A False Reality In California
CBS 13 reports from California. “The wrecking ball has claimed another major builder, John Laing Homes. With nearly a dozen housing developments in the Sacramento area, realtors were surprised to learn how soon the well-respected developer was falling apart. Realtor Mani Del Rosario says construction on some projects have stopped indefinitely. ‘They’re a very good company,’ he said. ‘I’m not surprised, because there are so many builders shutting down.’”
“Homeowners worry that unfinished homes could eventually bring down their neighborhoods. ‘You think this community was going to be built right away, and now they’re holding off with no explanation,’ said Jessica Vanbockern. ‘It’s not good.’”
The Fresno Bee. “A central San Joaquin Valley-based builder has filed for bankruptcy protection for the first time since the new-home market started tanking. Ennis Homes of Porterville, which has been in business for three decades, filed a Chapter 11 petition Monday in federal court in Fresno after struggling for two years with the real estate meltdown, its chief executive said.”
“CEO Brian Ennis said the company was selling houses, but its land holdings fell in value so far so fast that some banks stopped financing development. ‘When the land is collateral supporting a loan and the value drops by 50% or more, it’s impossible to adjust to that in a short period of time,’ Ennis said in a statement.”
“Ennis started preparing for an economic downturn in 2006, but the deterioration surpassed expectations. ‘We planned our business based on what the best economists were predicting. Unfortunately, the economists’ crystal ball was not very accurate,’ he said.”
The Recordnet. “Kevin Huber, president of Stockton-based Grupe Co., said foreclosures have significantly affected development and home building in both the short and medium term, because foreclosures are selling well below what it costs to develop and build new homes.”
“It typically costs between $40,000 and $50,000 to develop a Stockton lot with the infrastructure - curbs, gutters, utilities and so on - needed to get ready to build, Huber said. And that doesn’t count the cost of the land itself. In the past few weeks, though, ready-to-build ‘finished’ lots have been sold for between $5,000 and $7,500 each, he said.”
“That’s as little as 10 cents on the dollar from those who bought and developed land while the boom was on but found themselves hurting in the bust and forced to sell. ‘You can buy today for substantially less than what it would cost you to develop,’ he said.”
The Bakersfield Californian. “While a forecast of 2009 released this week by the California Building Industry Association suggests new home construction in Kern County would hold steady at 2008 levels, builders here are more optimistic. Lenox Homes, for example, cleared out most of its inventory — 13 homes — in December, President David Cates said.”
“Home prices now are below what it costs to build them, Cates said, because the houses occupy land bought at the height of the market, when prices were high.”
“McMillin Homes started building 19 homes locally in January. ‘It’s a pretty good start. I think we’re going to have a pretty good year,’ said Carrie Williams, general manager of the company’s Bakersfield division. ‘It’s not going to be stellar like it was several years ago, but that was a false reality.’”
“Guadalupe and Ariana Sanchez represent hope in the housing market. Guadalupe, a carpenter…toured 20 homes, bid on four, and landed a deal with a three-bedroom, two-bath house on Sherman Avenue in the southwest for $160,000. ‘I told my wife, we’re just throwing our money away by renting. Let’s try to get a house,’ he said.”
From NBC Bay Area. “It’s not the news Bay Area homeowners were looking for. The San Francisco Bay Area lost $113 billion in home values, according to Zillow. Compared to the fourth quarter of 2007, home values in the Bay Area plummeted more than 17 percent at the end of 2008.”
“By the end of 2008, almost 18 percent of homeowners owned homes that were worth less than they had been when they were first bought.”
The Mercury News. “The late-payment problem is creeping across the valley into areas such as Willow Glen, Campbell and Sunnyvale. Condo owner Leslie Martin is still up to date on her payments, but she’s worried about becoming one of the statistics. In May 2006, following her divorce, Martin purchased her two-bedroom condo in San Jose west of Willow Glen for $415,000, with a down payment of nearly 20 percent. Now, nearly three years later, falling property values have eroded most of her equity, her take-home pay is less after a job change, and her homeowner association dues have increased.”
“Martin, who works as a San Jose city water-meter reader and shares custody of her 10-year-old son, said she’s been able to make ends meet by getting help from her parents, and by working part time for a valet parking company on weekends when her son is with his dad.”
“‘There’s nowhere to turn,’ said Martin. ‘It’s not like I’m not trying.’”
“Campbell mortgage broker Skip Houston…said he fields a few calls each week from homeowners who are ‘upside down’ or nearly so, and are contemplating their options. Can I refinance? Should I keep paying the loan? Or stop paying and go into foreclosure? ‘Even the people who are making big dollars, relatively, are scared,’ Houston said.”
“The value of all homes in the San Jose metro area fell 17.2 percent in the final three months of 2008 compared with the same period in 2007, to an estimated median value of $587,360, according to Zillow. Across the San Jose metro area, which includes all of Santa Clara County, all homes lost a total of $58.8 billion in value in 2008. The lion’s share of that loss, nearly $29 billion, occurred in the fourth quarter.”
