Home Front

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

June 30, 2010
Best books about the housing crash and financial meltdown

41vvmbigshortXp3IRL._SL500_AA266_PIkin2,BottomRight,-16,34_AA300_SH20_OU01_.jpgI recently finished reading "The Big Short" by Michael Lewis, a really excellent book in which he debunks the notion that no one could have seen the coming financial crash. I've now rumbled through several interesting histories of the terror that gripped us all though much of 2008, especially the fateful month of September when it appeared all civilization was about to collapse. Believe you me, all these Sacramento mortgages that were easy to get and hard to pay off were all part of a huge money-making machine with no thoughts of consequences.  

Page 260 in Lewis' book contains one of the great paragraphs in the history of books (OK, maybe books about the financial industry):

He writes:
"The people in a position to resolve the financial crisis were, of course, the same people who had failed to foresee it: Treasury Secretary Henry Paulson, future Treasury Secretary Timothy Geithner, Fed Chairman Ben Bernanke, Goldman Sachs CEO Lloyd Blankfein, Morgan Stanley CEO John Mack, Citigroup CEO Vikram Pandit, and so on. A few Wall Street CEOs had been fired for their roles in the subprime mortgage catastrophe, but most remained in their jobs, and they, of all people, became important characters operating behind the closed doors, trying to figure out what to do next. With them were a handful of government officials - the same government officials who should have known a lot more about what Wall Street firms were doing, back when they were doing it. All shared a distinction: They had proven far less capable of grasping basic truths in the heart of the U.S. financial system than a one-eyed money manager with Asperger's syndrome."

51nVgreatesteverkFua0JL._SL160_AA160_.jpgRight now, I am trying to slog through "The Greatest Trade Ever," a tale about investor John Paulson who made a fortune shorting subprime mortgages. It seems for whatever reason to be slow going.

I recommend "A Colossal Failure of Common Sense" by Lawrence G. 51SIovcommonsenseP1D1L._SL160_AA160_.jpgMcDonald. It offers a great insider sense of the chaos building inside investment bank Lehman Brothers as it gorged on subprime mortgages. Great, too, is a sense of The Central Valley being an alarm bell for all that was about to go spectacularly wrong.

41CCtoobigl0Jf-T7L._SL160_AA160_.jpgCheck out "Too Big to Fail," by Andrew Ross Sorkin. It's largely a gripping chronicle of that horrifying weekend when the establishment let Lehman Brothers go into bankruptcy and Merill Lynch became part of Bank of America.

I also liked "Street Fighters, The Last 72 hours of Bear Stearns, " by 5streetfighers1jOl+Ew5ML._SL160_AA160_.jpgKate Kelly. It's a little drier, it seemed to me. Nontheless, it's all about madness gripping Wall Street in March 2008. I can still remember that Sunday night waiting for the Asian markets to open, and having a sense of what awesome trouble we were all in. And we were.  (Images courtesy of Amazon.com).

June 28, 2010
More movement on state pension cuts

Overhauling the state's pension system remains one of the hottest topics in California politics. Our colleague Jon Ortiz has the latest on two more unions falling into line with Gov. Arnold Schwarzenegger's plans for rolling back costs.

Still uncertain is what will happen with the largest union, powerful SEIU Local 1000.

Earlier, four other unions agreed to pension concessions. And more than a handful of states have been rolling back pension benefits in an effort to cut costs.

In California, the backdrop of all this is the specter of CalPERS and CalSTRS coming to the state for more money, in part to help them recover from huge investment losses of 2008. CalPERS is raising the state's contribution by $600 million in the new fiscal year. Next year CalSTRS, which needs lawmakers' permission, will go to the Legislature to discuss higher contributions.

June 28, 2010
Will job market rebound? History says yes

Michael Bernick, former head of the Employment Development Department, makes an interesting point in his blog on the Fox & Hounds Web site.

The job market historically does come back, no matter how bleak things seem now.

Bernick is one of the savvier labor market analysts in the state, and it's worth taking a look at his blog post. You can find it here:


June 25, 2010
California's first-time homebuyer tax credits: going, going....

It's going fast. California's Franchise Tax Board reports that it's received nearly 18,000 applications requesting $91 million of an available $100 million set aside for first-time home buyer tax credits up to $10,000.

