Home Front

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

February 25, 2010
Hey - where's my data?

It's nearly the end of February and we don't have the January state and local unemployment statistics yet. What gives?

Relax. It's the time of year when the Employment Development Department goes through its revisions of the prior year's figures. That means things get delayed a bit.

The January figures are scheduled to be released March 5. The February numbers will come out three weeks later.

For the record, Sacramento's unemployment rate for December was 12.3 percent; the statewide rate was 12.4 percent.

February 24, 2010
A new owner for Elk Grove Promenade?

The long-delayed Elk Grove Promenade Mall would be spun off to a new company under a tentative and complicated investment plan announced today by the mall's bankrupt developer, General Growth Properties Inc.

The stalled Elk Grove site and 44 other properties described by General Growth as "non or low-income producing, high long-term potential assets" would become part of a new company called General Growth Opportunities.

Other properties would remain part of the old General Growth.

General Growth announced it agreed to a $2.63 billion equity infusion by Canadian real estate firm Brookfield Asset Management Inc. Other suitors could outbid Brookfield, and the entire deal is subject to approval of the bankruptcy judge.

As part of the deal, the developer's existing shareholders would get stock in both the "old" and "new" General Growth companies.

Thomas Nolan, General Growth's president, said in a press release that the new General Growth Opportunities would have "a large portfolio of opportunistic assets that have substantial long-term value."

Construction halted on the Elk Grove mall in late 2008. The company went bankrupt a few months later.

February 24, 2010
Bill targets CalPERS, CalSTRS housing deals

An assemblyman has introduced legislation aimed at preventing the state's two big public pension funds from investing in so-called "predatory" schemes that displace rent-control tenants.

The bill is AB 2337 by Assemblyman Tom Ammiano, D-San Francisco. It's in response to a couple of controversial investments, one in New York and one in East Palo Alto, that were predicated on converting thousands of rent-controlled apartments and houses into market-rate units by moving new tenants in.

CalPERS invested a total of $600 million in the two deals, CalSTRS put $100 million into the New York deal.

Both deals went bust when the market soured, but not before generating lots of controversy and litigation over how rent-control tenants were being treated. Tenants rights advocates say the landlords harrassed longstanding tenants to get them to leave.

Generally speaking, a rent-control unit can be decontrolled when a new tenant moves in.

 The investments were the subject of a lengthy piece in The Bee last November.

A CalSTRS spokesman, Ricardo Duran, said the teachers' fund's legislative committee hasn't yet reviewed the legislation. A spokesman for CalPERS, Brad Pacheco, said the fund will study the bill.

February 17, 2010
Massive foreclosure prevention session coming to Sacramento

A massive eight-hour foreclosure prevention workshop and free counseling sessions with lenders has been scheduled Friday, Feb. 26, at the Sacramento convention center. This morning's news release is here.

It comes 14 months after more than 1,000 struggling borrowers attended a similar session in late 2008. The event is sponsored by the Obama Administration's Making Home Affordable Program, Hope Now and NeighborWorks America.

The event comes to Sacramento, though, as credibility of lenders and such help programs has greatly eroded. Many borrowers still say it's extremely difficult to get their loans modified and question if lenders are really sincere about it.

The event is free and will take place from 1 p.m. to 9 p.m.

Attendees will have a chance to meet one on one with their mortgage companies and will learn if they are eligible for loan modifications through the Making Home Affordable Program. We'll be doing more reporting on this through the day to flesh out details for you.

February 16, 2010
"The video" and the FDIC response

In the past week at least 15 people have sent us a video regarding OneWest and the FDIC which alleges a sweetheart deal that makes it more profitable for OneWest to foreclose than to do loan modifications. 

The FDIC has finally issued its own response, calling the charges "blatantly false claims."

The heavyweight national blog "Calculated Risk" is backing the FDIC, agreeing the video makers are inaccurately depicting the situation.

 

February 16, 2010
January home sales, prices, fall slightly in Southern California

It's the usual seasonal pattern - a fall in sales and prices from December. That's what researcher MDA DataQuick is showing for Southern California for January.

 Here is a  link to the January news release issued this morning.

February 16, 2010
Signs of life in commercial real estate

Vacancies continue to inch up in Sacramento's commercial real estate sector, but there are signs of improvement.

The vacancy rate rose to 12.9 percent at year end, up slightly from 12.7 percent at the end of the third quarter, according to a report by Colliers International real estate.

But the fourth quarter witnessed "a surge of leasing activity for vacant big box space," said the report by Colliers research director Garrick Brown. He noted that much of the space vacated by defunct retailers Mervyns and Gottschalks has been taken or is about to be taken.

On the other hand, much of the vacant Circuit City space is still available. And many of the new tenants are paying considerably less than the previous occupants.

Read the full Colliers report here.

