Home Front

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

January 29, 2010
The best story you'll ever read on loan modification hell

Here is one of the best stories I've seen to explain the constant complaints from borrowers in Sacramento about their loan servicers. Written by MSN it features Elk Grove borrower Dannette Armstong's long battle with Litton to modify her mortgage.

The story explains some of the reasons the system is so baffling.

I got two letters today from people with similar problems. One loan modification specialist said her client got a three-month trial payment in Oct, Nov. and December and he made his payments two weeks early each month to show good faith. Now, he hasn't gotten a permanent modification because he made his payments TOO early. He has to start over.

The second was about a guy who had his modification approved, but the bank forgot to send the paperwork to headquarters. He finally got that nightmare straightened out. Jan. 8 he got a letter from BofA saying his loan modification was approved and being processed. On Jan. 15 he got another saying it was denied. He's looking for an attorney now.

Read the story. It will help explain why this crazy stuff keeps happening - and, I might, add, prolonging the economic downturn.

 

 

 

January 29, 2010
A strong quarter

Yes, the economy still feels awfully dreary around here. Some economists believe California is still in a recession, and will be stuck for another few months, even if the national recession probably ended last summer or fall.

With that, it's worth noting that the national Gross Domestic Product figures are out today for the fourth quarter of 2009, and they're pretty smashing: 5.7 percent annualized growth rate.

Here's some instant analysis from an email from California economist Sung Won Sohn, of CSU's Channel Islands campus:

The good news is that the recession has ended around mid-year and the economy has begun to expand during the second half of the year. Most of the sectors has contributed to economic growth during the quarter. Final sales have increased from the second quarter.

 

The not-so-good news is that most of the growth came from temporary factors such as inventories and government stimulus which can't be sustained.

 

Consumers are doing their part in this economic recovery. The "cash for clunkers" program has boosted spending temporarily. Nevertheless, consumers seem to feel better about the future of the economy. The employment market is the main problem facing consumers and the economy. However, the job market is in the process of stabilizing with the unemployment rate topping sometime during the first half of 2010.

 

Capital spending has been another source of economic positivs. In this report, the spending for equipment and software has risen as businesses try to raise output by raising  productivity. The Achilles' heel of this sector is commercial construction, a lagging indicator.  Offices, apartments, warehouses, etc. will lag the overall economy by as much as a year or more in recovery.

 

As expected, housing continues to be a drag on economic growth even though we expect bottoming out sometime during the first half of the year. Net exports were another positive to economic growth during the quarter.

 

 

January 28, 2010
Too many offices, too few tenants

Colliers International has released its 4th Quarter 2009 report on the Sacramento-Roseville office market.  The first line of the report: "The good news is that 2009 is over and there are a few reasons for optimism in 2010."

 

January 28, 2010
New car sales in steep decline

Sales of new cars plummeted in California last year, falling at a rate that was worse than the U.S. average.

The statewide decline was 28.3 percent, according to a report today by the California New Car Dealers Association.

By contrast, U.S. sales fell 21.2 percent.

The association's report did offer some encouraging news. The decline in California was a horrific 39.6 percent in the first six months of 2009 but slowed to a relatively modest 13.7 percent during the second half of the year.

In addition, the association said it believes 2010 sales will increase.

Still, there was no doubt it was a bad year for car dealers. Sales fell to their lowest level in California since 1975, the association said. Total sales of 1.04 million were just half what they were four years ago.

Our colleague Mark Glover will have a more complete report in Friday's paper.

January 27, 2010
Foreclosure crisis slowing some as banks rethink strategies

La Jolla researcher MDA DataQuick released new Q4 2009 foreclosure numbers this morning,

real-estate-investment-property-foreclosure.jpgshow that defaults are down to their lowest levels since early last year. But the capital region saw 5,081 more foreclosures in the last three months of 2009 - raising the tally since the mortgage crisis began in early 2007 to nearly 52,000.

Statewide, more than 650,000 homeowners have surrendered keys to banks since 1/1/07.

Here are the 

regional numbers of foreclosures and defaults.

The statewide press release with all the details

is here.