“‘It’s devastating,’ said Anne Ramstetter Wenzel, an economist at Econosystems in Menlo Park, referring to the effect on homeowners whose loans are underwater. ‘In a nutshell, you’re basically poorer than you were when you bought the house.’”
“The number of homes sold in California for at least $1 million plummeted 43 percent last year from 2007. Orange and San Diego counties, once bastions of high-priced home sales, ranked third and fourth, respectively. ‘Orange County and San Diego County both have seen prices throughout the price range decline significantly, so what might have been million-dollar homes a year or two or three years ago are now certainly well below that threshold,’ said Robert Kleinhenz, an economist with the California Association of Realtors.”
The Press Enterprise. “The great Val Verde Unified school construction boom of the past decade has ground to a halt. With developers pulling up stakes and abandoning projects in the district because of a depressed housing market and an ailing economy, district officials virtually have declared a moratorium on seven new school construction projects.”
“‘It’s not a prudent, wise decision at this time to build at all,’ said Deputy Superintendent Mike Boyd, Val Verde’s head of business services. ‘And, were we to build, we wouldn’t have the kids to fill it.’”
The Santa Monica Daily Press. “The school district…is expected to take a significant hit from the state economic crisis. The district could face as much as $12 million in cuts over the next 18 months. The quality of public education could play heavily into property values. Dr. Stephen Carroll, a RAND expert on the economy… spoke of how a solid school district can have a positive impact on the community, making it a more desirable place to live and therefore increasing the price to buy a home in the city..”
“‘It isn’t only people who have kids who are willing to pay more, but people who don’t have kids are willing to pay more because high quality schools reflect higher quality communities,’ he said. “Everyone one of you who lives in a house in Santa Monica enjoy higher housing values because of the quality of the schools.’”
From KABC TV. “Real estate values in affluent Westside communities have remained high, despite the recession- until recently, that is. Mary Beth Woods has been a realtor for 35 years and has seen downturns in real estate before, but nothing like this one and now it’s hit the affluent Westside.”
“And that means dropping your dream price and getting realistic. Last year according to MDA DataQuick, the median price in Pacific Palisades was $2.6 million, now it’s $2.2 million. In Santa Monica the median was over $2 million, now it’s $1.6 million. And in Beverly Hills a $3 million property last year is now going at the more reasonable $2.1 million.”
“A house that Mary Beth is currently showing in the Palisades would have gone for $4 million a year ago. In today’s market the Palisades home has nearly dropped a million in value. ‘”We’ve had more inventory come on the market, we have had fewer buyers, and the sales have slowed. So anybody who has really wanted to sell has had to communicate that by being competitively priced,’ said Woods.”
The San Gabriel Valley News. “Analysts caution that prices will likely continue to fall through 2009 and that the outlook for home sales is uncertain, at best - especially as layoffs mount and banks’ lending standards remain tight. Tom Adams, owner of Century 21 Adams & Barnes in Glendora and Monrovia, agreed that home values will probably experience further declines. ‘I don’t think we’ll see home values climbing for some time,’ he said. ‘But I do think we’re as close to the bottom as we can predict.’”
“‘In the last six months about 95 percent of our transactions have either been short sales or bank-owned properties,’ said Chris Vigil, a broker/associate in Whittier. ‘But buyers are better qualified and more motivated now than they were six months ago.’”
“Adams said stricter lending standards have knocked some potential buyers out of the market. But for the ones who are qualified, his advice is simple. ‘My advice is if you can afford it, buy it,’ he said. ‘And then just sit back and let the market carry you up. Don’t plan on this being a quick turnaround … and this is not the time to be flipping homes. But if you want to buy a home that you can enjoy with your wife and kids this is a good time. And you can watch your value go up in time.’”
The Oakdale Leader. “Richard Hundley, a real estate broker in Riverbank, said foreclosure sales have made up 85 percent of the company’s sales, making December the best month the company has ever had. ‘Foreclosures are carrying the market right now,’ Hundley, a 20-year real estate veteran, who also handles Oakdale properties as well, said. ‘The number of sales are through the roof. There are such great deals out there.’”
“In Riverbank, the master-planned community Crossroads was swept up in the foreclosure wave, resulting in hundreds of foreclosed homes that were nearly new when they returned to the bank with bloated balances on the books from owners that were overextended and upside down by the time the market started to go sour. A similar situation happened to areas within the Bridle Ridge subdivision in Oakdale. Prices tumbled, foreclosures started overwhelming banks, builders left with unsold inventory, and struggling homeowners were left to try and hold on to the American dream by their fingernails.”
“‘Banks are overloaded with foreclosures,’ Hundley agreed. ‘Banks are requiring higher credit scores, more money in the bank, better job histories…and that’s definitely cut some people out of the market that might’ve been able to buy a year ago. But interest rates are just fantastic and there’s a lot of good things going on.’”
“Hundley said he sees more first-time home buyers out there than investors. ‘I’ve seen more cash offers (lately) than I’ve seen in my career. Some homes have dropped their prices by half and some, especially the larger homes, have dropped by almost a third. Million dollar homes are going for $700,000. If you can buy a home, now is the time to do it.’”
