A Bermuda Triangle Of Financial Hurricanes
The LA Times reports from California. “Southern Californians facing the loss of their homes are finding refuge in rentals. At larger apartment complexes, monthly rents have declined an average of 4.9% in the last year. Joyce Ann Cato is out of work and about to lose her San Bernardino home to foreclosure. As Cato searches for another job, she and her daughter, Minjoy, have landed in a Pomona house that they rent for $1,795 a month, substantially less than the old mortgage payment but still a hefty chunk of the mother’s $2,500 monthly income. ‘Well, it is reasonable because I don’t have to pay the house now,’ Cato said. ‘I am able to pay that.’”
“The decline in prices marks a significant reversal from the boom years, when rents increased as people flooded into the Los Angeles area, attracted by a diverse economy. Now many of the region’s key industries — construction, trade, manufacturing, tourism and entertainment — are reeling. Los Angeles County’s unemployment rate soared to 12.8% last month.”
“Thomas DeLong said he lost five homes to foreclosure, including investment properties, an inheritance and the house he lived in with his girlfriend. DeLong said renting was a relief after years of worry and a financial juggling act that came crashing down all around him. He walked away from the mortgage on his final home in September and began renting a house for about $1,400 a month, with utilities, in the high-desert area of Perris.”
“‘You are trying to pay all these people, and unfortunately, you have to go through a process of elimination, and even though we did that, we still lost everything,’ DeLong said.”
The Associated Press. “John and Donna Pringle were newly widowed when they fell in love and decided to slip into retirement together at a sprawling community being built for the 55-and-up crowd a few miles from their homes in this sun-bleached Southern California town. The Peppertree subdivision promised an expansive swimming pool where visiting grandchildren could splash and swim, a gym stocked with exercise equipment and hundreds of similarly aged neighbors.”
“But when Peppertree’s builder abandoned the project months after the Pringles moved in, the pool disappeared behind a locked iron gate, the exercise machines were repossessed and the 13 existing residents were left alone to grow testy with each other in their cramped corner of the 85-acre development, looking out at empty, overgrown lots stacked with abandoned metal pipes and roof tiles.”
“‘We really feel cheated out of our retirement,’ said Donna Pringle, 72, as she and her 81-year-old husband sat outside on their porch. Theirs is one of only seven occupied homes in the planned 470-unit subdivision. ‘We’ve worked all our lives toward this and it’s not what we were promised.’”
The Union Tribune. “Mortgage defaults in San Diego County fell 7 percent from September to October in a sign that, at least for the moment, housing distress is easing, according to figures released by MDA DataQuick. So far this year, there have been 31,215 default notices, eclipsing the 26,668 for the same period last year.”
“University of San Diego economist Alan Gin read the figures as a sign of an improved housing market in the wake of improved sales and modest price increases in certain neighborhoods. ‘(Banks) don’t want to take back properties, hoping that the housing market will turn around and owners can work things out,’ Gin said. ‘And so even the fact that they are holding back some (from default and foreclosure) is a sign of what state the market is in.’”
“Foreclosure sales in the large ZIP areas of La Mesa-Mt. Helix, western Rancho Bernardo and University City were 100 to 220 percent higher than in September, while Oceanside, College and southern Escondido were off between 23 and 33 percent. ‘That in itself may be a trend,’ Gin said. ‘In the past, foreclosures were concentrated at the very low end and this might be an indication that things have spread out some, that it’s less in low areas and an increase in the high end.’”
“These days, Realtor Matt Battiata, the CEO of The Battiata Real Estate Group…is concentrating on his family — wife Amy and five children — and the tough housing market. ‘Property values are down an average of 40 to 50 percent in San Diego County alone,’ Matt says. ‘A lot of people are upside down — they owe more on their mortgages than their houses are now worth, and foreclosures are rampant. The banks are overwhelmed and because they are so overwhelmed, they aren’t always making the’ smartest decisions in handling mortgage defaults.”
“‘It’s a freak show out there. And I don’t see it starting to get any better until 2013. My work for most of my clients these days is in short sales.’”
The Herald. “One of the main concerns that an agent-broker panel voiced at the recent National Association of Realtors convention in San Diego was a prevailing rudeness in today’s highly competitive market. Speakers traced the cause to a lack of education, communication and etiquette during the boom years, when when not enough time was spent mentoring new members of the nation’s largest trade organization.”
