Home Front

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

May 29, 2010
An old Libbys warehouse gets a Sutter Pediatrics makeover

 

Home Front had a chance to visit 1625 Stockton Blvd. in Sacramento a few days ago, checking out Sutter Medical Foundation's new multimillion-dollar makeover of a 52-year-old former Libbys Cannery warehouse. Call it a very nice way to start a morning - touring a colorful art-splashed setting for children and their parents.

 The medical foundation calls the center Sutter Medical Plaza, It's a new pediatrics outpatient center that pulls together in one place the various offices and clinics where parents have previously had to take their children. Sutter opened the center in April, said Eric Rassmusen, director of growth and development for the foundation. The Sacramento development firm Separovich/Domich owns the building, which housed BloodSource before Sutter moved in.

sutterwoodbfly.jpgSutter took a lot of care to make it inviting to kids. Check out the warm colors, the wood, the art and butterflies and the light fixtures.

The outside of the building has tile murals in keeping with the Moorish theme the city is trying to encourage along neighboring Alhambra Boulevard.

Life, yes, is a long haul. Generations come and go and buildings get new lives and new acts. This is one old  Sacramento warehouse that's come a long way.

Pictures are worth a thousands words in this case. Here's a look at the hallway art just inside the entrance: Rasmussen said the mural is named "Window Into Nature," painted by Nikki Solone of Sacramento.

sutterhall.jpg

 

 

 

 

 

 

 

 

 

 

 

 


A look at the waiting areas as people make their way to where they're headed.

sutterwaiting.jpgAnd a colorful dragonfly down the hall.  sutterdragonfly.jpg(Photos/By Home Front) 




 

 

 

 

 

May 29, 2010
Market-rate apartment construction dead in Sacramento

 
  I picked up the phone a couple of days ago and asked Steve Nelson, partner with Hendricks & Partners, about whether anyone is building market-rate apartments in Sacramento. He's an apartment broker.

I called because affordable-apartment developer St. Anton Partners of Sacramento seems to be the only firm building any rentals in this region.

Nelson called back after deadline and left a voice mail about market-rate apartment construction Here's what he said:

"There is zero market activity going on today. Nothing. The only buildings being built are affordable housing deals, tax credit deals. The market doesn't support market-rate deals.

"The effective rents after concessions and so forth simply won't support new construction. You're upside down. The banks won't underwrite unless the developer puts 40 percent down or more. And historically, developers never put that much real cash into a deal.

"The banks are being very difficult. Sacramento is on the Fannie (Mae) and Freddie (Mac) watch list. It has been for the last year and a half because of our employment issues and budget issues with the state. Our economy is specious at best. Consequently, the banks are being very, very, very conservative in underwriting loans, period, for Sacramento."

Now you know. I might add that after my story appeared about 316 new low- and moderate-income apartments in North Highland, I got half a dozen calls from people wanting to know the phone numbers. There's an excess, yes, of higher-end apartments. But demand for less-expensive rent in this region seems to be insatiable.

May 28, 2010
Elk Grove: A new small sign of rebalancing the housing market
SUNDAY UPDATE: Here is the full story that ran in this morning's Sacramento Bee, plus a lot of spirited commentary from readers who wonder why we need more new houses in this economy and whether this really is a sign of things getting better.


Thumbnail image for Thumbnail image for mad2.jpgEverywhere, we are looking for those small signs that say the housing market is slowly rebalancing. This Sunday we'll show you new evidence from Elk Grove's Madeira community, formerly called Laguna Ridge. There a handful of builders have bought hundreds of finished and repossessed lots for as low as $40,000 each. Above, crews in Elk Grove are building new homes for Newport Beach-based William Lyon Homes.

Same below: More William Lyon Homes under construction. It's been awhile since we've seen many of these scenes:

 

mad3.jpg    At the height of the boom those lots cost $200,000, meaning a builder could only build the most expensive humongous house possible.

Now with land prices low they can price lower - $290,000 to $320,000 in the case of The New Home Co. That's the spot where analysts say builders can compete with foreclosures.

So Sunday brings a new Road to Recovery story - about new faces in the building scene,new land prices and a new look at a 1,900-acre development nearly left for dead in the housing crash. 

Here's a roofer finishing up a New Home Co. model home to open in June:

mad1.jpg And below: a picture of human-friendly infrastructure already in place in Madeira:

 

mad5.jpg Home Front Photos

 

May 26, 2010
Economy's up; so's the market

I don't pretend to understand what drives daily fluctuations in the stock market. But here's my broad-brush sense of how things work:

As the US economy goes, so goes Wall Street. The debt crisis in Europe will probably continue to raise hell with stocks. But as long as traders believe the US economy is fundamentally improving, then stocks will stay relatively healthy. That doesn't rule out a correction; it just means we're probably not in for a repeat of 2008.

