Home Front

WEDNESDAY A.M. UPDATE: Here is the story we wrestled together for this morning's print edition. Ocwen remained silent throughout and HomEq employees were told not to talk with the media. But it sounds as if the pink slips might begin this morning.

I got a call about an hour ago that subprime loan servicer HomEq is shutting down today or tomorrow? I don't have anything confirmed yet from its parent firm, Ocwen Loan Servicing. But an insider at HomEq said employees are in meetings today about the operation closing. And they have been ordered not to talk with the media or they will lose their severance pay.

This could mean several hundred layoffs eventually,if true, into a regional economy with 12.7 percent unemployment.

Here is Ocwen's second-quarter earnings report in which it says its purchase of HomEq in May is expected to close Sept. 1.  There are mentions in there of closing HomEq and spending $1.5 million to add new facilities. The firm notes on its web site that it outsources some of its loan modification work to Uruguay and India.

Near as we know HomeQ has about 1,000 employees in North Highlands and a couple hundred more in Raleigh, N.C.

It's still pretty fuzzy. If you can shed any light on this please call me at 916-321-1102 or email jwasserman@sacbee.com.

The numbers are different, but the story is the same. Too many Sacramento-area homeowners owe more than their houses are worth. Zillow said recently it's 38 percent of all mortgages.

But today, Santa Ana-based CoreLogic reported that 43.4 percent of mortgages in El Dorado, Placer, Sacramento and Yolo counties  are in a state of negative equity. Their owners owe more than the house is worth. CoreLogic says there are 214,468 homeowners in that predicament locally.

That's a huge number, but it's been coming down slightly.  CoreLogic's first quarter 2010 report said 44.8 percent of Sacramento-area mortgages were underwater.

There's no accounting I know of that explains how the two differ. Both used automated valuation systems to judge what houses are worth in the region against what's owed on them.

The best thing about Sacramento is it's not one of the cities in the Central Valley - or Las Vegas. Look at these numbers for other Highway 99 cities in the Central Valley Business Times.

Sept. 7 UPDATE: Thanks to all who mailed and called regarding this request. Here is the story that ran Sunday, Sept. 5 in The Bee.
Your intrepid Home Front reporter is in early stages of doing the be-all end-all account of the short sale lifestyle that has rooted itself in the Sacramento region. It's an upside down world where little adds up, and where common sense and logic are sometimes in short supply. Yet it's a cornerstone of how houses are bought and sold these days.

I had an enlightening interview this morning with broker Bill Joyce in Roseville, who gives his would-be buyer clients "The Speech." Essentially, he warns them they are entering real estate's version of burning deserts and stormy seas, where they must, above all, endure the punishment and frustration.

I have talked with a couple who lost almost a year of house hunting after getting fixated on a short sale in Natomas that finally went into foreclosure.

I talked with a seller who tried for a year to short sale his house in Elk Grove - and was yanked from the very jaws of foreclosure this month by real estate agents who salvaged a short sale Hail Mary at the last second.

These stories are commonplace in this new market. I'd like to hear a few more - especially what you might have put up with on the journey to finding the good deal you live in now. Or if you are still on that journey I'd love to hear a dramatic tale or two to include in what's shaping up to be a slice of life in our times. Feel free to call 916-321-1102 or drop a line at jwasserman@sacbee.com.

Township 9, a 65-acre transit-oriented development along Richards Boulevard north of downtown Sacramento, won top honors from the California Housing and Community Development Department as a "Catalyst Project," the HCD announced today.

Township 9, a mixed-use development that will include up to 3,000 residential dwellings along with offices and stores and parks, won a Gold award alongside Emeryville Marketplace in Emeryville, Mission Bay in San Francisco, the Village at Market Creek in San Diego and Fullerton Transportation Center in Fullerton.

The project on the site of a former cannery which is being demolished, aims to put thousands of transit-dependent residents in mid-rise buildings in one of the most efficient uses of land in the capital region. Developers are Nehemiah Corp. of America, along with Sacramentans Steve Goodwin and Ron Mellon. A new light rail station is opening next year to serve the project.

HCD, which has approved $30 million in state housing bonds for the project, said  Township 9 and 12 other Catalyst Projects across the state provide "great examples of how to build sustainable economically vibrant communities."

The state will monitor them to test strategies for "broad implementation throughout California."

Homebuilders in El Dorado, Placer, Sacramento and Yolo counties again applied the brakes in July on building new single-family houses, the California Building Industry Association reported this morning.

