An Ironic Bright Spot For California
The Contra Costa Times reports from California. “Zena Hall figured the eagerness of lenders to sell foreclosed houses would help her capture a great price on her next home. About $380,000 later, Hall found out she was right on the mark when she bought a foreclosed townhouse in San Lorenzo. ‘I think I got an excellent deal,’ Hall said. In 2005, that townhouse sold for $532,000. That means Hall’s price was 29 percent below the 2005 price. That was 5 percent below a $400,000 appraisal done on the home just before Hall bought it.”
“Banks and other lenders now account for a sharply rising share of the homes being sold in the Bay Area and East Bay. A year ago, 1 percent of all home resales in the Bay Area involved a foreclosed house.”
“During November, 446 foreclosed homes were sold in the nine-county Bay Area. That’s 11 percent of all the home resales in the region in that month, according to an analysis by the Times of sales data compiled by Dataquick. In the East Bay, 229 foreclosed homes were sold in November — 16 percent of all the resales in that area.”
“All of this is an ironic bright spot for a Bay Area housing market tainted by mortgage defaults, real estate job losses and plunging homes sales. The housing bust has created something of a boom in transactions involving foreclosed houses.”
“‘They were anxious to sell,’ said Alex Almendarez, who with his wife bought a Martinez house in December for about $290,000. The seller, World Savings Bank, foreclosed on the house through a trustee’s deed in July 2007, according to Contra Costa County property records.”
“At that time, county files show, the bank valued the house at $382,000. His purchase price was 24 percent below the bank’s value.”
“A small sample of East Bay agents disclosed they are listing for sale hundreds of foreclosed homes in the area. Other brokers say they have hundreds more homes that banks are preparing to sell.”
“Carlos Gaytan and two family members bought a foreclosed property in Mountain House in western San Joaquin County. ‘Initially, they dropped the price, but they were still asking over $500,000,’ Gaytan said. ‘Two weeks later, the bank called my agent and said they had cut another $30,000.’”
“Katherine Prinzivalli, an agent in Antioch, pointed to one house in that city that has been listed by the lender for three months. This house’s fate underscores the dismal Bay Area residential market.” “The prior owner paid $650,000 for the Antioch house, Prinzivalli said. The bank took back the home for $503,000. The bank now seeks $413,000 — more than one-third below the original sales price.”
“‘That’s a huge hit and no offers,’ Prinzivalli said. ‘There is so much inventory out there.’”
“Frank Carbone in September bought a house in Oakland’s Glenview district, deemed a desirable neighborhood. The bank first sought $525,000. Carbone countered at $450,000. He ultimately bought the home for $465,000.”
“‘I got a good deal, but I couldn’t pay more for it because it needs a lot of work,’ said Carbone, who does his own construction work. ‘It remains to be seen if it’s worth it.’”
The Mercury News. “Home price declines in California this year will be steeper than she originally forecast, an economist for the state’s biggest real estate trade group said.”
“‘I’ve obviously had to eat my ’soft landing’ words,’ said Leslie Appleton-Young, chief economist for the California Association of Realtors, referring to a refrain from the statewide housing forecast she delivered in October.”
“Last fall she predicted median prices in the state would drop about 4 percent this year. Wednesday, she said she’s in the midst of revising that forecast, and that a median price decline of 8 to 10 percent is more realistic.”
“Appleton-Young exhorted real estate agents to double their efforts to cultivate prospective clients, especially first-time buyers who are finally seeing conditions turn in their favor.”
“‘Believe me, they are out there,’ she said, and waiting until they think prices are reasonable. ‘Nobody rings a bell at the bottom of the market,’ Appleton-Young said. ‘Everybody’s waiting for the bell.’”
The Recordnet. “A second major foreclosed-home auction will be coming to Stockton next week, with about 85 Stockton-area houses going up for sale at the San Joaquin County Fairgrounds. Real Estate Disposition Corp., based in Irvine, will hold a series of seven foreclosure auctions in Northern California in coming days, with about 950 houses up for bid.”
“Each property has an undisclosed minimum acceptable bid, but sellers, generally banks, mortgage companies and investor groups, can later accept high bids that fall under that minimum.”
