It’s A Bubble Here In California
The Santa Cruz Sentinel reports from California. “After sustaining heavy losses in the economic downturn, CalPERS is recovering. But to some, the asset tumble gave rise to a growing realization that investment returns alone can’t sustain the higher level of benefits. Even a blip in the Internet-driven economy in the early part of the decade didn’t slow things down. Soon, the housing market caught fire. With property and sales taxes on the upswing, pension portfolios looked secure. Then came the housing crash, the stock market dive, the recession. CalPERS’ fortunes plunged.”
“Local governments that followed CalPERS’ lead, sweetening retirement deals in the past decade and counting on big payouts from Wall Street to cover the cost, are faced with huge pension liabilities. ‘In retrospect, it seems clear now we shouldn’t have given the benefits,’ said Carlos Palacios, city manager in Watsonville. ‘On the other hand, this is a recession like no one has seen before.’”
The San Francisco Examiner. “The percentage of ‘underwater’ homes worth less than they are mortgaged for rose sharply in San Mateo County in the first quarter of this year, more than in any other Bay Area county. ‘The foreclosures are absolute disasters,’ said Daly City Councilman David Canepa. Canepa said that foreclosures and negative equity impact the city’s source revenue of property tax, as well as the community as a whole. Though a renter himself, Canepa can’t escape the anguish of people losing their homes as he receives about two calls a month from people asking for help.”
“‘It’s heartbreaking, these people are pouring their hearts out. We all got steamrolled by this economy,’ he said.”
“The trend toward increased negative equity was not limited to San Mateo County. In San Francisco, the percentage of underwater homes rose from 8.4 percent this time last year to 21.8 percent, while Bay Area-wide it increased to 25.7 percent from last year’s 22.4 percent mark.”
The Press Democrat. “It could take years before all the Sonoma County homeowners with negative equity in their homes can sell their properties without a short sale, according to local agents. Mike Kelly, an agent with Keller Williams, said underwater owners represent the real ’shadow inventory,’ a term associated with homes on track to be lost in foreclosure. ‘The shadow inventory is people who want to sell but can’t sell because they’re frozen into the houses,’ Kelly said.”
“About 31,000 county homeowners owed more than their homes were worth at the end of last year, according to CoreLogic. That represents 29 percent of all county homeowners with mortgages. Belinda Andrews, a broker associate in Santa Rosa, said it took three years and 10 contracts written with different buyers before a bank agreed to a short sale for a house on College Park Circle in Santa Rosa. Her client, Consuela Zavala, had bought the house for $479,000 in 2006.”
“‘We put it on the market because my husband lost a job,’ Zavala said. ‘We didn’t have the money to pay for it anymore.’”
“The bank turned down sale offers even when the home’s value kept falling and after the couple had stopped paying the mortgage of $3,600 a month, Zavala said. Last fall the bank agreed to sell the house for $219,000. Short-sale clients typically have stopped paying their mortgage even when they’re still living in the homes.”
“‘I hardly have anyone come to me who hasn’t depleted their savings and run up their credit cards trying to save their homes,’ said Andrews.”
The Daily Breeze. “The Vue, one of several condominium projects constructed in downtown San Pedro over the past several years, has been sold to a San Francisco-based company for $80.1 million. Last summer, the development landed in receivership, a form of corporate bankruptcy, and this month was sold in foreclosure.”
“The development came online right was the housing market began to crash. The Vue was one of several high-profile new condominium developments planned and launched in the early 2000s as a way to bring residents - and thereby more businesses - to downtown San Pedro.”
“While some units in those projects were sold, most are now rentals. The most recent development to come online, the LaSalle Lofts at 255 W. Seventh St., was hoping tax breaks and price cuts for first-time buyers would be enough to sell the 26 units when it opened in May 2009. All 26 remain vacant.”
The Press Enterprise. “Foreclosure filings were filed on 10,066 properties in the Riverside-San Bernardino-Ontario metro area in April, according to RealtyTrac. That’s on par with 10,033 homes in March. Foreclosure activity fell 7 percent statewide from March and 20 percent year-over-year. Mike Novak-Smith, a Moreno Valley-based real estate broker who specializes in selling bank-owned homes, said banks are taking extra care to ensure they are following rules and regulations. The industry’s capacity for processing foreclosures also may be maxed out.”