The FTB points out that the numbers so far are only estimates based on small samples. So it plans to take 28,000 applications before shutting off the fax machine. Also, many of those applications coming in are duplicates, and most people won't be able to claim the full $10,000.

But the numbers show again the popularity of a stimulus passed almost unanimously by state lawmakers in March. The bill, AB 183, was designed to soak up excess housing inventory and help revive the state's construction industry. Many have argued that it's a giveaway to people who would have bought anyway, and that there are more pressing needs in a state facing $20 billion in budget gaps. But consumers sure appear to like this.

FTB expects to have numbers next month on a similar $100 million allocation for tax credits to buyers of new, unoccupied houses.

June 24, 2010
May Single-family home starts rise 9.6% in Sacramento

Oddly, while the national news is about a terrible fall in single-family home starts from April to May, they rose almost 10 percent in the Sacramento region, according to the newest release from the California Building Industry Association.

Here is a PDF with numbers from all the state's metros, including Sacramento and Yuba City.

June 24, 2010
Sacramento woman headed to jail for credit card fraud

 The U.S. Attorney's Office just announced 2 1/2 years in jail for a woman who stole peoples' identities and took out credit cards in their names. There are 114 victims.

June 24, 2010
Sacramento credit union deposits signal a stronger consumer

The California Credit Union League published some interesting stats this afternoon showing a pretty sizable jump in deposits the first quarter of 2010. It's touting the deposits as signs that consumers may be about to unleash their spending.

"We're hoping these small and subtle buildings-up over the last few quarters will portend very good things in the coming quarters," said Daniel Penrod, the league's senior industry analyst. "That's in terms of comfort and people feeling confident enough in their employment situation that things won't get worse. They can use the savings in terms of bringing back retail and having an impact on the job numbers."

The CCUL reported $1.9 billion in new net credit union deposits statewide in Q1. Nearly a fourth of that - $501 million - flowed into Sacramento credit unions.

Banks, meanwhile, saw their deposits shrink by 0.35%

I asked Penrod if that might partially be about people checking out of big banks over TARP and the Wall Street meltdown. There's a movement for people to register their disapproval of "too big to fail" by moving their money out of the biggest banks.

He said, "It appears to point to individuals taking initiative with their finances. For a long time people got with one institution and and rode it for the rest of their lives. Now, with all the information available they are looking at finances and deciding what's best for them. We're seeing a shift to individuals taking control of their finances.

"Confidence and trust is huge," he said. "With the big bailouts, the isues with WAMU and IndyMac, the state was shaking. It remains a very tentative situation."

Finally, the CCUL noted that use of ARMS is up in Sacramento. Credit unions originated an extra $27.8 million worth of adjustable-rate loans in Q1 - and $31.8 more in fixed-rate loans than the previous quarter.

I am not sure this is something to rave about - another rise of ARMs.

But they're spinning it as a sign of confidence in homebuying.

June 24, 2010
Elk Grove: Places of the real estate meltdown

EMPTY1.jpg I visited my dentist this morning in Elk Grove for a routine checkup and found him almost surrounded in his strip center by empty stores. It was worse than six months ago, which was worse than six months before that.

 Gone now is Cartridge World, another little business that sold cookies and another little restaurant. I counted nine vacancies in Laguna Park Village.

Big 5 is still there, as is Kragen. Both are the main anchors. Newly arrived is a check-cashing business, which probably doesn't argue for upward mobility here.

One word: Ouch (And I don't mean from the dentist).




June 23, 2010
U.S.: more than 6,200 permanent loan mods in Sacramento

The newest U.S. Treasury Department reports for May show that lenders have done 6,227 permanent loan modifications with Sacramento-area borrowers under the Obama Administration's Making Home Affordable program.

A closer look at  the data shows 5,795 permanent modifications so far in Sacramento, El Dorado, Placer and Yolo counties and 432 more in Yuba and Sutter counties.

Here is a look at all U.S. metro areas for permanent modifications and trial periods in motion.

June 23, 2010
CalHFA gets federal nod for $700 million plan to help borrowers

UPDATE: Here is the full June 24 Sacramento Bee story that explains the program:

 The California Housing Finance Agency has just announced U.S. Treasury Department approval for a $700 million plan to help more struggling California borrowers stay in their homes.