Sure enough, stocks rose today on good economic news:

NEW YORK (AP) -- Stocks rose Wednesday after gains in durable goods orders and home sales helped reassure traders that a rebound is occurring. The Dow is up about 90 points as I write this.

So there you have it. Rest easy. Unless I'm wrong.

 

May 25, 2010
72-year-old Sacramento real estate investor pleads guilty

This just in from U.S. District Court and the U.S. Attorney's Office: A 72-year-old Sacramento real estate investor has pleaded guilty to underreporting his profits from a property sale and filing a false tax return.

Authorities said in a news release that Wallace Chin of Sacramento admitted he falsely underreported capital gains by $700,000 after selling property he owned through a partnership.

 Chin submitted false and forged documents "to substantiate the false information in his return" after an IRS audit, according to U.S. Attorney Benjamin Wagner.

Chin agreed to pay the IRS $104,977 as part of the  plea agreement.

Sentencing is scheduled Aug. 10 in U.S. District Court.

 As part of the agreement the government will recommend a sentence at the low end of federal guidelines for the offense.

May 21, 2010
Unemployment stuck at 12.6% in California

California's unemployment rate was stalled at 12.6 percent in April even though the state added jobs, the state announced today.

The state did add 14,200 jobs in April. That means California payrolls have grown by a total of 56,000 jobs this year.

But the state is clearly lagging the U.S. recovery, which produced 290,000 jobs nationwide last month. In California, "the job growth is modest," said Michael Bernick, a labor lawyer and analyst in San Francisco. "There are other states with smaller economies who are creating more jobs."

The U.S. Bureau of Labor Statistics said California's rate was the third highest in the nation, behind Michigan (14 percent) and Nevada (13.7 percent).

Sacramento's unemployment rate in April fell to 12.4 percent, down from 13.1 percent a month earlier. However, the region actually lost 200 jobs during the month, largely the result of unexpected losses in farm employment, said Alex Alvarado of the state Employment Development Department.

The wet April weather delayed farm hiring across the region, said Russell van Loben Sels, a Courtland pear grower and president of the Sacramento County Farm Bureau.

 

 

May 20, 2010
Brown announces arrests in huge alleged loan mod scam

  Here's a story to make your hair stand up on end: Attorney General announces arrests in major alleged loan modification scam.

May 20, 2010
Sacramento: April home prices and sales numbers by ZIP
FRIDAY UPDATE: Here is today's story on the April numbers.

 MDA DataQuick released its April sales and price numbers by ZIP Code a few minutes ago.
Interesting angle we are exploring for tomorrow's edition: there are more sales in the higher end as sellers get the sense that this is as good as it's going to get for awhile. They're getting realistic, say real estate agents.
May 20, 2010
Red Hawk still sluggish

The managers of Red Hawk casino say they're still being hampered by the region's economy.

Management company Lakes Entertainment Inc. provided an update on the Shingle Springs casino while reporting first quarter financial results.

The weak economy and housing market, plus uncertainties about the state budget, "continue to impact Red Hawk's ability to achieve" consistently strong results, Lakes Chairman Lyle Berman said in a conference call with investment analysts.

Overall the company's first quarter revenue fell to $7 million from $7.3 million a year ago, although much of the decline was due to increased competition at a casino in Michigan.

The company said "improved operating efficiences" are helping Red Hawk's profitability. Lakes trimmed employment at Red Hawk shortly after it opened in December 2008.

 

May 19, 2010
CoreLogic: Sacramento home prices to rise 1.93% in next year

Orange County-based CoreLogic says it expects home prices in Sacramento, Placer, El Dorado and Yolo counties (including distressed homes) to rise nearly 2 percent in the next year.

The national market tracker says this morning that prices declined 0.53 percent regionally between March 2009 and March 2010. That beat February's performance, but still lags behind slight price appreciation being seen nationally.

Full details regionally and nationally at this link.

May 19, 2010
Foreclosure situation in California is finally improving

The Mortgage Bankers Association reported this morning that the foreclosure crisis in California is beginning to ease. The MBA issued first-quarter numbers showing that delinquency rates fell slightly to 10.88 percent. The number of loans entering foreclosure also remained flat instead of rising. Finally, the percentage of loans somewhere in the foreclosure process also fell slightly.

