The Common Element In California
The Record Searchlight reports from California. “The severity of the housing downturn hit home Tuesday with the release of North Valley Bancorp’s first-quarter earnings. The Redding bank’s nonperforming loans went from $459,000 in the first quarter a year ago to $25.7 million in 2008. The bank reported $1.6 million in nonperforming loans on Dec. 31. The dramatic spike is centered in four real estate projects, including three in Shasta County, with loans totaling a little over $24 million.”
“The two largest loans are residential development projects of $9.5 million in Placer County and $6.75 million in Shasta County.”
“‘We are seeing subdivisions or developers that are experiencing either a slowdown in sales … or price declines that are such that banks can no longer cover in terms of collateral,’ North Valley Bancorp CEO Mike Cushman said.”
“In Shasta County, the number of homes lost to foreclosure in the first quarter went from 65 in 2007 to 150 this year, according to the Shasta County Recorder’s Office.”
“Cushman, who’s been a banker for more than 30 years, said the current housing downturn is the worst he’s experienced. ‘We actually feel pretty lucky. Most of our markets are still performing pretty well. … It’s the Sacramento area where we are experiencing the greatest reduction in values,’ Cushman said.”
“The spike in North Valley’s nonperforming loans are not a result of subprime lending. ‘There were not any community banks in our area involved in any type of subprime lending,’ Cushman said.”
The Daily Bulletin. “Blaming the national real-estate market’s blowout, a local housing-land developer has gone bankrupt and left more than $5.1million of unpaid loans in the lap of its largest creditor, Rancho Cucamonga-based PFF Bancorp Inc.”
“There are other loans, but Ontario-based Empire Land LLC left PFF’s Pomona First Federal Bank & Trust holding the bag on the unpaid loans. Other big-name creditors listed include homebuilder D.R. Horton and banking giant Wachovia.”
“The bank loaned millions of dollars during the housing boom to local real-estate developers who got stung by the subprime mortgage meltdown.”
“Like several other home developers and builders, Empire Land’s revenue dropped when new-home sales began falling in the past year or so. At the same time, thousands of home foreclosures started hitting the market, forcing prices even lower and persuading would-be buyers to lay low.”
“The company owned or had interests in 11,800 properties across 14 California land projects as of March 31, according to court documents. Its sister company, Aviat Homes L.P., owned 330 residential properties - some unfinished - in California, with projects in Hesperia, Moreno Valley and Brentwood.”
From Reuters. “LandSource Communities Development LLC, a large California land and development company, is expected to file for bankruptcy protection in the next two to three weeks, a Standard & Poor’s publication reported on Tuesday, attributing the information to unnamed lenders.”
“S&P…reported that the company’s cash had declined to about $25 million from about $115 million in early February. An article on the Web site, citing unnamed sources, said a bankruptcy filing would help preserve cash and start a process to sell assets.”
“LandSource had received an official notice of default on a $1 billion loan after it failed to meet certain terms of its lenders, the Wall Street Journal reported last week. LandSource’s primary investment is The Newhall Land and Farming Company, which owns 15,000 acres of land north of Los Angeles.”
The Recordnet. “Foreclosure activity in the Stockton metropolitan area continued as the busiest of any in the nation during the first three months of this year, according to RealtyTrac. A total of 7,560 foreclosure filings, default notices, auction sale notices and bank repossessions, were filed countywide in the first quarter, RealtyTrac reported. That was almost a threefold jump year to year.”
“Six of the top 10 foreclosure hot spots in the nation were in California.”
“The actual numbers of repossessions also are soaring, DataQuick said. The firm said the number of homes repossessed during the first quarter in San Joaquin County nearly topped 2,500, more than a fivefold increase from 440 a year ago. That compares with almost 4,000 homes repossessed countywide all of last year.”
“Pending sales countywide nearly hit the 1,200 mark last month, compared with about 800 homes being foreclosed on per month countywide, at the first-quarter foreclosure rate. That’s a higher sales rate than at any time during the previous boom years of 2000 to 2005.”
“Jerry Abbott, president of Coldwell Banker Grupe, Stockton, said most of the sales are foreclosure homes.”
The Press Enterprise. “Owners of foreclosed homes in Temecula would have to register with the city and hire someone to oversee their properties under an ordinance expected to come before the Temecula City Council. As of Tuesday, there were nearly 1,000 bank-owned properties in the Temecula ZIP codes, according to Realtytrac.”
“March foreclosures in the 92591 ZIP code, which covers Temecula, are up 117 percent from March 2007, said RealtyTrac spokesman Daren Blomquist. Another 817 were in the foreclosure process.”
“Garnett, board president of the Redhawk homeowners association, argued that the city should drain abandoned pools and bill the lenders, whom he considers to be part of the problem. ‘These are not nice people,’ he said.”
The North County Times. “The ‘witching hour’ for foreclosures, as described by City Councilwoman Maryann Edwards, is the period from when buyers abandon the home they can’t afford to when the lender repossesses the house, a process that often takes months.”
“It is a state of ownership limbo that has cursed numerous neighborhoods in Temecula as it turns green lawns brown and clear pools into cauldrons of algae and goop. City officials envision creating a registry to track empty homes and to find the lenders who are responsible for the properties after the buyer walks away.”
“Many property managers want to see pools on abandoned properties drained. ‘As for the concern that pools may crack if we drain them, I don’t even care,’ said Harry Garnett, president of the Redhawk Homeowners Association.”