Builders in the four-county region applied for just 170 permits to start new single-family houses in July. That was down 43.9 percent from June's 303 construction starts - and 14 percent fewer than June 2009. The numbers speak to continued caution as federal and state first-time homebuyer tax credits have expired. 

Builders are also holding back in Yuba and Sutter counties, starting just three single-family houses in July. In June, they started work on 10.

 A year ago in July they started 13.

State tax credits up to $10,000 to buy new unoccupied homes in California, however, are still available, according to the California Franchise Tax Board. (Go deeper into the release for info on new-home credits). About $83 million of an available $100 million allocation provided for the credits remain.

Builders in El Dorado, Placer, Sacramento and Yolo counties are about even with last year for construction starts of single family houses and apartments and condos, says the CBIA analysis of numbers provided by the Construction Industry Research Board. Statewide, building permits are running 21 percent ahead of last year.

Here's how single-family starts have lined up so far in 2010:

 January - 225

 February - 117

March - 179

April - 188

May - 206

June - 303

July - 170  

 Source: Construction Industry Research Board

June's sales of 252 new homes managed to outperform May across the Sacramento region, but the longer-term trend is still negative. June continued a sustained pattern of year-over-year decline, the California Building Industry Association reported Monday.

The number of closed escrows was 16.6 percent lower than June 2009 in El Dorado, Placer, Sacramento and Yolo counties, said the CBIA.

The plunge was deeper in Yuba and Sutter counties. June's 11 sales were 69 percent below the same time last year.

Statewide, closings of 2,454 homes and condominiums fell 36 percent from a year earlier, according to data provided to CBIA by Hanley Wood Market Intelligence. Median sales prices of new California homes in June were up 3 percent from June 2009.

But prices remained about the same as last year in the four-county Sacramento region. They fell 10 percent in Yuba and Sutter counties.

Kris Vogt, managing broker of Coldwell Banker Residential Brokerage's Elk Grove operation, has been named president of the company's Sacramento-Tahoe regional office, Colwell Banker announced this morning.

He replaces fomer president and chief operating officer Bob Bronswick. Bronswick has run the operation for roughly the past five years.

Vogt will oversee operations of the region's largest brokerage with 14 offices and more than 700 sales associates, Coldwell Banker announced.

The company made the announcement in this news release.

The statewide unemployment rate for July was 12.3 percent, the Employment Development Department said today.

California lost 9,400 jobs during the month, mainly the result of temporary Census Bureau positions ending.

Sacramento's unemployment rate rose to 12.7 percent, up 0.3 percent, as seasonal school layoffs contributed to a 5,300 decline in jobs.

State officials noted that the private sector added 13,700 jobs in California. although it wasn't enough to offset the loss of government work. "There's kind of some good news buried in there," said Dennis Meyers, economist at the state Department of Finance.

He said California's private payrolls have added jobs six of the last seven months.

Still, the numbers underscore the weakness of the recovery. California's unemployment was third highest in the nation, according to the US Bureau of Labor Statistics. No. 1 was for the third straight month was Nevada at 14.3 percent, followed by Michigan at 13.1 percent.

We're a day away from the monthly checkup on the job market in California and Sacramento, and chances are the numbers will be less than inspiring.

If you'll recall, the number of jobs nationwide fell by 131,000 last month, and the state and local numbers tend to go in tandem with the national figures. While there was a small amount of private sector hiring nationally last month, the new jobs were more than offset by the government layoffs caused by the conclusion of the US Census count.

And as you may have heard, the economic news in general hasn't been too spectacular lately. The stock market tumbled again today, based on some weak economic data, and it's once again appropriate that the state and local unemployment results will be released the same day that Furlough Fridays resume. It's a reminder of the fragility of the economic recovery around here and the Sacramento area's continued dependence on state government.

In June, unemployment was 12.4 percent in greater Sacramento and 12.3 percent statewide.

Look for the July numbers on www.sacbee.com sometime around mid-morning.

July sales numbers from MDA DataQuick show almost 1,000 fewer closed escrows in July in the Sacramento area than June. Here is a first look online.

Here is the full chart with July sales prices and sales numbers for Amador, El Dorado, Nevada, Placer, Sacramento, Sutter, Yolo and Yuba counties.

Couple of quick updates here.

1) MDA DataQuick of La Jolla just reported that San Francisco Bay Area Home Sales fell sharply in July, hitting a 15-year for the month. That's similar to the Los Angeles region. DataQuick will report Sacramento-area sales within the hour.

