It’s Never Going Back To Where We Were
The Press Enterprise reports from California. “First-time buyers with limited funds aren’t the only ones looking for deals in the depressed Inland Southern California real estate market. People confident of their incomes and flush with cash are seizing the opportunity to buy vacation homes in the desert and mountain resorts that they hope will become a profitable investment or a dream retirement. Sharon and Richard Burns, of Juneau, Alaska, were vacationing last week in a three-bedroom house they bought in August in Palm Springs. Sharon Burns said…’It seemed like a good time to take advantage of the real estate market. I think there is an opportunity to invest and make a capital gain down the track when the market recovers.’”
“Vacation home buyers in the desert also demand bargains, said Chris Gilfillen, a real estate agent who specializes in selling houses priced at $1 million and more in La Quinta and Rancho Mirage. ‘They feel totally empowered and feel if someone isn’t basically punished they didn’t cut a good enough deal,’ he said.”
“In some cases, baby boomers in their 60s with shrunken assets are selling mountain vacation homes where they had hoped to retire. ‘We have had a lot of heartbreaking calls,’ said Bob Angilella, a leading Re/Max agent in Big Bear.”
The Sacramento Bee. “Investors paying cash for houses accounted for one in four home sales during the past year in Sacramento County and West Sacramento, becoming dominating players in a distressed market and squeezing out scores of first-time buyers, 2009 statistics now show. Many of these cash buyers are from the Bay Area. Carey Covey, a Cook Realty agent in Sacramento, said he recently sold a bank repo to a Sunnyvale investor by phone. He paid $55,000 – in cash.”
“‘I never met him. He never saw the property,’ Covey said.”
“‘I have lists and lists and lists of houses I have looked at and put offers on. Everything has been investors, investors, investors,’ said Kimii Carter, a city employee in West Sacramento. Carter said she made offers on 30 houses south of downtown Sacramento, including a $145,000 bid on a $114,000 listing. She’s in escrow on her first house, but it’s smaller than she hoped and not exactly what she wanted.”
“‘I felt I had to take it. It’s my only option,’ she said.”
“Rob Wassmer hasn’t been affected so much. Fourteen years ago he bought an east Sacramento house – in the Fab 40s – cheaply at the very bottom of the last housing bust. His older neighborhood has largely escaped the brunt of 52,000 foreclosures across the Sacramento region since 2007. But Wassmer knows the financial whipping people have taken in Lincoln, Elk Grove, North Highlands and Yuba City. Being an academic, he knew there had to be a number for the carnage.”
“Wassmer analyzed $9 billion in sales prices from 36,822 home sales in Sacramento, Yolo, Yuba, Sutter, Placer and El Dorado counties between January 2008 and June 2009. Almost half were homes sold by banks. The other half were sold by regular folks. He concluded that the foreclosed homes cost this one region of America $2.7 billion in price cuts and lost equity over just 18 months.”
“Said Wassmer, ‘This is a call for regulation.’”
The Colusa Sun Herald. “Colusa County officials are looking at tax-defaulted property as an opportunity to add houses to their holdings. Among the properties going up for sale is 40 acres in Arbuckle, owned by Contractors Yellow Pages, a California corporation, a Century Ranch parcel, owned by a Bay Area couple, and several homes and lots in Williams, Arbuckle and Colusa.”
“Unless the taxes are redeemed, the county could invest in a home on 10 acres in Arbuckle, valued at $299,752, for only $19,663. A $75,000 Colusa home in the 1300 block of Clay Street can be picked up by the county for as little as $6,441, according to the approval of sale authorized by the Colusa County Board of Supervisors on Tuesday.”
“Colusa County Treasurer Dan Charter said the county would have to come up with a funding source to purchase the property, and would not be allowed to use investment income. He said he would also, for the sake of public image, prefer the county invest in property not inhabited by its owners.”
“‘I would hate to see the press show up to take pictures as we evict people from their homes,’ Charter said.”
The Record.net. “A second round of tax credits may become available to 20,000 California home buyers before summer arrives. State Sen. Roy Ashburn, R-Bakersfield, has introduced legislation that would provide $200 million worth of $10,000 tax credits to buyers of both new and resale homes. The bill mirrors a proposal made by Gov. Arnold Schwarzenegger in his January State of the State address.”
“Building industry professionals are hopeful the California Legislature will support Ashburn’s measure. ‘It’s great for the industry and for the total economy in San Joaquin County,’ said John Beckman, president of the Building Industry Association of the Delta. ‘When housing was booming, the entire economy was booming.’”
The Merced Sun Star. “For people like Brad Miller, it’s the sound of hope. Four years ago, Miller, owner of Atwater’s B&B Plumbing, employed 30 people mainly doing plumbing work on newly constructed homes. Today, B&B employs three people who largely do repairs. The company, however, just landed a contract to plumb four homes, part of a group of models which could lead to the construction of another 105 new houses.”
