A Long Way To Go In California
The Contra Costa Times reports from California. “A grass-roots effort aimed at curbing the massive home foreclosures in East County, as well as across the nation, spurred nearly 1,000 people to show up at a town-hall meeting at an Antioch church. ‘There are 10,000 homes in Contra Costa County that are owned by the banks. There are another 8,000 homes in Contra Costa County that are in one stage or another in foreclosure,’ said Catherine Kutsuris, director of the Contra Costa Department of Conservation and Development. ‘This is not an acceptable situation for us.’”
“The latest report of the State Foreclosure Prevention Working Group, for the period from January through May, found that nearly eight out of 10 seriously delinquent homeowners were not on track for any modification. According to the report, ‘the mortgage industry’s failure to develop systematic approaches to prevent foreclosures has only spurred declines in property values and further increased expected losses on mortgage loan portfolios.’”
“‘It’s like in medieval times, where the kings are in their castles and the subjects are outside trying to get a crust of bread,’ attendee Mary Rabon said.”
The Los Altos Town Crier. “California Association of Realtors President William Brown met with Silicon Valley Association of Realtors’ leaders to discuss the economic crisis and the state trade association’s response. Brown said the state realtor group is now offering Special Weapons and Tactics (SWAT) to members. The tactics program teaches real estate agents how to handle sales and dispositions of distressed properties – short sales, foreclosures and REOs . The association plans to continue offering the courses in 2009, Brown said.”
“‘If we don’t get banks to lend money again, we will be in dire straits. We need to provide more liquidity to the market,’ Brown said. ‘The bottom line is, things still need to be addressed. Indications are this problem is going to be with us for a while.’”
“A total of 7,271 new and resale houses and condominiums closed escrow in the nine-county Bay Area in September, up 45 percent from September 2007, according to DataQuick. The increase was due to home sales up in the inland areas hit hard by foreclosures. Last month the median price paid for all new and resale houses and condos sold in the Bay Area was $400,000, down a record 36 percent from $625,000 in September 2007, according to DataQuick.”
“Nearly 42 percent of all existing homes sold across the Bay Area last month were foreclosed at some point within the year, up from 36.1 percent in August and 6.9 percent a year ago. In Santa Clara, 30.5 percent of home sales were foreclosure resales.”
“DataQuick reported the typical monthly mortgage payment Bay Area buyers committed to was $1,890 last month, down from $2,121 the previous month and from $3,171 a year ago. Adjusted for inflation, current payments are 27.3 percent below typical payments in the spring of 1989, the peak of the prior real estate cycle. They are 45.3 percent below the current cycle’s peak in June 2006.”
The Sacramento Bee. “Is Sacramento’s woeful housing market bottoming out? The answer isn’t immediately clear. The bursting of the housing bubble caused considerable harm to the economy in Sacramento and across the state. As home values plunged, equity ‘extractions’fell by 34 percent last year in Sacramento, according to MDA DataQuick. That took $2.1 billion out of the region’s economy. Unemployment rates – 7.4 percent in Sacramento, 7.7 percent for the state – are at their highest in 12 years.”
“A big question mark is whether Sacramento should brace for another wave of foreclosures. Cathy Shosenburg of Citrus Heights said she’s in danger of losing her home after the monthly payment on her negative-amortization loan doubled last spring, to about $2,500. ‘I know there’s a lot of people in this position,’ she said.”
The Times Delta. “Last fall, Julie Sampson called 25 mortgage brokers in search of someone who would refinance her adjustable-rate mortgage. Not one was able to help her. For Sampson, it’s far from what she envisioned when she first saw her dream home east of Visalia in 2005. She balked when she first saw the adjustable interest rate and the steep terms to her loan. But her mortgage broker reassured her, saying that by the time the loan was due to reset, she would be able to refinance into a fixed-interest loan.”
‘The mortgage industry was booming. Refinancing was easy. There was no reason for Sampson to think she would be stuck with a high-interest loan. ‘My broker made an appointment with me in two years to refinance into a fixed-interest loan,’ she said. ‘The credit crunch happened two months before my loan was due to reset to a higher rate.’”
From Reuters. “Just a few years ago, Kristin and her husband Mike Bertrand were confident they owned their own piece of the American dream. They pulled in $140,000 (84,580 pounds) a year, owned a house, two cars, a telescope and other gadgets, and had season tickets to Disneyland for their two kids. But since they lost their home in May, the Bertrands live in a sparsely furnished rental in Thousand Oaks, California, and have cut expenses to the bone.”
