What Goes Around Comes Around In California
The Inland Valley Daily Bulletin reports from California. “Foreclosed homes are getting scooped up by investors and first-time buyers, but the massive supply of units being repossessed by banks and put on the market still exceeds home-buyer demand. More plunging home values are destined for Southern California, and especially San Bernardino and Riverside counties. ‘Home prices are falling faster than they were before, and that’s what people don’t understand,’ said Michael Carney, executive director of the Pomona-based Real Estate Research Council of Southern California. ‘We won’t see any leveling off until at least the spring of 2010. It’s likely to be later.’”
“Alex Espinoza Sr., president of Ontario-based California Capital Home Loans…says there are 8,000 homes and condominiums in the two-county area now going for $200,000 or below. Buyers should realize it’s a long-term investment and that California home prices rise an average of 5 percent to 6 percent every year if you hold on to the property for at least 30 years, Espinoza said.”
“Jim Mulvihill, an urban planning and economic geography expert at Cal State San Bernardino…notes the tax break homeowners receive for owning a home. ‘We’re the only industrialized country that does that,’ he said. ‘We’re going to have that, I think, forever.’”
“‘In general, in California, property is always going to rise in value,’ Mulvihill said about long-term real-estate values. ‘It’s an investment.’”
The New York Times. “With nearly one in six homes worth less than the mortgage owed on it, according to Moody’s Economy.com, divorce lawyers and financial advisers around the country say the logistics of divorce have been turned around. For John and Laurel Goerke, in Santa Barbara, Calif., the housing market crashed in the middle of what Mr. Goerke said had been an orderly legal proceeding. At the height of the market, Mr. Goerke said, they had their house appraised at $2.3 million, which would have given them about $1 million to divide after paying off the mortgage. But by the time they sold last year, the value had fallen by $600,000, cutting their equity by more than half.”
“‘That changed everything,’ said Mr. Goerke, who is now nearly two years into the divorce process, with legal and other fees of several hundred thousand dollars. ‘The prospect of us both being able to buy modest homes was eliminated. The money’s not there.’”
“Now, with both spouses living in rental properties, their lawyers still cannot agree on what their remaining assets are worth. Their wealth is ticking away at $350 an hour, times two. ‘It’s got to end,’ Mr. Goerke said, ‘because at some point there’s nothing left to argue about.’”
“‘We used to fight about who gets to keep the house,’ said Gary Nickelson, president of the American Academy of Matrimonial Lawyers. ‘Now we fight about who gets stuck with the dead cow.’”
The Recordnet. “State and federal regulators have hit Community Bank of San Joaquin, based in Stockton, with a cease-and-desist order that charges bank management with unsafe or unsound banking practices.”
“The bank was operating with insufficient capital, had too large a volume of ‘poor quality’ loans and engaged in unsatisfactory lending and collecting practices, according to an order issued jointly by the Federal Deposit Insurance Corp. and the California Department of Financial Institutions.”
“The bank did no subprime mortgage lending, said Bank CEO Jane Butterfield, and all of the ‘nonperforming’ loans were to local home builders taking out loans before 2007 to buy land and build single-family homes. No one guessed the real estate and financial sectors would see such a harsh downturn, she said, and San Joaquin County is ‘ground zero’ as the worst market in the country in the real estate-related meltdown.”
“‘Hindsight is 20/20,’ Butterfield said. ‘I don’t feel we were operating in an unsafe and unsound manner. … At the time we made the loans, they were good loans.’”
The North County Times. “One of North County’s largest home builders, Carlsbad-based Barratt American, filed for bankruptcy protection from creditors last week as it struggled to survive one of the worst local housing downturns in history. If Barratt American were to fail completely, it could cause a painful ripple through several local businesses. Of its top 20 creditors listed in a Chapter 11 bankruptcy filing, 11 were based in San Diego or Riverside counties and were owed $10.9 million.”
“Michael Pattinson, the company’s president, said Barratt was forced into bankruptcy after its lender, Bank of America, canceled a line of credit. He said the two companies had worked together for 27 years. Bank of America has seized all four North County projects in foreclosure.”
“Pattinson has crisscrossed the country, telling legislators about the pain builders are feeling because of ‘bad banks.’ ‘What upsets me is that a company that I was loyal to was not loyal to me,’ Pattinson said. ‘But we’re big boys. We know what goes on in this world, and what goes around comes around. I’ve got my boxing gloves on, and I’m up for the fight. I’ve lost Round One, but there’s 14 more rounds to go.’”
“But Dan Schaldach, owner of D&S Construction in Escondido, said he sees it differently. His company has been framing houses for Barratt for years, he said. ‘I think he (Pattinson) has been blaming other people for their mismanagement,’ Schaldach said. ‘They had a pretty high lifestyle, and it caught up with them.’”
From New Times SLO. “Caleb Lopez is one of the lucky ones. With several big development projects on his plate and a steady flow of smaller, private jobs coming in, Lopez might be considered a rarity when it comes to being a contractor in today’s economy. Following the overall downturn of the nation’s economy and the collapse of the housing market last year, contractors have been working especially hard to stay afloat financially.”
“‘Everything has changed,’ said Lopez, a general contractor and owner of Cal Coast Construction.”
“For several years, he said, construction was ‘people’s bread and butter’ in San Luis Obispo and Santa Barbara counties. But as the economy began to slow the business was forced to readjust to the changing economic climate. To make ends meet, companies tightened their tool belts by lowering prices, laying off laborers, or even filing for bankruptcy.”
“According to Leslie Halls of the San Luis Obispo Builders Exchange, development has slowed significantly.She said the number of bidders per project is higher than it has been in 15 years. ‘There’s just a lot more guys coming in chasing a lot less work,’ Halls said. ‘It’s gotten incredibly competitive.’”
“And while Lopez continues to do good business the state of his ailing industry stays on his mind like caulk on kitchen tile. ‘The industry has a pattern that repeats itself over and over again,’ he said. ‘Hopefully, you saved up when times were good.’”
The Press Enterprise. “The Inland region’s population boom is over, in large part due to skyrocketing foreclosures and unemployment. In Riverside County, about 13,600 people moved into the county, nearly one-third of the 30,000 people who moved in the previous year. In San Bernardino County, about 9,000 people who lived in the county left this year; about 1,000 people left the county in 2007.”
“Inland economist John Husing…said the state’s finance figures suggest that people losing homes and jobs are moving out of state. This group also includes retirees, who Husing said are moving to places like Utah and Nevada because of the lower cost of living. ‘If they can’t afford a house here, how are they going to afford one in Los Angeles County?’ Husing said. ‘If they are moving out, they are moving to places that they can afford.’”
“Husing predicted the next housing boom would begin in 2012, when he believes homebuilding will resume. ‘That still is four years away,’ Husing said.”
“Those who try to predict the future in a sometimes unpredictable California economy aren’t immune to the subjects of their prognosticating. That includes the economists.”
“The California Building Industry Association, a statewide trade group that advocates on homebuilder issues, this week sent out an e-mail to the media containing this message: ‘We’re sending you this note to let you know that due to budget cuts, Alan Nevin will no longer be under contract with us as of the end of the year. We encourage you to continue contacting Alan for his insights into the marketplace, but in order to avoid confusion, please do not refer to him as CBIA’s chief economist in the future.’”
