Home Front

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

December 31, 2009
Looking for some help regarding "The New Stability"
We've been thinking about a story that highlights one block, one cul de sac, or possibly even one house that exemplifies a phenomenon surely taking hold in some parts of the Sacramento area. It's what we are thinking of as "The New Stability."

What I mean is one place where a house or series of houses have been through constant turbulence - and now found a new buyer or occupant at a sensible price. My own little universe in Elk Grove has something like this beginning. I am looking for something similar or farther along.

Here's a little story to set the stage: The house to the right of us, for example, sold first - new in 2002 - when we bought our own new house in Elk Grove.
 It sold again at the very top of the market in April 2005 to a Bay Area investor - for twice its original value.
 It sat empty for quite awhile. Then it was rented to a single mom and a couple of kids for about a year.
 They left suddenly without explanation.
 Then there was a lease-option sign in the front yard.
 Another couple with a teenager moved in, leasing to own. They lasted about a year, then learned that the Bay Area investor was pocketing the money and not paying the bank.
 They left suddenly, too, forced out by foreclosure against the investor.
 We kept thinking, when is this ever going to end? (And this is going to kill our value).
 The house set empty for a few weeks. Then a guy bought it for about what it sold for in 2002, about $210K.  He fixed up the battered interior and is talking about planting flowers in the spring. He represents the new stability. This should last now, which means one nearby house has now stopped the downward spiral of boom and bust. Nearby, however, another is vacant. It's had three owners in six or seven years. The 2007 buyer's short sale didn't work.
 Behind me the grass is getting uncomfortably high, always a bad sign.

So that's what we're looking for, a block, a cul de sac or a house where everyone is new and bought at good recent prices, where the house or houses are no longer subject to turbulence. That phenomenon multiplied by the hundreds, maybe thousands as buyers move in, is what is going to turn traumatized streets into neighborhoods again. We want to capture that sense of renewal after three straight heavy years of foreclosures - 2007, 2008 and 2009.

If you know of any such places please let me know. 916-321-1102. or jwasserman@sacbee.com


P.S. We are also thinking that the first wave of people who lost their homes to foreclosure may be in shape to buy again. That first wave has endured the trauma, probably had some time to rebound and get their finances together. If that's you we'd love to hear your story to put alongside others for a big story. That, too, may represent the new stability.

Thank you all. Happy New Year.
December 30, 2009
A CalPERS real estate loss

A $108 million Oregon office building that CalPERS lost to foreclosure has been sold.

CalPERS and an investment partner purchased the KOIN Center, a Portland office tower, for $108 million in June 2007. The partnership lost the building this summer after defaulting on a $70 million mortgage.

At the time, CalPERS said it was better to walk away from the investment instead of pouring more money in. "The partnership...didn't believe a capital investment was appropriate," the fund said.

Although the building didn't go into into foreclosure, it was taken over by lender New York Life. The insurer has now sold it to American Pacific International Capital Inc. Gene Grant, a lawyer for American Pacific, said the purchase price was in the range of $50 million to $60 million.

The Portland deal is one of many real estate investments that have soured in the past year for the California Public Employees' Retirement System, which has lost billions in real estate.

Spokesman Clark McKinley said CalPERS would have no comment on the sale of the Portland building.

 

December 28, 2009
33 % more energy efficient at Gateway Oaks office buildings

It's always good news to hear that big real estate operators are making their buildings more energy efficient. This news comes from Houston-based office developer Hines, that it's won federal Energy Star designations for four Natomas office buildings recently made 33 percent more energy efficient.

The four Gateway Oaks buildings range from two to four stories and contain 316,000 square feet.

Hines officials said they installed new heating and air-conditioning controls and occupancy light sensors. The firm also worked with tenants including the State of California, Esquire Reporting and Camp Dresser & McKee Engineering to reduce energy consumption. Hines said the four buildings are 81 percent leased.

The U.S. Environmental Protection Agency awards the Energy Star designation.

Here's a picture from Natomas:

Gateway Oaks (2295) -entrance.jpg

 

December 28, 2009
Layoffs at Jackson Rancheria

Jackson Rancheria casino laid off approximately 115 workers today.

The casino's chief executive Rich Hoffman said the layoffs are due to the sagging economy. The casino had eliminated about 100 jobs in the past year through attrition but "we finally got to the point where we needed to do these layoffs," he said.