MBA Chief Economist Jay Brinkmann said this morning, "The role of California, Florida, Arizona and Nevada is lessening. A year ago they had 45.3 percent of the problem loans. That's down to 37.9 percent. We are seeing improvements in California on a quarter to quarter and year over year basis."

Specific details and numbers are in this news release.

May 18, 2010
2009: Sacramento foreclosures touch nearly 20,000 renters

A new report says residential foreclosures touched the lives - and leases - of 19,791 Sacramento-area renters last year. They were among more than 200,000 renters statewide who had to move out after three months or at the end of their leases, according to a report by Tenants Together, a statewide renters' rights group.

The "2010 Report: California Renters in the Foreclosure Crisis," used data from Contra Costa County-based Foreclosure Radar to calculate an estimated 7,314 foreclosed rental properties last year in Amador, El Dorado, Nevada, Placer, Sacramento, Sutter, Yolo and Yuba counties.

The report said between 32 percent and 39 percent of foreclosed properties in the eight counties were occupied by renters.

The tenants group cited at least one major gain for renters during 2009: a new federal law giving tenants without leases 90 days to leave. New owners must let tenants with leases stay until the lease expires.

Tenants Together said foreclosures increased by 70 percent from 2008 to 2009 at apartment buildings with five or more units.

May 18, 2010
Sacramento homebuilders still search for recovery signs

Sacramento-area homebuilders shouldn't expect a "quick turnaround anytime soon," says a new analysis of the region's housing market by Houston-based Metrostudy.

Metrostudy's Northern California division director Greg Gross says new-home closings will likely "remain flat or even fall slightly in the first half of 2010 as the weak economy continues." Builders are already dealing with sales numbers that rival lows seen in the 1960s and earlier.

Gross says they're still facing too many negative trends such as the region's abundance of distressed housing. It continues to lower prices even with a pickup in sales activity, he says.

The consulting firm says builders have responded with nearly 40 percent of home starts being priced below $300,000.

 "That means that builders are now lowering base prices to compete directly with foreclosures and 'short sales,' and using fewer incentives," he says. "One of the more difficult challenges builders are facing now is that appraisals are coming in lower than sales price."

The consulting firm also released a cheerier outlook for San Francisco Bay Area builders - saying they are poised for recovery.

May 18, 2010
"Baby steps on a long road to recovery"

MDA DataQuick reports that Southern California sales were down slightly in April while median sales prices rose to $285,000. That's up 15.4 percent from an April 2009 low.

The researcher speculates that fewer April sales might be due to first-time buyers holding back on closings until May to get a new $10,000 state tax credit.

    "The market's still taking baby steps on a long road to recovery, trying to find its footing. It's unclear which of today's sales characteristics are part of a new reality, and which are still temporary turbulence. The mortgage market, especially for larger home loans, is definitely dysfunctional. Obviously things would be different if the job picture were brighter," said John Walsh, MDA DataQuick president.

 

 

May 17, 2010
Permanent loan modifications rising slowly in Sacramento
Slightly more than 5,000 struggling borrowers in El Dorado, Placer, Sacramento and Yolo counties have received permanent mortgage modifications, reports the newest look at April loan modification data from the U.S. Treasury Department.
 
Another 380 borrowers in Yuba and Sutter counties have gotten the permanent modifications.

The data suggest that ever more people are getting their loans permanently modified through interest rate cuts, longer payback periods and temporary suspension of payments. But the number of people in trial modification payments - the pipeline leading to permanent modifications - is apparently falling. Some fear this may mean fewer people will get help in the longer run.

Here is five months of data showing how permanent modifications are rising:
                         Sacramento MSA                  Yuba City MSA
Dec. 2009          1,156                                            90
Jan. 2010            2,078                                          159   
Feb.                   2,921                                           213
March                 3,882                                           296
April                    5,019                                          380

(Sacramento MSA: El Dorado, Placer, Yolo, Sacramento counties)
(Yuba City MSA: Yuba and Sutter counties)

Here now is the number of active trial modifications in place by month. As you can see these numbers are falling locally. Home Front hasn't been able to analyze this fully yet, but it would seem to suggest that fewer people are getting into the modification process period. That seems to follow some of the criticism implied in articles that the government loan's modification program is running out of steam.

 Is this how you're reading  it?

Here's the number of loans in trial modification programs in recent months (usually for three to six months, a test period for possible permanent modifications).
                                
                                  Sacramento MSA                  Yuba City MSA
Dec. 2009                        11,848                                 908
Jan. 2010                         12,346                                 941
Feb.                                 12,450                                 956
March                               11,653                                 884
April                                   9,624                                  727

According to the report most of these permanent modifications are reducing monthly payments by an average of $500. They include lowered interest rates, longer periods to pay off the loan and temporary suspension of payments.