Photo courtesy of trexglobal.com
January 26, 2010
Data center opens

A Pennsylvania company said today it's opening a data center in Rancho Cordova.

The announcement was made by SunGard Availability Services of Wayne, Pa. The facility spans 69,000 square feet.

The center will provide network, hosting and other services and is being marketed as an earthquake-safe location for Bay Area companies.

 

 

January 25, 2010
Would the world end if we let foreclosures just play out?
 Here's a provocative thought on the subject from the publisher of Housing Wire.

Incidentally, we expect to get 4th quarter 2009 foreclosure stats from MDA DataQuick in a couple of days. I know it's asking a lot to go public, but if you lost your house to the bank during the quarter and have a comment or two, call me at 916-321-1102 or send email to jwasserman@sacbee.com.

Foreclosures in 2009 could actually be about the same or fewer than 2008. It will be interesting to see the final tallies, which are almost certain to push us past the 50,000 mark in the capital region since the start of 2007.

January 25, 2010
CalPERS' New York deal collapses

CalPERS' $500 million investment in New York real estate has officially gone by the wayside.

A massive Manhattan apartment complex, partially owned by CalPERS, is being abandoned to its creditors after defaulting on a $4.4 billion mortgage.

The investment had been on the ropes for months.

CalPERS was among the high profile investors that went in on the 2006 deal to buy the Peter Cooper Village and Stuyvesant Town apartment complex for $5.4 billion, the costliest residential real estate deal in U.S. history.

CalSTRS wrote off its $100 million investment in the project months ago.

 CalPERS spokesman Clark McKinley said today that his pension fund has written off its $500 million investment.

The deal was masterminded by Tishman Speyer Properties and BlackRock Inc., both of New York. "It has become clear to us through this process that the only viable alternative to bankruptcy would be to transfer control and operation of the property, in an orderly manner, to the lenders and their representatives," Tishman and BlackRock said in a statement to the Wall Street Journal.

The deal was controversial because the complex has long been a middle-class haven in pricey Manhattan, and investors hoped to increase cash flows by liberating the units from New York's rent-control laws. That strategy imploded and a New York court ruled that the partnership had illegally raised rents. 

January 22, 2010
FHA has high market share in Sacramento area

We are doing a story for Saturday's paper on the FHA changes announced this week. Most don't expect it will have a giant impact on the region. But we got numbers from MDA DataQuick that show what a big role FHA plays in this market, especially in 2009.


 Percentages of mortgages insured by FHA by county:


               Sac    Yolo      Placer   El Dorado  

Jan.        41.8     33.9      31.3   24.1

Feb.        39.3    37.4      27.6    28.1

March     42.4     43.3      33.7    23.4

April       39.4      40.8     40.8   30.5

May       40.8       40.0     37.1   21.4.

June       41.2      41.9     38.0   23.9

July        43.0     37.7      35.2   23.0

August   44.2      47.5      34.6  20.4

Sept.     46.1       45.3     42.0   24.6

Oct.      46.7      36.4      38.7   31.5

Nov.     49.3      43.8      40.0    32.9

Dec.      43.2     40.1     39.8      25.5

 

Source: MDA DataQuick

January 22, 2010
California unemployment: 12.4 percent

The job losses returned to California in a significant way last month. Some 38,800 payroll jobs disappeared, according to figures released today by the state Employment Development Department.

The state's unemployment rate clocked in at 12.4 percent for December. That was unchanged from the revised November figure.

Analysts had been hoping that the job losses in California had mostly run their course.

Sacramento area unemployment fell two-tenths of a point from November's revised figure. The rate for December was 12.3 percent, even though the region lost 3,700 jobs during the month.

In the past 12 months, the state has lost 579,400 jobs. The region has lost 40,900.

In the Sacramento area, state government shed 1,500 jobs, construction fell by 1,300 and the leisure and hospitality sector cut 900 jobs.

<b>More unemployment information</b>

<a href='http://www.sacbee.com/1232/rich_media/1698037.html' target='_blank'>Updated interactive California unemployment map</a>

January 21, 2010
Unemployment: up or down?