February 16, 2010
A bid for Promenade's developer

General Growth Properties Inc., the bankrupt developer of the stalled Elk Grove Promenade mall, received a takeover bid today.

The $10 billion bid was made by Simon Property Group, a rival mall developer from Indianapolis.

If accepted, the bid would enable General Growth to emerge from Chapter 11 bankruptcy. Simon would pay $7 billion to creditors and $3 billion to shareholders.

There was no immediate word on what the bid might mean for the Promenade site. Because of weak market conditions, real estate analysts in the Sacramento area believe it will be several years before the mall gets built, regardless of what happens to General Growth.

Construction on the Promenade, an open-air mega-mall off Highway 99 in Elk Grove, was halted in late 2008. General Growth, based in Chicago, filed for Chapter 11 a few months later.

Simon made a hostile or unsolicited takeover bid, saying it made a friendly overture to General Growth more than a week ago but had yet to receive a "substantive response." The Indianapolis developer said its offer has the support of the official bankruptcy committee representing General Growth's unsecured creditors.

 

February 12, 2010
Home builders sell 3,012 homes in Sacramento area in 2009

 Consulting firm Hanley Wood Market Intelligence just released its 2009 sales numbers for Sacramento, Placer, El Dorado, Yolo, Sutter and Yuba counties - 3,012. It's down pretty substantially from 4,847 last year.

Overall, it's probably the worst year for new-home sales in a half century as Sacramento slowly, painfully, digs its way out of the housing crash.

The full report is here.

Top builders were Lennar, Centex, JMC Homes, KB and Taylor Morrison, according to the way Hanley Wood ranks them.

But...if you combine Pulte, Del Webb and Centex as one company Pulte is the real number 1.

 

February 12, 2010
New GM at Red Hawk Casino

Red Hawk Casino, which has struggled to meet expectations since opening in late 2008, named a new general manager today.

Tracy Mimno, who was chief executive at the Peppermill Casino in Reno, will take over at Red Hawk in March, pending approval from gaming regulators.

Mimno replaces Peter Fordham, who resigned in October following a difficult first year. Within a few months of opening, the Shingle Springs casino cut staffing to around 1,500 full-time equivalent employees, a loss of 250 jobs, mainly through attrition. Other Sacramento area casinos have also cut employment s the casino industry has suffered through the recession.

Executives with Lakes Entertainment Inc., the Minnesota company that manages Red Hawk, have said traffic is strong but customers aren't spending as much money as forecast.

Since Fordham's resignation, the Shingle Springs casino has been run by assistant general manager Terry Contreras, who will continue in that role.

"Tracy had tremendous success during her tenure" at Peppermill, said Lakes Chief Financial Officer Tim Cope in a press release. She was CEO of the Reno casino since 1997.

Red Hawk is owned by the Shingle Springs Band of Miwok Indians.

February 11, 2010
Homebuilding to rebound in 2010, sort of

Homebuilding will generate $20.38 billion worth of economic activity in California this year, a new study out today says.

That's a significant increase from last year but still a pittance compared to 2005, when the housing market was in full bloom.

The study by Sacramento's Center for Strategic Economic Research says California homebuilding, even in its weakened state, remains a significant contributor to the state's economy. The study was funded by the industry-supported California Homebuilding Foundation.

According to the study, homebuilding meant $67.7 billion to the economy in 2005. Its economic impact fell to a mere $14.34 billion last year but will perk up somewhat this year as permitting and construction improve.

February 10, 2010
One in four Sacramento County home buyers pay cash

By Jim Wasserman

I just got the Sacramento Association of Realtors January stats - where the stats say investors paying cash snapped up 26.7 percent of homes in Sacramento County and the city of West Sacramento. That's a story we aim to do for Friday or Saturday's paper. I am looking for your help.

I checked out cash-buy stats for the past year - and learned that it's been the way for more than a year: cash buyers always trumping first-time buyers. No wonder all the frustration among first-time buyers who say they are constantly outbid by investors buying cash.

Local market watchers say about two-thirds of these investors are from the Bay Area.

So somebody in this downturn sure has money. I'd like to talk with anyone associated with this phenomenon - cash-paying investor, Bay Area investor, first-time buyer still getting outbid. What's the story here? I am 916-321-1102 or jwasserman@sacbee.com.

In meantime here are a couple links I found a couple media accounts in the Bay Area about investors there looking inland to buy our cheap houses.

Here's one from the San Jose Mercury News about their preference for Sacramento. Here's another TV report from the CBS Channel 5 affiliate in S.F. about money pouring inland to the Central Valley.