Source: Making Home Affordable Program
May 17, 2010
2,470 apply already for first-time homebuyer tax credits

They're going fast.

California's first-time homebuyers have applied for an estimated $13.3 million in state homebuyer tax credits in the first two weeks of the program, according to the state Franchise Tax Board.

At that pace $100 million in available credits are "expected to be used up very quickly," says an FTB announcement.

The agency has warned buyers that it may take them up to an hour to connect to the agency's fax machine during business hours "due to the high volume of faxes we are receiving."

An estimated 17,500 first-time buyers are expected to get an average tax break of about $5,700 over three years, according to the FTB.

A second allocation of $100 million in tax breaks for buyers of new, unoccupied homes is expected to last longer, said FTB spokeswoman Brenda Voet. An estimated 14,000 buyers are expected to claim an average of $7,000 in tax breaks over three years, according to FTB estimates.

State lawmakers and Gov. Arnold Schwarzenegger approved the tax credits with March legislation designed to stimulate the state's economy.

May 14, 2010
Sacramento mortgage fraud indictments: Change your name, buy a house

This is a few days late, but the U.S. Dept. of Justice in Sacramento has announced mortgage fraud-related indictments against four Elk Grove men and another from Fair Oaks.

This is wild stuff. They've been charged with 11 counts of mail fraud for allegedly changing their names to Muslim names to buy houses that many then lost to foreclosure. Losses are estimated at $1 million.

May 14, 2010
The budget and the economy

Gov. Arnold Schwarzenegger's revised budget, released earlier this afternoon, says the economy is improving but not quickly enough to erase the deficit.

The the so-called "May revise" points to a $19 billion deficit. The accompanying economic forecast is rosier than the one Schwarzenegger released in January, to the tune of an additional $3.7 billion in tax revenue in the upcoming fiscal year.

But still it won't be nearly enough to cure the budget.

"The outlook for the near future is positive but sober," the forecast says.

We know that California has been lagging the U.S. recovery. When the stronger-than-expected nationwide jobs report for April came out last Friday, economists told us California was on the brink of joining the party. We'll see next Friday, when the state and local job figures are released, if that's true.

We already know Schwarzenegger's team was disappointed with the results of April's income tax collections; they were well below expectations.

Look for more in Saturday's paper.

 

May 13, 2010
Top 15 Sacramento-area home builders, Q1 2010


Hanley Wood Market Intelligence is out with its first quarter 2010 numbers for new home sales in the six-county Sacramento region (El Dorado, Placer, Sacramento, Sutter, Yolo and Yuba). We're counting 732 sales altogether in the region. Here's who's in the Top 15:

1) Pulte (including Centex and Del Webb) 108
2) Lennar 67
3) JMC 45
4) Taylor Morrison 44
5) Pacific West 39
6) Woodside 33
7) Signature 32
8) Standard Pacific 32
9) S360 Development 27
10) K. Hovnanaian 25
11) Tim Lewis 23
12) Beazer 23
13) Elliott 22
14) Meritage 21
15) Shea 21

May 13, 2010
80% of first-time buyers can afford a house in Sacramento

The California Association of Realtors reports today that 80 percent of Sacramento County first-time buyers could afford a home during the first three months of 2010 - same percentage as last year. It is the flip side of the housing crisis: opportunity has opened for people priced out of the market before prices fell.

In Sacramento that assumes a 10 percent down payment and a $152,520 entry-level price. The average monthly payment is $860 including taxes and insurance. Minimum qualifying income: $25,720.

Statewide, the first-time buyer affordability figure is 66 percent - down from 69 percent the same time last year.

May 13, 2010
Sacramento: new home sales up from Feb. but slump continues

RCB TAX CREDIT 02.JPG
Sacramento-area home builders reported sales of 253 new homes and condos during March, continuing a long slow decline that began in 2005.

The March tally was down from 365 sales in March 2009, according to figures by consultant Hanley Wood Market Intelligence. Last year set a new low for sales in the region, possibly the worst in a half century, according to statistics.

Builders, who have seen a 90 percent reduction in their regional workforce during a devastating housing market slump, hope to beat last year with help of a state $10,000 tax break for buyers of new, unoccupied homes.

The numbers released today by the California Building Industry Association show 234 sales in Sacramento, El Dorado, Placer and Yolo counties and 19 in Sutter and Yuba counties.

