This Overwhelming Feeling Of ‘We Can’t Lose’
The LA Times reports from California. “The Obama administration’s budget threatens to cut a benefit many Americans view as practically a right — the mortgage interest tax deduction — and powerful real estate interests are fighting back. The move would affect only households earning $250,000 or more, but opponents say it could prolong the housing crisis by slowing already torpid home sales and deal another blow to home values ravaged by the market crash. The heavy hit on California is also why Bob Gartland said he is against the proposed deduction cut. A consultant to the consumer electronics industry who said he voted for Obama, Gartland just bought a $4-million home in Manhattan Beach and said he borrowed just under $1 million solely to get the tax deduction.”
“Gartland said reducing the deduction wouldn’t have a dramatic effect on his life. But he contends that in high-priced areas such as Southern California, a $250,000 household income doesn’t quite make you rich. ‘I have many friends making $250,000,’ he said. ‘The husband and wife both work. They live in a middle-class house and go out to dinner twice a month because that’s what they can afford.’”
“Fear that the Obama proposal could lead to future cuts to the deduction is a major concern of some opponents, said David Kissinger, director of government affairs for the South Bay Assn. of Realtors. ‘If today it’s households earning $250,000 who will pay more, does it mean tomorrow if they still need to balance the budget it will be those making $180,000, then $160,000? How often is the government going to go back to the well?’ he said.”
The San Gabriel Valley Tribune. “Home foreclosures in Los Angeles County spiked nearly 70 percent last month, according to figures released this week. A total of 3,921 foreclosures were reported in February, up from 2,314 the previous month. In February, 9,228 notices of default were issued, a 47 percent increase over the 6,286 issued the previous month.”
“Noman Cox, regional VP of Coldwell Bank Town & Country, said that 80 percent to 85 percent of the transactions his office handles are either foreclosures or short sales. ‘There are a lot of them to wade through and there are more coming,’ said Cox, whose office covers the eastern San Gabriel Valley and western Inland Empire. ‘But we’re seeing an upsurge in buying. We’re getting multiple offers on anything under the $300,000 range.’”
“Cox said home prices have fallen so dramatically that most sellers are opting to wait on the sidelines. ‘We counsel people that if you don’t have to sell now, don’t,’ he said.”
The Union Tribune. “When one of downtown Los Angeles’ largest landlords said this past week that it may seek bankruptcy protection because the company can’t pay its loans, it didn’t bode well for the commercial property market. Meruelo Maddux Properties is just one of many Los Angeles landlords struggling against the recession and job losses, which are driving vacancies higher and giving tenants leverage in renegotiating more favorable lease terms.’
“‘I think 2009 will inevitably be a very difficult year for property owners,’ said Hessam Nadji, managing director at Marcus & Millichap Real Estate Investment Services.”
“‘We have definitely seen a market turn here in the last five months,’ says Lew Horne, executive managing director of CB Richard Ellis Inc.’s Los Angeles region.”
“‘What happened was everybody wanted to be in West L.A., so the prices went up,’ says Chuck Hunt, executive managing director at the Los Angeles arm of real estate services firm Grubb & Ellis Co. ‘Now everybody is willing to look at downtown, so West L.A. prices are coming back down.’”
The Union Tribune. “Call it the Charge of the Lighten Up Brigade. For Dale Condy, it’s making playful signs and stickers to banish the recession. Ben Kephart is giving a free meal at his restaurant to customers who have a positive story to tell. And Kelly Schneider has replaced the daily specials etched on a coffeehouse chalkboard with upbeat quotes and philosophy.”
“‘As a nation, we’ve always talked about consumer confidence, but in the last year the focus has shifted to the opposite perspective – fear,’ said George Belch, a professor of marketing and consumer behavior at San Diego State University. ‘So if consumer confidence is important – and it’s one of the leading economic indicators – somehow this mind-set that the world is coming to an end in an economic sense has to be reversed.’”
