The Sacramento Bee reports from California. "After weathering one of their toughest periods in a decade, Sacramento-area home builders closed 2006 with a bang, boosting year-over-year quarterly sales of new homes for the first time since 2004 with steep price cuts and giveaways that often totaled as much as $150,000 per house."

"But even as builders celebrate a strong finish, 2006 still saw the fewest new home sales since 1998 in El Dorado, Placer, Sacramento, Sutter, Yolo and Yuba counties. Builders sold 9,588 single-family homes and condominiums during the year,- 4,500 fewer than in 2005."

"Placer County showed the quarter's biggest year-over-year sales gains as builders cut prices and offered huge incentives at large master-planned communities in Lincoln, Roseville and Rocklin. In Roseville, for example, fourth-quarter sales prices fell 11.3 percent from the same time in 2005."

"In contrast, Sutter and Yuba counties saw the region's biggest fourth-quarter declines in sales. Both felt the brunt of builder price cuts and incentives in Sacramento's urban core, Paquin said. 'If Lincoln and Natomas and West Sacramento are responding with appropriate pricing levels, buyers are going to go there instead of further out,' said Gregory Group President Greg Paquin."

"Barry Grant, Sacramento-based president of KB Home's North Bay territory, acknowledged the tougher sales climate in Sutter and Yuba counties. 'You have to price aggressively there to make it a compelling deal for the buyers,' he said."

"Construction has stopped on downtown Sacramento's most ambitious development project ever, two 53-story condominium and hotel towers planned for the foot of Capitol Mall."

"In a sign of developer John Saca's ongoing financial struggle to build his skyscrapers, several contractors filed liens against him in the past week for unpaid bills totaling $7.3 million for such items as architectural work and pile driving."

"Eric Rasmusson, a spokesman for Saca, called the work stoppage 'a short temporary regroup' while the developer tries to reconstruct a workable budget and secure his construction financing."

"'We want them to follow through with their commitment and their investment on that site,' said said John Dangberg, the city's assistant city manager for economic development. 'This is a very important project to the city of Sacramento, particularly since a building has been torn down and there are piles in the ground. We want it to proceed, and we think it will proceed. We're not interested in having a hole at the gateway to the Capitol Mall.'"

The Orange County Register. "Production in California's manufacturing sector declined in the fourth quarter, according to a survey of purchasing managers by Chapman University that was released Thursday."

"The survey's production index fell to 47.5 in the fourth quarter from 63.6 in the third quarter. A reading under 50 indicates a contraction. It's the first time production has fallen since the survey began in 2002, Chapman said."

"Raymond Sfeir, a professor of economics at Chapman, said the drop was tied to a decrease in housing construction in California. Manufacturing of wood products, furniture and metal products were hurt, he said."

The Daily Breeze. "House flipping in California last year declined to its lowest level since 2003 as speculators retreated from a market in which sales plunged and prices flattened, a market tracker said Thursday. Homes owned for six months or less accounted for just 3.2 percent of resales last year, down from 4.2 percent in 2005 and 3.6 percent in 2004."

"'What's happened now is the flipping activity is just reflective of today's real estate climate,' said Steve Morgan, the company's VP. 'Investors, if they can, have adopted a buy and hold strategy until prices come back up.'"

"And if prices don't start rising, some owners will be forced to sell and cut their losses, he said."

"Speculative buying and selling of homes contributes to market volatility and risk, all part of that bubble theory people were talking about. Lending institutions measure risk and volatility, homeowners and buyers would also do well to keep an eye on them in addition to watching the ups and downs of their local prices and sales,' Mike Ela, the company's president, said."

"When factoring in commissions and costs, 24.9 percent of the last year's flip sales resulted in a loss for the seller, the highest percentage since 25.2 percent during 2002. If there were improvement costs, profit would be lower."

"As the market has cooled off, particularly in terms of prices, the investors have become increasingly wary about buying investment homes," said Nima Nattagh, an independent market analyst.

The Press Enterprise. "The California community with the greatest amount of flipping as a percentage of sales was Corona at 12.9 percent. San Jacinto came in third at 12.2 percent, trailing Playa Vista at 12.3 percent."

"Bruce Norris, president of a Riverside-based real estate investment company, said flipping homes for profit is much riskier now than a year ago and requires more knowledge and research. 'You have to buy at a greater discount to make sure you realize a profit,' Norris said."

"He predicted that over the next five years, more of the prime properties for flipping will be lender-owned properties in foreclosure, as households who bought homes with adjustable-rate mortgages can no longer afford their mortgage payments."