Things Can’t Just Keep Going Up Forever
The Desert Sun reports from California. “Riverside County officials have announced that more than 400,000 property owners will receive notifications in the mail in July that their property’s assessed value will be reduced. About 100,000 of the reduced assessments affected nonresidential properties such as commercial space, timeshares and vacant land. Housing declines and deflation caused the value of the housing roll to drop by $9.2 billion, said Riverside County Assessor-Clerk-Recorder Larry Ward. ‘While significant, the decrease is less severe than in 2009,’ Ward said, an indication the housing market in a county with 945,000 total properties is stabilizing.”
“The California Consumer Price Index, which sets rates used in assessing property values, identified ‘negative inflation’ in the state for the first time in 32 years.”
Inland News Today. “Hundreds of thousands of local homeowners are being notified this month that their property taxes are going down. That comes on the heels of new assessment rolls that fell 4.5% in San Bernardino County, according to Assessor Dennis Draeger. ‘We were predicting a larger decline than what actually happened. Property tax payers will see relief when the bills go out in September.’”
“Property values took double-digit drops in the desert cities of Coachella, Desert Hot Springs, Adelanto and Hesperia.”
The Morgan Hill Times. “Santa Clara County’s assessment roll shows a dramatic decline in property values that reduces public revenue and hits Morgan Hill and Gilroy hardest, but many local homeowners will see a drop in their tax bills next year. The county has not seen such deeply negative growth in property values since the Great Depression, except in 1978 when Proposition 13 capped assessed values’ annual growth statewide - “a political, not economic circumstance,’ said county Tax Assessor Larry Stone. That year, property values decreased by about 21 percent.”
“During the Great Depression, while the county saw three consecutive years of negative growth in assessed values, only one of those years saw a steeper decline than this year. These numbers are ‘only the tip of the iceberg,’ Stone said. The assessor’s office has not yet conducted widespread appraisals of the county’s commercial properties, as it has for 220,000 residential properties in the last two years.”
SIlicon Valley Community Newspapers. “Stone told the Filipino American Real Estate Professional Association this year’s assessment roll is ‘not pretty’ and that for the first time in 15 years the county’s roll is going to be negative. This year he has already reduced the value of 118,000 properties, 99 percent of which are residential, taking off $21.4 billion from the assessment roll.”
“Stone said it is more difficult to quickly assess the value of commercial properties, but he anticipates when all is said and done there will also be big assessment reductions in this sector. He said he is already seeing high vacancy rates and buildings with fewer employees. ‘The bottom line is the roll will be 2.5 percent negative. This is a disaster,’ he said.”
The Mercury News. “Four years ago, Mercy Martinez plunked $100,000 down on her dream condo in San Jose. Today, the single mother is on the brink of losing it all. ‘I don’t want to default but I could see the day coming soon when I won’t be able to make the payments,’ a tearful Martinez testified at a San Jose hearing, attended by Laurie Maggiano, policy director for the Homeownership Preservation Office at the U.S. Treasury Department.”
“The hearing is one of 10 being held across the country focusing on the Home Affordable Modification Program, or HAMP. With home foreclosures continuing at an alarming pace, Santa Clara County community leaders are urging the Treasury official to hold banks accountable, claiming President Barack Obama’s promise to help homeowners is failing.”
“‘I can’t pay these payments. I’m so much under water but I can’t walk away because I put so much money down,’ Martinez said. ‘I just wish the banks would do what they were bailed out to do.’”
The Monterey County Herald. “Recovery from the recession has started and will be slow and steady, an economist told Monterey County real estate agents. Because it is gradual, recovery ‘doesn’t feel as good as a recovery should feel,’ Leslie Appleton-Young, chief economist for the California Association of Realtors, told agents at its annual meeting in Seaside.”
“In May, the average sale price of a Monterey County home was $527,000, up from $283,00 for May 2009. The average jumped because there were more multi-million dollar homes selling and fewer foreclosure sales of low-priced homes in Salinas. Appleton-Young said she has been hearing people say that on a given day, banks will take all their inventory and flood the market. That is not likely to happen, she said. Lenders have a strategy and aren’t going to take on all the foreclosures at once.”