“They’ve sold Kristin’s set of wedding rings, given up a car and the Disneyland passes to get back on their feet. ‘It’s going to be a lean holiday for us,’ said Kristin, who said the family has put plans to visit relatives in Idaho on the back burner. ‘I think this year we need to lay low.’”
The Ventura County Star. “About 650 people registered for the 10th annual State of the State Conference at the Beverly Hilton in Beverly Hills. The conversation inevitably turned to the economy. ‘We clearly are going into a more severe contraction of economic activity,’ said Ross DeVol, director of regional economics for the Milken Institute. ‘We have really fallen off a cliff.’”
“DeVol was part of a panel that discussed the real estate market in California, a group that was asked if it saw any bottom to the market in sight. DeVol’s simple answer was ‘no.’ ‘Capitalism goes through this every once in awhile,’ he said. ‘We go through the excesses, and we have to clean them out. And this one is going to be costly to clean out.’”
“Bobby Turner, managing partner with Canyon Capital Advisors LLC, said he expected to see home prices drop another 20 percent. ‘We have a long way to go before we bring home ownership back to affordability,’ he said.”
“How long will it last? That’s what was discussed during the 2008 Inland Empire Economic Forecast Conference held at the National Orange Show Events Center in San Bernardino on Wednesday. The bursting real-estate bubble will continue feeding thousands of foreclosures into the Inland Empire’s housing market for another two or three years, according to Christopher Thornberg, founder of San Rafael-based Beacon Economics.”
“‘The wealth is disappearing,’ he said about inflated home prices. ‘That money was never there in the first place.’”
“Never mind those plunging prices homeowners have suffered since 2006 - Thornberg is predicting residential real-estate owners nationwide will collectively lose another $15 trillion over next year. That’s good for home shoppers sitting on the sidelines, says Johannes Moenius, business and economics professor at the University of Redlands.”
“The biggest Inland Empire price drops are happening in lower-income neighborhoods and high-unemployment areas - regions where home prices jumped four times their 1998 values, Moenius said.”
“University of Redlands President Stuart Dorsey, who is a former chief economist for the U.S. Senate Committee on Finance, said the government’s intervention in the financial markets have a ‘limited ability’ to prop up the system. ‘What’s going to happen in the next few years is important,’ Dorsey said about the two-county region. ‘How we come out of this - how we’re steered and in what direction - will determine how we go into the next couple of decades.’”
The Press Enterprise. “Thornberg said there are no quick fixes because an entire country was living on people who were dreaming about wealth and trying to make it come true on credit. They looked at the paper profits from their homes or stock portfolios and felt like millionaires. ‘We’re at the back-end of a 15-year consumer party,’ Thornberg said. ‘This country is now carrying a massive debt load. Why did we do it? It’s because we wanted to feel rich.’”
The Voice of San Diego. “August home prices in San Diego County fell 25.8 percent from the previous year, a record annual decline, according to the newest Standard & Poor’s/Case-Shiller home price index. Prices declined 32.8 percent from the peak in November 2005. August was the 28th straight month in which prices were lower than the month before.”
“In the second quarter of 2005, the best boom-time quarter, 4,662 new homes sold in the region. Last quarter represents an 89 percent decline from that level. Russ Valone, MarketPointe’s president, said he never expected to see sales drop below the 1,000 level. But now three of the last four quarters have shown sales rates below that line.”
“‘We’ve got a slog to go here,’ said Mark Goldman, mortgage broker and real estate professor at San Diego State University. ‘There’s also an emotional malaise that’s going on right now,’ he said. ‘There are millionaires who are just staying home. Go to a shopping center, take a look around. There’s a lot fewer buyers. Car lots are closing up. People are just buying less and less stuff. Can it get worse? Yes it can, but the world hasn’t ended. It’s going to change significantly. There’s going to be a bleeding off of all that consumption. You can’t put all the stuff on the credit card anymore and pay for it by refinancing your house.’”
The Union Tribune. “On La Jolla’s trendy Girard Avenue, the era of $75 lace panties is coming to an end. On La Jolla’s trendy Girard Avenue, the era of $75 lace panties is coming to an end. Neroli Lingerie’s owner, Ceslie Rossi, is closing shop because sales no longer support the 1,200-square-foot boutique’s $7,000-per-month rent.”
“‘It’s been touch-and-go for a year now, and then in September the bottom fell out – no one was spending,’ said Rossi, who this month liquidated her lingerie inventory in a going-out-of-business sale. ‘I can’t handle the stress anymore. When my art-gallery neighbor sells one painting for $20,000, they are OK, but panties – even expensive panties – is another matter.’”
