It’s A Mountain Of Foreclosures In California
The North County Times reports from California. “Some homeowners in the area have gone months without paying their mortgages and have yet to receive a foreclosure notice; a development that suggests banks are overloaded and that also might mean foreclosure reports are understating the region’s housing crisis. Since January, more homes entered foreclosure than were sold to new buyers, according to monthly reports from several data firms. But even that rate probably fails to include all the distressed homeowners.”
“‘It’s not even volume anymore. It’s a mountain of foreclosures. … There’s no comparison in history,’ said Ramsey Su, a real estate investor in San Diego who used to run a brokerage firm that sold foreclosures.”
“‘We have a couple of clients where we’re just like, ‘Wow, how long are you going to let them live rent-free?’ said John Woodall, a real estate agent who specializes in short sales.”
“‘Most alarming is the fact that, in spite of all these programs that are trying to save or stop the process, more and more people are not paying. The question is, are these programs encouraging people to not pay?’ Su said.”
The Union Tribune. “The University of San Diego’s monthly report on leading economic indicators fell again in July. The USD index has fallen for 27 of the last 28 months. ‘I would say the local economy is in a recession right now,’ said Alan Gin, an economist with USD’s Burnham-Moores Center for Real Estate.”
“The intensity of the housing downturn has overshadowed any gains by other sectors, dispelling the notion that San Diego’s economy was too diverse to suffer much in a recession. Gin used to endorse that theory. Not anymore.”
“‘It turns out the damage from housing, the loss of employment from housing, is much more severe than I would have thought,’ he said.”
“Kelly Cunningham, an economist with the San Diego Institute of Policy Research, thinks the recovery isn’t in sight yet. Though the pace of home-price declines may slow, there is no sign of a bottom.”
“‘It’s not just that home prices have fallen,’ he said. ‘It’s the fact that so much money has been withdrawn. That’s really what kept the economy going for so long - people being able to take money out of their homes and spend it.’”
The Press Enterprise. “Some homeowners tempted to buy a more affordable house in a declining market have committed fraud to ditch the supersized mortgage they no longer want.”
“The abusers are homeowners who could afford their mortgage payments but didn’t want to keep a house whose value had dropped below what was owed on it. On the loan application, they led the lender to believe they intended to put a tenant in the first house so they could afford the two mortgages. But once escrow closed on the new house’s purchase, they stopped making payments on the first house, letting it go into foreclosure.”
“‘This adds an element of fraud to a market that is already out of control,’ said Inland economist John Husing.”
” Michael Pfeifer, an Orange County lawyer who specializes in recovering losses from mortgage fraud for lenders, blamed the abuses on homeowners desperate to keep houses on which the mortgages have reset at higher interest rates and on ‘brokers who are out to get a commission and don’t particularly care how.’”
“A 55-year-old man said he let a house in southern Corona go to foreclosure and bought another in Lake Elsinore, lowering his monthly payments from $5,200 to $2,100. He wanted to remain anonymous because what he did ‘could be construed as fraud,’ he said.”
“His Christian beliefs told him lying was wrong, and his parents had taught him to pay his debts, he said.”
“‘The only way I can justify it (lying to his lender) is that I think a lot of people made a lot of money selling bad mortgages to anyone who walked in the door,’ he said.”
“Judging by last month’s existing home sales in Riverside and San Bernardino counties, which the California Association of Realtors said increased 177 percent from a year earlier, many consumers have decided that their circumstances make it right to buy now.”
“‘I always wanted to be a homeowner and now it is finally possible,’ said Michael Carlin, a 29-year-old Corona school teacher. Carlin, who started house hunting in July, has faced fierce competition in his $200,000 to $240,000 price range, with each house receiving up to 18 offers. He said recently he made offers on eight houses in hopes of having one accepted.”
“Carlin said he considers a house an investment and wants one with resale value. But he said he is not willing to wait for the lowest price because he is tired of living in a condominium he rents for $875 a month.”
“‘Once I buy a house, I will make a definite effort not to monitor housing prices for my own peace of mind,’ he said.”
The Fresno Bee. “The worst home-building climate in decades is buffeting another developer, forcing Woodside Homes into bankruptcy court in Riverside.”
‘The company has subdivisions throughout California, including three in Fresno and Clovis and five in Visalia and Tulare. A group of five insurance companies holding more than $155 million in notes filed an involuntary petition, asking a judge to force the builder into bankruptcy.”
“Instead, Woodside agreed on Wednesday to file a Chapter 11 reorganization petition by Sept. 16. Lafferty Homes of San Ramon and Dunmore Homes of Roseville left the Fresno marketplace, and Beazer Homes of Atlanta said it will stop building here Sept. 30.”
“‘Historically, Woodside has posted industry-leading profit margins,’ said Jennifer Mercer, a company spokeswoman. ‘Unfortunately, the tightening of the credit market, the devaluation of land and the overall economic downturn has resulted in declining home sales.’”
“After 52 years of selling everything from discount dishwashers to high-end ranges, Fresno retailer Bilsten’s has closed. Owner Paul Gilchrist said the slow economy killed sales and, on Aug. 15, his company.”
“‘There’s no one coming into the stores,’ he said.”
“Bilsten’s, like so many others, rode the wave of skyrocketing home values. Customers bought newly built homes and ordered high-end Wolf ranges for up to $15,000 and tacked on $2,000 dishwashers. The company’s outlet near Blackstone and Barstow avenues also did big business, selling dented and scratched appliances at a steep discount.”