The layoffs represent about 6 percent of the casino's workforce.

Hoffman said business is down about 10 percent from a year ago.

Most casinos have downsized as the economy weakened; layoffs hit Thunder Valley near Lincoln in the spring, while Red Hawk Casino in Shingle Springs has eliminated more than 250 jobs through attrition since opening a year ago.

 

 

 

December 28, 2009
A look back at a roller-coaster decade

You may have missed it during the holiday rush. But it's the time of year for looking back so here's a look back at the turbulent decade in real estate that we're leaving in a few days. My favorite part was realizing how much we've added to the skyline in a decade. Photo courtesy of Flickr.com.

398314222_64629afc72.jpg
December 22, 2009
Angelides' Financial Crisis Inquiry Commission sets Jan. hearing

MONDAY UPDATE: (DEC. 28)  Here's an interesting interview with Commission Vice Chair Bill Thomas in Sunday's Bakersfield Californian. He is former chairman of the House Ways and Means Committee.


WEDNESDAY UPDATE: Here's a partial witness list of

heavy hitters.

 The 10-member commission created by Congress to investigate the causes of the U.S. financial meltdown - and chaired by former Calif. State Treasurer Phil Angelides - will hold the first in a series of 2010 hearings on Jan. 13 and Jan. 14 in Washington D.C.

 Here's 

details in a brief news release earlier today.

 

December 22, 2009
California home prices post first YOY gain since Aug. 2007

For the first time since Aug. 2007, California's median home sales price posted a year-over-year gain in November, climbing 5.8 percent above the same time in 2008, the California Association of Realtors reported Tuesday.

News release is

here.

 
November's median statewide price of $304,520 was nearly $60,000 higher than the lowest point of the housing downturn early this year.
Sacramento County's November median was $188,480, up 2 percent from $184,760 in Nov. 2008, CAR reported. Median is that price point where half the homes sold for more and half for less.
The statewide trade group for real estate agents counted a 4.5-month inventory of homes for sale, down from 7.1 months in Nov. 2008. Months of inventory is the time it would take to sell all homes at the current sales pace.
Houses also spent less time on the market in November than last year. The median number of days to sell a single-family home in November was 33 days, compared to 44 days last year, CAR said.
Fixed-rate mortgages statewide averaged 4.88 percent in November, compared to 6.09 percent in Nov. 2008.
December 21, 2009
About 13 percent of U.S. mortgages aren't "performing"

Thanks to the California Bankers Association for sending this third quarter report on mortgage metrics from the Office of the Comptroller of the Currency and Office of Thrift Supervision. I've had time for only a quick look at the executive summary.

Here is the entire report.

December 21, 2009
Market tracker: capital prices will rise 4.6 percent in next year

Home prices in El Dorado, Placer, Sacramento and Yolo counties are projected to rise 4.6 percent by October 2010, housing market analyst First American Core Logic reported today.

A very detailed national report is here.

The percentage puts the capital region among several California metros "projected to experience the strongest recovery in 2010," according to the Orange County firm.

Home prices collectively fell 9.9 percent in the four-county region from Oct. 2008 through Oct. 2009, said First American. That compared to a 7.8 percent decline nationally, and showed continued improvement as the sales mix included fewer bank repos.

First American said its "forecast continues to predict declines in the short term followed by recovery beginning this spring."

The market tracker said Rust Belt cities in Michigan and Ohio have replaced Sunbelt cities in California, Arizona, Nevada and Florida for the largest projected home price declines in 2010.

First American CoreLogic Chief Economist Mark Fleming credited government support as having stimulated housing demand in 2009 and helping restrict supply.

December 21, 2009
State Realtors' group extends mortgage protection program

A California Association of Realtors program to help pay homebuyers' mortgages for six months if they lose jobs has been extended through 2010, the group reported Monday.

The CAR news release is here.

 The Mortgage Protection Program, launched in April, provides laid-off homebuyers up to $1,500 a month to help make the payment. It is free to buyers and funded by CAR's Housing Affordability Fund.

The association said it approved the benefits for 3,122 first-time buyers in 2009. CAR officials said the aim is to overcome fears of buying a house in an economy with double-digit unemployment.

Among recent buyers approved for the protection program was Giovanni Sedda of Sacramento. He cited its "additional security" in helping make a buying decision.

