It’s All About The Moment In California
The Desert Sun reports from California. “There’s no dispute, it’s been a buyer’s market in real estate. Buyers with good credit, decent income and the stamina to withstand a rigorous loan approval process — some taking as long as 90 days to clear escrow — are standing pat and getting some of the best real estate deals the Coachella Valley has seen in decades. The median price of sold homes hovering at $180,000. The typical mortgage payment falling to $976, a price less than many first-time buyers pay in rent. The typical mortgage payment has not been below $1,000 since May 1999, according to MDA DataQuick.”
“There have been accounts of new, never-occupied homes with upgrades that are selling for 60 percent less than the original sticker price. And Kelly Collier, a senior escrow officer with Fidelity National Title Co., Indian Wells, said she’s heard some amazing auction stories that include the sale of new, 1,800-square-foot homes near the Salton Sea for $47,000 in cash. ‘The REO sales have been huge,’ said Collier. ‘It’s location, location. But it’s also the ability for someone with lower income to get into their dream home.’”
“While the sales of new construction lagged 52 percent over last year, the median price of the new homes sold dropped 15 percent from one year ago to $281,000. That’s about $100,000 higher than the overall median sales price. ‘The people who are coming into the market are speculators, investors and others who — until now — feel they’ve been frozen out of the market,’ said Sam Schenkl, executive officer of the Palm Springs Regional Association of Realtors.”
“‘It’s only going to be a matter of time before demand evens out and catches up with the supply,’ said Patrick Veling, president of Brea-based Real Data Strategies. ‘Then we’ll see people who missed the bottom of the market, as interest rates climb.’”
The Press Democrat. “Owning a home was out of reach for Casi Christiansen and Aaron Jewett a year ago when the typical Sonoma County house sold for $100,000 more than they could afford. Today the couple has settled into a southwest Santa Rosa home they purchased out of foreclosure from Wells Fargo Bank without breaking their budget.”
“Casi Christiansen, 27, and Aaron Jewett, 26, once feared being shut out of home ownership in the region where they grew up and wanted to raise a family. ‘I figured I was going to be a renter for life,’ Jewett said.”
“After looking at several homes, one looked promising. But seven other buyers had already made offers on the home, which had been on the market just two days. The couple had their first taste of the frenzy for homes around $300,000. ‘You have to prep buyers to be realistic and know what to expect. They’re going to need to move quickly. But there will be more coming up,’ said Toni D’Angelo, their real estate agent.”
“After looking over two dozen more homes, the couple jumped on one that came back on the market at a reduced price. The day it was listed they offered the full asking price: $285,000. But the bank only accepted the offer after completing its own check of the couple’s finances. In the end, the couple had a newer, three-bedroom home needing minimal work at a good price. The previous owner who lost it to foreclosure paid $515,000 three years ago.”
“Such a steep price decline helps make the couple’s mortgage manageable. There are fewer dinners out and weekend ski trips are a luxury now, but the couple isn’t stretching financially. ‘It’s definitely tighter now. But it’s ours,’ Jewett said.”
“Strong sales are needed to reduce the accumulation of foreclosed homes before county home prices bottom out and the housing market can stabilize. That appears to be happening at the lowest-price ranges, said Leslie Appleton-Young, chief economist for the California Association of Realtors. But the housing market in Sonoma County is expected to remain unsettled into next year, she said.”
“‘The severity of the downturn is greater than we imagined,’ Appleton-Young said. ‘It changes the tenor of the market. First-time buyers and investors are on it. They’re recognizing what great bargains there are.’”
The Orange County Register. “Corey Fast waited nearly three years for a chance to buy a condominium inside the Stadium Lofts in Anaheim’s Platinum Triangle. Fast, 30, and his girlfriend Michelle Ewing, 31, of Dana Point, were among more than 75 people who camped out Friday night for ‘The Event’ – a marketing blitz to sell 60 of the 120 condos remaining inside the 390-unit Stadium Lofts complex.”
“A two-bedroom unit that once listed for $514,500 they got for $362,000. ‘I started looking at these three years ago and the prices were just out of my reach,’ Fast said. ‘We almost bought last year. … I’m glad we waited.’”