“The project is a ray of light in an otherwise very dark market. Unemployment in Atwater hovers at 20 percent with few signs of turning around. City Manager Greg Wellman said any job-creating event is a good one, but it remains to be seen if the Claremont project is an isolated spark or the beginning of a wildfire. What makes the project work in a down market is Sterling was able to pick up finished, ready-to-build lots at a bargain price, he said. The streets are done, curbs and sidewalks are in. All the lots need are houses.”
“‘Because the amount of these deals is limited, I am concerned this could be a temporary phenomenon. But anything that adds jobs and gets people back to work is what we are trying to focus on,’ Wellman said.”
“Charlie Woods, Atwater’s community development director, questions how well Sterling’s project might sell, pointing out that it will compete with a substantial inventory of discounted homes. He notes, ‘Whatever the housing market will be will be a much closer reflection of the household incomes and the employment in this area.’”
Palo Alto Online. “Russ Hancock doesn’t make predictions. But as CEO of Joint Venture Silicon Valley, Hancock doesn’t like what this year’s ‘Index of Silicon Valley’ portends for the valley’s potential recovery from the current economic hole. Key findings indicate the valley may not be able to regain its worldwide reputation as ‘the epicenter of innovation,’ Hancock said in an interview with the Weekly.”
“He said the Index shows disturbing signs of weakness in core areas that have made Silicon Valley a byword in technological innovation for decades. ‘Two years ago we said, ‘There’s bad weather out there, but we may be OK,’ Hancock said of past Index findings. ‘Last year we said, ‘No, it’s hit.’ The storm winds hit and had gale force.’”
“‘Something is going on. Venture capital hasn’t made money in about 10 years,’ industry-wide, he said.”
The Press Democrat. “Sonoma County is a golfer’s paradise, but the recession, an oversupply of golf courses and the sport’s fading popularity are enough to give golf course owners a stroke. Pricey private clubs that once had waiting lists now have members lining up to exit. And nearly all courses are either slashing fees or running aggressive promotions.”
“‘I won’t sugarcoat it. It’s very difficult,’ said Tom Isaak, president of Petaluma-based Course Co., Inc., which operates 15 courses in California and Washington. One of those is Foxtail Golf Club, the 36-hole municipal course in Rohnert Park. Since taking over the course in 2001, the company has spent $3.1 million on upgrades to the course. In addition, it has suffered operating losses of about $2.8 million, or about $300,000 per year, Isaak said.”
“The company bet it could turn around a course that had fallen into such disrepair that players referred to it as ‘Mountain Shambles’ instead of its former name, Mountain Shadows.”
“Joe Ross of Sonoma joined Adobe Creek late last year, lured by the $1,200 all-you-can-golf annual fee, down from $1,600. His golfing buddy last week, Sonoma remodeling contractor Al Vogt, said the soft economy and the deals are allowing them more time to play golf than ever. ‘We’re playing more because there’s no work,’ Vogt said.”
“Vic Pectol, a retired accountant from Novato, said the 40 percent swoon his 401(k) took last year made him wonder if he’d be able to afford to continue playing golf as much as he’d like. As the market has recovered, those fears have subsided, and Pectol says he still manages to play three or four times a week. One of his golfing buddies hasn’t been so lucky. His son is a Petaluma mortgage broker who lost his job in the real estate implosion. ‘He’s cut back quite a bit,’ Pectol said.”
The Glendale News Press. “Flower shops saw a steep drop in business for Valentine’s Day, which is typically the biggest sales day of the year for the sellers. The decline in activity at the start of 2010 was a letdown for store managers, who hoped for a rebound from a dismal sales year in 2009, which was the worst in memory, they said. ‘It’s worse than last year,’ said Jason Lee, a manager at Conroy’s Flowers on Glendale Avenue.”
“Business was also slow at Little Bee Flowers on Glendale Avenue, which received few takers for its 15% discount on pre-orders, said Sarkis Markosyan, a manager at the store. Although the store had its worst sales year in 2009, it secured 39 pre-orders that year, Markosyan said. This year just six customers ordered in advance of the holiday, he said.”
“‘The economy is so messed up right now,’ Markosyan said. ‘People don’t have a lot of money.’”
The Lodi News Sentinel. “America is on the road to recovery but is only beginning to rebound from a recession unlike any since the end of World War II, a former chief economist for U.S. Bancorp told more than 200 people gathered at the Brookside Country Club. John W. Mitchell said the nation still has fundamental economic issues, such as a looming Social Security crisis that must be addressed in the coming years. He said one of the biggest keys to recovery is in the nation weaning itself of federal stimulus.”
“‘If something can’t continue forever, it won’t,’ Mitchell said.”
“He also expressed concern with the strength of the commercial real estate market, concerns that were shared by one local business spokesperson. ‘Mitchell accurately indicated the next shoe that might drop is in the commercial real estate market,’ said Pat Patrick, CEO of the Lodi Chamber of Commerce. ‘We’re holding our breath on that one.’”