“Then construction of new homes stopped, and high-end appliance sales dried up, said Gilchrist.”
“Howard Davidowitz, chairman of Davidowitz & Associates Inc., a national retail consulting and investment banking firm, said he’s not surprised at the number of closures.”
“‘We have 19.5 square feet [of retail space] for every man, woman and child in the United States. That’s a crazy number,’ he said. ‘As long as our economy booms you can support that, but when the economy goes down … do you need 12 shoe stores in every mall? … Do you need eight jewelry stores? I don’t think so.’”
The Modesto Bee. “Testimony on how foreclosures are hurting the Northern San Joaquin Valley will be offered during a House Committee on Financial Services ‘field hearing’ Sept. 6 in Stockton. Valley housing experts and community leaders will share their views with members of Congress.”
“San Joaquin, Stanislaus and Merced counties have the highest foreclosure rates in the nation. More than 20,000 homes have been lost to foreclosure in the past year, and the volume of defaults keeps rising. Nearly 12 percent of all mortgages are 90 days or more delinquent in Stanislaus County and more than 15 percent are delinquent in Merced County, according to research firm First American CoreLogic.”
“‘This is an incredibly serious problem and getting worse,’ said Rep. Dennis Cardoza, D-Merced. ‘For us, this is as devastating as Hurricane Katrina. … If it had happened in one week, the federal government would have sent in Army troops to help us, but it happened over time’ so the impact isn’t widely understood.”
“Patty Amador, whose 20-year-old Modesto mortgage company is among the region’s largest, will share her concerns about recent changes Congress made to mortgage finance requirements.”
“‘Many of these buyers have the ability to qualify for loans and make payments on safe, fixed-rate mortgages. Unfortunately, few have the funds necessary for the down payment or closing costs,’ Amador said. ‘Recent legislation has not only eliminated a widely used financing tool, known as Nehemiah, but will also increase the amount of required down payment along with the monthly payment as a result of increase mortgage insurance requirements.’”
“Many first-time buyers, however, depend on down payment help to become homeowners, Amador said.”
“‘Now is not the time to be taking away financing tools, nor increasing costs to borrowers, if we are going to come out of this ‘crisis’ anytime soon,’ Amador said. ‘If we back financing tools with prudent underwriting, we can bring this market back without the risk of a reoccurrence of bad loans to the wrong borrowers.’”
The Manteca Bulletin. “Homes are now selling every 6.2 hours in Manteca. It is a torrid pace even surpassing the go-go days of the housing bubble that is fueled by one thing and one thing only - housing prices too tempting to resist.”
“There were 635 closed deals as of Aug. 22 within the City of Manteca. But that is only a part of the story. The sales pace virtually doubled overnight in mid-July when banks started aggressively pricing foreclosed homes to the point where it makes sense for investors to buy as well as first-time homebuyers.”
“Another positive is the inventory of available homes. But since foreclosures are driving 80 percent of the sales, the fact there is essentially a 4.8-month supply isn’t working to the advantage of sellers. Instead, the fire sale pricing continues at a level that apparently is working as banks are unloading foreclosed homes ahead of an increasing wave to keep a floor under the potential for even deeper losses on loans.”
“The fact the median selling price so far on all homes that have sold this year in Manteca has now slipped to $253,000 would at first glance look like the market is in the 2002-03 price range where median house prices were between $237,892 and $267,030 on previously owned properties.”
“But that is only part of the story. The bottom of the market is reflecting pricing of the late-1990s. A 1,094-square-foot home at 324 S. Powers Ave. closed escrow this month for $100,000. A similar property sold in the same neighborhood for $92,000 in 1997.”
“A 1,010-square-foot home at 314 Dan St. closed escrow this month for $109,900. A similar sized home in the same neighborhood fetched $115,000 in 1998.”
The Sacramento Bee. “Most urban analysts believe Sacramento’s future is bright. But Sacramento-area residents know one thing for sure: The region can’t successfully grow until it gets through this housing slump. How long will that take?”
“Mark Zandi, chief economist at Moody’s Economy.com and a longtime housing market bear, says Sacramento should be back on its feet within a year. ‘We are at the beginning of the end of the Sacramento housing crash,’ Zandi told Home Front in an e-mail this week. ‘There are more house price declines to come, but the worst of the free fall in prices is at hand.’”
“Just days ago, Zandi told national media that new indicators - a five-month low in unsold new houses and an easing of home price declines in some parts of the nation - showed ‘the bottom of the housing market is coming into view.’”
“And that applies to Sacramento, Zandi told Home Front. But he offers some caveats. ‘There remain some serious threats to the outlook, including the ongoing credit crunch and weak job market,’ he said. ‘But with a bit of luck, including stable oil prices and good policymaking, the Sacramento housing market will find its footing by this time next year. And prices will resume rising again early in the next decade.’”
“Others, meanwhile, wait, wondering how much more prices will drop. Scott Thompson, a partner at Citrus Heights-based Mortgage Resolution Services, doesn’t see a bottom any time soon. Thompson believes the median sales price in Sacramento County - $208,750 last month for existing homes - is headed below $200,000.”
“‘I think we are plowing through all the good buyers who are enthusiastically in the market,’ he said. ‘We’re going to get to November and be at the end of the buyer pool.’”