It applies to moderate-income borrowers and contains some money to write down loans to today's values. There is also money to help people who simply can't afford their homes move to new rentals.  It's part of a $2.1 billion federal initiative to help borrowers in states where home prices have fallen by 20 percent or more.

Approvals for the first $1.5 billion of that $2.1 billion were also announced this morning by the U.S. Treasury Department.  

UPDATE AT 10:15 AM: We just talked minutes ago with Evan Gerberding, marketing manager for what's being called the Keep Your Home Program. (Check the link for details about eligibility etc). The aim is to help approximately 40,000 borrowers over the next three years, starting with the hardest-hit counties.

The goal is to start Nov. 1, said Gerberding.

Here is the full 44-page California proposal approved by the U.S. Treasury Department.

It looks so far like they will provide  up to $1,500 a month for people in danger of defaulting on mortgages because of job losses. And they'll offer $50,000 to lenders to lower what's owed on the house - and aim to have lenders match that amount.

CalHFA is adding some staff to run this. We asked what percentage of the $700 million is going to staff. They promised to get us a number on that.

Overall, it sounds like a new cushion that could help thousands avoid foreclosure. On a cautionary note, earlier programs have been rolled out with fanfare and then proved a disappointment. But anyone who gets saved here from a foreclosure is one less.

Gerberding advised people who are struggling now NOT to wait until this begins. Keep trying to work with your lender through a HUD-approved counselor, she advised. More details on how to apply for this and what to do will become available as we get closer to Nov. 1, she said.

June 22, 2010
FBI issues its 2009 mortgage fraud report

 I have been carrying this 2009 FBI mortgage fraud report around in my briefcase for a few days without reading it yet. But people say California features prominently in it. Enjoy.

Incidentally, this FBI report covers the fiscal year begin Oct. 1, 2008 and Sept. 31, 2009. 

June 18, 2010
Attorney General issues alert about rising short sale scams

Attorney General Jerry Brown adds here to the warnings about short sale fraud as short sales become a growing part of the real estate market.

He warns against unlicensed firms offering services, illegal hidden surcharges, requests for advance fees, straw buyers and house flipping.

I was just talking yesterday to a buyers' real estate agent who said the seller's agent demanded some kind of surcharge at the last minute - an extra $3,000 that he was sure was illegal. But sellers paid to get the deal done without another hassle.

This short sale fraud has been a big top so I include a couple more links below to previous alerts. First, a replay of last week's Home Front article on the topic - with a lot of reader comments about their own experiences.

And second, a link to Department of Real Estate consumer alerts issued in April about short sales and forensic loan audits.

Be wary out there.

June 18, 2010
Sacramento's May home sales strongest for month in 4 years

Yesterday was a breaking news bombardment so today we bring a late run of the MDA DataQuick sales report from yesterday. First, today's news story showing that May's closed escrows topped 3,700 in the eight-county capital region. That was the best May since 2006, according to DataQuick.

And here is DataQuick's micro-look with May sales and price information by ZIP Code.

June 18, 2010
Where Sacramentans move - and who's moving here

A colleague just forwarded this stunning 2008 population migration map based on IRS data. Check it out for a great visual for every county in America. You'll never be the same after seeing this.

June 18, 2010
California unemployment falls to 12.4 percent

Unemployment fell to 12.4 percent in California last month as the state recorded its fifth straight month of job growth, although the numbers still reflect a weak recovery.

Payrolls grew by 28,300 jobs in May, the Employment Development Department reported today. The statewide unemployment rate fell a tenth of a point from a revised 12.5 percent.

The job growth was twice as high as in April, when meager hiring prompted economists to fret that the recovery was failing to gather momentum. However, it's also clear that much of the hiring in May was due to temporary hiring by the U.S. Census Bureau; the federal government added 30,000 jobs during the month.

Howard Roth, chief economist at the state Department of Finance, said the California's non-farm private sector actually lost 1,700 jobs during May.

Sacramento's unemployment rate fell to 12 percent, down from a revised 12.3 percent in April. The region added 3,800 jobs during May. As on the statewide level, the big gain was in federal government payrolls as the census geared up.