2) Mortgage interest rates hit a new low of 4.42 percent for a 30-year fixed loan, mortgage giant Freddie Mac reported this morning.

Sacramento-based TrendGraphix reported this afternoon that home sales fell sharply in July across the Sacramento region as the stimulus power of tax credits eased and more buyers took a wait-and-see approach.

In a news release accompanying the newest statistics, Lyon Real Estate Chief Executive Officer Mike Lyon said, "Buyers took a step back to take advantage of the larger inventory at lower prices."

Lyon said the area has seen a big increase in the number of homes put on the market - and that listing prices have declined.

He said he expects escrow closings to "rebound in the next 60 days."

Latino homeowners have absorbed the worst in California's foreclosure crisis, and account for 48 percent of homes repossessed from late 2006 through 2009, the nonprofit Center for Responsible Lending reported today.

Its new study, Dreams Deferred, showed that Latino owners surrendered 301,086 homes to lenders - almost half the state's 625,356 foreclosures during the period.

About 11 percent of the state's foreclosures - 69,176 - occurred in El Dorado, Placer, Sacramento and Yolo counties.

Statewide, 41 percent of loans that resulted in foreclosure were made in 2006, said the report.

The CRL study said that Latino households, particularly in the hard-hit Central Valley, have suffered disproportionately. Latinos accounted for almost half the state's foreclosures, but are 21 percent of California homeowners and one-third of its adult population.

Half the state's foreclosures were tied to purchase loans and half to refinance loans, the study said.

Authors of the study said most of the repossessed homes were modest, averaging about 1,700 square feet.

The study says Latino and African-American households accounted for nearly six in every 10 homes repossessed in California. African-American households suffered 47,337 foreclosures, nearly 8 percent of the state's total.

Lenders repossessed 216,037 homes from non-Latino whites - 34.6 percent of foreclosures statewide. Asian Americans were 6.4 percent, with 39,718 foreclosures.

In what appears to be a national phenomenon likely to include Sacramento, we're seeing that July homes sales fell hard in metropolitan Los Angeles - largely due to end of the federal tax credits. Researcher MDA DataQuick reported the monthly numbers this morning.

"Southland home sales saw their biggest year-over-year drop in more than two years last month as the market lost most of the boost from the federal home buyer tax credits. The median sale price dipped for the second month in a row, the result of a shaky economic recovery, continued uncertainty about jobs, and the expiring tax breaks."

  California's once-vaunted homebuilding industry has lost 80 percent of the economic impact it had in 2005, says a new report from the California Homebuilding Foundation and Center for Strategic Economic Research. There are also 84 percent fewer employees working in residential construction than in 2005, the report said.

The new study said that new housing construction in California supported nearly 77,000 jobs and $13.8 billion in economic activity during 2009. That "represents just a fraction" of the 487,000 jobs and $67.7 billion in activity just a few years earlier in 2005, said the industry trade group, the California Building Industry Association.

The newest report adds statewide context to a Bee story early last month that noted that the Sacramento-area new-home market has come nearly to a standstill. Homebuilders have taken to say that their industry is enduring another Great Depression, far more severe than that stalking the rest of the economy.

"The problem faced by both lenders and the government is that they can neither afford to kick homeowners out, or bail them out."  - Sean O'Toole.

 As the housing market downturn and foreclosure mess runs on and on, it's almost impossible to fathom some of the behavior that keeps occuring. You know the story: The government proposes new programs and the banks and lenders turn in disappointing results. The people, especially the people struggling with loan troubles, are baffled why they aren't getting any help.

On the surface the response to this entire mess has been extremely difficult to read. But last week ForeclosureRadar's Sean O'Toole came as close to make sense of it all as anyone I've heard recently. Here's his commentary. It's an eye-opener, worth a read. ForeclosureRadar is based in Contra Costa County. It's an information service for people who buy houses on the courthouse steps.

Saturday's Bee contained this story about federal indictments involving an alleged $11.4 million real estate investment fraud scheme that involved eight people and scores of U.S. investors.

Most are members of the Bhamani family of Carmichael, owners of Heaven Investments.

There's more reading and details here in a news release from the U.S. Attorney's Office in Sacramento and more still here in the federal indictments.

The weak economy continues to depress results at Red Hawk Casino, the casino's operating company said today.