Unemployment's high enough as it is. Friday we'll find out whether it's going to go higher.

The Employment Development Department will release the state and local unemployment figures for December sometime Friday morning.

We're not in the prediction business at Home Front, unless we're talking about baseball, but I will say this: A key stat is likely to be the retail sector. The November numbers were pretty drab in large part because of weak hiring by retailers for the holidays. If the hiring didn't pick up significantly during December, then the overall employment statistics will probably be pretty crummy.

For the record, unemployment statewide was 12.3 percent in November. It was 12.4 percent in the Sacramento area.

We'll start posting numbers and analysis on The Bee's home page as soon as we get em.

 

January 21, 2010
Sacramento County ends 2009 with same price as it opened
 Sacramento_from_Riverwalk.JPG
FRIDAY UPDATE: Here's the full version of the December pricing and sales report.

Here's a look at neighborhood sales and prices in December by ZIP Code.

And an overall look at 2009 in the Sacramento area by ZIP Code.


Here's an early online version of the Sacramento pricing and sales numbers from MDA DataQuick. Sales fell just shy of 2008 and prices in Sacramento ended the year 0.6 percent higher than when the year started. That's after falling 20 percent in 2007 and 37 percent in 2008.

  DataQuick says it's noticed that more people are buying houses and re-selling them within three weeks to six months. In December in Sacramento County 4.8 percent of home sales were homes that were sold just three weeks to six months earlier. That's a percentage that ranks up with the flipping that was going on in early 2005. Then, 5.3 percent of all Sacramento County sales fit that category.

Investors, too, remain active in Sacramento County. DataQuick said 24.9 percent of sales during the month were to absentee owners.

"You've been in the 22 to 25.5 percent range for the past year," said DQ analyst Andrew LePage.

January 21, 2010
Bay Area climbing out of the housing downturn
bay-bridge-traffic.jpg Researcher MDA DataQuick just posted December sales and prices for the nine-county Bay Area, showing the highest number of December sales since 2006.

DataQuick executives say when we look back on all this we may see the beginning of 2009 as the bottom. "But that doesn't mean we're anywhere near normal yet."

Sacramento numbers are also coming shortly. We'll post soonest.

Photo courtesy of ncbm.org




January 20, 2010
Southern California pulls out of "nose dive" in home prices

Los Angeles-area home sales picked up in December from November, repeating a typical pattern in the annual real estate calendar, researcher MDA DataQuick reported.

Its December sales and pricing report  shows that the median price rose over the same time in 2008 - the first year-over-year gain since the summer of 2007. We're expecting Bay Area and Sacramento reports later this week.

 

 

 

 

January 18, 2010
Russ Solomon on life after Tower Records: 'R5's doing OK'
By Dale Kasler

<a href='mailto:dkasler@sacbee.com'>dkasler@sacbee.com</a>

Russ Solomon says R5 Records Video, the store he founded after Tower Records folded, is still finding its way in a weak economy and a brutal climate for record stores.

"R5's doing OK. The record business today is tough. We've got our heads above water," Solomon said in an interview Sunday night after a rare public appearance in Sacramento.

Solomon was the first speaker in the new Sacramento Living Library series, which brings major figures from politics, the media and business to midtown used bookstore Time Tested Books. He spent 90 minutes charming an overflow crowd with stories about Tower and his assessment of the state of the industry.

"Why anybody would go into the record business today is beyond me," the 84-year-old Solomon told the audience.

Tower went out of business in December 2006, victimized by competition from big-box stores and the Internet. Solomon acknowledged that the company took on way too much debt during its growth phase, leaving it vulnerable when sales began faltering. The debt structure "was unsustainable," he said.

R5 opened in 2007 in the old Tower location on Broadway.
January 17, 2010
Has this CalPERS hitch also happened to you?
 I received a call a few days ago from a CalPERS-covered public employee in the area who said he is having trouble getting Bank of America to refinance him under the Obama Program.
 