February 10, 2010
Angelides' Financial Crisis Inquiry Commission sets 2nd hearing

By Jim Wasserman

Set your calendars for Feb. 26-27 as the Financial Crisis Inquiry Commission holds a second two-day hearing schedule. This time it's a series of experts, including two from UC Berkeley a series of experts, including two from UC Berkeley to talk about their research into the financial crisis engulfing the U.S. as a result of the housing bust. The commission, which grilled investment bankers in January, is chaired by former California State Treasurer Phil Angelides.

February 10, 2010
Hearings to commence for Sacramento's Curtis Park Village

By Jim Wasserman

The Sacramento Planning Commission has scheduled a Feb. 25 hearing on the environmental impact report for proposed development Curtis Park Village, and an April 1 hearing before the City Council, developer Paul Petrovich said this week.

The hearings are only to certify the EIR, not to recommend approval or approve the 72-acre project on the abandoned site of the former Western Pacific Railyard. The project between two historic city neighborhoods - Land Park and Curtis Park - proposes 500 residential dwellings, a major grocery store and several smaller retail outlets, said Petrovich, owner of Sacramento-based Petrovich Development.

The development has been the object of some controversy among the Sierra Curtis Neighborhood Association, which says the plan is too suburban in character to mesh in with the area neighborhoods.

Nonprofit builder and property manager Bridge Housing of San Francisco is the project's first builder - planning 90 senior apartments if the development wins city approval.

Previous coverage:

Sacramento project signs up nonprofit senior housing - Jan. 9, 2010

Tempers flare as disputed Curtis Park railyard development plan nears Sacramento City Council hearing - Oct. 31, 2009

Alex Kelter: Plan for Curtis Park Village now less 'smart' - Aug. 23, 2009

Tina Thomas: Project an exciting example of cutting-edge urban infill - Aug. 16, 2009

Rosanna Herber: Just where is the 'village' in Curtis Park Village plan? - Aug. 16, 2009

Neighbors, developer wrestle over Curtis Park railyard project - July 25, 2009

Editorial: Curtis Park project needs to happen - July 29, 2009

Sacramento housing projects win state grants - July 14, 2009

February 10, 2010
Green company gets funding

Propel Fuels, a Sacramento company that operates alternative-fuels filling stations, received $12 million in new equity funding, it was announced today.

The funding was announced by Craton Equity Partners, a Los Angeles investment firm that specializes in green-tech deals. Craton contributed $8 million toward the funding. The rest came from Nth Power and @Ventures.

Propel owns and operates 11 filling stations in Sacramento and Seattle dedicated to low-carbon fuels.

 

February 9, 2010
Folsom tech firm in big takeover

Numonyx, the Swiss computer chip company with North American headquarters in Folsom, is being taken over.

Numonyx said today it's being sold to Micron Technology Inc., an Idaho chipmaker, for $1.27 billion in stock.

A spinoff of Intel Corp., Numonyx employs 450 workers in Folsom.

Numonyx spokesman Mark Miller said it's too soon to say what will happen to the Folsom operation but added that Micron was particularly interested in the wireless and mobile chip technology that's developed in Folsom.

"Those people have the skillset that made Numonyx interesting to Micron in the first place," he said.

February 9, 2010
Sacramento buyers claim surprise at tiny California tax credit
By Jim Wasserman
90-2010.gif
This question comes from a summer 2009 home buyer in Lincoln who just got his taxes done and says he's getting nowhere near a $3,333 state tax credit.

In fact his tax 2010 credit will be something along the lines of $300, he said.
 
"What's the deal? I thought I was getting a $10,000 tax credit over three years?"

We put the question to the California Franchise Tax Board
What gives?

Spokeswoman Brenda Voet said the size of the tax credit will depend on the buyer's tax situation.

The most simple way to understand it, she said is this: "It's a dollar for dollar credit for taxes owed."

That means if you owe $300 in state taxes you get a credit for the $300.

If you make $200,000 a year and owe $4,000 in state taxes you get a credit for $3,333 and pay only $667 in state taxes.

 You do not get money back from the state - over and above what you owe, she said.

Here at Home Front, we expect there to be more calls like this. It was always billed as a $10,000 tax credit and people in sales offices told buyers that's what they would get.

Now the fine print may disappoint some people.

Meanwhile, three bills to extend a similar tax credit into this year's buying season have been introduced and are pending before the Legislature.

Photo courtesy of lookpdf.com


February 9, 2010
Report alleges lenders still crushing poor neighborhoods

The California Reinvestment Coalition has released a serious new research study alleging that the same lenders that targeted poor neighborhoods for risky lending are now hitting them with the opposite extreme: lack of mortgage lending.

 

February 9, 2010
Report says banks still crushing poor neighborhoods

The California Reinvestment Coalition has just released a serious report, alleging that poor neighborhoods that lenders targeted for risky loans are getting hosed again by the opposite extreme: lack of mortgage lending.

