our outlook and conclusion:  We have a potential light in the economy. Demand is still weak, but it is turning. We've seen unemployment drop in July, but it's still up, and its still up higher than other places around the country. The stock market is rebounding. The Fed will continue to buy mortgage-backed securities. But there is still a large overhang of foreclosures and we expect  Sacramento's mortgage delinquency rate to  be 12.2 percent by the year's end. California's could be 14.2 percent by the end of the year.

Finally, it's  a wild card if the municipalities will lower fees or not. We've seen a couple of them doing it, but we've seen a couple of them say no. In terms of consumer demand, the first-time home buyer stimulus was a plus. The impact was good for first half of 2009. We're hearing talk of the National Association of Home Builders going to Congress asking for a $15,000 tax credit for all buyers. That would replace what we have in California because I don't believe (the state of) California is going to be able to pick up that demand again.

Thanks.
September 14, 2009
What's selling?

As the housing market continues to show signs of recovery, our crack staff has updated the home-sale database for the Sacramento region.

Check it out at http://www.sacbee.com/homesales/

The figures are updated as of Aug. 19. 

September 14, 2009
Median price rising toward $200K again in Sacramento County

August's median sales price for existing single-family homes rose to $190,000 in Sacramento County and the City of West Sacramento - after three straight months parked at $180,000, the Sacramento Association of Realtors is reporting this afternoon.

That $190,000 figure is 2009's highest - well up from bottoming out at $167,000 in March.

The median sales price first fell below $200,000 in Sept. 2008, dropping to $194,500.

The higher number almost certainly reflects the continuing fall in the really cheap repo share of this market. Bank repos fell again to 47.6 percent of sales, while short sales - in which a bank accepts less than owed to avoid costs of foreclosing - went up again to 18.8 percent of sales.

That makes "distress sales" about two-thirds of all sales.

The number of single-family home sales also fell a bit. August's 1,683 closed escrows were down 8.9 percent from 1,848 in July - and are down 10 percent from 1,871 the same month last year.

 Here is the 

summary of statistics.

And here is a look by ZIP Code.
September 14, 2009
Extension of new-home buyer tax credit fails to pass
Legislation aiming to extend California's maximum $10,000 new home buyer tax credit to several thousand more buyers has stalled, failing to pass during a frantic weekend rush to adjournment by the state Legislature.
The bill, AB 765, was among those pushed aside by bigger final-hour statewide issues, backers said Monday.
"With the prison reform package still being negotiated and water discussions going on, things like that kind of got pushed to the back," said Willie Armstrong, chief aide to Assemblywoman Anna Caballero, D-Salinas.
The bill's status is unclear. Armstrong said it could receive a vote during upcoming special sessions being considered later this year.
But that provides little certainty to first-time new-home buyers hoping to combine a state tax credit up to $10,000 with a federal $8,000 home buyer tax credit. The federal tax credit expires Nov. 30.
California's home-building industry had aimed to extend the credit to at least another 4,300 home buyers after the state's Franchise Tax Board estimated the average tax credit would be $7,000, not the full $10,000.
  
September 11, 2009
Consumer confidence slips

Consumer confidence among Californians remains troublesome despite signs of economic strength on the national level.

After rising sharply in the second quarter, the California Composite Index of Consumer Confidence fell slightly in the third quarter. The quarterly index, compiled by economists at Orange County's Chapman University, was released today.

The index came in at 69.2, down from 70.7 in the prior quarter. Anything below 100 means the pessimists outnumber the optimists.

Still, there are some indications of hope in the Chapman survey: The latest reading is the second-best figure since the fourth quarter of 2007. When consumers were asked about the current state of the economy, the index came in at a dismal 39.6. But when asked about future trends, the index was a much healthier 99.5 - suggesting that many Californians believe the worst is over.

Yet Californians remain in a wait-and-see mode. With regard to near-term consumer spending plans, the index clocked a mediocre 71.7, or slightly below the second quarter.

  

September 10, 2009
On economic theory

Up for some heavy-duty reading?

Paul Krugman, the New York Times' Nobel-winning economics columnist, has written this lengthy piece on the long-running debate between free-market thinkers and government interventionists.

Essentially, Krugman is appalled that there's even much of a debate anymore. He believes the events of the past year make it obvious that government intervention in the markets is essential to prop up the economy in troubled times.