The Orange County Business Journal. “Irvine-based homebuilder Standard Pacific Corp….reported (a) third-quarter net loss of $369 million, more than three times the $119 million loss reported a year earlier. Write-downs of unsold homes, land and other charges made up $368 million of the loss. Standard Pacific builds homes in some of the hardest hit housing markets, including California, Arizona, Nevada and Florida. Southern California, Arizona and Florida led the price declines with drops of about 25% each from a year earlier.”
“‘Housing market conditions deteriorated further during the quarter as the growing level of foreclosure inventory combined with the tumultuous global financial markets, worsening economic conditions and record low consumer confidence further undermined the already weak housing market,’ CEO Jeffrey Peterson said. ‘It does not appear at this time that the earlier efforts by the federal government to stabilize the housing market across the country has had any meaningful impact.’”
“Standard Pacific has a market value of about $210 million, down 95% from its peak during the height of the housing boom in 2005.”
The Orange County Register. “Newport Beach City Councilman Steve Rosansky, a real estate broker who is up for re-election next week, signed loan documents agreeing to live in a now-rundown house as his ‘principal residence’ for at least a year, records show, but never moved in, according to neighbors. The councilman declined to explain the discrepancy, but real estate experts say it is common for buyers to sign ‘principal residency’ clauses on income properties to obtain lower interest rates.”
“Although it is fraudulent to sign documents saying you will live in a property and then rent it instead, lenders rarely checked that during the years of the real estate housing boom and the Register could find no recent examples of local prosecution on such grounds.”
“Neighbor Melissa Chong, who has lived next door to the property for a decade, said she has never seen Rosansky spend a single night there, and that the property is uninhabitable because of its poor condition. ‘It’s been vacant since he bought it,’ Chong said. ‘It’s never been able to be lived in.’”
“Rosansky purchased the house in the Newport Shores area in April 2004. Rosansky’s $440,000 loan to acquire the property came from Riverside-based Provident Savings Bank. The deed says that the loan will go into default if the borrower intentionally makes inaccurate statements, including ‘representations concerning borrower’s occupancy of the property as borrower’s principal residence.’”
The Kansas City Star. “A federal grand jury on Wednesday indicted 17 people in an alleged $12.6 million mortgage-fraud scheme that targeted upscale neighborhoods in Raymore and Lee’s Summit. The scheme purportedly paid $2.3 million in kickbacks to home buyers through shell companies the defendants established. The real estate agent and the builder also allegedly profited from the scheme, authorities said.”
“The buyers purportedly obtained loans by providing false information to lenders and then bought 25 homes at inflated prices in the Raintree and Belmont Farms subdivisions in Lee’s Summit and the Eagle Glen subdivision in Raymore. Real estate agent Angela R. Clark…from Lee’s Summit…and Jerome Shade Howard, 39, of Anaheim, Calif., purportedly sought potential buyers. Howard also supplied false Social Security numbers that some buyers used to obtain loans, the indictment alleged.”
“According to the indictment, defendants secured a $603,000 mortgage in July 2006 for the purchase of a home in Belmont Farms at 509 Southeast Snaffle Bit Court. After subtracting his building costs and profits from the mortgage payout, Raymore builder Jerry Emerick allegedly paid a $114,000 kickback to a shell company controlled by Howard, the purchaser, and $30,000 in real estate fees.”
“But while the home’s 2008 market value is listed at $625,000, according to county tax records, it sold in August for $290,000. Another nearby home identified in the indictment had the same issue. Its 2008 market value is listed on county records at $520,000, but it sold in February for $248,000.”
“Although the scheme may have artificially inflated area property values at first, U.S. Attorney John Wood noted that many of the 25 houses now are vacant and in foreclosure, thus depressing values.”
“Others indicted Wednesday were: James F. Simpson, 39, of Lee’s Summit; Ronald E. Brown Jr., 39, of Gladstone; Enrico J. McClain, 36, of Kansas City; Daryle A. Edwards, 37, and Leon T. Jones. 42, of Olathe; Willie Charles Cadenhead Jr., 38, of Grandview; Gerald D. Williams, 47, and his wife, Judith E. Williams, 47, of Omaha, Neb.; Michael Conrad Smith, 47, of Lancaster, Calif.; Cheryl Ann Romero, 50, of Santa Fe Springs, Calif., Anahit Nshanian, 29, of Long Beach, Calif.; Mark Whitney Jackson, 48, of Woodland Hills, Calif.; and Steven M. Salas, 35, of Hacienda Heights, Calif.”