I am experiencing computer problems that block me from loading the full report. But the CRC site is here. Go to What's New and click on the link "From Foreclosure to Re-Redlining."

 

February 5, 2010
"Buyers guilt" - Placer County style
I've seen it all now. Here is a great news release from the Placer County Association of Realtors advising buyers of bank repos how to feel better about scoring bargains resulting from others's misfortunes.
February 4, 2010
What to pay first: mortgage or credit cards?

Chicago-based credit tracker TransUnion sent some great data comparing mortgage delinquency and credit card delinquency for the Sacramento region since 2006. It shows how people seem to be prioritizing their credit cards over their mortgages. 

TransUnion says Californians started staying current on credit cards at the expense of mortgage payments in late 2007 - reversing a widely-held belief that people will always protect their mortgage first. That "flip" started nationally in early 2008. 

A news release from the company  explains it all here.  

Said the study's author Sean Reardon in a phone call with Home Front this morning: "It's become easier for consumers to put mortgages lower on the priority scale given the turmoil in the economic market."

 

February 4, 2010
Foreclosures cost Sacramento $2.7 billion in lost home equity

 

Picture2.jpgThousands of foreclosure sales from Jan. 2008 through June 2009 cost capital-area homeowners $2.7 billion in lost equity, says Rob Wassmer, chair of the public policy and administration department at California State University of Sacramento.

Wassmer's tracks more than 36,000 home sales in a new study - about half of them foreclosures. He says the foreclosure properties sold at about $600 million in discounts while being sold in a declining market.

That, in turn, stripped another $1 billion in values from other foreclosure properties nearby when it was their turn. And the whole thing stripped another $1 billion in equity from homes not being foreclosed and trapped in the crossfire.

It appears this is the first analysis of its kind in the region.

See Wassmer's PowerPoint presentation 

at this link.

February 4, 2010
Delinquencies still haven't leveled off in Sacramento region

First American CoreLogic reported this morning that 11.99 percent of mortgages in Sacramento, Placer, El Dorado and Yolo counties are 90 days behind on payments, somewhere in the foreclosure process or tied to a bank repo listing.

That's a December 2009 number, concluding a year that opened with 7.64 percent of area mortgages in that condition. The number of distressed mortgages rose all year long as unemployment rose, more private sector workers took wage cuts and state government continued furloughing its employees three days monthly.

The full First American report for the four-county region is here.

  

February 4, 2010
Sales of million-dollar homes fall across capital and California

It's not surprising given the economy. But sales of million-dollar homes fell across the capital region and statewide in 2009 as buyers were wary, mortgages were harder to get and more homes slipped below the million-dollar threshhold, researcher MDA Dataquick reported Thursday.

 The capital region counted 291 sales of luxury homes in 2009, with nearly two-thirds of them located in El Dorado and Placer counties. That compared to 502 in 2008.

DataQuick's announcement is here.

Here is a county-by-county look including  eight area counties.

February 4, 2010
Fewer pink slips ahead in California

Layoffs in California are tailing off, a new survey shows.

The California Employment Indicator Index, compiled by Orange County's Chapman University, rose sharply this quarter to 81.6. That compared with a reading of 72.3 for the fourth quarter of 2009.

But that doesn't mean employment is rebounding. When the index is below 100, employers are still retrenching rather than hiring. They're just doing it more slowly than before.

Job growth probably won't return to California until midyear, the survey suggests.

The results are consistent with the official state unemployment statistics from the past few months. Those numbers show that employers are still cutting jobs but at a slower pace than a year ago. 

February 3, 2010
GenCorp earnings rise

GenCorp Inc., the Rancho Cordova owner of Aerojet, reported improved fourth quarter earnings and revenue today.

The company said it earned $15 million, or 24 cents a share. That compared with a year-earlier loss of $5.7 million, or 10 cents a share, when GenCorp took one-time charges because of its decision to freeze its pension plan.

Revenue grew to $240.1 million from $198.5 million the year before, thanks to higher sales in its Orion and Standard Missile programs.

February 2, 2010
Legislature mulls three homebuyer tax credit bills
 My story this morning noting a $200 million homebuyer tax credit bill introduced Monday by state Sen. Roy Ashburn, R-Bakersfield, prompted notices by lawmakers' reps of two more similar bills also being introduced.

One is from Riverside County Republican Kevin Jeffries - AB X8 34, being introduced in special session. 

The other is from Sen. Ron Calderon, D-Montebello. It's SB913, also being introduced in special session. 

These tax credits are popular with constituents. That was proved last year when the original $10,000 tax credit for buyers of new unoccupied homes ran out in four months.


February 1, 2010
HUD's official report on "Roots of the Foreclosure Crisis."
 The U.S. Department of Housing and Urban Development has issued a lengthy analysis of origins of the foreclosure crisis. If you've got time and the attention span it's 83 pages long.



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