The rules:

  • Must be a first-time buyer or not have owned a home in three or more years.
  • Must close escrow before Dec. 31, 2010.
  • Must use a California Realtor in buying and request an application for the program.
  • Must be a W-2 employee, not self-employed.
December 18, 2009
Unemployment falls, but job cuts resume

California's unemployment rate fell two-tenths of a percentage point last month, to 12.3 percent. But the state lost 10,200 payroll jobs, resuming a discouraging trend after a one-month holiday, according to figures released today by the Employment Development Department.

Analysts said the numbers suggest the economy is bottoming out - but is doing so slowly.

In October the state actually gained 31,100 jobs, the first monthly increase since April 2008. But economists cautioned that the job losses weren't over and there might have been some glitches in the November data - even though they generally put more faith in the payroll statistics than in the unemployment rate. The unemployment rate is calculated from a much smaller survey.

The November numbers, showing a resumption of job cuts, seemed to validate those warnings.

Sacramento unemployment was reported at 12.4 percent. That was unchanged from the October rate, which was revised. During the month, some 1,500 jobs disappeared in the Sacramento region.

Construction fell by 2,100 jobs - nearly twice as much as usual for November. And retailers added a mere 2,100 jobs, a much lower than usual for the month, said EDD labor market consultant Justin Wehner.

"You can see rays of hope in the California reoprt, but it's not really here in Sacramento," said economist Jeff Michael, director of business forecasting at the University of the Pacific.

Michael Bernick, former EDD director, said the drop in California's unemployment rate had more to do with Californians dropping out of the labor force, either because they're discouraged or they're seeking new job training. Once they drop out of the labor force, they're no longer counted among the unemployed.

Although there are encouraging signs on the job front, "we're not out of the woods yet," Bernick said.

At 12.3 percent, California was tied with Nevada and South Carolina for the third highest unemployment rate. Michigan had the worst unemployment at 14.7 percent and Rhode Island was second at 12.7 percent

December 17, 2009
"Where has all the optimism gone?"
 The Wall Street Journal has a great column here about the psychic toll this economy is taking on people in the U.S.

 Amazingly, most people believe they have it better than the next generation will, believe the U.S. is in decline and that China will be the great power in 20 years, not the U.S.
December 17, 2009
Negative equity, foreclosures and shadow inventory

It all sounds like a horror movie, but it's three recent reports for people who love to dig into the details from Orange County's First American CoreLogic.

We learn here of First American's contention that 44 percent of the mortgages in El Dorado, Placer, Sacramento and Yolo counties are in negative equity territory:

 Details are

here. 

Second, is a recent report showing that 11 percent of mortgages in the four-county capital region are 90 days or more behind on payments.

 Those details are

here.

Third is a big report on shadow inventory across the U.S That just came out today. 

It is  here.

 

December 17, 2009
Sac County home prices post first Y-O-Y gain since May 2006
 For the first time since May 2006 Sacramento County median home sales prices - for resale homes - have climbed above the same time a year earlier, property researcher MDA DataQuick reported Thursday.
The Sacramento County median price was $177,000 - up slightly from $175,000 in Nov. 2008, the firm said.
Sacramento County is the largest sector of the region's real estate market, and its existing homes represented nearly nine in 10 of its November sales.

 DataQuick, which noted similar trends in the Los Angeles region and the Bay Area, said the phenomenon reflects "widening price stability, fewer foreclosures selling and more activity in pricier areas."

Sales of bank repos now represent 49.3 percent of Sacramento County sales. In Nov. 2008 thousands of heavily-discounted repos snatched up by first-time buyers and investors accounted for 69.1 percent of sales.

November regional highlights for new and existing homes combined in the capital region:
  • Sacramento County: 21,900 sales with a median price of $175,000. That price is down 5.4 percent from November 2008.
  • Placer County: 549 sales with a median price of $305,000. Prices are down 11.5 percent from the same time last year.
  • Yolo County: 187 sales with a median price of $246,000. It's down 3.3 percent from November 2008.
  • El Dorado County: 201 sales at a median price of $289,000. Prices are 13.7 percent lower than the same time last year.
  • Yuba County: 93 sales with a median price of $162,250. It's down 0.5 percent from a year earlier.
  • Nevada County: 125 sales with a median price of $330,000. That's 4.8 percent less than November 2008.
  • Sutter County: 84 sales with a median price of $160,000. Prices are down 5.9 percent from November 2008.
  • Amador County: 44 sales at a median price of $176,000. That's down 21.1 percent from November 2008.