“The association has gone out of its way at its national convention to help prepare its rank-and-file members by offering more than 20 classes in basic computer applications. The Technology Learning Center at the annual convention drew more than 4,200 attendees to the classes last year and 5,700 in 2007.”
“The Technology Learning Center was canceled at this year’s convention. That’s because Stewart Title had sponsored the popular program in the past. A new California bill places significant restrictions on the types of training a title company can provide to the real estate industry. The California law seeks zero tolerance in any incentives to real estate sales agents.”
“I thought about how California got to that $10 number when a San Diego-based writer reminded me that a few years ago California-based Southland Title Corp. and its subsidiaries, Southland Title of Orange County and Southland Title of San Diego, were alleged to have spent at least $174,000 on food, beverages and entertainment plus $62,000 on gifts and gifts certificates and $218,000 more on business support services. The amazing piece was that the same company was fined $1.5 million two years before for similar practices. That’s a lot of free lunches — and it gives you an idea of what Southland felt it had to do to stay in the game.”
The Bakersfield Californian. “The California Department of Real Estate has barred former real estate agent David Crisp from working in any real estate-related field for three years. The state revoked the licenses of Crisp and Cole last year after finding them guilty of fraud and dishonest dealings, among other charges, in an administrative hearing. More than 140 properties connected to Crisp, Cole and their relatives and business associates are troubled, with most going into foreclosure.”
“Meanwhile, the company’s officers and their associates face several civil lawsuits from lenders. Crisp’s actions ‘epitomized the rampant greed that contributed to the market collapse,’ Real Estate Commissioner Jeff Davi said in a statement released Monday. ‘He should not be allowed to work in any capacity related to finance or real estate.’”
“As of Monday, there was no ban on Cole. ‘That isn’t to say there won’t be one in the future, but at the moment there is not,’ said Department of Real Estate spokesman Tom Pool. Cole hung up when contacted by a reporter Monday.”
The County Sun. “ICB Financial’s president and CEO says the company is open to buying a troubled bank’s assets, as long as its the right fit. The parent company of Ontario-based Inland Community Bank reported $97,000 in third-quarter losses compared with $221,000 in losses in third quarter 2008. Losses stem from two residential construction loans that the business bank is trying to sell,said Jim Cooper. Another two have already been wiped off the books.”
“‘We’re posting record gross revenues, but the majority of it is continuing to go to provisioning for credit losses,’ Cooper said.”
“More than $1.5 million in prepaid assessments to the Federal Deposit Insurance Corp. is also affecting the bank’s financial picture. ‘Those of us that are still standing are paying for those that’ve failed,’ Cooper said. ‘I think (FDIC Chairwoman) Sheila Bair will end up having to do this again by third quarter next year. They’re projecting they’ve got up to 500 more (bank failures).’”
The San Francisco Chronicle. “United Commercial Bank of San Francisco liked to boast that it was the first U.S. bank to buy a bank in China. Instead it will go down in history as the first U.S. depository institution to fail after its parent company took money from the Treasury’s Troubled Asset Relief Program. When regulators shut down United Commercial Bank on Nov. 6 , ‘it was like deja vu,’ says Richard Newsom, a retired West Coast bank and thrift regulator.”
“United Commercial Bank grew from the ashes of United Bank, a San Francisco thrift that failed in the mid-1980s as a result of ‘reckless construction lending,’ Newsom says. Likewise, the FDIC cited commercial real estate and construction loans as a cause of United Commercial Bank’s failure, along with ‘alleged fraud.’”
“That may have surprised people who still saw it as a conservative bank catering to Chinese Americans in San Francisco, Los Angeles and a few other cities with large Asian communities.”
“Julianna Balicka, an analyst who followed UCBH until last week, says ‘the real problem started’ when the company wanted to buy a bank in China but needed $10 billion in assets to do so. ‘Management got greedy about growth,’ she says. Between the third and fourth quarters of 2006, its assets surged from $8.3 billion to $10.3 billion.”
“‘It was one of the worst times to push growth given what happened in the housing and credit cycles,’ Balicka says.”