“As home prices have come down in the past few years, Appleton-Young said, ’sellers at the high end are not motivated to reduce prices.’”
The Bakersfield Californian. “Christopher Lance Stovall, formerly a loan officer with the mortgage lending arm of Crisp, Cole & Associates, entered a guilty plea in federal court Thursday as part of a plea deal in a mortgage fraud investigation. Stovall is the fifth person to take a deal in the case. Stovall’s attorney, Carl Faller, said outside the courtroom that his client’s guilty plea ‘obviously indicates a knowledge of the scheme that was being run by Crisp and Cole. One thing that’s important to remember about Chris, though, is that he is one of the few who left the company voluntarily before everything came crashing down. When he got a sense of what was going on, he reached a conclusion on his own that this was not a place he wanted to be.’”
“At least 88 foreclosed properties are linked to former Crisp & Cole agency employees, family members and associates. Authorities said Stovall, who worked for Tower Lending, was part of a mortgage loan operation that knowingly submitted applications for loans that contained false information about borrower income, assets, employment history and the intended use for the property.”
“Loans on two homes Stovall worked on later defaulted, costing lenders nearly $2.5 million.”
The Pasadena Star News. “Pasadena experienced an uptick in the leasing of commercial property during the second quarter, fueled heavily by discounted pricing, subleases and tenants moving up to higher-quality office space, the John Alle Co. reported. ‘The key thing to take from this quarter compared to the last quarter is that landlords are finally becoming more flexible,’ said John Alle, owner and president of the Pasadena-based company.”
“They have to be. Because monthly office rents that once averaged $3.15 to $3.45 per square foot during 2007 and 2008 are now priced at $2.15 to $2.35 per square foot. As a result, landlords are offering a variety of concessions to lure tenants in.”
“The loss of occupied office space, Alle said, has been dramatic. The vacancy rate for office space remained at 18 percent, almost unchanged from the previous quarter. Alle figures low lease rates are going to be around for a while. ‘I think this is the new reality for the next 18 to 24 months,’ he said. ‘The previous rates had gotten too high and weren’t realistic. Things can’t just keep going up forever.’”
The Orange County Register. “The condo that Jesse James, ex-husband of actress Sandra Bullock, is selling in Sunset Beach got its asking price sliced the other day, 3 weeks in to landing on the market. It’s now listed at $1,195,000, down from $1,290,000. The housing market in Sunset Beach has several less expensive condos near the one that James owns. A couple can be spotted as distress sales right off the bat.”
“A 3-bedroom condo not far from his is listed as a short sale at $565,000, though it’s 1,324 square feet compared to James’ 2,634-square foot condo. The nearby condo, in the process of foreclosure, lists 2 living rooms. James’ condo, on the other hand, includes an elevator. Another 3-bedroom condo, a bank-owned property right near James’ place, went from $1,149,800 in May to $924,800 4 days after the James condo was listed. That one is 3,200 square feet and now is in backup offers.”
“And a 3,000-square foot, 3-bedroom condo near those that’s a traditional sale is now in backup offers. It’s listed at $1,098,000. That price dropped nearly $100,000 last month.”
The County Sun. “At 21, Shane Smith has already felt the sting of a bad economy and the reality of little work in the construction industry. Basic knowledge about how to financially survive in this economy - after it turned upside down - would have been nice, he said. ‘It would be cool if they taught more about responsible consuming,’ he said.”
“Squeezed into the Wall Street Reform and Consumer Protection Act is a provision to create an Office of Financial Literacy. The idea is to spur the federal government into helping consumers understand investing and where their money is going. Marty Rodriguez, a Glendora Realtor, has seen financial illiteracy in the home-buying process. ‘I feel (many buyers) are not educated,’ she said. ‘They don’t have a full understanding of a loan product. Sometimes, they just say `yes, yes,’ and they really don’t know.’”