“Mitchell said while California’s unemployment rate is worse than the national average of 9.7 percent, the recession has caused significant job losses in every state. ‘I found it very interesting that all 50 states lost jobs,’ said Phil Marcus, a AAA Insurance agent. ‘Here in California we are kind of isolated and we tend to think it’s only us, but it’s all 50 states.’”
“Marcus said his biggest takeaway from the event was the realistic portrayal of the nation’s economy. ‘t’s going to recover, but it’s never (going to) go back to where we were,’ he said.”
The Del Mar Times. “Real estate professionals in areas in and around Del Mar are looking for markets to stabilize and even improve slightly in 2010, but such factors as rising interest rates and a potential wave of new foreclosures could put a damper on things. Bob Angello, a broker in Del Mar, said pundits are predicting that rates could climb above 6 percent by March.”
“‘The truth is, anyone looking to buy, move up or refinance must do it before spring. Interest rates are at an all-time low,’ he said. ‘Once the government stops purchasing mortgage-backed securities, which is the reason (rates) are low … then the rates will rise. History tells us once they start to rise, they will do so quickly and dramatically.’”
“‘As long as homeowner distress does not rebound and recent federal government programs designed to avert foreclosure have some success, a more conventional recovery in the residential sector should be underway this year,’ said Mark Schniepp, author of the UCLA Anderson Forecast’s San Diego report.”
“Factors such as buyer demand - and available inventory - can and do vary from community to community, and by the level of home prices. For example, in communities where homes are available for $500,000 or less, inventory is low and prices could increase in 2010, according to local real estate professionals. However, inventory remains high and demand sluggish in some higher-end communities where homes sell for $2 million or above.”
“‘Overall prices have rolled back to the 2004 to 2005 range, which seems to be a floor. Prices have not dropped any lower nor are they predicted to,’ said Shawn Hethcock, of Willis Allen’s Shawn Hethcock and Shawn Rodger team in Del Mar.”
“Among the factors that could put pressure on higher-end markets is the relative difficulty of obtaining so-called jumbo loans, due to tighter lending requirements established by banks. Amy Green, co-owner of Coastal Premier Properties, based in Carmel Valley, said the prospect of rising interest rates, while potentially dealing a blow to the housing market, could stimulate demand in the short-term.”
“‘The threat of interest rates going up may help put a little drive into them, motivate (buyers),’ Green said. ‘My advice is if they see something and the numbers work, it’s your home, so go for it.’”
“Those seeking to buy properties and ‘flip’ them for a quick profit face the biggest risk, Green said. ‘Some will do well, but if there’s a big release of inventory, they could get caught.’”
“Jason Barry, of Barry Estates Inc. in Rancho Santa Fe, said ‘time will tell’ if interest rates do indeed rise in 2010. But for now, Barry said, prices have dropped and demand has increased. A year ago, Barry said, buyers were scared away from the housing market by the fallout from the financial meltdown on Wall Street. Since then, he said, many people in the financial services industry have recouped much of the money they lost and are coming back.”
“‘They’re feeling better about it. Sentiment has changed,’ Barry said.”
The Salem News. “If you haven’t heard of it, Redline is one the worst pieces of filmed entertainment ever made. It may however be recognized by posterity as the most acute documentary of the greed, stupidity, and excess of the first decade of the new millennium. Redline was produced and paid for by Daniel Sadek. The movie is a grandiose fantasy depiction of his own life.”
“Daniel Sadek was a car salesman in Orange County California until 2002, when he founded the company Quick Loan Funding. He proceeded to churn out $4 billion in mortgages, purchased and securitized by Citibank, Bank of America, Bear Stearns, Countrywide Home Loans, Lehman Brothers, Merrill Lynch, and Morgan Stanley.”
“I drag the story of Daniel Sadek and his ill fated attempts at film making out of the dustbin of recent history in order to raise a question. Why would the largest financial institutions in the world pick a car salesman with no education or business experience to be their partner in issuing, securitizing, and selling $4 billion dollars in home mortgages? Did they have any second thoughts about their partnership when, in 2007, Sadek released his spectacle of a film with the tagline ‘Fear Nothing. Risk Everything.’?”
“The answers to these questions are simpler than one might expect. These financial institutions knew that lowering mortgage standards and partnering with petty hustlers would result in a flood of new mortgages, issued to people without the income to pay, and at values far in excess of the real value of the underlying properties. They knew that many of these borrowers would default. They knew that crisis would ensue.”
“These financial institutions also knew that this would be highly profitable for them. What is the extent of potential profit from mortgage and credit card related money creation? According to Fed data, U.S. household debt increased from $6.4 trillion in 1999 to $13.8 trillion in 2007. Most of that debt is in home mortgages. Depending on how many people default, increased profits for financial institutions should be hundreds of billions of dollars or more.”
“The entire process of mortgage issuing for the past decade has been fundamentally fraudulent. This was not an accident. Like everyone else, the leading financial institutions in the country were well aware that people with no incomes could not pay off half-million dollar mortgages. They were well aware that their accomplices like Daniel Sadek were common criminals who would issue plenty of mortgages precisely to those who could not pay.”