“Jerry Abbott, president and co-owner of Coldwell Banker Grupe, said about 70 percent of current sales are foreclosure properties.”
“Abbott said that with about one-third of the properties sold at high bids and another third negotiated to sale, ‘Auctions are going to become commonplace,’ he said.”
The Modesto Bee. “Diablo Grande’s financial troubles continued this week when the company that runs the community’s water treatment plant threatened to terminate the contract because bills weren’t paid.”
“Charles Voltz, president of Veolia’s western division, said he didn’t know how much Western Hills owes the company, but said it was in the neighborhood of $3 million.”
“The water issue was more aggravation for people who purchased homes at Diablo Grande, a 33,000-acre project in western Stanislaus County with plans for 2,300 homes, five golf courses, a hotel and conference center, winery, and commercial development. The resort is in the early stage of residential construction, with about 400 homes completed.”
“‘We moved here because of the promises they made of a hotel, a spa, a shopping center, and none of this has panned out, and now we don’t even have golf courses,’ said homeowner Kristina Ross-Ortiz. She said many residents don’t know about the water treatment issue.”
“‘The few of us who know are worried about it,’ said Christy Peterman, another homeowner.”
The News Mirror. “Despite losing nearly $100,000 in the now defunct Mesa Verde Estates project, the city of Calimesa could well end up the current fiscal year with a balanced budget. The failure of the Mesa Verde project, the downturn in the housing market generally and two lawsuits the city is involved in have created some financial problems.”
“The city learned just recently that Fiesta Development, which had secured approval for the Mesa Verde Estates project, had filed bankruptcy. ‘Fiesta has walked away from the project owing the city almost $100,000 for planning and engineering services,’ acknowledged David Lane, Calimesa’s city manager. ‘The city will have to pay for these services, but we won’t get that money back from the developer now.’”
“Lane reported that the downturn in the housing market hurt the budget generally. This year’s budget projected $150,000 in revenue from new building permits. At mid year, however, the new projection is for only $50,000.”
“‘With continued, judicious spending by departments, we could be all right,’ Lane said during the city council meeting.”
The Desert Sun. “Palm Springs Mayor Steve Pougnet promised during his campaign that he would explore eminent domain if developer John Wessman didn’t submit plans for the Desert Fashion Plaza within the first 90 days of his taking office.”
“Wessman Development VP Michael Braun wrote in a Jan. 29 letter to the city that a specific plan to turn the Desert Fashion Plaza into a lifestyle center with condos, a movie theater, hotels and shops would be submitted in the second quarter of this year.”
“This week, Wessman Development officials said plans will not be submitted until April - two months after Pougnet’s deadline.”
“‘The Desert Fashion Plaza, under the Wessman Development Company’s stewardship, remains not merely under-utilized; it has been poorly maintained and remains a blighted eyesore, creating an economic maelstrom that is draining the vitality of our downtown,’ Pougnet wrote.”
The Union Tribune. “After San Diego County dodged the last recession in 2001 – continuing to grow as the rest of the nation went into decline – some civic boosters boasted that the region was immune to recessions.”
“But as the nation appears to be heading into a recession, a growing number of economists fear that the county’s sagging housing market and weakening employment could pull it under as well.”
“Economist Christopher Thornberg said California and San Diego County are already in a recession.”
“‘Unemployment is rising. Consumer spending is declining. Home prices are continuing to fall. The foreclosure rate is huge,’ said Thornberg. ‘That’s why I’m not saying a recession is about to happen in San Diego. I’m saying it already is happening.’”
“Alan Gin, economist at the University of San Diego, agreed that the region has entered a ‘San Diego-style recession,’ meaning that job growth is lagging behind the population’s growth rate. But he believes the county’s diverse mix of industries will help it avoid the technical definition of a regional recess.”
“‘It’ll be very weak growth compared to what we’ve had, but it won’t be a decline,’ Gin said.”
“On the other hand, Gin said the housing downturn could affect consumer spending. ‘A key question is to what extent consumer spending was fueled by home-equity loans,’ he said. ‘With those loans drying up, what will happen to retail spending?’”