December 15, 2009
Sac County's Nov. median price rises above Nov. 2008

"For the first time in over three years the single family home median sales price made an increase year to year, signaling a possible end to the home price freefall."

That's the word from the Sacramento Association of Realtors, which just released its November sales and price numbers for Sacramento County and the City of West Sacramento. 

SAR declared a $187,000 median sales price in November for 1,439 sales. The price was 1.1 percent higher than the Nov. 2008 median of $184,944.

That's the first time for a year-over-year gain since May 2006!

Listed inventory is down 23 percent from last year. And of November sales, 40 percent were bank repos. Short sales were 21.5 percent and conventional sales were 38 percent.

Details:

 - The News Release

Summary statistics for the region.

- ZIP Code Report

December 15, 2009
Lenders are cancelling more foreclosures

I haven't had a chance yet to analyze this November report from ForeclosureRadar.com, but the point is that foreclosures are increasingly being cancelled - and that may a leading new trend.

The report is here.

Here is the firm's owner, Sean O'Toole in a blog post with further explanation.

December 15, 2009
Median price in Southern California is same as a year ago

La Jolla based property researcher MDA DataQuick says the Los Angeles region's $285,000 median home price in November is the same as Nov. 2008. It's the first time since Sept. 2007 that the price didn't fall below the same time a year earlier.

 The firm's November price and sales report is here. 

We expect similar numbers this week for the Bay Area and for Sacramento.

 

December 11, 2009
Kings' value: $305 million

The Kings are worth $305 million, down 13 percent from a year earlier, according to Forbes magazine.

Forbes estimated the market value of every NBA team. The Kings came in 22nd out of 30 franchises.

The magazine said the Kings recorded an operating loss of $2.8 million during the last NBA season on revenue of $109 million.

The most valuable franchise: the Lakers, at $607 million. The Milwaukee Bucks, worth a mere $254 million, were ranked last.

The Kings were one of 20 franchises whose value declined in the past year, Forbes said, citing the bad economy. Earlier this year the Kings imposed layoffs and made other cost-cutting moves; they also were among a group of franchises that borrowed money under a line of credit arranged by the league. Co-owner Joe Maloof recently told The Bee the team is now operating at close to break even. 

 

 

December 10, 2009
Another look at a troubled CalPERS investment

The Wall Street Journal today offers this look at Page Mill Properties, a troubled housing project in East Palo Alto in which CalPERS invested $100 million.

The Journal's story says local officials are blaming problems at Page Mill's rental properties for a new crime wave in East Palo Alto, although the story acknowledges that a lousy economy is playing a role as well.

We served up our take on the Page Mill situation with this story a month ago. We noted that CalPERS is in danger of losing a total of $600 million - $100 million in East Palo Alto and $500 million on a New York apartment complex. In both cases, landlords planned to convert rent-controlled units into free-market apartments, driving up income. The plan fell apart in both cities and exposed CalPERS to criticism that it shouldn't have invested in deals that took advantage of working-class and middle-class tenants. CalPERS defended the deals.

 

December 9, 2009
Ritz-Carlton Highlands opens at Northstar near Lake Tahoe

It's a hard job, but somebody had to attend the ribbon cutting earlier today at the new $300 million Ritz-Carlton Highlands at Northstar. More than 100 people showed in a stunning winter setting to launch the first five-star luxury hotel in the Tahoe region. We'll have more on this, the economic impacts of the hotel, in a story in Sunday's business section. In meantime, here is some video from the scene.

Ritz-Carlton President and COO and East West Partners executive Harry Frampton cut the ribbon to take the hotel from 10 years of planning to its first day in business. 

Here's a view of the hotel from the back patios. Voices are two guys shoveling snow in preparation for hotel's first occupants on Wednesday.

Here's remarks by Ritz Carlton's Simon Cooper to launch the chain's 71st new hotel at Northstar near Lake Tahoe and its fifth in California.

December 8, 2009
2010: More of the same, says CB Richard Ellis

SacramentoSkylineNight_526.jpg At this hour Sacramento's real estate community is gathering at the downtown Sacramento Sheraton to hear the 2010 forecast from capital-area executives of commercial real estate services firm CB Richard Ellis. Warning: next year still looks a lot like this year.