California still had the third highest unemployment rate in the U.S. in May, trailing Nevada (14 percent) and Michigan (13.6 percent). May marked the first time since April 2006 that a state other than Michigan had the worst unemployment in the nation.

June 17, 2010
80 percent of Calif. first-time buyer tax credit is gone

This just in from the California Franchise Tax Board:  About 80 percent of the state's $100 million tax credit is already spoken for. Details are in the link.

June 16, 2010
Fed grand jury indicts 10 - five in Elk Grove - on mortgage fraud

THURSDAY UPDATE: Here is the full report from this morning's Bee.

News came this morning that a federal grand jury in Sacramento returned a 48-count indictment against 10 people for allegedly falsifying loan applications and getting kickbacks by borrowing more than the house was worth.

It all allegedly involves Liberty Land and Investment Co. and Liberty Mortgage in Elk Grove, and loans made from April 2006 through Feb. 2007 - the height of loose lending standards, especially by subprime lenders.

We reached Liberty owner Hoda Samuel by phone this afternoon. She said her attorney advised her not to comment.

"I cannot talk about it," she said. I know Iam not guilty. But I cannot talk about it."

She said the business is closed.

 An attorney for another indicted defendant who pled not guilty said the federal government needs to go after the bigger fish - lenders and large banking institutions. Full story in tomorrow's Bee and Sacbee.com.

Here are a couple of links, to the news release from the U.S. Attorney's office and the actual 28-page indictment that lays out the government's allegations.


June 15, 2010
TrendGraphix: Median sales prices up 3% in past year


 "The majority of all sales are occurring under the $300,000 threshold; however, due to significant price-reductions, we are starting to see an increase in sales in the $500,000+ upper-end market."

So says Mike Lyon, head of Lyon Real Estate in Sacramento, in his May report from TrendGraphix.

Full May report is at this link

Number of homes for sale by county as May ended:

El Dorado 1,082

Placer 1,504

Sacramento 4,365

Yolo 473

Total 7,424

June 15, 2010
Southern California: median prices break $300,000 barrier

May sales prices topped $300,000 for the first time in 20 months across Southern California, researcher MDA DataQuick reported this morning.

Mainly, it's because higher-end sales are rising, and sales of really cheap bank repos are falling. The same thing apparently happened last month in the capital region, where median prices edged closer to the $200,000 barrier, according to the Sacramento Association of Realtors.

May prices in SAR's zone - Sacramento County and City of West Sacramento - were highest in 32 months. We expect DataQuick to weigh in with bigger regional numbers from Sacramento and the Bay Area later this week.

June 15, 2010
An improbable answer to delinquencies: doing nothing
This just arrived from Sean O'Toole, CEO of Foreclosure Radar in Contra Costa County:
"We saw drops in foreclosure activity across the board in May. Foreclosure filings, sales, cancellations and inventories all down. Given the percentage of delinquent home loans in CA (see the LPS Mortgage Monitor Report or the Mortgage Banker Association's National Delinquency Survey) this drop in activity makes no sense. I would love to say it was due to short sales or loan modifications, but I see little evidence from residential home sales, or HAMP reports to support that theory. The question we should all be asking is, if it is not by foreclosure, short sale or loan mod, then how do lenders plan to deal with delinquent loans? Increasingly seems that they, and the regulators that in the past have forced the liquidation of non-performing assets, are simply waiting and wishing for a return to peak prices reached during the bubble."
The full California report, including regional counties is at this link.
June 14, 2010
Valley watch: Another federal real estate fraud indictment

A federal grand jury has issued a 30-count real estate fraud indictment against a Modesto man. He's alleged to have made phony offers of construction loans for stressed-out landowners as the housing bust set in, the FBI announced today.

Tony Huy Havens, 36, is charged with wire fraud and criminal forfeiture related to alleged incidents in eight states. It's part of a new crackdown on mortgage and real estate fraud in the Central Valley.

June 11, 2010
Vallejo sisters face plead guilty to bank fraud in real estate deals

Vallejo sisters Ralondria Stafford, 36, and Necole Ward, 31, are scheduled to be sentenced in federal court in Sacramento on Aug. 26 after pleading guilty to charges related to phony real estate deals in 2005 and 2006.