“‘The foreclosures, the defaults are out there, they’re just not getting processed,’ he said.”
The Desert Sun. “Prospective buyers looking for homes in the million-dollar market have about 700 to choose from across the Coachella Valley. Some 157 homes priced in that range have sold in the past six months, and another 74 are in escrow, said Jim Franklin, president of the Palm Springs Regional Association of Realtors.”
“High-end shoppers who need to borrow have new opportunities as banks make available more jumbo mortgages, said Louise Hampton, broker associate who heads a team at Prudential California Realty. It’s often more difficult to qualify for jumbo loans, however, because banks typically require at least a 20 percent down-payment, and some borrowers don’t have the equity to refinance. Sellers of prestige homes have begun to realize that unless they’re prepared to hold on for a year or two, they must become ‘realistic’ about prices, Hampton said.”
“There has been a steady stream of foreclosures and short sales in the high-end market as well. Some high-end homes have fallen into disrepair after their owners walked away. Landscaping died, appliances were stripped and pools became messes. Buyers have swooped in and purchased more foreclosures for bargain prices, which could be a silver lining in the days ahead, Hampton said.”
“‘What we’re seeing in many of our neighborhoods is buyers have been able to come in and get a really good base price for a property,’ Hampton said.”
From KFSN. “Encouraging news for the city of Merced, it’s no longer at the top of the list for foreclosures. According to RealtyTrac, last year at this time, Merced had the third highest foreclosure rate in the country, behind Las Vegas and Modesto. But now, the top two remain the same, while Merced has dropped to tenth on the list.”
“Merced was hit especially hard by foreclosures when the housing crisis started and all those out of town investors who came as U.C. Merced was being built, bailed. But now realtors say that flood of foreclosure activity seems to be slowing down. It’s still not hard to find foreclosed homes in Merced. Local realtors say it’s not as bad as when the housing crisis started.”
“Sheila Splitt said, ‘We had a huge amount at one time, that it was just a floodgate. So I think most of them we’ve gone through.’ Splitt says those that are on the market are also selling more quickly because of increasing demand and prices she believes are at rock bottom. ‘A house that I had that I listed for $26,000, it had sold in 2006 for $200,000.’”
“RealtyTrac attributes a 40 month low in foreclosure activity nationwide to massive delays in processing foreclosures, not a true housing recovery. Splitt said, ‘The banks were not releasing their foreclosures. So if they’re not releasing them or recording them, then obviously that number would go down. But I think you’ll see it go back up.’”
The Business Journal. “The filing for bankruptcy last month of La Dante Rose Homes Inc. of Visalia underscores the continuing challenges in the central San Joaquin Valley’s housing market, especially new construction in an era of deflated values and still-high unemployment. Mike Miller, president of the Central Valley division of builder Lennar Homes, said his firm certainly has seen a slowdown since the housing bubble burst.”
“‘In ’06 we were doing a thousand, twelve-hundred homes. That was just from Tulare to Fresno. Now we’re pushing about four-fifty from Bakersfield to Fresno,’ he said.”
“He said the new home market has evolved from a trend in 2,300-square-foot, big-box, two story homes built for move-up and investment buyers to pockets of 1,300- to 2,200-square-foot, single story starter homes. Fueling that is competition from existing homes, including heavy pressure from back-to-bank properties.”
“‘There is a supply issue,’ Miller said, ‘not necessarily new homes but just the quantity of the foreclosures that are still occurring out there. We have to compete with the resale market.’”
“Some builders that have kept afloat have taken on developments abandoned by defunct players. Lennar bought two tracts of finished lots from Porterville-based Ennis Homes, which went bankrupt in 2009 and emerged from the status without, apparently, returning to business. Lennar plans to demolish 90% of the partly built homes that stand on Ennis’ 80 sites in Visalia and 81 in Tulare before building its own models in their place, Miller said, to ‘kind of clean up the blight.’”
The Fresno Bee. “The landmark Fresno Pacific Towers building on the Fulton Mall was reclaimed by a bank — again — in a foreclosure auction. The building had been owned since 1993 by the partnership that included San Luis Obispo developer John King, his wife, Carole, and King’s sister Saundra, who also managed the building. For years, King promoted plans to convert six of the upper floors into luxury residential lofts for sale. But only six lofts over two floors have been completed, and none were ever sold. Only three are leased.”