Details are in this 30-page report.

Four highlights:

  • Land: Commercial land development will almost stop as commercial users take their pick of cheap vacant space. With so few commercial land sales, it's hard to even define prices.
  • Apartments: Rents will fall still more with rising unemployment and a plentiful supply of single-family homes for rent. Apartment owners with heavy debt will fall, making 2010 "a buyers market, bringing "contrarians off the sidelines."
  • Offices: Rents will remain flat or fall more. Downtown Sacramento buildings, still in demand by a private sector interacting with the state Capitol, will outperform the rest of the market.
  • Stores: The 14 percent vacancy rate in area shopping centers will begin to ease with no new construction and retailers competing for limited space. New tenants will bet on a California recovery and take advantage of cheap rent.
  • Google Image Photo by CB Richard Ellis
December 7, 2009
Oh thank Heaven.....

 I think that's the jingle for 7-Eleven, isn't it? 

  It seems sometimes that stores are closing right and left, but 7-Eleven says in this 

just-arrived news release that it plans to add 50 stores to Sacramento and the Bay Area in the next two years.

  It's hooked up St. Louis-based Colliers Corporate Solutions to identify and find sites.
December 3, 2009
At the end of the repo road a house gets new life

Here's to long-time renters Ken and Diana Tate and their newborn son, among the first families to buy a Sacramento foreclosure renovated with federal stimulus funds.The couple paid $117,000 for a house near Fruitridge Road and Highway 99, and moved in two weeks ago.

The Housing Group Fund, small-scale local builders, remodeled the house, and SMUD turned it into a energy efficient model demonstration project.It's a tiny piece of the $3.9 billion federal Neighborhood Stabilization Plan that sent $32 million to Sacramento County earlier this year.

The Sacramento Housing and Redevelopment Agency contributed $86,000 from the allocation to bring back a house nearly destroyed on its way to foreclosure. Said Diana Tate at a ribbon cutting marking the accomplishment Thursday: "It's been a long time coming."

In another moving scene, husband Ken said they'd looked at houses for a year.  "We finally finished the race," he said.

Here's a look at the ribbon cutting held in their front yard:


December 3, 2009
Californians' confidence: weak, but improving

Californians are feeling better about the economy. But there's still a lot of pessimism.

Consumer confidence in California has risen to its highest level since the third quarter of 2007, according to a survey released today by Chapman University in Orange County.

The California Composite Index of Consumer Confidence, created by the university's Anderson Center for Economic Research, hit 76.3. That was up from 69.2 in the third quarter.

These numbers don't exactly scream "Eureka," however. The university notes that any level below 100 means there are more pessimists than optimists among Californians.

 

December 2, 2009
Elk Grove mall fate still unknown despite progress on bankruptcy

The developer of Elk Grove's unfinished regional shopping mall took a big step toward exiting bankruptcy today, but the Elk Grove project remains in limbo.

General Growth Properties Inc. said today it reached agreement with lenders on more than 90 malls, part of a bankruptcy reorganization plan that would keep the Chicago mall developer largely intact. But the agreement didn't cover unfinished projects such as the Elk Grove Promenade, said company spokesman Jim Graham.

The company halted construction on the Promenade in October 2008; in February it said the project was on hold indefinitely. Contractor lawsuits started piling up. The company tried selling the mall site to investors but pulled it off the market several months ago.

Market analysts believe the mall won't get completed for several years, regardless of what happens to General Growth.

Graham said the fate of Elk Grove's mall is "subject to market conditions that are unrelated to the bankruptcy."

Crushed by billions in debts, General Growth filed for Chapter 11 bankruptcy last April.  

December 2, 2009
Uptick in online shopping

Cyber Monday, the Internet's answer to Black Friday, turned out pretty well.

Market research firm comScore said today that Cyber Monday sales rose 5 percent to $887 million. That matched the single richest day in online spending history, last Dec. 9.

And it wasn't just a one-day splurge. For the first 30 days of the holiday season, comScore says, online shopping was up 3 percent, to $12.26 billion.

Which raises two questions: Are consumers starting to come out of their bunkers? And, more importantly: The holiday shopping season is 30 days old already? Shows how much I know.

 



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