“Garnett said that, of the approximately 3,000 homes in the association, roughly 50 are abandoned.”
“‘I think this ordinance is a great idea, but we should have been talking about it three or four months ago,’ he said. ‘We didn’t think it would get this bad, and now we don’t think we’ve seen the bottom of this. It’s only going to get worse.’”
“Debra Thomas, president of the Meadowview Home Owners Association said, because of fewer assessments being paid, many associations have less money coming in for community improvements. She said it is evident that the number of foreclosures is increasing among the 900 homes in Meadowview, and ‘it’s getting worse.’”
“San Diego home prices were pummeled again in February, returning the county’s price decline to a record clip after the price freefall slowed in January. The decline in prices from the same month a year earlier hit 19.2 percent, the largest locally during this housing recession and the biggest drop since the Standard & Poor’s Case-Shiller Home Price Index started calculating home prices in 1987.”
“And when compared with January, the year-over-year gap widened by its largest margin yet, indicating that the fall in prices might be accelerating.”
“How long prices will decline for is impossible to predict, most analysts agree. And the role of easy money in the form of no-down-payment, no-verified-income loans makes this housing recession impossible to forecast, said James Hamilton, an economics professor with UC San Diego.”
“‘It’s a more extreme boom up and it’s a more extreme down,’ he said. ‘So as far as where prices are headed and when they’ll stabilize, I don’t think you can tell because I really feel we’re in uncharted territory.’”
“Kelly Cunningham, an economist with the San Diego Institute for Policy Research, said the monthly decline of 3 percent will not continue for long.”
“‘I hope not. Gosh, that’s well over 30 percent decline if it continue on for a year. I don’t think that’s going to happen,’ said Cunningham. ‘But of course I’ve been saying the worst is here for a while now and then it gets worse.’”
The Union Tribune. “Las Vegas, Miami, Phoenix, Los Angeles and San Diego, five areas that saw home prices rocket ahead in the housing boom, are now leading the retreat backward.”
“The S&P/Case-Shiller index is based on homes sold in December, January and February as compared with previous sales of the same properties. The results are translated into index values with 100 for all areas as of January 2000. Percentages then are derived from changes month by month and year over year.”
“San Diego County’s February index value was 190.34, down from 197.45 in January and 235.54 in February 2007. The all-time peak was 250.34, set in November 2005, meaning that prices soared 2½ times their level in January 2000 before falling back 25.1 percent.”
“Of the 20 areas tracked, Los Angeles, Miami and Washington, D.C., still posted index values above 200.”
“James Hamilton, an economist at the University of California San Diego, said the downward trend is likely to continue because of the ‘overhang’ of unsold homes, numbering about 19,000 in the county – several times the typical listings count at the peak of the boom in 2003-05.”
“‘It’s not a shock that we’re seeing this decline now, and I think we’ll see some further declines yet to come,’ Hamilton said. ‘That overhang of unsold homes is still there.’”
“In explaining the San Diego area’s high ranking among declining markets, Hamilton said, ‘The common element there is those were the communities that had the biggest run-up.’”
The Modesto Bee. “Dennis Swann of Swann’s Automotive Repair in Modesto said he’s seeing more people forgo repairs for things they see as unnecessary, such as air conditioning. Dennis Slewoo of USA Auto Service, also in Modesto, said he’s had to schedule more repairs in stages, rather than doing them all at once.”
“Both men see the same standard: Consumers, stung by high gas prices and a downbeat economy, are clamping down on their automotive expenses.”
“‘Buying a vehicle because it looks good is less and less of a reason,’ said said Chuck Parker, publisher of Automotive Digest. ‘People are looking for utility, for cars to last. People are fighting to keep their kids in school and pay their mortgage.’”
“Slewoo said a customer brought his car in for a brake inspection Tuesday. Slewoo found the brakes were nearly metal on metal and needed immediate replacement.”
“‘He asked me if we could push it back two or three weeks,’ Slewoo said. ‘With his income, he said, he has to save his money. Two or three years ago, this conversation wouldn’t happen.’”
The Salinas Californian. “The first-ever completely affordable housing project in Monterey County will instead be priced at market rates, following a decision Tuesday by the Monterey County Supervisors.”
“At the request of the developer, Woodman Development, supervisors voted unanimously to remove all affordability restrictions on 123 single-family homes in the Commons at Rogge Road, north of Salinas. The project was first approved in 2006.”
“The company has claimed falling home prices have made it impossible to sell the homes at pre-set affordable rates, which are now more expensive than market-rate homes.”
“‘I don’t think there’s an advantage to those homes sitting vacant,’ said Supervisor Dave Potter.”
“The vote means Monterey-based Woodman Development can sell the once price-restricted homes at any price they choose, and buyers won’t have to meet income requirements. The homes must be owner-occupied.”
“Additionally, the homes’ resale prices will no longer be restricted to keep them affordable - a stipulation that also kept people from buying. Woodman will also have to pay the county more than $150,000 in fees it had avoided by building affordable homes.”
“Woodman’s original agreement with the county required it to provide homes for moderate and ‘workforce’ buyers, households of up to four people with incomes ranging from $76,080 to $114,000, with a maximum price of a home set at $480,000.”
“William Silva, Woodman’s chief financial officer, told supervisors the changes are necessary because qualified buyers have been opting to purchase cheaper market rate homes with no deed restrictions.”
“‘It has left us in a predicament,’ Silva said.”