“Anthony Pulsifer, 27, and his fiancée Shannon Roberts, 25, both of Orange, drew No. 47 Friday. They decided not to stay the night. When they came back this morning about an hour before the doors opened, they were still No. 47. ‘There was a lot of hype and we were disappointed to draw that number,’ said Pulsifer, a sales associate with Xerox and an MBA student at Cal State Fullerton. ‘But we figure we’ll give it a shot and, if not, then it wasn’t meant to be. We figure the good news is if this developer is offering great prices like this, then other developers are soon to follow.’”
“As of noon, the line of campers had been through the sales office and 37 of the 60 units were sold.”
The Sacramento Bee. “As home to the newest University of California campus, Merced hoped to leave behind the high unemployment, rural poverty and other miseries that have plagued the Central Valley for decades. Instead, the recession has hit here as hard as anywhere. Unemployment is at 19.9 percent, the worst in 22 years.”
“UC mania inflated the housing bubble here. Home builders rushed to fill the five-mile gap between central Merced and the campus northeast of town. Speculators poured in. Merced was the state’s hottest market in 2005, and ninth-hottest in the nation, for price appreciation. Median prices more than doubled in three years to a peak of $382,000 in late 2005, right after the first UC students arrived, according to MDA DataQuick.”
“The median now: $105,500. ‘In 30 years, I’d never seen anything like it,’ said Mayor Ellie Wooten, a real estate agent. ‘Common sense tells you that if you have a little house and suddenly it’s worth $350,000, something’s fishy in Denmark.’”
“The story is similar throughout the valley. The housing boom and the brief taste of prosperity it brought are history. Valley retailing has been devastated…Out by the municipal airport, Merced’s industrial belt has been hit, too. ‘It’s all tied to the collapse of the real estate market,’ said Frank Quintero, city development manager. ‘People were taking out home equity loans, buying boats, buying things … that’s what was keeping some of our manufacturers (going strong).’”
“Quebecor, a Canadian-owned printing plant and one of Merced’s largest employers, cut staff last year. ‘A lot of people like myself are still pretty much in shock,’ said Oscar Guillen, 55, who lost his job at Quebecor in July. ‘Because of the university … I thought things wouldn’t be that bad.’”
The Modesto Bee. “Superheated construction activity helped drive cities in San Joaquin, Stanislaus and Merced counties to expand their boundaries 45 percent in the past 18 years, according to a Bee review of annexation data. The 22 cities’ populations grew 53 percent, on average, in the same time frame. Progress shifted to shame when the flurry ground to a halt and the three counties suddenly found themselves at the epicenter of the nation’s mortgage default crisis.”
“Assuming leaders are making the link, have they learned any lessons from the building boom and bust? ‘They were all wanting to let it rip,’ said Max Neiman, senior fellow at the Public Policy Institute of California. ‘Understandably so. The opportunity was there (and officials said), ‘Let’s let the housing market go gangbusters.’”
“But demand for housing dollars, not effective planning, drove the valley’s rapid growth over the past couple of decades, several experts say. Now we have acres of single-family homes replacing farmland on cities’ fringes — many neighborhoods pocked by bank-owned homes with ill-kept yards.”
“‘It’s hard to separate out how much of that is due to poor planning or to the general economic decline,’ Neiman said. ‘Those places that have the most dramatic impact were probably overbuilt. That’s the bad planning part. But a number of things were converging. The cliche is ‘the perfect storm.’”
“Some decent growth plans were set aside during the latest building frenzy, noted John Wilbanks, president of Oakdale-based RRM Design Group, suggesting a flaw in even the best-laid plans. ‘They adopt general plans but the first guy who comes in simply files for an amendment and gets (leaders’) support to change the plan based on the market,’ he said. ‘It’s all about the moment.’”
The Daily Bulletin. “Look around you. See any empty office buildings with multiple ‘for lease’ signs posted? They’re going to stay empty for some time. Just like housing, the office market is overbuilt, especially ‘Class A’ space.”
“These days, landlords of classy steel-and-glass offices in the Ontario-Rancho Cucamonga area are struggling to attract tenants. Even after the housing boom went bust in late 2006, dozens of office-space projects in the pipeline had to be completed.”