  He has a mortgage through CalPERS that was made by then-Countrywide and now Bank of America. He meets the Making Home Affordable criteria of being less than 25 percent underwater, but says BofA is telling him that there's a hitch with the CalPERS involvement that blocks the bank from refinancing him.
 
 He says CalPERS tells him it shouldn't be an obstacle. But BofA says it is. And it's been months - unsuccessfully - trying to get the bank to move on a refi. He's worried, obviously, that if it takes much longer he WILL be more than 25 percent underwater.

The guy said he's heard that he's not alone in this hitch. There might be lots of others.

I am fishing here to see if that might be true. Does this sound familiar? Have you had the same experience?

jwasserman@sacbee.com
916-321-1102
January 15, 2010
It's going to be slow around here for awhile
This morning I sat through a very interesting economic forecast sponsored by the Sacramento Sierra chapter of the Appraisal Institute. Speakers were Garrick Brown, Sacramento researcher for commercial real estate brokerage Colliers International, Greg Paquin, president of the home building industry consultant firm, The Gregory Group, and Chris Thornberg, owner of Beacon Economics in LA.

Here are some facts and points that stood out for their contention that it's going to be slow around here (Sacramento) for another three or four years to work off the excesses of overspending, overbuilding and racking up too much debt during the boom.

Sacramento-area jobs lost during recession: 90,000

Jobs lost statewide: 1 million

Number of state jobs lost so far in Sacramento: 2,500

Percentage of empty office space in the region: 15.8

Percentage of area retail space sitting empty:  12

Percentage of industrial space sitting vacant: 11.6

Region's home sales in 2009: 2,814

Percentage of area new-home sales under $400,000: 83

Number of area new-home projects: 125

Number of new-home projects in 2005: 375

Region's unemployment rate: 12.4 percent, possibly rising to peak of 13.5 percent. State budget crisis impact on capital economy is a wild card.

 

Expectations for Sacramento area

Two to three years of no new commercial construction.

Four to five years of very little small business formation.

Remaining uncertainty about scale of residential foreclosures

No "tsunami" of commercial foreclosures; will come in waves for next five years.

Slight rise in new home construction after 2009 bottom.

No double-dip recession likely

Interest rates rise in 2010

 

Sources: Colliers International, The Gregory Group, Beacon Economics, California Employment Development Department.

 

 


January 15, 2010
Worst year for builders since the 1950s

The first official count of Sacramento-area new-home sales is in, and it shows just 2,814 sales for 2009. That's a combined count for El Dorado, Placer, Sacramento, Sutter, Yolo and Yuba counties.The count comes from Folsom-based consultant The Gregory Group.

It's down 40 percent from the worst year previously imaginable - 2008's 4,695 sales. Most agree it's the fewest sales in the region since the 1950s and possibly, since the end of World War II.

Fourth quarter 2009 sales and pricing details by city are here.

Roseville led other cities by a long shot in 2009. One of every four regional sales were in the city of 112,000. The city counted 733 sales for the year.

That was followed by Elk Grove with 368, Rancho Cordova with 316, Natomas, with 230 and Rocklin, with 204. Lincoln counted 150 sales. El Dorado Hills had 109 and West Sacramento 101.

 

January 14, 2010
The Great Recession is hard on capital's hotels

The Recession is seeping in everywhere. Here's what it's doing to hotels:

The cost of staying in Sacramento hotels  fell 8.1 percent in 2009 amid rising  vacancy rates and a continued slowdown in business travel, a lodging industry consultant reported Thursday.

The  full report is here.

Itcould have been worse.

 Room rates fell an average of 13 percent across Northern California in 2009,  according to PKF Consulting. San Francisco, San Jose and Monterey hotels, for instance, cut their room rates 15 percent from a year earlier, the firm said.

Nightly stays in the capital averaged $94.46 the first 11 months of 2009. The 2008 average during the same months was  $102.77.

Rates fell as travelers booked 11 percent fewer hotel rooms in Sacramento in 2009. Average occupancy for the city's hotels was 59.3 percent, down from  66.7 percent in 2008, PKF reported.