Statewide, homebuilders reported 2,189 sales of homes and condos in March, beating February's total of 1,938. But March sales were 31 percent below those of March 2009.

Photo: Sacramento Bee/Renee Byer

May 12, 2010
Online real estate searches shift toward rentals

Check this out: Experian Hitwise - which measures Web searches - says there's been a significant year-long drop in numbers of people searching online for homes for sale.

Correspondingly, more are searching online for rentals. Hitwise cites much of the negative media reports on housing. It reminds me of a theory I heard in 2007: you will truly know the market is at bottom when very idea of owning a home becomes - in pop culture - revolting.

May 12, 2010
America's top 100 homebuilders last year

Builder Magazine just announced its 2009 list of top American homebuilders.

Texas-based D.R. Horton, once one of the leading Sacramento-area builders, ranked first.

 Many other familiar names across the corporate homebuilding scene in Sacramento are high on Builder's list.

May 12, 2010
Sacramento County: Q1 home sales down 20% from year earlier

Time-consuming short sales and fewer listings combined to shrink the number of first-quarter home sales in Sacramento County from the same time last year. That's according to Prudential Realty, which released its first quarter sales statistics this afternoon.

Prudential counts 3,854 sales of single-family detached homes in the county in January, February and March - compared to 4,806 the same time in 2009.

Most of the homes for sale in Sacramento County and West Sacramento are short sales - where lenders accept less than owed to avoid the higher costs of foreclosing. Those sales can take months to be approved. And agents still say there are more buyers than listings at the lower affordable end of the market.

Inside the metro area, sales were up from last year in Antelope, Carmichael, Fair Oaks and Folsom.

They were down in Citrus Heights, Elk Grove, North Highlands, Orangevale, Rancho Cordova, Sacramento and West Sacramento.

In the larger region - Amador, El Dorado, Nevada, Placer, Sacramento, Sutter, Yolo and Yuba counties - first quarter sales totaled 8,323, according to MDA DataQuick. That's down from 9,034 in the first quarter of 2009.

May 12, 2010
Pension funds: We're complying with Iran law

Officials with California's two public pension funds tried to convince legislators today that they're complying with a law requiring the sale of stocks of international companies doing business in Iran - even though they've dumped almost none of their holdings.

CalPERS and CalSTRS told the Assembly Accountability Committee that they're following the law by pressuring the companies to pull out of Iran. In many cases, they said they've succeeded, and only a handful of their investments have any Iran ties.

Only CalSTRS, the California State Teachers' Retirement System, has actually sold any stocks because of the 2007 law.  The board of the California Public Employees' Retirement System has decided not to sell any stocks in deferrence to its fiduciary duties - its legal obligation to make as much money as possible for its members.

Committee members were mostly satisfied with the explanation but Chairman Hector De La Torre, D-South Gate, said he believes the pension funds should part ways by year's end with companies that refuse to change their business behavior in Iran. CalPERS and CalSTRS should be able to find "equivalent or better investments" without harming their portfolios, he said after the committee hearing.

CalSTRS and CalPERS have come under fire for not unloading their Iran-related investments. But officials with the funds say they can exert more influence through "constructive engagement" than by selling their stocks.

"When we sell the stock, it's like taking our ball and going home," said Chris Ailman, CalSTRS' chief investment officer.

But Cliff Berg, representing the Jewish Public Affairs Committee, said CalPERS and to a lesser extent CalSTRS are simply ignoring the law. It "was the Iran Divestment Act, not the 'Iran engagement act,''' he told the committee.

May 10, 2010
Has your house trapped you in Sacramento's unemployment?

Richard Florida, who wrote a widely-quoted book about revitalizing cities by attracting "the creative class," has penned a new book about changes wrought by this financial crisis - especially in housing. It's titled "The Great Reset."

One of the really interesting points is how home ownership isn't necessarily good, especially for people who live in hard-hit economies and want to move to places with jobs. He says mobility is the key to the new economy. People trapped in houses, as many are here in Sacramento, are held back and so is the larger economy, he argues.

I am hoping to talk with Florida by phone about this phenomenon and write a Friday Home Front column on it. I'd love to get a couple of examples from people here, too. Are you seeing jobs in Texas or New York that you'd love to apply for? But can't because you're upside down? Trapped professionally and financially in Sacramento's unemployment by a routine home buying decision made in 2004? I have until about 10 a.m. Thursday for this if you'd like to get in touch. Thanks.

jwasserman@sacbee.com

Or by phone direct, 916-321-1102.