The Contra Costa Times. “Say goodbye, finally, to hopes of extending that $10,000 tax credit for buyers of new, unoccupied homes in California. It’s all but dead for this year, says one lobbyist who patrols the state Legislature on behalf of homebuilders. ‘We were disappointed neither of those bills panned out this year,’ said Allison Barnett of the California Building Industry Association. ‘We’re looking for options next year.’”
“If you’re among those who think we’ve seen enough new beige-colored houses for a while, here’s welcome news. It will take until 2016 for area builders to get back to production levels of 1999. That’s a prediction from Folsom building industry consultant Greg Paquin. He sees a 2016 with 10,921 sales in El Dorado, Placer, Sacramento, Sutter, Yolo and Yuba counties. That would compare with 10,656 in 1999.”
“This year’s expected sales totals in the region: 3,048. Paquin still calls current events in the capital region ‘an economic recession and a housing depression.’”
The Sacramento Bee. “There’s life again at the upper end of the local housing market. We’re hearing of a number of recent sales of homes priced above $1 million, mostly in Sacramento’s older, established neighborhoods. Lyon Real Estate agent Debbie Davis reports two recent sales on swanky Crocker Road in Sierra Oaks Vista – one going for $1.65 million, the other for $1.3 million.”
“A nearby property on Hawthorne Road closed three weeks ago at a price of $1.27 million, she says. The reasons for the pickup in a market segment that’s been hardest hit by the housing downturn? Killer deals, Davis says.”
“‘People tell me the prices are so low (relative to a few years ago) and they want to get into these neighborhoods at a discount,’ she says.”
The Mercury News. “With many Americans still spooked by the stubbornness of the Great Recession, hesitant to splurge while the economy remains so iffy, Black Friday this year seemed to fall into a gray area. Some Bay Area stores drew killer crowds, but others were dead. And despite the hype of deep discounts and early-bird openings, one mantra echoed from Silicon Valley to San Francisco: Consume with caution.”
“Many shoppers seemed conflicted — they lusted after the great markdowns, yet they thought hard before going for their wallets. Instead of the unbridled spending of past years, many people window-shopped and moved on, as if they’d come to the malls just to pretend happy days were here again. ”
“‘Last year was better because the recession was just getting started and people didn’t realize how bad it was going to be,’ said Rashid Mohammed, standing alone at his iPod Place kiosk Friday morning in the Great Mall in Milpitas. ‘Now they do, and they’re not spending like they used to.’”
The Lompoc Record. “There will be fewer places to shop in Lompoc this holiday season, as at least six local businesses have closed in recent weeks. The businesses represent a diverse cross-section of the local economy: Awards and Things, Creative Kids tutoring academy, Honda Motorcycles, Johnny’s Bar and Grill, McConnell’s Ice Cream, and Sports Nutz.”
“Phil Skillin, the owner of Video Library will raise the closure count to seven this week, when he closes his store after the Thanksgiving holiday. ‘You’re the fourth person I’ve had in the store. The first two were looking for jobs,’ Skillin said.”
The Desert Sun. “Paul R. Ryan is a seasoned business operator who can see only faint light at the end of the tunnel from what he thinks is not just a recession but a deep economic depression. But at the same time, the CEO of Fantasy Springs Resort & Casino thinks the things that made the Coachella Valley such an attractive place for economic development at the start of the 21st Century will return, and he spends much of his time preparing for the turnaround.”
“‘All the things that made the Coachella Valley such a dynamic growth area three, four years ago are still there,’ he said. ‘We still have great sunshine, affordable land and provide an opportunity for people from northern states to get into an ideal area. I think all those great things remain true and by 2012, we’ll start coming back to normal.’”
“Looking at the economy, he said he didn’t ‘believe we are in a recession. I think we are in a deep depression.’ He said he did not think the flow of information from the government educated Americans on how bad things are.”
“Ryan said that when he ‘was a kid, my father used to tell me that the entire economy was built on the housing industry. He’d say that when you build a house, you are employing the guy who makes shingles, one who does plumbing, another who does landscaping and that’s the lifeblood of the economy.’”
“He said he felt the Coachella Valley was a great example of this concept. ‘When the housing industry was healthy, we were the second fastest growing county in the entire United States,’ he said. ‘But until people get back to work, this will be a very depressed area and will remain depressed until they go back to work.’”
