A Third Wave In California
The Christian Science Monitor reports on California. “California’s Central Valley already sits at the center of the housing crisis, but high prices and contracting incomes are now compounding the foreclosure problem. Homeowners have mortgages higher than their home’s value, and the payments have gotten beyond their reach, not necessarily because interest rates have risen, but because their budgets have tightened.”
“That’s what happened to Bob Scarpitto. He used to donate his time installing pools for needy families on the TV show ‘Extreme Makeover: Home Edition.’ Mr. Scarpitto’s pool business dried up last year when banks tightened home equity lending.”
“He went from a $300,000 salary to zero trying to keep the business afloat. With no income and a higher cost of living, he lost his modest home to foreclosure. He sold everything, except a prized boat, which he just put on craigslist. In April when he had to hand back the keys of his home.”
“‘I’ve lost everything. I had more when I started the business in late 2000 and I thought [then] I was taking a huge risk,’ says Scarpitto. ‘I’ve been slowly selling it off to keep afloat and try to find gainful employment.’”
“His greatest problem is the tough job market here for anyone connected to the housing sector. ‘No one wants to hire a contractor,’ he says.”
“Scarpitto’s hometown, Merced, now tops the charts with 9.3 percent of first mortgages in delinquency, according to figures from economy.com. Stockton sits at 8.6 percent and Modesto at 8.3 percent. Meanwhile, incomes in the three cities fell by around 4 percent over the past year in terms of purchasing power, according to estimates from Andrés Carbacho-Burgos, housing economist at Moody’s Economy.com.”
“The tough economy and inflation are piling onto the housing market’s woes, says Merced Mayor Ellie Wooten, who is also a real estate agent. ‘There are so many elements involved in this that realistically it’s terrifying.’”
“In Modesto, city housing official Barbara Kauss worries about a coming ‘third wave’ of foreclosures. The first wave washed over investor properties, the second - peaking in early July - wiped out recent adjustable mortgages whose rates ratcheted up.”
“A third wave, she worries, ‘will be people who just truly can’t afford the mortgage payment.’ Even for those who could have afforded it before if they had a fixed rate, ‘that’ll be the last straw: the economy,’ she adds. ‘If someone earning wages in your family was laid off, and food has gone up, and gas has gone up, there’s no more way to reach.’”
The Fresno Bee. “The number of troubled homeowners able to sell their houses for less than their debt on the property is increasing. The number of houses sold in July in Fresno and Clovis through short sales totaled 30, up from 19 in June. Short sales in just those two months topped the 46 in all of 2007, said Don Scordino, president of the Fresno Association of Realtors.”
“The story is similar in Visalia, where real estate broker Nancy Riggs said many banks are organizing short-sale divisions to handle the soaring number of requests. Riggs estimated that 17% of the 800 houses for sale in Visalia are potential short sales.”
“Whether those homes close as short sales remains to be seen. Real estate agents say the process can be difficult, time-consuming and frustrating. By some estimates, fewer than 10% of all short-sale attempts succeed, although Realtors expect that percentage to increase.”
“‘There is nothing short about a short sale,’ said Ken Neufeld, a London Properties agent who is spending a large chunk of time trying to close two of them. ‘In the two I’m working, the bank lost the offers twice.’”
“A bank often would rather work with homeowners in structuring some kind of workout or loan modification. Workouts only succeed if the borrower has a reasonable chance of recovery. ‘If there is lost income and they can’t make any type of reasonable payment, there is no conversation to be had,’ said Martha Lucey, president of a nonprofit financial counseling service in Fresno.”
“Patrick Prince of Westland Realty & Investment in Fresno, is one of the leaders in the area when it comes to short sales, completing almost 50% of those he attempts on behalf of sellers and buyers. ‘It’s changing, but I don’t know if it is for better or worse,’ he said. ‘Some banks get it and some absolutely don’t.’”
“Prince said a key is to price the property according to its value, not the loan amount. ‘If the house is worth $300,000 and the loan is $450,000, the bank only cares about the appraisal,’ he said.”
The San Gabriel Valley Tribune. “The city’s Block 36 redevelopment project proved to be another casualty of a faltering housing market. The City Council last week…terminated Block 36, a redevelopment project slated for the southeast corner of Foothill Boulevard and Azusa Avenue.”
“‘Officials from Lowe Enterprises, the Los Angeles-based developer, blamed economic conditions for halting the Block 36 project in an e-mailed statement.”
“‘We think the project we planned is the right thing for the City of Azusa and regret that we cannot move forward at this time,’ the statement read. ‘Unfortunately, the current national economic climate has made it impossible for us to obtain construction financing for a project that includes for-sale residential product.’”
“City Manager Fran Delach said Lowe had suggested making the residential units rentals, but the City Council declined the idea. ‘The general feeling was that there are a significant number of apartments in Azusa currently,’ Delach said.”
“Block 36 - also known as Azusa Village Center - would have been a mixed-use project, consisting of floor-level retail with 66 residential units above, a type of vertical building often seen in dense areas like New York City.”
The Simi Valley Acorn. “Like food pantry operators around the county and across the country, Kittie Fidermutz is being squeezed. Hit with higher food prices and fewer donations, the coordinator of Care and Share in Simi Valley has helped more than 800 new families this year.”
“‘We’re seeing people who used to donate food coming in and getting food now,’ Fidermutz said. ‘We’re getting hit really hard.”
“During the first eight months of last year, the nonprofit served 1,947 households, more than 4,700 individuals, compared to 2,762 families or nearly 7,500 people so far this year.”
The Monterey County Herald. “At least in certain markets, it’s a new world for Monterey County real estate. Becky Jones can tell by the armload of offers that a 900-square-foot Seaside home recently attracted.”
