Restoring Some Measure Of Affordability In California
The LA Times reports from California. “They filed into the Eagle Rock open house alone and in groups. Twenty-three families checked out the bedrooms and kitchen during the four-hour open house on a recent Sunday. Three expressed interest in buying the three-bedroom ‘character home,’ as agent Denise Barnes described the 1,364-square-foot 1922 California bungalow, reduced to $605,000 from $645,000. But most said they were waiting for prices to drop further.”
“‘It’s pretty ugly out there,’ said longtime broker David Toyama, who specializes in Eagle Rock, Glassell Park, Highland Park and Azusa. His business is down 50% from a year ago, he said, ‘and that wasn’t our best year either.’”
“The market slide means bargains galore in areas hard hit by foreclosures, such as Hemet 92543 in Riverside County, where median prices plummeted 48%, to $130,000, during the first quarter this year, compared with the same period a year ago, according to DataQuick.”
“Step outside the inland valleys, however, and some sellers still are stuck in the fantasy world of 2005, insisting on prices that buyers won’t entertain for a minute, then despairing when their homes attract no offers.”
“Elizabeth Powell, 28, learned how tough the market is. She first listed her four-bedroom West Covina house for sale for $600,000 in February 2007.”
“Two buyers fell out of escrow due to lending problems — they had difficulty qualifying for jumbo loans — so she lowered the price to $550,000, then $480,000, $460,000 and in August, $430,000. She sold the 1,489-square-foot house in January for $440,000.”
“‘I’m very glad it’s over with,’ Powell said of the selling experience she described as frustrating and stressful. ‘The loan terms kept changing; neighbors started selling their homes for less. I can’t imagine having to sell another property.’”
The Orange County Register. “To say Orange County’s housing market got off to a rocky start in 2008 would be an understatement. Sales and prices are down. But, perhaps more troubling, the total of 2,232 foreclosures during the first quarter was the highest in at least 20 years and up 328 percent from a year ago.”
“During a similar period in the ’90s slump, foreclosures rose at a 123 percent annual clip.”
“Santa Ana tops the list of foreclosure concentrations with two ZIP codes – 92707 and 92701. These two areas saw steep price declines in March. Last month’s median price of $219,000 in 92701 was the lowest in the county and down 37 percent in a year.”
“Each month foreclosures and short sales take up a greater portion of homes on the market, according to Steve Thomas at Re/Max Real Estate Services in Aliso Viejo. In early April there were 5,335 such distressed properties on the market, up 42 percent from Dec. 27 and accounting for 34 percent of all properties for sale at the time.”
“Walter Hahn, a real estate economist in Irvine, said foreclosures either peaked during January’s record high of 802 foreclosures, or they will by June. But it’s not straight down from here, Hahn said.”
“The end of low introductory teaser rates on mortgages are spurring foreclosures now and will do so again in 2010 and 2011, when studies show many loans will see a jump in payments, he said.”
“‘It’s not over,’ Hahn said. ‘It’s not going to be over until 2012.’”
The Daily Bulletin. “Faced with the most severe economic conditions in nearly two decades, Los Angeles County officials today will unveil proposed budgets that are expected to call for wide-ranging service reductions while also asking residents to pay more.”
“The budget squeeze comes as property and sales taxes have plummeted. The last time there was a drop in year-over-year sales- tax revenues was in the early 1990s amid a national recession.”
“‘It is a long, dark tunnel for local government these days,’ said Jack Kyser, chief economist at the Los Angeles Economic Development Corp. ‘You have the housing situation at one of its worst points, retail sales are down, and there is no immediate end in sight.’”
“Adding to pressure on all local government was the decision by county Assessor Rick Auerbach to launch a reassessment of properties as the housing market has plummeted. Auerbach said he plans to review the values of more than 300,000 properties purchased between July 2004 and July 2007 - when prices were at their highest.”
“The average reductions have been $66,000, saving the average homeowner $660 a year in taxes - but also reducing revenue to local government.”
“Jerry Nickelsburg, a senior economist at the UCLA Anderson Forecast, said the problem for local government is that the sectors it relies most on for revenue have been the hardest hit.”
“‘The areas the government relies on - real estate, sales tax and construction - are sectors that are not doing so well,’ Nickelsburg said. ‘We think the home-building sector will reach the bottom sometime this year so that it might come back beginning in 2009. But we don’t expect it to be like the volume of the past few years when government was able to generate a lot of revenue during a speculative boom.’”
The Desert Sun. “Justin Martin found his calling in teaching. He and his wife, Pandara bought a home in La Quinta in 2006 and began settling down. But with the state’s $16 billion budget crisis spilling over into every school district in California, he’s on notice that if the school district can’t cushion a $13.4 million funding shortfall, his job won’t exist next year.”
“Martin is not alone. Some 20,000 teachers, counselors and support staff across the state are in limbo, too. That doesn’t stop the unknown scenarios from running through Martin’s head as he drives to school and works on the house.”
“Instead of dinner out, they use the barbecue. He’s applied to teach summer school. Plans for a December trip to Thailand, Pandara’s home, aren’t so certain.”
“Except for a lone orange tree that’s been planted and the donated cacti they’re getting next month, the yard improvements have to wait. It’s what you do ‘when you have something that could be taken away,’ Martin said.”
“The one thing the couple is committed to is keeping the house, their dream of staying in the Coachella Valley. Between his wife’s fitness jobs at local gyms and private studios, they hope to make it work.”