The Daily Democrat. “When Rochdale Grange was proposed as 44 apartments of affordable housing for Spring Lake in Woodland in 2004, everything was a go, according to David Thompson. ‘Three years later, you could hardly find the project’s heart beat,’ Thompson reported recently. ‘The owners of the subdivision were in receivership, the bank which now owned the subdivision had been seized by the FDIC, and the financing had fallen apart (the tax credit program no longer worked and the state agencies had lost their bonding and funding capacity). The project had entered a Bermuda Triangle of financial hurricanes.’”
“However, Luke Watkins of Neighborhood Partners ‘found a way to pilot the ship first to safety and then to success,’ stated Thompson, and at noon, Tuesday, there will be a groundbreaking. ‘Working with all of the players (The city, the state, the receiver and the bank) Luke Watkins re-structured the financing of the entire project,’ Thompson reported. ‘His efforts finally secured special funds from the federal government’s American Reinvestment and Recovery Act assigned through the Tax Credit Allocation Committee of the state of California.’”
The Manteca Bulletin. “It is true that unemployment in California has topped 12 percent and that foreclosures are still piling up while government at all levels is going on crash financial diets that are hopefully shedding fat without cutting into the muscle. But between the stories of the demand for free meals and the requests at food closets being up significantly as well as the story of one Brentwood family that has been able to keep their home and enjoy Thanksgiving at home through a loan adjustment were three reports of how people were coping with Christmas in these challenging economic times.”
“One San Jose woman was talking about how rough the downturn has been on her family before rattling off a list of stuff she intended to buy after waiting in a Best Buy parking lot overnight. The list included a couple of big screen TVs, an MP3 player and two laptops.”
“Another woman told a TV reporter that things were tight and they were cutting back on spending as she struggled to hold about two dozen articles of clothing while waiting in a checkout line at an Old Navy store. Still another talked with consumers at the San Francisco Auto Show including one bemoaning the weak economy before saying he would probably be buying a new Mercedes in 2010.”
“Tom Joad meet the 2009 version of the ‘Grapes of Wrath.’”
“Yes, there are some barely getting by…The vast majority of us aren’t drowning in the downturn although it is safe to say that can change with the loss of the job since more than a few of us are the proverbial check or two away from the edge. Yet when stores are packed and non-necessities – sorry but big screen TVs, iPods, cell phones that can run nuclear power plants and download MTV, and video games aren’t essential to survival – are flying off the shelves this isn’t a repeat of The Great Depression.”
“It is unfortunate what has happened with housing where many buyers either let greed, bit off more than they should of, hoped against hope that the bubble would keep going , didn’t fully understand what they were doing, or in the case of those hit by unemployment are losing their homes.”
“It is not the end of the world and they aren’t the first Americans forced to start over because of an economic meltdown.”
“Edna Towle – my maternal grandmother – was forced to sell her 1,000-acre ranch at the height of the Great Depression in 1936 in order to meet bank loans. She had been abandoned by her husband to run the ranch in the foothills of Nevada County with seven kids to raise in 1929. With three kids still at home at age 55, she moved to town and started cleaning houses, working the night shift at the cannery, and took on odd jobs. She bought a small lot and built her own home by her own hand going along as she could.”
“The house is more than modest by today’s standard. It has three bedrooms, one bathroom, and less than 800 square feet. She never complained, never looked back, and never cursed her lot in life. She had kids yet to raise and had to support herself. She did what she had to do.”
“When she died at age 85, all of the possessions she had were essentially in her modest home as she didn’t even have a car. But she raised seven kids essentially on her own, refused to wallow in self-pity, demanded of herself and others that they do the best they could, and paid all of her debts. And she also made sure to help those who were less fortunate however she could.”
“She also refused to judge herself against others who had more material things. It is something that those who have to start over today should keep in mind especially if they are not among those who are walking away from their home simply because it is worth less today than it was when they bought it. There is great dignity in doing the right thing. There is no shame in failing if you tried to do the right thing but couldn’t overcome circumstances. You can fail and you can get back up again.”
“Success in life isn’t about big screen TVs, big houses, touring Europe, or the latest gadgets. It is about how you deal with trials and tribulations.”