They ran RN Realty in Vallejo and use a straw buyer scheme that earned them some big money - and now, big trouble with the law.

Details are in this news release from the U.S. Attorney's office in Sacramento: VALLEJO SISTERS PLEAD GUILTY TO MORTGAGE FRAUD.


June 11, 2010
Consumers are confident - but they're not spending

Consumers are more confident about the economy, in California and across the country. But the increased confidence isn't translating into spending.

That's the gist of some new surveys out today.

In California, consumer confidence continues to rise, according to a regular survey by Orange County's Chapman University. The university's Composite Index of Consumer Confidence increased to 82.7 in May, up from 81.1 in February. Confidence has been steadily rising since August.

On the national level, confidence is at its highest point since January 2008, according to the Reuters/University of Michigan survey.

On the flip side: The US government reported that retail sales fell 1.2 percent in May. It was the first drop in eight months and was a surprise to analysts. The news sent stocks tumbling, albeit modestly, in morning trading.


June 10, 2010
A bump in state tax revenue

California's tax collections ran well ahead of expectations last month.

State Controller John Chiang, in his monthly report, said today the state took in $6.61 billion in total revenue in May. That was nearly 25 percent better than last year and almost 10 percent ahead of Gov. Arnold Schwarzenegger's latest forecast.

The May results show economic progress, but the state's recovery isn't happening quickly enough to wipe out a projected $19 billion deficit forecast for the upcoming fiscal year.

"The financial problems before the Legislature and governor remain just as daunting and time-sensitive as they did a month ago," Chiang said in a press release.

June 10, 2010
CalSTRS sues over W.Va. coal mine disaster

CalSTRS joined two other investors this week in suing officers and directors of Massey Energy, the company being blamed in the West Virginia coal mine explosion that killed 29 workers.

The teachers' retirement system, along with Amalgamated Bank and Manville Trust, filed the suit in state court in West Virginia. The suit says Massey executives violated their duty to shareholders "by consciously ignoring the company's obligations to comply with federal and state law." CalSTRS noted that the Massey mine had been cited numerous times for violations in the months leading up to the blast.

CalSTRS owns more than 336,000 shares of Massey. The stock was trading at $30.30 a share this morning on the New York Stock Exchange.

June 10, 2010
Business confidence soars - in the Bay Area

You look for signs of upward momentum in the economy wherever you can find them. Here's one sign, just released today:

Business confidence in the Bay Area is the highest it's been in five years.

That's according to a survey by the Bay Area Council, which conducts surveys on this topic every quarter. The survey of 500 CEOs showed 58 percent think business conditions in the Bay Area are better than they were six months ago.

Perhaps more importantly, 63 percent said they expect conditions to improve in the next six months.

It might not be too surprising that Bay Area folks are generally upbeat. Although the East Bay has been rocked by the closure of the NUMMI auto plant, the tech sector has been on the leading edge of the economic recovery.


June 8, 2010
10 ways to help sell that house

Home & Garden TV just e-mailed its Top 10 Ways to Boost Curb Appeal and sell your house faster. Hint: fix the roof, get the oil off your driveway and light the place up.


June 8, 2010
Sacramento Co. median price highest since Sept. 2008

Median sales prices for existing homes in Sacramento County and the City of West Sacramento are headed back toward $200,000, having reached $190,000 in May, says the Sacramento Association of Realtors. That's highest since Sept. 2008.

SAR announced today that 1,720 homes changed hands in May, a 12 percent rise from April.

Perhaps more importantly, conventional sales - not repos or short sales - reached 41 percent of May sales. That's up almost 20 percent from this time last year, an indicator that higher-end homes are starting to move, and another small step back toward normal.

Short sales accounted for 23.7 percent of sales in May. Bank-owned repos were 35 percent of sales, according to SAR.

Here is a summary of May's numbers, followed by a closer look at the ZIP Code level.

If you're looking to compare May with other months check out SAR's statistics page.

June 8, 2010
Countrywide to pay $108 million for overcharging the desperate

During the worst of the market excesses that characterized Sacramento's housing boom, Countrywide Financial Corp. was the region's single largest lender. So it stands to reason that many residents of the capital region might get a piece of its new $108 million settlement with the federal government.