“The bank-owned property - two bedrooms, one bath on a 6,000-square-foot lot - drew 35 offers within days of being listed. The number would certainly have kept climbing, she said, except that the bank stopped taking new offers.”
“A buyer - Jones can’t disclose who it is, other than to say it’s a local resident - is now in escrow, with one of the many offers that topped the $189,000 listed price. She’s prohibited from disclosing what the top bid was until the sale is completed. But the last time the property changed hands, in December 2005, it sold for $625,000.”
“The bulk of sales right now is in the distressed housing market, and that is creating opportunities for first-time homebuyers and those previously outpriced from the region’s housing market, according to Jones.”
“But while that’s where the flurry of action is these days, Jones said it’s not just the foreclosures and the short sales that are creating opportunities. Traditional sellers have been forced by market shifts to reset price expectations. And unlike bank-owned properties, those homes have been maintained and often upgraded.”
“‘I’ve got homes right now all over the Peninsula that people are selling for less than they bought them for,’ said Jones. ‘If there’s anything good out of this, there are a lot of local people who have been saving their pennies and doing things the right way.’”
The Press Democrat. “Business confidence in the Sonoma County economy fell to its lowest level in nearly a decade, and is likely to fall further, according to a survey of local executives. It’s important to keep the survey in perspective, said Ben Stone, the board’s executive director. He noted that confidence was at an all-time high just two years ago.”
“‘We’ve been on a fantastic boom for several years,’ Stone said. ‘It’s a cycle.’”
The Napa Valley Register. “On atree-lined street in central Napa, green lawns in front of modest 1940s-era homes paint the typical picture ofmiddle class suburbia.”
“All seems in order - except for the one house with furniture dumped on the lawn and boxes of clothing and other detritus scattered on the driveway. An old garage sale sign hangs on the trunk of a shady tree, covered with a second, hastily scrawled sign that reads ‘Free.’”
“The two-bedroom, one-bath home on Pacific Street foreclosed on June 30. To a passerby, it seems the residents attempted to make few bucks as an eviction date drew near, then gave up as the deadline passed.”
“Unfortunately, the trouble isn’t isolated to Pacific Street. Over the last five months, some 209 Napa County homes went into foreclosure, according to title company reports for all county foreclosures between March 10 and Aug. 6, 2008.”
“Some of the 209 homeowners were less than $10,000 behind in payments, according to title company reports. A homeowner on Michael Lane in American Canyon was only $2,078 behind. A family on Tallac Street in Napa owed $14,242.”
“Others had fallen delinquent by staggering amounts. A homeowner on Kingsford Drive in Napa had missed payments totaling $55,530 when the lender foreclosed.” “Harrison and Kilburn avenues and Beecham Street in Napa - and Via Bellagio, Vine Terrace Way and Rio Del Mar in American Canyon - have between two and five foreclosures each.”
“Harrison and Kilburn are in Westwood. Three or four years ago, values for two- and three-bedroom, single bathroom homes in the neighborhood soared above $400,000, as many residents of the largely Latino community sought a place of their own. In Napa County, the majority of newer foreclosed homes are in American Canyon.”
“‘A huge number of the folks being foreclosed are Hispanic,’ said Stephen Cogswell, director of Fair Housing Napa Valley. Sixty percent of Hispanic home buyers in 2006 used lenders whose primary business was subprime lending, he said.”
“According to Cogswell, 2006 was the peak year for subprime loans. As these loans mature and interest rates adjust, ‘It is likely that we are only beginning to see a portion of the homes on their way to foreclosure,’ said Cogswell.”
“Many of the Napa County homeowners now in trouble paid between $300,000 and $600,000 for the homes, supporting (the observation) of Mike Silvas of Morgan Lane…that it is the first-time buyers who are most at risk.”
“The problem is particularly dramatic for American Canyon, where our numbers show as many as one in 12 homeowners are currently being, or have been, foreclosed,” said Cogswell.”
“A foreclosed home in the Rancho Del Mar neighborhood of American Canyon is just one example. Three years ago, the three-bedroom, one-bath home at 211 Carolyn Dr. sold for $465,000. The current listing price: $219,900.”
The San Francisco Chronicle. “Times are tough in the real estate market. Even in the top echelons, some properties are languishing. One Marin County Realtor is hoping to kick-start the mansion market, going after international buyers whose euros carry extra oomph here in the land of the weak dollar.”
“Luxury-home Realtor (and owner) Olivia Hsu Decker is running a swank six-day event in September for ‘ultra-high-net-worth individuals,’ mostly from overseas, to view 30 palatial estates in the Bay Area.”
“This black-tie affair is a parallel-universe version of the foreclosure bus tour, in which bargain hunters see discounted bank repos - but it’s born of the same market downturn, as these times require a little extra vigor to sell real estate even to the ultra-rich.”
“Even in this upper-crust market, ‘it’s slowed down,’ Decker admits.”
“Why? ‘Because they read the press. It’s not like they don’t have money to buy, but they’re pausing because of the press.’”
“‘When the market is good, we can sit here waiting for local people to buy; we didn’t do that much marketing out there,’ she said. ‘But now we have to (market) and also do some very interesting, exciting events to get people out here.’”
“Prospective buyers will be wined and dined by sponsors such as Bentley and First Republic Bank, and chauffeured to tour such properties as an English Tudor-style mega-mansion in Los Altos Hills ($38 million) and a Tuscan villa in Tiburon ($15 million).”
“‘These are really glorified open houses,’ Decker said, in a dry understatement.”
“For the discerning luxury home shopper, there’s plenty of room for haggling, even at the top. ‘You don’t have to wait for the seller to drop the price,’ she said. ‘If you want to pay a million dollars less, offer a million dollars less.’”
