The Housing Bubble

The Sacramento Bee reports from California. “As California voters go to the polls today in a low-turnout primary, those who bother to show up aren’t likely to be happy. With a teetering economy and an unpopular war, only 17 percent of voters in a new state Field Poll believe the country is headed in the right direction, the most dour view in 16 years.”

“Vicki Cabrera, of Sacramento, who plans to vote, directly feels the effects of a lagging economy. She lost her job as an administrative assistant for a real estate firm due to the weak Sacramento housing market.”

“‘I’ve never in my life gone without a job. Never,’ said Cabrera, who had to let go three of her family’s five prized Sacramento Kings season tickets and is contemplating selling her sports memorabilia collection.”

The Associated Press. “Robert Lindsey was not surprised by new data last week that showed new home sales have fallen more than 40 percent from their peak almost three years ago. He can tell from his company’s bank account.”

“‘We’re literally losing money every month,’ said Lindsey, general manager of Signature Drywall Inc., in Sacramento, which installs drywall in new homes and apartments in the Sacramento and San Francisco areas.”

‘In 2005, the firm raked in some $30 million in sales. Last year, sales were less than half that, and this year Lindsey hopes he can make $8 million. ‘It’s kind of like bleeding to death,’ he said.”

“In California, subcontractors have laid off, on average, up to 80 percent of their staff, according to the California Professional Association of Specialty Contractors in Sacramento.”

“Kelly Bice had been working as vice president of construction for San Diego real estate developer Keystone Communities Inc. for more than seven years before he lost his job in February when the company filed for bankruptcy. Bice, who lives in Murrieta, east of Los Angeles, was pulling in around $136,000 a year with bonuses. Now he’s scraping by on $500 a week as a consultant on a home renovation project.”

“‘I’m living on my savings,’ he said. ‘That’s just buying the groceries.’”

The Salinas Californian. “The rising cost of gas and groceries combined with fallout from home foreclosures means increased business for thrift stores in Salinas and around the nation, say those who track the industry.”

“More people than ever are shopping for furniture at the Salvation Army on 326 N. Main St., employee Stella Ponce said. ‘A lot of people are coming here because they have lost their homes,’ Ponce said. ‘They need smaller furniture to fit apartments they move into.’”

The Gilroy Dispatch. “Property foreclosures do not usually conjure up images of mosquito clouds carrying the West Nile virus, but for a handful of Gilroyans who live near abandoned homes, the sour housing market implies more than just tough economic times.”

“Unattended pools can become breeding grounds for mosquitoes and watering holes for crows and other birds susceptible to the West Nile virus.”

“‘My wife and I stay indoors now when sunset comes,’ Weiler said outside his home on London Place.”

“‘The last thing people are worried about when their house is foreclosed is the pool,’ said John Ballard, a vector control technician with the County of Santa Clara Department of Environmental Health. ‘They’re more worried about where they’re going to live next than draining their pool.’”

The LA Times. “It wasn’t long ago that Andy Krotik was selling houses to out-of-town investors who would sometimes buy two at a time. Now, Krotik spends his days warily entering abandoned houses, checking for angry holdouts or startled squatters.”

“Few places in California flew as high in the real estate boom and crashed as hard as Merced. Three years ago, home values were rising at 30% a year or better, making it one of the hottest markets in the state. Now it has one of California’s highest foreclosure rates.”

“Merced officials say they’ll need to cut spending by 5%, forcing them to leave 20 open positions vacant. ‘The whole foreclosure problem and the economy is our major concern now,’ city spokesman Mike Conway said. ‘Some people are torn between spending their money driving to work in Silicon Valley or on the house payment.’”

“Faced with that choice, he said, the job will come first. ‘If they don’t have the job, they won’t be able to make the house payment anyway.’”

The Bakersfield Californian. “Kern County supervisors approved a $1,000 fine on individuals caught participating in an illegal party on private property. The nuisance fine was triggered by a rash of teen-powered parties in homes left vacant or abandoned by Kern County’s high foreclosure rates.”

“The penalty ‘applies to any party held on any property without the permission of the owner,’ said County Counsel Bernard Barmann.”

The Desert Sun. “Fern Rudd is known to many Palm Spring High School students as the ‘work permit lady’ and though she’s issued more than 400 work permits this school year, Rudd has noticed an unprecedented trend in the Coachella Valley.”

“‘I’ve done this for 10 years and, usually by the end of the school year, we see a lot of employers asking about our graduates - but for the first time, I haven’t had any calls yet,’ she said. ‘Something’s changed.’”

“Jose ‘Junior’ Rodriguez, 17, of Palm Springs let out a sigh of relief when he landed his job as a cashier at Manhattan in the Desert last month - he had been searching since October.”