“Preliminary first-quarter 2009 data shows that 33 percent of all Class A office space in the Inland Empire is vacant, according to Thomas Galvin, research associate at the Ontario office of Colliers International brokerage-research firm. That’s up from about 26 percent in fourth-quarter 2008.”
“Class B office space will probably show a 20 percent vacancy rate for this year’s first quarter, preliminary numbers show, Galvin said. ‘The vacancy rate is still going up,’ he said. ‘As far as a peak, I don’t think we’ve reached that yet’.”
“‘Having empty commercial buildings is not necessarily in anyone’s interest, but it’s not a disaster for anyone but the speculator behind the building,’ added Eric Nilsson…economics professor and director of the Center for Labor Studies at Cal State San Bernardino.”
The San Diego Reader. “All across the United States, and around the world, convention centers are vastly overbuilt. Supply exceeds demand. So municipalities that own the centers resort to price-slashing. A…herd mentality has almost run the global economy into the ground. In recent years, economists and executives genuflected at the altar of a number of myths: that housing prices would always rise and people would always pay their mortgages; that gambling on derivatives distributed risk, rather than increased risk, ad nauseam.”
“Heywood Sanders, who has an idea of how many new centers may be built and old centers expanded by 2014, says, ‘Can [San Diego] build an expanded convention center if they can find the dollars to pay for it? Sure. Does it make any sense? Are they going to get any persistent increase in new business? The answer is very clear: no. The bar for dealing with reality in San Diego has never been set very high.’”
The San Gabriel Valley Tribune. “Realtor James Joseph remembers the good old days. That’s when his team of agents would walk into their Whittier office excited about getting a new listing. The phones rang, a lot. Commissions were huge. They were in line with the bloated price of homes, which often sold within a few days - or hours - after being listed.”
“Unfortunately for the U.S. economy, with the help of easy-money banks those buyers all too easily fudged their way into the American dream. ‘They knew they would sell right away, regardless of price,’ said Joseph, referring to the excitement of his agents.”
“That was only about a year and half ago. Oh, how things have changed. Scores of for sale signs - or worse, foreclosure signs - now stand in weed-ridden front yards in the San Gabriel Valley. Realtors are leaving the business, and the housing industry that supported them - the contractors, the lenders, the builders - have gone down with them. Even Joseph, a veteran of the business, had to lay off staff.”
“Commissions paid to real estate agents and brokers totaled $46.6 billion in 2008, a $12 billion dropoff from 2007, according to ForSaleByOwner. The savvy agents survive. But other aren’t so lucky, Joseph said. Joseph has survived three boom-and-bust cycles since he got into the business in the late 1970s. ‘No question, the sunshine soldiers are gone,’ he said.”
“Economists point to banks as the key to unlocking the economy’s woes. When they loosed up credit, not only housing, but other sectors such as small business will be reborn. But that rebirth will occur under a watchful eye. ‘My guess is you’re just going to go back to the way we were … back to the `80s and `90s,’ said Babette E. Heimbuch, CEO of California Federal Bank. ‘You come in, and you need to have a down payment. You need to have good credit. It will go back to the days before Wall Street started buying (loans) up and selling them.’”
The Merced Sun Star. “When John Barker, 40, was arrested in March for burglary and mortgage fraud in San Joaquin County he called Lonnie Todd at Gangster Bail Bonds. But the Modesto-based bail bondsman, who does about 30 percent of his business in Merced, wouldn’t issue Barker’s $200,000 bond. The co-signer, Barker’s brother, had property for the collateral but there was a catch. Barker’s brother owed $900,000 on a piece of property worth only $700,000.”
“This has increasingly become common in the past year, said Todd. The precipitous drop in home values in the Valley ‘has affected people’s ability to get out of jail.’”
“Todd said the lack of collateral has meant about half of all the people who call him for bail higher than $50,000 can’t get collateral. That is because so many homeowners who would have used their property as collateral to get relatives out of jail are underwater.”
“‘They owe more on their property than it is worth,’ said Tony Suggs, a board member of the California Bail Agent Association. ‘No one has that equity anymore. Most bail agents, when their bonds are pretty large — let’s say $20,000, $50,000 or $100,000 — require collateral and the best collateral is a deed of trust, or property. Property can’t move.’”