“Saundra King held back tears after an auctioneer gaveled the sale to a close. ‘It’s fun to have your visions,’ King said. ‘I’m not angry or bitter.’”
The Modesto Bee. “A decade ago, about 62 percent of Stanislaus County residents owned the homes they lived in. But by last year, owner-occupied housing had fallen to just 60 percent. That’s even lower than the ownership rate was in 1990. This all comes after the real estate bubble burst more than five years ago in the Northern San Joaquin Valley, sending prices tumbling and triggering a tidal wave of foreclosures.”
“In some low-income rural neighborhoods, few folks own their homes. Only 21 percent of housing is owner-occupied in the western Stanislaus farming community of Westley. In south Modesto’s airport neighborhood, just 34 percent of homes are owned by the people who live in them. ‘People are moving out of state or people are doubling up,’ said Richard Green, director of the Lusk Center for Real Estate at the University of Southern California.”
“When Maria Rodriguez’s sister lost her house to foreclosure two years ago, the sisters agreed their families would double up in a rental. It hasn’t been easy. Six people are now crammed into a small, two-bedroom home in this rural west-side city. Rodriguez, her husband and their 5-year-old son sleep in one bedroom.”
“Her sister and brother-in-law sleep in the other. Her 18-year-old nephew stays in the living room. ‘This is all we can really afford right now,’ Rodriguez said in Spanish. ‘It’s really compact for me. But it’s worse for my sister. She basically had to move a whole home into one room.’”
“Newly released 2010 Census figures show that tough times have left more Californians renting, more staying with extended family and more living under the same roof than 10 years ago. Rodriguez, who lived with another sister in Los Angeles before moving to Mendota, said she’s used to living with family — although not in such close quarters as now. ‘None of us like the situation, but we have to deal with it,’ she said.”
The Sacramento Bee. “About 44 percent of the 80,471 Californians who moved to Texas between 2006 and 2008 – when the recession took hold – are white, said Texas state demographer Lloyd Potter. Meanwhile, only 43,405 Texans, half of them white, moved to the California, Potter said. Many of the California escapees – 295,000 – left between 2003 and 2005, as housing prices ballooned. ‘During the run-up of housing prices, many cashed out or left because they were priced out of the market,’ said demographer Hans Johnson of the Public Policy Institute of California.”
“Dan Howle is among those who uprooted. He said his decision to relocate from Sacramento to Austin, Texas, last December was all about the economics. Howle said he regularly meets other wealthy white Californians who are bailing out. ‘I still own my house in Arden Arcade, but I haven’t been able to sell it,’ said Howle, adding that the tens of thousands he saves each year in state income tax made the move worth it.”
The Tribune. “San Luis Obispo County’s commercial real estate market isn’t in full recovery mode yet, but it is showing some signs of stabilizing as the economy eases out of recession. While the situation in San Luis Obispo may be improving, the South County market remains soft, said Bruce Freeberg, an agent for Patterson Realty.”
“Freeberg does not keep statistics on vacancy rates; however, he said he believes there are going to be more vacancies and noted that commercial real estate continues to lag residential. ‘It’s mostly due to the economy,’ he said. Freeberg said many owners are putting their properties up for sale or letting them ‘go back to the bank. ‘Every situation will be unique, and some are doing fine, but I think you’re going to see more and more in distress.’”
“The weakest part of the commercial market, he agreed, will likely be offices. ‘Some buildings that had been in families for years are owned free and clear, and even if there are vacancies, they can withstand it,’ he said. ‘It’s the new ones with financing that won’t be able to hold on.’”
“Preston Thomas, of Rossetti Co. in San Luis Obispo, said shopping centers, such as Irish Hills Plaza and Madonna Plaza, are doing well, and the retail market downtown is strong, with several new restaurants. The weak spots are office spaces, particularly those below 1,000 square feet, which cater to smaller ‘mom and pop’ businesses, he said. The tough lending environment has also proved challenging for some businesses wanting to expand.”
“Overall, Thomas said, there has been a marked improvement in the market. ‘The city of SLO … it’s a bubble here,’ he said.”