May 10, 2010
California's homebuyer tax credit: what you need to know

California's Franchise Tax Board announced details Monday onthe specific ins and outs of getting new state homebuyer tax credits up to $10,000. The explicit guidance follows passage last month's legislation setting aside $200 million in buyer tax breaks on a first-come, first-served basis.

The FTB, which is California's version of the Internal Revenue Service, advises that  applications must be faxed only after the close of escrow. The close of escrow is the trigger date for being eligible for the tax credit.

More specifically, the tax agency notes that applications - and a copy of the escrow settlement statement - must be faxed within two weeks (14 calendar days) after the close of escrow.

The new program began May 1 and runs until the supply of credits is exhausted.The FTB estimates that up to 32,000 California buyers will be able to claim them. State lawmakers allocated $100 million for all buyers of new unoccupied homes and $100 million for first-time buyers of existing homes. Though controversial in a time of budget deficits, lawmakers and Gov. Arnold Schwarzenegger said it would create new residential construction jobs and trim the state's inventory of homes for sale.

More details from the FTB are at this link.

May 10, 2010
Report: 45 percent of Sacramento mortgages are underwater

The number of Sacramento-area homes that are underwater appears to have stabilized 20081128__20081130_k01_bz30underwaterp1.jpgat about 45 percent, according to a  new report this morning from CoreLogic(formerly known as First American CoreLogic).

The firm, which tracks 47 million U.S. properties, said 44.8 percent of homeowners with a mortgage in Sacramento, El Dorado, Placer and Yolo counties owed more in the first quarter of 2010 than their homes are worth.

That's roughly the same as much of the third quarter, according to the firm. It's an indicator, according to another report today from online home value calculator Zillow.com, that home prices appear to be bottoming out in California.

CoreLogic said said 24 percent of all homes in the U.S. are underwater. In California, 34 percent are in that condition.

The worst market is Las Vegas, with 70 percent of mortgaged properties being underwater. The next three are all neighbors of ours - Stockton, where 65 percent are underwater, Modesto - 62 percent,  and Fairfield-Vallejo - 60 percent. Phoenix rounds out the top five with 58 percentof mortgaged homeowners being underwater.

Image courtesy of altergroup.com

 

May 6, 2010
Another fast and enviable V-Shape Asian recovery in Taiwan

 

taipei2.jpgTAIPEI, Taiwan

  Anyone of a certain age, becoming a consumer during the 1970s, will recall the phrase "Made In Taiwan" as the first wave of globalization. It was a joke in some ways, the euphemism in a time when U.S. manufacturing industries still ruled globally - for cheap.

But that was a long time ago in both countries, as our small group of American business reporters is discovering on this East-West Center tour nearing its end.

Today, the U.S. remains embroiled in a devastating financial meltdown, and Taiwan has quickly bounced back with an enviable V-shaped recovery. Unemployment on this island of 23 million people off the China coast is 5.6 percent. The economy is expected to grow by almost 5 percent this year.

Officials say they were scared half to death in late 2008 when the financial crisis began spreading from the U.S. Exports in this exporting nation plunged 40 percent. The first quarter of 2009, the economy contracted by 9 percent as the world stopped buying.

And then....China quickly sidestepped the global crisis. The rising middle class there began buying again and Taiwan rode the wave back to boom times. Gone now is the time when Taiwan existed largely on American consumption. Today, 40 percent of its exports go to China.

 

taipei1.jpgIt is striking how a small nation - smaller than California - is now filled with construction cranes. Everywhere, I see new residential high-rises, more office buildings. The most notable new piece of skyline is Taipei 101, once the world's tallest new skyscraper. While California argues about high-speed rail alignments and whether we'll ever have the money, Taiwan has a new system in place. It is also expanding its subway system at a time when Californians are witnessing the budgetary destruction of transit systems.

"The people of East Asia, the Oriental people, like to do things and compete," said  Cheryl Tseng, director of the nation's overall planning department, the Council for Economic Planning and Development.  She can reach the southern end of Taiwan in 90 minutes, have a meeting and be back in her office in the afternoon.

  It is easy on a tour like this of a booming Asia to internalize a notion of U.S. decline while we try to dig out of this financial morass. More than once our group of reporters has heard officials make reference to this perception among people.

Yet yesterday, during a sit-down with David Hong, president of the Taiwan Institute of Economic Research (a prominent national think tank) we were told that perhaps we worry TOO much.

"I don't worry as much as you do," said Hong. "It's still the best in the world (U.S. economy) and we have to appreciate that...The foundation is solid. It's solid. It's a market economy."

And so is China's, however. It was amusing just an hour or so later to hear the small country's vice-minister for foreign affairs, David Lin, describe China as "a Communist country without Communism.