In the same vein, but on a much humbler scale, I'd like to refer you to a story I wrote last December about the ascendancy of the "Berkely school" of economic thought at the expense of the "Chicago school" of free-market theory. It was written shortly after UC Berkeley professor Cristina Romer was named chair of the White House Council of Economic Advisors.

September 10, 2009
C.C. Myers' home for sale

Famed contractor C.C. Myers' palatial 8,000-square-foot home in the Sierra foothills was put up for sale this week, in the latest chapter of Myers' financial downfall.

The unfinished home, which he lost to foreclosure, was conceived as as a centerpiece of sorts at Winchester Country Club, the posh residential project developed by Myers.

Winchester went into foreclosure and Myers filed for personal bankruptcy last year.

Real estate agent Matthew Baughman, of Keller Williams Realty in Auburn, listed the home this week for $1.5 million. He said at least $2 million has been spent on the home, and it will take another $1 million to $2 million to finish.

Myers' spokeswoman, Beth Ruyak, said Myers concluded that "it's very expensive for them to finish it. It's economically unfeasible for them to think about living there."

The home includes an underground tunnel connecting the driveway to the garage, plus a media room on the top floor accessible only by elevator. "It's that whole house on steroids thing," Baughman said.

Although the bankruptcy didn't touch his company, bridge and highway contractor C.C. Myers Inc., it is expected that he will lose his 45 percent ownership stake in the company. His workers, through an employee stock ownership plan, are in the process of buying the stake, Ruyak said.

September 8, 2009
Tax credits for buyers of new Calif. homes breathing new life
Monday Update: (Sept. 14)  The tax credit bill, AB765, did not pass during the weekend rush to adjournment. It is possible it will come back in special session later this year. But it's clearly in limbo for now.


Remember that $10,000 tax credit for buyers of new unoccupied homes that was all the rage this spring and then disappeared when the state Franchise Tax Board pulled the plug on applications on July 2?

It might be back for Round 2, up for a state Senate vote as early as today.

 The Legislature is in its final frenzied week, and the eyes of the home building industry and buyers who might try for a tax credit for buying a new unoccupied home in California are on AB765, by Assemblywoman Anna Caballero, D. Salinas.

That would bring a tax credit to an estimated extra 4,285 California buyers, alongside 10,659 who have already qualified for the credit before the state Franchise Tax Board shut off applications on July 2. (Roseville and Sacramento were among the Top 10 cities where residents claimed the tax credit).

The simple story is this: The Caballero bill reauthorizes the credit with $30 million that the FTB expected wouldn't be claimed. Original thinking was everyone who qualified would likely get the full $10,000. But a closer look by FTB in this legislative analysis showed that the average buyer wouldn't owe enough state taxes to claim the full amount. The average is closer to $7,000 - thus allowing more applicants for the entire $100 million pool created in February.

The bill must be passed by the Senate, re-approved with changes by the Assembly and then signed by Gov. Arnold Schwarzenegger. The conventional thinking is this has a green light - as a means of stimulating jobs and the larger economy. Some economists say it doesn't really do much, and other critics wonder why the state is helping builders put up new homes when there's already a glut of unsold homes in California.
   And still others question subsidizing new home owners. But the wheels are in motion and this will likely pass, allowing more first time-buyers to jump in the game and combine this with a federal $8,000 tax credit set to expire Nov. 30 unless Congress reauthorizes this one, too.




September 3, 2009
Should cities divest from banks that don't modify mortgages?
Sunday Update: Here is the complete story on this and other related bank backlash issues published today.


When the League of California Cities convenes in San Jose Sept. 16-18 for its annual conference, members will take up an unusual resolution aimed at getting banks and loan servicers to step up their loan modification efforts. The idea: cities should yank their money from banks that don't do an adequate job of helping people avoid foreclosure.

Collectively, cities have billions of dollars in banks in California.

Here is the proposal as it appears inside the League 

RESOLUTIONS PACKET  (go to last two pages for the divestiture resolution and background sheet).

The proposed resolution comes from Los Angeles City Council member Richard Alarcon, once a Democrat in the state Assembly and Senate. He introduced the idea in Los Angeles earlier this year, but it hasn't become policy. Now he's taking it to the full dimension of 480 California cities for consideration and debate this month.

We are featuring the idea in a story to run this weekend on how banks are feeling more public sector pressure to modify loans.