The Federal Trade Commission said the firm - now part of Bank of America - overcharged struggling borrowers with inflated fees and mishandled loans of borrowers in bankruptcy. It said the practice stems from before BofA bought Countrywide.

Reports said it will be months before those who were wronged receive notice of impending payments.

June 7, 2010
Roseville: still building houses (sort of) like the old days

whitehouse.jpgI drove to Roseville's WestPark and Fiddyment Farm communities this morning - to see if it is true that Roseville accounts for one in three sales of new houses in the six-county area.

I believe it now. I saw more houses going up in one place there than I've seen in three or four years. I saw sights that I haven't seen in a long time - a sign on a tree about window blinds, dirt on a driveway indicating the start of a back yard and scores of workers earning their living through residential construction.

A few weeks ago I added up numbers from a consultant, The Gregory Group, showing that West Roseville is home to 32.6 percent of houses sold the past year in El Dorado, Placer, Sacramento, Sutter, Yolo and Yuba counties.

We are starting a story to run soon about Roseville's continued growth as the new home market took harder hits in other parts of the region. Until then, here are few pictures from this morning's trip:

 Construction at Centex (I think).

Thumbnail image for Thumbnail image for workingit.jpg  A closeup at Vintage Square at WestPark. Nice colors 

Thumbnail image for aptsclose.jpg

Finally, open space. There's still a lot of it left out there:

emptyspace.jpg Photos/Home Front


June 3, 2010
12.2% of Sacramento-area mortgages are in distress

Housing industry tracker CoreLogic reported this morning that 12.2 percent of mortgages in Sacramento, Placer, El Dorado and Yolo counties in April were at least 90 days behind on payments, somewhere in the foreclosure pipeline or a bank-owned listing.

That's up from 11.8 percent in March - and well up from 8.45 percent in April 2009.

Sacramento-area mortgage distress is higher than California as whole, where 11.6 percent of mortgages are in a distressed condition. Nationally, 8.9 percent of mortgages are at least 90 days behind on payments or in the foreclosure pipeline, said CoreLogic.

Full details are at this link from CoreLogic.

June 3, 2010
Aerojet's solar plant grows

Aerojet, SMUD and Roseville's Solar Power Inc. today announced they've completed a significant expansion of a solar-energy facility at Aerojet's Rancho Cordova campus.

The three companies said they've finished a 2.4 megawatt expansion of the project. It's now a 6 megawatt facility, using more than 29,000 of the Roseville company's photovoltaic modules.

The companies said the program at Aerojet, which covers 40 acres, is the largest single-site industrial photovoltaic generating facility in the state. Aerojet will use all of the electricity.

The facility first opened last fall. 

June 2, 2010
Two more years of discount flood insurance in Natomas

U.S. Rep. Doris Matsui, D-Sacramento, just announced a two-year extension of preferred rate flood insurance for 26,000 Natomas residents through 2011 and 2012.

Here is the news release from the congresswoman.

Basically, that means these residents can get flood insurance for about $300 a year instead of the usual cost of $1,200 or more. They need the flood insurance while the Sacramento Area Flood Control Agency is beefing up area levees to provide 200-year flood protection in Natomas.

There was a lot of background paper flying on this issue. Rep. Matsui shared three letters related to the insurance issue.

Mail related to the most recent two-year extension is here.

The original letter from Matsui to Fema requesting a first extension is at this link while FEMA's original response is here.

June 2, 2010
More hiring at Thunder Valley

In another sign the regional economy is perking up, Thunder Valley Casino is hiring 100 more workers.

The hiring is in addition to the 600 employees the Lincoln casino hired this spring as it prepares to open its hotel tower and other new amenities in July.

Spokesman Doug Elmets said the casino realized the 600 employees weren't enough. It needs an extra 100 serves, cooks and others.

"If the casino busienss is any indication...the economy is on the uptick," he said.

The casino employs around 2,300 full- and part-time workers.

Elmets said job seekers must first apply at the casino's Web site, www.thundervalleyresort.com , and then attend a job fair Saturday from 9 a.m. to 5 p.m. at the casino's employment center on Athens Avenue across from the casino. 

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