“‘People are really angry at the situation, not just unhappy about it,’ Schneider said. ‘It’s not just the economy. A lot of people think the government is taking advantage of people, that the media is negative. The chalkboard is a way for everyday people to have a voice, even if it is a small voice. When they see something that strikes a nerve, it’s like a breath of fresh air. It’s human.’”
“Nearly 70 plaintiffs who invested millions of dollars in the Trump Ocean Resort, a planned luxury oceanfront development in Baja California that was never built, are now suing Donald Trump, his son and daughter, and the project’s developers on a fraud claim. The lawsuit was filed yesterday in Los Angeles Superior Court. It alleges, among other things, that buyers who put down deposits on the planned development’s 526 condo-hotel units were deceived into believing they were buying into a Trump development when the Trump name was merely licensed by the developers.”
“In a phone interview yesterday, Donald Trump maintained his distance from the developers, saying he was ‘not happy’ with what occurred. ‘I have never been there,’ he said of the site. ‘They licensed my name.’”
“Nearly 200 buyers are believed to have deposited more than $32 million for ocean-view units priced at $300,000 to $2.5 million. Tammy Willis, 38, a city employee in Oakland, put down three installments totaling $150,000 for a one-bedroom unit costing $525,000. She said she paid her last installment in early 2008. By that time, the developers were already in financial trouble, said Bart Ring, an attorney representing 69 plaintiffs.”
“Willis, who has not yet taken legal action, traveled to San Diego for a sales reception in December 2006, where prospective buyers were served appetizers and drinks as they chose color schemes. She paid her first $50,000 then. ‘I was never told the (Trump) name was only licensed,’ she said. ‘It could have been in the legal documents, but I didn’t know that. I thought it was what it said, Trump.’”
The Press Democrat. “Home prices not seen in Sonoma County in nine years continued to draw buyers back into the housing market in February, according to a new report. Sales jumped 77.6 percent in February compared to a year ago — rising for the 11th consecutive month — as bargain hunters snapped up foreclosure properties, often priced under $300,000. More than three out of five homes sold in February were owned by banks that had seized the properties in foreclosure.”
“But for the first time in four months, sales failed to keep pace with the number of homes hitting the market. A surge of foreclosure homes for sale swamped buyer activity. Banks are putting more foreclosure homes up for sale and the number of homeowners falling behind on mortgages is on the rise again. Buyers continue to find ample choices because they remain outnumbered by bank-owned homes and properties put up for sale by homeowners hoping to avoid foreclosure. Sellers put 502 homes on the market in February, while just 309 properties moved off the market when buyers purchased them.”
“Homeowners in trouble had gained a reprieve last fall, the result of a new state law aimed at slowing the foreclosure process. It requires lenders to delay foreclosure proceedings and attempt to help borrowers stay in their houses. But lenders have now started to release more foreclosure homes for sale, according to real estate agents who sell distressed homes for banks. That puts increasing pressure on other sellers to reduce prices.”
“Falling prices are good news for buyers who can face increasing difficulty obtaining loans. While interest rates are near record lows, lenders have tightened standards to qualify for mortgages in response to record levels of defaults and foreclosures. Lower prices improve a borrower’s chances of qualifying for a loan. ‘It’s a great opportunity. They may not have qualified as they did a month or two ago,’ said Colleen Militello, owner of Century 21 Classic Properties, in Rohnert Park. ‘“People who had been waiting are taking advantage right now. We have a lot of first-time buyers, and investment buyers have been coming out of the woodwork.’”
The Enterpriser Record. “To prevent a Chico woman from losing her home, several lawyers filed suit against three firms they accused of engaging in a ‘predatory lending scheme.’ Jan Poythress, 53, was within days of being evicted from her northeast Chico home last month when the attorneys intervened. The eviction was put on hold, and Poythress remains in the house while a new trial is scheduled to decide the legality of requiring her to move.”