Lakes Entertainment Inc. of Minneapolis said second quarter revenue fell sharply. The main reason was a poor quarter at its Michigan casino, but Red Hawk contributed to the decline as well. Management fees from the Shingle Springs casino, which are based on operating results, fell compared to a year ago.

Red Hawk "continues to face challenges in its market due to the harsh economic conditions in California," said Lakes Chairman and Chief Executive Lyle Berman in a press release.

Total company revenue dropped 32 percent and the company reported a loss from operations. But because of various one-time adjustments, Lakes' bottom line net income grew to $3.9 million from $2.8 million.

The Sacramento County District Attorney's office has expanded its real estate fraud unit to fight scammers who are preying on struggling area homeowners, District Attorney Jan Scully said Monday.

"Our goal is to prevent future victims by aggressively pursuing and prosecuting these crimes, as well as educating the community on how to protect themselves," Scully said in a statement.

The office's long-time real estate unit now has an extra lawyer and investigator to handle citizen complaints and prosecute offenders, said Marv Stern, assistant chief deputy district attorney.

Under the new system the Sacramento County Sheriff's Department and Sacramento Police Department no longer have their own investigators for real estate fraud. (Other cities have their own systems).

"It's a one-stop shop now," said Marv Stern, assistant chief deputy district attorney. "We're hoping to make it more of a specialty and do a more efficient job."

The unit is funded by a $3 fee charged for recording many real estate documents with the county. The expansion also occurs amid a serious amount of real estate fraud and scamming in a region hard hit by the housing crash.

Stern steered callers with fraud complaints toward the unit's phone number: 916.874.9045.

"We are here to help before someone makes a mistake that could have huge ramifications," he said.

The Sacramento region's negative equity rate is still falling - down to 38.1 percent during the second quarter of 2010, Seattle-based online evaluation service Zillow.com reported this morning.

Negative equity describes people who owe more than their homes are worth. It's also referred to as "being underwater" or "upside down." The phenomenon, which has especially plagued people who bought or refinanced during the housing boom, prevents them from being able to refinance. They're also still stuck paying boom-era mortgages for houses that are worth much less. That makes it tempting for many to walk away.

The second quarter's 38.1 percent collective negative equity rate for El Dorado, Placer, Sacramento and Yolo counties is down from 40 percent in the first quarter.

A year ago in the second quarter it was 45.2 percent.

Here is the release this morning showing figures for metros nationally.

Negative equity is falling for several reasons. One is that some people who had negative equity a year earlier lost their homes to foreclosure or sold them in short sales. That takes them off the list. But another reason, says Zillow, is that there have been fewer foreclosures. That means home values haven't been crashing as fast as they did before. In some cases they're rising. All of this combines to slowly reduce the rate of people in this unfortunate condition.

First-time California homebuyers seeking state tax credits up to $10,000 have until midnight Sunday, Aug. 15, to apply, the state Franchise Tax Board announced in a news release this afternoon.

The state tax agency set the deadline after receiving 31,460 faxed applications as of Wednesday, it said. Some of those are expected to be duplicates or invalid.

The FTB estimates it can award approximately 17,500 to 20,000 credit certificates for $100 million made available by legislation last spring. Stated the agency: "Once the funds are exhausted, any remaining applications will be denied."

The program, which began May 1 in California, provides state tax breaks up to $3,333 in each of the next three tax years. Most buyers owe less in state taxes than that, however, and won't qualify for the full amount, the FTB said.

Buyers must fax a special FTB application and copy of the final settlement statement within two weeks of the close of escrow.

This just arrived from the U.S. Department of Housing and Urban Development, a news release announcing a new plan to refinance underwater borrowers. The first-lien holder has to forgive some debt as part of the deal. But it may keep a few more people in their homes.

A sting operation Wednesday by the Contractors State License Board netted four allegedly unlicensed contractors in Nevada County, the CSLB has announced.

The CSLB issued notices to four suspects to appear in court on charges of illegal advertising and contracting without a license.

State investigators pretended to be homeowners seeking bids for paving, landscaping and painting a home near Grass Valley. Everybody who bid more than $500 and was allegedly unlicensed was charged.

Details and names are in this news release.

FRIDAY UPDATE: Here is the full column running in today's Bee and Sacbee.com.

I stumbled this week onto a really interesting policy intersection, the corner of legalized pot cultivation and real estate. Landlords and property managers are waking up to the idea that people will want to grow and consume legal pot in their rental properties. That's if Proposition 19 passes this November.