January 14, 2010
2009 home sales fall 3% below 2008 in Sac Co./West Sac

The Sacramento Association of Realtors reports that 2009 existing home sales in Sacramento County and the City of West Sacramento fell 2.9 percent below 2008 as cheap bank repos became a smaller part of the sales mix.

 The SAR reported escrow closings on 19,991 single-family homes in 2009 - down from 20,587 in 2009.

The year ended with a median price of $187,500 - where half cost more and half less. That is 4.5 percent higher than Dec. 2008.

In December, bank repos were 40.7 percent of sales. Short sales - in which banks accept discounted offers below what's owed - were 24.5 percent of sales.

That means about two-thirds of existing home sales are still rooted in distresss.

Details: Here is the news release.

The summary statistics are here.

A detailed report by ZIP Code is here.

 

 

January 14, 2010
Nearly 12% of Sacramento-area mortgages in big distress

The newest statistics from First American CoreLogic prove again what negative equity and 12.4 percent unemployment is doing to household bottom lines throughout the Sacramento region.

 The market tracker based in Orange County said 11.6 percent of mortgages in El Dorado, Placer, Sacramento and Yolo counties in November were 90 days late, somewhere in the foreclosure process or linked to a repossessed property that hasn't yet been re-sold.

All the details  are here.

January 13, 2010
Unemployment at 13.5 percent?

A new forecast says Sacramento's unemployment rate will hit 13.5 percent early this year.

The rate was 12.4 percent in November, the most recent data available.

At the same time, the forecast calls for brighter skies. The Sacramento Business Review, published by CSUS' College of Business Administration and the CFA Society of Sacramento, says the economy is looking better this year than last year. But job losses will continue.

"We forecast that the unemployment rate in the Sacramento region will reach 13.5 percent in early 2010 with an improvement in the employment picture unlikely until later in the year," said co-author Sanjay Varshney, dean of the business school. "Even then, we expect the unemployment rate in the region to remain elevated through 2012."

The forecast echoes other predictions that Sacramento will lag the rest of the country in coming out of the recession.

January 12, 2010
Putting bankers on the hot seat (on live TV)


}   Wednesday brings the first of two days of hearings by the Financial Crisis Inquiry Commission chaired for former State Treasurer Phil Angelides. Thanks to an alert Home Front reader who checked out where to watch the hearings on TV and sent this:

"I called the committee. It will be on CSPAN and videostreamed at http://www.fcic.gov."

Live video stream from the site is here:

Here is the schedule:

First Public Hearing of the Financial Crisis Inquiry Commission
Day 1


Panel 1: Financial Institution Representatives

Panel 2: Financial Market Participants

Panel 3: Financial Crisis Impacts on the Economy

First Public Hearing of the Financial Crisis Inquiry Commission
Day 2


Panel 1: Current Investigations into the Financial Crisis -- Federal Officials

Panel 2: Current Investigations into the Financial Crisis -- State and Local Officials




 
January 8, 2010
Bridge Housing gets first nod for Curtis Park Village dwellings
Curtis Park Village, the big plan to fill 72 acres of abandoned Western Pacific Railroad land with new houses and stores has named its first builder: San Francisco's Bridge Housing.

The non-profit builder has been tapped to build 90 senior apartments. They'll be income-qualified to fulfill the project's requirements that part of it be set aside for affordable housing.

 Developer Paul Petrovich plans more than 500 residences in all between the historic neighborhoods of Land Park and Curtis Park.

For Bridge, it's a definitive new announcement in a strategy that is taking it eastbound of the Bay Area and into Sacramento.

"We have thousands and thousands of units in the Bay Area, and are kind of moving toward Sacramento, Stockton, Solano County and West Sacramento," said Bridge Vice President Brad Wiblin. The non-profit builder claims it's built 13,000 dwellings in California since its founding in 1983. About 2,000 are senior apartments and condominiums.

The newly-minted deal calls for Petrovich to provide 1.3 acres of land to Bridge at no cost, build the infrastructure and a sound wall between the apartments and nearby railroad tracks. Bridge Housing will build and manage the apartments, said Wiblin.