"Mainland China," he said, "wants to be identified as a market economy. They all want to get rich. They all want to be successful."

It has, indeed, been a long road since "Made in Taiwan" was a joke and China was a revolutionary socialist mystery awaiting the state visit of Richard Nixon. A few days in Taiwan shows how much the world can change in one small lifetime.

To hear them talk in this part of the world, the biggest changes are yet to come.

 

 

 

 

 

 

 

May 6, 2010
Big lawsuit in CalPERS scandal
Thumbnail image for JD_BUENROSTRO_CALPERS.JPG

California officials filed a fraud suit against the former chief executive of CalPERS and his close friend, a former pension fund board member turned placement agent, in an explosive new twist in the influence-peddling scandal that's been simmering at CalPERS for months.

The lawsuit by Attorney General Jerry Brown says former CalPERS CEO Fred Buenrostro accepted thousands of dollars worth of gifts from Alfred Villalobos, a former CalPERS board member who has earned tens of millions of dollars as a placement agent. These agents are hired by private equity firms to obtain investments from public pension funds such as the California Public Employees' Retirement System.

Among other things, the suit says Villalobos "substantially subsidized" the cost of Buenrostro's 2004 wedding at Villalobos' Lake Tahoe mansion - an incident first reported by The Bee last fall. Buenrostro has said he reimbursed his host.

The suit demands the return of at least $70 million in commissions earned by Villalobos over the years from CalPERS investments.

The suit was filed in Los Angeles County Superior Court. Brown, at a press conference today in Sacramento, said CalPERS "should have run a much tighter ship."

The state won a court order freezing Villalobos' 21 bank accounts and numerous properties at Lake Tahoe, Hawaii and elsewhere. It said it needed to freeze the assets because Villalobos is a "frequent, high-stakes gambler" with a history of "moving large sums of money" around. He could squander his money paying gambling debts before the state can pursue its case, the state argued.

The suit says Villalobos' gifts "compromised the integrity of CalPERS' investment process." It says he has a reputation in the investment industry as someone "who attempts to exert pressure on CalPERS' representatives."

It also says Villalobos frequently entertained Buenrostro and recently retired CalPERS board member Chuck Valdes "and paid for their meals, drinks and entertainment at Christmas parties." Valdes wasn't named as a defendant. The Bee reported last fall that he accompanied Villalobos on a round-the-world trip in 2006, and while Valdes produced a check indicating he reimbursed Villalobos for the cost, the lawsuit called that statement "questionable."

The suit also said Villalobos arranged for Valdes to attend the Oscars in 2006. Moreover, Villalobos arranged for three of his employees, including his daughter Carrissa, to contribute thousands of dollars to Valdes' re-election campaign for the CalPERS board in 2005, the suit says, reimbursing them for their costs. 

The suit also said CalPERS investment official Leon Shahinian accompanied Villalobos on a trip to New York in 2007 to attend a fundraiser hosted by Leon Black, the founder of private equity firm and frequent Villalobos client Apollo Global Management. Two weeks later, Shahinian recommended that the CalPERS board approve a $700 million investment with Apollo. Eventually the board approved a $600 million deal with Apollo, one of CalPERS' biggest investment partners.

CalPERS officials said Shahinian, who wasn't named as a defendant in the suit, has been placed on administrative leave, with pay. 

According to the lawsuit, neither Buenrostro, Valdes or Shahinian disclosed their gifts from Villalobos on the conflict-of-interest forms they filed with CalPERS.

CalPERS praised Brown for bringing the suit and said it was "deeply troubled" by the allegations. Villalobos, Shahinian and Buenrostro couldn't be reached for comment. Someone answering the phone at Valdes' home said, "We don't do interviews." 

Buenrostro was CalPERS' chief executive until 2008. He has acknowledged going to work for Villalobos' firm, Arvco Capital of Stateline, Nev., a year later. But the lawsuit said he became Villalobos' business associate just a day after leaving the pension fund, earning $300,000 a year. "Buenrostro was compromised by Villalobos' gifts so much that he was already working for Villalobos before he even left CalPERS," the state said. For instance, he planned a trip to India to make a speech on Villalobos' behalf nearly a month before he left CalPERS in June 2008. 

(Photo of former CalPERS CEO Fred Buenrostro/Bee file, 2005)

May 5, 2010
An improving job market?

A new study out today points to a better job market in California.

The California employment indicator index, compiled by the economic research folks at Orange County's Chapman University, has jumped sharply in the second quarter to a reading of 94.8.