“The lawsuit states that Poythress, who is disabled, lived in her home, with her parents, most of her adult life. Before her parents died, several years ago, they looked after her finances. After their deaths, Poythress was lonely and vulnerable, the suit says. It wasn’t long before a salesman convinced her he was her friend and talked her into letting him and his girlfriend move in with her. The suit says they didn’t pay rent and persuaded her to buy them luxury items, including a car. Then they disappeared.”
“Poythress, who then had a large credit-card debt, was contacted by a telephone salesman representing Expedia. He called her two or three times a week until she agreed to take a loan against her house to pay off her debts. Although her home was worth quite a lot, Poythress has a very low income — less than $1,000 a month from Social Security.”
“Poythress believed she had obtained an affordable loan that was in her best interest and that she was borrowing $100,000 to pay off her debts and get $20,000 back in cash, the suit said. But in fact, the loan was for $195,000, the entire balance of the loan was to be repaid in a ‘balloon’ payment after one year, and Poythress’ monthly payments were to be about $2,356.”
“In a separate case, the lawyers, on March 5, sued Instant Mortgage Lending Corp. of San Diego, ForeclosureLink of Fair Oaks and Expedia Home Loan of San Diego, demanding, among other things, that Poythress’ loan and the foreclosure on her home be canceled. ‘When you read this complaint, you see how sinister this is,’ said Evanne O’Donnell, managing attorney of Legal Services of Northern California, in a phone interview.”
The Recordnet. “California small-business owners are increasingly pessimistic about the economic outlook, saying that they plan to cut spending and jobs this year, according to new survey conducted by Union Bank of California. Daniel Hoag, owner and president of Hoag Construction Inc. in Lodi, said this week he’s feeling less optimistic now than when the Union Bank survey was conducted in mid-January.”
“While Hoag’s company is busy with some restaurant remodeling jobs, his residential business has dried up. ‘I’m basically down to a 10th of the calls I was getting,’ he said.”
The Sacramento Bee. “The losing streak that defined last year for the home building industry continued in the first month of the new one, the California Building Industry Association said Friday. The association reported 1,355 January sales statewide, a 64 percent drop from 3,773 sales in January 2008. Last year was the industry’s worst for home starts since records started in the 1950s.”
“Yuba and Sutter counties builders sold six homes in January, 64.7 percent below the 17 last year. Merced’s four sales were the state’s biggest year-over-year drop: off 94.7 percent from the 76 sales in January 2008.”
The Merced Sun Star. “It didn’t have to be this way. Maybe County Bank could have made it. Maybe a Dutch white knight could have rescued Merced’s only publicly traded corporation. Maybe more employees would’ve kept their jobs. Maybe more branches would’ve stayed open. But we’ll never know because that’s not the way events played out.”
“Instead, County Bank, beset by mounting multimillion-dollar losses, quietly went on the auction block in late November as it became clear its survival was unlikely. By January’s end, County Bank announced it would suffer nearly a $100 million loss. Its failure was imminent. Eight branches — Stockton, North Clovis, Sunnyside in Fresno, Delhi, Newman, Coalinga, Farmersville and Lemoore — are set to close by the end of the weekend.”
“Former County Bank CEO Thomas Hawker blames the failure, not on the bank’s lending practices, but on the unimaginable decline in loan values. Every time land prices went down — even if the loan payments were current — the bank was forced to set cash aside in case the borrower defaulted. ‘That’s the problem I don’t think people have focused on,’ Hawker said.’
“The form of accounting is called mark-to-market, and its effect on the crisis has been questioned. That’s because it requires lenders to put a value on assets that can’t sell. County Bank had $1.3 billion in loans, with $470 in commercial real estate and $135 million in construction and development. Both industries have been battered during the recession. The Financial Accounting Standards Board will discuss the accounting rule Monday.”
“Yet others believe County Bank, and similar lenders, made too many risky bets and were doomed. ‘There was this overwhelming feeling of ‘We can’t lose’ and ‘We’ll just keep going on our merry way,’ said one former employee. ‘We wanted to be the gorilla in the Central Valley.’”