Bridge, specializing in bond funding and tax-credit financing, is doing more deals in Sacramento. Wiblin said the non-profit firm is in contract to buy a site in downtown Sacramento, though he declined to disclose the site. It's also allied with the West Sacramento Redevelopment Agency and Sacramento-based Fulcrum Property to build 70 income-qualified apartments in the city's riverfront Bridge District.

The Curtis Park Village apartments are years from a move-in date. Petrovich needs approvals from the City of Sacramento and the state of California to begin construction. First on the agenda: City Hall votes in February and March to win certification of the project's Environmental Impact Report.

January 8, 2010
About that UC Davis-Tiger Woods study...

During the week before New Year's, a notoriously slow time for news, two UC Davis professors caused an international media sensation. They released a study saying the Tiger Woods scandal cost his corporate sponsors' stocks to drop a combined $12 billion in the weeks after the scandal hit the news. (You can find our story on the study by clicking here.)

Now the study is getting picked apart. Notably, a column by Carl Bialik, the Wall Street Journal's "Numbers Guy," takes issue with the professors' methodology and findings. Here's a link to his column, which ran in Thursday's Journal.

Bialik wrote that it's practically impossible to blame a specific event for the fluctuation in a stock.

Among his concerns: The study overlooked the fact that one of Woods' sponsors - PepsiCo, which owns Gatorade - issued a negative profit and revenue forecast a couple of weeks after the Woods scandal broke. Bialik argues that PepsiCo's forecast may have skewed the entire results. 

Interestingly, the professors, Victor Stango and Chris Knittel, quietly released a revised version of the study earlier this week in which they mention the PepsiCo forecast and make a few other clarifications. But they say the PepsiCo forecast doesn't undermine their central thesis. We should point out that the new study was released before the Journal published its column.

You can find the new Stango-Knittel study here.

January 8, 2010
Factories bouncing back?

California's troubled factories could be ripe for a comeback.

A survey of factory purchasing managers by Orange County's Chapman University, released today, suggests the state's manufacturing sector will ramp up sharply this quarter.

Chapman's Anderson Center for Economic Research said its index of factory managers' confidence rose to its highest level in four years.

A comeback would be welcome. California's factories have laid off 114,000 workers in the past year, according to the Employment Development Department. That's an 8 percent decline. It doesn't include the more than 4,500 jobs that will disappear when the NUMMI auto factory in Fremont closes this spring - the state's biggest mass layoff of the recession.

 

January 6, 2010
The Geography of Recession
Found this on a Facebook friend's posting. It's an automated map showing the spread of recession over the U.S. California takes it hard in this animation:
January 6, 2010
Schwarzenegger proposes new state $10K homebuyer tax credit

Minutes ago in his state of the state address, Gov. Arnold Schwarzenegger said he will propose a new state tax credit of up to $10,000 for buyers of new and existing homes in California.

This could be combined with the federal government's $8,000 tax credit which runs through the end of April. It still has to be approved by both houses of the Legislature.

Here is the announcement.

 

January 4, 2010
Will our cheaper housing help this economy rebound?
I am just starting on a story about how cheaper Sacramento-area housing may eventually help set the stage for a rebound in job growth and an improved economy. The assumption is this: area companies may find it easier to hire and others may be more inclined to relocate if housing is more affordable. Start-ups might also be more likely. Did cheaper housing influence your decision to move to the region for work or to start a business? Did you decline a job offer here during the housing boom because it cost too much to live? Have you considered taking your business elsewhere, but will stay put because it's more affordable again?

It seems pretty natural that there are huge economic advantages for a region with cheaper housing. But an economic development strategy based on saying "hey, it's cheap again," might also just bring a bunch of low quality jobs. What do you think?

Please call Jim Wasserman this week at (916) 321-1102. Or e-mail jwasserman@sacbee.com.

January 4, 2010
More forecasting: still "a ways to go" before bottom

Commercial real estate brokerage Grubb&Ellis released this 2010 Forecast today for Northern California and the Central Valley's office, commercial and retail environment. The common prognosis is: the decline continues, but not as fast as last year. Look for a recovery starting in early 2011. Until then rents keep falling.

 



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