This week the City of Elk Grove in suburban Sacramento became one of the first to pass a resolution backing the idea. Vice Mayor Sophia Scherman plans to lobby extensively at the convention to get it passed. In a telephone interview, Scherman said "The banks were willing to lend money to anybody and everybody. Come on down. Consquently, we are left with the foreclosures."

Scherman lives next door to a foreclosed home, and says she senses support statewide for the resolution, especially among inland cities hard hit by foreclosures.

She called it a "drastic time. We have to resort to a drastic solution if that's what it takes to get this thing right side up again. It's time. It's past due," she said. "We should have done this some time ago. Now with the League of Cities, we have a chance to put it out there. It's going to send a very strong message to the (financial) institutions. They will notice. They will take notice from this."

In Los Angeles, Alarcon said some cities will do it, some won't. But he said, "If you count up the money that cities have in banks that's an amazing amount of power. We have never tried to seize it. I am trying to seize it."

At the California Bankers Association, president and chief executive officer Rod Brown called the idea "misguided. The inference is banks are doing nothing."

He said it would only make things worse for the banking industry and the larger economy.

 "I think if a municipal government or a group of governments were inclined to pull their funds away that's really going to have an adverse impact on banks' ability to have deposits and extend credit and trying to help and rebuild," he said in an interview.

Meanwhile, we also talked with finance professor Tony Cherin at San Diego State University about the idea. He said he could understand the cities' frustration, but believes it would be hard for cities to carry it out. The economic downturn has caused so many bank failures and mergers, he said, that there are fewer big banks than ever capable of handling cities' deposits.

In any event, the resolution to be taken up by a series of League committees seems most intent on getting the attention of banks that hold so much power over their constituents. We'll see if this gains traction in the next couple of weeks.

 

September 3, 2009
Curtis Park Village won't be a "toxic time bomb"
A Monday debate on Capital Public Radio's "Insight" program about proposed development plans for Curtis Park Village really caught the attention of the California Department of Toxic Substances Control. Officials took issue with some of the points made on the show.

During the debate on the development concept between Sacramento developer Paul Petrovich and Rosanna Herber, president of the Sierra Curtis Neighborhood Association, Herber raised concerns about Petrovich's plan to bury some of  the old railyard site's toxic soils beneath a park planned for the development.

She said specifically, "There haven't been a lot of areas that have used this technology. There's only one in existence longer than five years.....It's a toxic time bomb that's waiting to go off."

Thursday, a team from DTSC called to have its say on the technology - and to state there will be no toxic time bomb at the site.

Ray Leclerc, assistant deputy director for the state's site cleanup program, said Thursday, "Leaving residuals (some toxic dirt) in place at these contaminated sites is a common part of most cleanups, especially in more urban areas. It's common in Southern California and even in Sacramento."

The team was quick to point out that it has received no specific plan yet from Petrovich about what he plans to do with the park. The point was that it has been done before, has been done for at least 20 years in California. The Petrovich plan for the park site, said DTSC project manager Fernando Amador, is expected later this year. The specifics will be made public reviewed and open to public comment before a DTSC technical team makes a final decision.

But bottom line, they said, this is not new, unproven technology that will unduly threaten nearby neighborhoods of the Curtis Park Village proposed development.

September 3, 2009
Sacramento books largest convention ever

Sacramento's battered tourism industry will get a major shot in the arm starting in 2010. A huge delegation of Jehovah's Witnesses from Northern California will meet in Sacramento for eight weekends a year over the next five years.

It will be the largest convention booking in the city's history and comes at a time when the hospitality industry is struggling.

The booking will bring more than 200,000 delegates to the city over five years, said Mike Testa, spokesman for the Sacramento Convention & Visitors Bureau.

He said the delegates will come on weekends in the summer - traditionally a slow time for Sacramento's hotel industry, which does most of its business during the week.

He said the group will generate $75 million in economic impact during the five years. In addition, the bureau believes the group, based on its experience in other cities, will extend the commitment beyond five years.

 

September 1, 2009
Crackdown on loan modification firms passes state Senate

The State Senate today passed an Assembly bill that cracks down on loan modification scammers and companies that prey on desperate borrowers. It goes now to Gov. Arnold Schwarzenegger to be signed or vetoed.

Here is the announcement from Democratic Assemblyman Pedro Nava of Santa Barbara.

 



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