That compared with 81.9 on the job meter in the first quarter.

Chapman's economists noted that California created 32,000 jobs in the first quarter, and the index "suggests that job creation should continue in the second quarter."

 

May 5, 2010
CalPERS wins a round vs. Wall Street agencies

CalPERS has won court permission to proceed with a $1 billion lawsuit against the three big Wall Street credit-rating agencies.

A San Francisco Superior Court judge rejected a request by the rating agencies to toss out the CalPERS suit, which stems from a string of failed investments.

"We are pleased with this result," said CalPERS spokesman Brad Pacheco.

In the suit, the California Public Employees' Retirement System says it relied on ridiculously high ratings when it poured more than $1 billion into the deals, known as structured investment vehicles. The investments all went bust in 2007 and 2008.

The rating agencies - Moody's Investors Service, Standard & Poor's and Fitch Ratings - have said they did nothing wrong.

 

May 5, 2010
Meanwhile, things are still bumpy in California...

It's hard to compete against the glitter and glamor of Hong Kong and other Asian datelines posted by my globetrotting Home Front colleague Jim Wasserman.

But I think it's worthwhile to take a look at a California small-business survey released this week by Citibank. It's a street-level glimpse of the struggles faced by business owners and the long road to recovery they face.

According to the survey, 79 percent say business conditions in California are fair or poor. Some 45 percent say their own business condition is worse than it was a year ago - a fairly grim outlook in view of the reasonably upbeat economic news out there. Only 21 percent expect to increase their payrolls over the next year.  

Still, things aren't all bad: 55 percent of small business owners in the state say their business is doing better than expected, and 44 percent say they expect imprvement in the next 12 months.  

May 2, 2010
Land-locked Singapore shows the way on smart growth

SINGAPORE

sentossamall.jpg  For several days now I have seen how the other half lives - in Singapore - and it's enviable, everything that SACOG has been talking about for years in Sacramento. Transit ridership is 62 percent of trips here and the goal is 70 percent. This little country has congestion pricing that makes cars entering downtown pay extra. It has incredible public transportation, including a subway that is being expanded. It is developing welcoming people places out of all its riverfront and flood control reservoir properties. It has incredibly beautiful landscaping (this is a tropical climate 85 mile north of the equator), a massive new skyline and construction like you wouldn't believe.

 I've been in lots of interesting conversations about how this city-state of 5 million people houses its people. It's nothing like we do it in the U.S. and California.

Singapore is a rich little country in Southeast Asia - with a 2.2 percent unemployment rate! It has one of the world's largest ports (it looks about 20 times bigger than the Port of Oakland) and is a major Asian financial center. It also does a ton of information technology work and high tech manufacturing. Needless to say, it's incredible to be somewhere that isn't gasping for economic breath and is ramping up again with job growth. They're all about booming here again.

I've had fun asking people tons of questions about their housing. People tell me 80 percent of the population lives in government-built homes. They call it "public housing," and immediately point that it has no negative connotations here whatsoever. The government subsidizes rent to about a third of incomes, though if you want more space it can cost up to 50 percent. Younger people live with their parents until they marry. If they buy a house then the government will give them up to about $11,000 off the purchase price by staying within a couple of miles of their parents.

Nearly all the housing is high-rise, about 20 stories. Almost no one lives in single-family detached homes. And since the population is a mix of Chinese, Indians, foreigners and native Malays the government has an ethnic integration policy for its housing. Every building has a population roughly similar to the ethnic mix nationally. The government is trying to create a society that gets along and doesn't split up into ethnic enclaves. If you want to rent you go along.

Singaporeans buy their houses with a 99-year expiration date. I don't understand this completely, but that's how it's done. One family can't keep passing the house onto relatives. A couple of reporters I talked with were surprised very much to hear that we don't have this in California. If you buy state-owned housing, you also have the ethnic integration policy. If you can afford the more expensive private sector housing you don't.

  singskyline.jpgThis probably sounds incredibly bureaucratic to American ears. But this is a one-party state that does its own thing. Tomorrow, we go to the country's Urban Redevelopment Agency for a presentation on how it's rebuilding Singapore. This is a small island where everything that gets built is part of tearing something else down or working with what's already there. From what I have seen of the lush landscaping, the nice buildings, the amazing shopping malls - this government, as the master developer, has good taste. 

One last nugget: two massive casinos have opened here in recent weeks. They're aimed at foreigners. Singaporeans have to pay $100 to get in - a discouraging barrier. Last night when we toured one of the big casinos the Singaporeans had their own giant room. The place was packed.

 

 



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