The Acorn. “Despite hopes for a turnaround this year, California’s economy will continue to sputter until the business climate improves and unemployment drops, experts said during a state and federal economic forecast on the campus of CLU in Thousand Oaks. ‘We’re looking at a long stagnant period,’ said Bill Watkins, executive director of the California Lutheran University Center for Economic Research and Forecasting.”
“Many attribute California’s ongoing economic troubles to the mid- 2000s housing bubble, but Watkins said other factors are in play. California has had no sustained job growth since 1990, a problem masked by the bubbles in technology and real estate.”
“The lack of progress also can be attributed to soaring taxes, still-high housing costs, lack of investment in infrastructure and a decline in the quality of public education. But the bigger problem hails from the state’s budget shortage and excessive regulations, Watkins said. ‘Business abhors uncertainty and California has a bunch of uncertainty,’ he said.”
“Watkins said contrary to popular opinion, most economists believe immigration is good for the economy. ‘I know it’s politically incorrect, but there is no problem that we have right now that couldn’t be solved by a few million immigrants,’ he said.”
“An influx of skilled workers and people with capital would create a surge in housing demand and improve overall commerce.”
The Modesto Bee. “Ceres City Manager Brad Kilger watched California economies boom and bust in his 30-year career in local government, giving him the impression the Gold Rush still shapes the Golden State’s approach to budgeting. He was on hand as the aerospace industry fled Southern California in the 1980s and ’90s, as the military shuttered bases critical to community economies in the early ’90s and the dot-com bust showed that even tech could collapse as the millennium turned.”
“This time Kilger still doesn’t see the bottom. Construction pulled the state up after the dot-com bust, and that industry remains stressed by a lack of financing, an overabundance of housing and a job shortage that keeps people from buying homes. ‘No one anticipated there’d by three years of (property tax) reassessments’ cutting revenue to local government. ‘In past recessions I’ve been in, there were no reassessments. It just really hits to the core of what you do,’ he said.”
“This recession exposed another trend that followed Kilger’s career — complicated budget Band-Aids that mask the state’s financial troubles until the next boom takes off. ‘What the state does is push their problems down so they don’t have to deal with them,’ Kilger vented.”
The Appeal Democrat. “Out of misplaced compassion, California’s Housing Finance Agency will spend $420 million to pay down private mortgages for delinquent homeowners. This is a horrific idea, couched as kindhearted and benevolent. This misuse of taxpayers’ funds will reward some people who have mismanaged their own money, and probably only delay many inevitable foreclosures.”
“To qualify for the giveaway that begins in November, borrowers must be in imminent danger of default or delinquent. By announcing the giveaway months in advance, housing authorities perversely tip off homeowners there’s still time for them to fall behind in their payments to qualify for the government to pay off $50,000 of what they owe.”
“If this weren’t bad enough, the giveaway also ‘asks’ private lenders to match what the government spends by forgiving an equal amount on each loan…That kind of government encouragement was one of the reasons for the rash of foreclosures beginning in 2007 when buyers defaulted on mortgages they couldn’t afford, but that the government had encouraged lenders to give them, anyway.”
“The mortgage pay-down will be first-come, first-served. ‘Unfortunately, there will likely be more demand than funding,’ lamented a CalHFA official. No doubt.”
“For those who don’t get in the giveaway line soon enough, the state has a consolation prize. Homeowners can get up to $5,000 in moving expenses if they can’t afford their mortgages. In all, the state will dole out $700 million in tax money from Washington, D.C. There’s another noteworthy point. The government’s administrative costs will be $52 million, 7.5 percent of the total.”
“This scheme isn’t compassionate. It is coercive and destructive. It takes money from taxpayers, most of whom aren’t facing default but probably could use the money to pay their own debts. It rewards people who, for good reasons or bad, haven’t met their personal obligations. And it coerces lenders to forgive what is rightly owed them, which the lenders obviously so far haven’t determined is something they voluntarily choose to do.”
“Worst of all, these schemes send a loud message that government will bail out people who fail to meet their personal responsibilities, which is certain to encourage more bad behavior, while digging an ever-deeper fiscal hole for the government, which will look to taxpayers for its bailout.”