“The median home price in San Diego County last month was 13 percent lower than it was the year before. In some neighborhoods, such as Spring Valley and southeast Chula Vista, the decline was more than 30 percent.”
“A record 987 houses were foreclosed upon in December. Bankruptcy filings jumped from 471 in January 2007 to 839 last month. Residential building permits declined 31 percent last year, following a 29 percent drop in 2006.”
“The unemployment rate rose by more than a full percentage point last year, jumping from 3.7 percent in December 2006 to 4.8 percent in December 2007, its highest point in four years.”
“To Thornberg, the jump in unemployment is the clearest sign that the economy has gone into a recession. ‘The only time the unemployment rate jumps more than 1 percent in a year is when the economy is heading into a recession or is already in one,’ he said.”
“One thing the economists agree on is that the decline in residential real estate, which sparked the downturn, will continue.”
The North County Times. “In San Diego County and elsewhere, shrinking home equity has led consumers to cut back sharply. Optimists and pessimists generally agree that’s a return to earth from the freewheeling days of easy money from home equity loans and cash-out refinancing.”
“‘The question is, ‘How rocky is the road going to be?’ Thornberg said. ‘The answer is ‘pretty rocky.’”
“Even economists who hesitate to predict a regional recession, such as UC San Diego’s James Hamilton, acknowledge that the picture has darkened considerably in recent months.”
“‘This is not a wild or irresponsible forecast at all,’ said Hamilton, who studies the effects of federal monetary policy.”
“Kelly Cunningham, chief economist at the San Diego Institute, said the county has probably already weathered the worst effects of the mortgage mess. Home prices peaked earlier in San Diego County than in other parts of California, and the local bubble has mostly deflated, he said.”
“A wide range of businesses in the region are continuing to create jobs, a factor that Cunningham said will soon begin to boost demand for homes and reverse a 27-month decline in prices.”
“The Federal Reserve’s cuts in a key interest rate should help to prod the real estate market and business investment, in San Diego County and elsewhere. ‘It’s a good time for taking out loans,’ Cunningham said.”
“‘The (economic) slowdown seems to be driven solely by the real estate fallout,’ he added. ‘I think Chris might be overstating it.’”
The Daily Bulletin. “If the towering steel power lines on Edison Avenue don’t scare you away and you’re OK with living near a state prison, Bridlewood Estates in east Chino might be the perfect fit for your family.”
“Dairy farmers have sold out to developers over the last two decades. ‘About 2000 or 2001, the (Bridlewood Estate) properties were removed from the contract restrictions and the properties developed,’ said Brent Arnold, city planner.”
“These ranch-style homes enticed new home buyers from 2001 to 2003 with half-acre lots and plans ranging from 3,190 to 4,370 square feet. Equestrian white-picket-fenced paths enhance this pristine development even though most - if not all - of the neighborhood’s residents probably don’t own horses.”
“It was the ‘big yards’ and ‘bigger garages’ that drew Darren Russell and his wife to buy a new two-story house in 2003 on Whitebark Court for $567,000.”
“‘I’ve seen some sell for $1.2 million,’ he said about homes for re-sale in 2005.”
“On some days, the smell of cow dung hangs heavy in the air. Remnants of the agricultural preserve have survived, butting up next to cinderblock walls that encase newcomers in their stucco villages.”
“The view from Euclid Avenue: new homes … strawberry fields … new homes … Van Wyk’s Milk Testing Plant. And don’t forget Stockyards - the store is giving away ‘free bulk fertilizer,’ according to a big sign in its parking lot.”
“Russell doesn’t mind the cows for now. Besides, the city’s master-planned Preserve community just south of his neighborhood will offer a maze of bike paths and walking trails he won’t be able to pass up.”
“The California Institution for Men, lies about a mile away, but that doesn’t bother him too much either.”
“‘A lot of people are bothered by the prison,’ he said about his neighbors. ‘I’ve gone on bike rides over by College Park (neighborhood), and you can hear the gates slamming. (The inmates’) voices carry over.’”