Being ever intrigued by how real estate is intertwined with everything I talked with legal pot proponents and real estate industry groups about the big questions:

What's the game plan when a tenant sets aside 25 square feet in the back yard or inside the house and begins to grow his or her own marijuana for personal consumption?

Can the owner say no? Does the tenant have to ask?

Key backers of Prop. 19 say it's their understanding that tenants will have to ask. One said it's like a dog. Dogs are legal. But landlords don't have to allow them.

The apartment industry isn't so sure. This is big month for industry meetings about what legalized pot in California might mean.

Homeowner associations are a whole new question, as well. I talked yesterday with Karen Conlon, director of the California Association of Community Managers. That is a trade group for association property managers. She thought homeowner association boards would be well in their rights to tell residents: You cannot grow pot, even if it's legal, in this neighborhood.

That raised the question then: will a real estate agent be legally obligated then to disclose that a particular neighborhood does or doesn't allow pot cultivation?

Fascinating stuff. Read the full Home Front column in Friday's paper and on sacbee.com.

By no means is the rental industry totally united against Prop. 19's passage. I talked with one Sacramento property manager who said legalizing pot would make it easier for managers like him. He can't check everybody, he said, to see who is doing what.

"If they make it legal to grow, it becomes a non-issue," he said. Like brewing beer in the basement.

Democratic Assemblyman Ted Lieu of Torrance says banks stiffed him and two Assembly financial committees on a planned hearing into reducing and suspending home equity lines of credit across California.

Lieu, chair of the Assembly Select Committee on Consumer Financial Protection, said he's hearing from constituents who have had their lines of credit taken away as home values fall across the state. He said he wanted banks to explain themselves.

But none pledged to participate in the hearing, which was cancelled.

On another bank front, SB175, by Sens. Mark Leno, D-San Francisco, and Senate President Pro tem Darrell Steinberg, D-Sacramento, didn't get out of the Assembly Appropriations Committee yesterday. It was placed on the so-called "suspense file." That's where some bills go to die. Leno's reps said the committee has another hearing next week.

The bill, greatly opposed by the financial and business sectors, puts more pressure on lenders to modify problem loans and deal more fairly with borrowers.

Truckee-based real estate tracker Clear Capital reports that collective home prices in El Dorado, Placer, Sacramento and Yolo counties are up 8.4 percent from the same time last year.   

The data shown here is for May, June and July. 

Clear Capital statistics show that bank-owned properties accounted for 33.6 percent of sales during the quarter. That's down from 46.2 percent the same time last year.

Surprisingly, considering that Clear Capital ranked Sacramento among its lowest performing major markets, the region's year-over-year price increases beat the national average of 8.1 percent. Others in the lowest performing markets included all the usual suspects - Riverside-San Bernardino, Las Vegas, Phoenix, Fresno and San Diego.

Here is the complete national report.

Despite relatively high operating costs, Davis and Folsom are listed among the top 45 small cities in America for running a technology company, according to a consultant's report.

The consultant, John Boyd of Princeton, N.J., advises corporations on site locations. He said Davis and Folsom offer talented workers, access to the UC Davis brainpower and state policymakers, among various attributes. They also provide a "low-cost alternative to the Bay Area," he said during a visit to Sacramento this week.

Boyd said he surveyed 45 of the "up and coming...best small markets in the country" for high tech. Davis and Folsom made the list - although they're among the most expensive on it.

He said it would cost $27 million a year to run a hypothetical 250,000 square foot high-tech factory in Davis, a little less in Folsom.

Boyd released his study at a time when companies are beginning to look around again for new locations, following a multi-year freeze brought on by the recession. "Clients are taking projects off the shelf," he said.

Home Front has heard real estate agents complaining that second-lien holders are asking homeowners or agents to cough up an extra few thousands bucks at the final hour and not tell the first-lien holder about it. If not, no deal.

This, of course, is illegal.

We are looking into a story on this phenomenon. We aim to get some sense of the frequency of it happening, and see what banks have to say about it. I have heard that sometimes the same bank is the first AND second. And that the second still wants a secret side deal that its own institution doesn't know about.

Short sales are becoming a significant sales sector in Sacramento. If this has happened to you - as a homeowner or real estate agent - we'd like to talk with you.

jwasserman@sacbee.com

Or: 916-321-1102

If you're struggling with the mortgage and looking for a new source of information, check out this new Website from Fannie Mae.  Here's hoping it's helpful.