“They’re committed that, whatever comes, they won’t become one of the 1,200 desert homes that are in stages of foreclosure. ‘I’ll do what I need to do,’ he said. ‘If that means working two or three part-time jobs, I’ll do it.’”
“‘I looked at my house differently. I look at my car differently,’ he said. ‘It makes you question what you need.’”
The Recordnet. “At a Dec. 13 gala to celebrate the opening of downtown’s Sheraton Hotel, a crowd sipped scotch and applauded the largest private investment downtown since American Savings Bank built its Main Street headquarters in 1989.”
“Yet even in December there was trouble at the hotel. San Joaquin County’s housing market - as elsewhere - was collapsing, and hotel owner Regent Hotel LLC had failed to sell any of 42 condominiums atop the hotel.”
“The housing market was more robust in 2004, when Regent promised to build a hotel…on land the city would sell to Regent for $1, and it required a city subsidy of $500,000. The following year, Regent obtained financing for the hotel’s construction, based in part on its expectation of an infusion of revenue from the sale of condominiums at the hotel.”
“And then the housing market fell. ‘The condos, that’s what’s killing us,’ said Rick Oshinski, chief operating officer of the parent company of Regent Hotel. ‘The condo market has gone totally into the toilet.’”
“The condominiums are not yet finished but are in a ‘fairly advanced stage of construction,’ hotel VP Jeroen Gerrese said. The number of people who have committed to buy one has fluctuated between eight and 14, he said. None has sold yet.”
“Since Dec. 21 - eight days after the hotel’s opening gala - 26 companies have filed mechanic’s liens against the property, demanding a total of $8.9 million for work they claimed to have done.”
“‘They keep putting us off and keep telling us, ‘Oh, we try to have meetings with the bank. The bank is holding our money,’ said Mike Jackson of Tracy’s Artistic Terrazzo and Tile. ‘It’s just turned into this fiasco at this point.’”
“‘I’m going to go to the hotel, and I’m going to rent a room,’ he said. ‘And in the morning when I wake up, I’m going to go, ‘I’m sorry. I don’t have any money. I’ll pay you in about six months’ — because that’s what (Regent) did.’”
The Sacramento Bee. “Only a year or two ago analysts were predicting that Sacramento’s traditionally dependable job and population growth would soon trim supply and create an atmosphere to raise rents. But the housing bust has proved unexpectedly severe and led to reassessments.”
“When a foreclosure on his landlord booted Aaron Myers from a house he rented with friends, it took no time at all to find another place in Citrus Heights. His new apartment came with a quick move-in date and cost him less than $900 a month. Best of all, it wasn’t a house where the same scenario could happen again.”
“‘It seems like there’s a lot of openings,’ Myers said.”
“Because the region dramatically overbuilt during the housing boom, there are plenty of apartments – about 111,000, according to some estimates – to go around. And a curious ’shadow market’ of new dwellings for rent – units that have come on the market principally because of foreclosure and the housing downturn – has kept monthly payments flat, they say.”
“Investors are buying foreclosed homes in the suburbs and turning them into rentals. Since 2007, more than 15,000 people in the Sacramento area have lost their homes to the banks. Homeowners who can’t sell their houses or don’t want to sell at these prices are renting out their houses.”
“Charlene Vomacka, a homeowner in Roseville, has added to the supply. She’s asking $1,600 a month for her three-bedroom, two-bath house. ‘We just purchased a new home,’ she said. ‘We decided to take this one off the (for-sale) market because we aren’t going to get what we want to. I’m thinking a lot of people are losing their homes, and they need somewhere to go.’”
“Home builders who can’t interest enough buyers in their new condominium projects are renting out their units for now. In Rocklin, Pacific West Cos. has added 171 units to the rental supply. Its Montessa development at Whitney Ranch was built to sell in the low- to mid-$200,000s.”
“Now, the condos are priced as rentals at $1,000 to $1,400 a month and have attracted 80 renters in three months, said Taylor Cohee, a Pacific West sales executive.”
“Apartment industry consultant M/PF YieldStar ranked Sacramento ranked almost dead last in the critical ’shadow market’ category that makes investors wary of buying or building new apartment complexes.”
“‘What really hurts it is what is happening with the ‘for sale’ (home) sector. There is too much available product out there. That is going to lead to a lot of shadow market rentals on the single-family side,’ said M/PF research chief Greg Willett.”
The San Francsico Chronicle. “It’s clear that some sectors carry more exposure to the perils and pitfalls of the national economy. Financial services companies, already battered from the subprime mortgage fallout, are likely to undergo more woes in 2008. Retailers are already feeling the pinch as newly house-poor consumers tighten their belts.”
“The housing slump affects the local economy in ways that can’t be measured in corporate financials. As home prices plummet and foreclosures mount, many residents will undergo wrenching personal changes.”
“‘It’s obviously very hurtful to middle-class working families who were able to buy a home and are now being pushed out of the home ownership market,’ said Jim Wunderman, CEO of the Bay Area Council.”
“But the painful process is also likely to help mitigate one of the region’s biggest problems, the lack of affordable housing. Falling prices could put home ownership within reach of a wider segment of the population. ‘Housing affordability is a challenge to our economic competitiveness,’ said Stephen Levy, director of Palo Alto’s Center for the Continuing Study of the California Economy.”
“‘Lower housing prices, while painful to people, overall are helpful to the Bay Area by restoring some measure of affordability. You cannot run an economy, even in the Bay Area, with housing prices that are four times the national average. The salaries here are not four times the national average,’ Levy said.”