“‘Many of them said they didn’t have the money or the hours,’ Junior said of his past attempts. ‘I think it was because of construction stalls, the slump in the real estate market and everything else going on in the world. It really slowed things down.’”

“In 1999, Gary and Debra Magsam bought a house in the Coachella Valley town of Bermuda Dunes. They paid $140,000 for that house and sold it the next year for $170,000. The Magsams scored again with their next home, which they bought in La Quinta for $215,000 in 2000. Four years later they sold it for $452,000, more than twice what they paid.”

“Proceeds from that sale enabled them to buy their current house in late 2004 for $685,000. They took out a mortgage for $537,000. A year later, with the house worth an estimated $865,000, they took out a second mortgage for $100,000.”

“Now it has…a foreclosure notice. Barring a last-minute reprieve, the Magsams’ house will be auctioned June 27. They’ve begun to pack. ‘We’ve accepted the fact that it’s going to have to take place,’ Gary said of their impending departure. ‘For a long time we felt, ‘Why did this have to happen to us?’”

“They say they simply got caught up in the excitement of the real estate boom and the bad judgment that went with it — on the part of lenders and borrowers alike. ‘The banks loaned money to all kinds of people they shouldn’t have, including us,’ Gary said.”

The Redlands Daily Facts. “Tonight, the City Council will consider an ordinance that would require lenders to maintain properties that are vacant because of foreclosures or owners’ leaving the homes. Through the end of May, there were about 500 home foreclosures in Rialto in 2008. In all of 2007, there were 480.”

“Also at the meeting, members of the council will decide whether to purchase a piece of downtown property for $450,000. ‘(The owner) finally relented, realized that Southern California real estate isn’t as high and mighty as it used to be,’ said Robb Steel, Rialto’s economic development director.”

The Pasadena Star News. “Despite national housing woes that have slowed sales across the country, high-end residential properties in Pasadena continue to sell - often with multiple offers greater than the asking price, local real estate agents say.”

“‘Pasadena is very healthy, at least on the upper end,’ said Rosey Bell, a Realtor with Coldwell Banker. ‘Compared with the rest of California, we are A-OK. I don’t want to call it bulletproof, but it kind of has been.’”

“Homes listed under $1 million - many more of which are on the market - are taking longer to sell, said Gretchen Seager, an agent in Pasadena.”

The Weho News. “In a report to be formally presented to West Hollywood’s City Council tonight, the Rent Stabilization Department reports that the rate of foreclosures in WeHo stands at half that of Los Angeles County’s.”

“Eric Scott of WeHo’s Prudential California Realty told WeHoNews that now could be the best time in decades to buy property. ‘If you can get financing or can come up with the down payment,’ Mr. Scott said, ‘it’s your time to buy; prices will only go up from here as financing loosens up.’”

“Supporting Mr. Scott’s urgings, the staff report says that homes in the state now sell for approximately the same price as they did April 2004, with the median price 20% below last year’s market peak of $505,000.”

“Furthermore, they say citing the LA Times, county-wide median asking prices have declined while the county’s inventory of unsold houses increased this year. ‘Of the 32 properties in foreclosure on the study date of April 8, 2008, 5 were single family dwellings and 27 were condominiums,’ the report requested by Council in January says.”

“‘Of the 32 properties in foreclosure, 31 owner addresses were the same as the property address, suggesting that nearly all of homes or condominiums in foreclosure are owner-occupied.’”

“The report noted that most of the properties in ‘pre-foreclosure’ during the study period ‘progress[ed] into further stages of bank-owned or auction status.’”

From LA Observed. “The dream of home ownership has long been part of life on 92nd Street and similar South Los Angeles working class neighborhoods. But making the dream come true has never been easy. The dream was the topic Saturday May 30 when ACORN, the community activist organization, held a press conference-demonstration in front of a small house at 755 East 92nd Street, a home headed for foreclosure.”

“Millicent (Mama) Hill, who was an English teacher at Crenshaw High School before she retired in 2000…set up a program in her home to help young women and men avoid the gang life and crime. ACORN volunteers, most of them older men and women, gathered in Mama Hill’s front yard, all of them wearing the organization’s bright red t-shirts.”

“Mama Hill has been operating the program on her pension, small donations and with the help of friends and supporters…in a neighborhood that is pretty thick with gang action despite its peaceful appearance on a Saturday.”

“With expenses exceeding income, and house prices rising fast, Hill refinanced her house. ‘I needed a loan quickly,’ she said.”

“She was promised one at 7.5 percent interest but before she signed the final papers, she was told the interest would be 10 percent ‘but they promised it could be renegotiated.’”

“When she obtained the loan, the house was appraised at $405,000 but has since dropped far below that. She fell behind in her payments, and the mortgage holder is now foreclosing.”

“One of her supporters, Cedric R. Brown, president of Youth Incentive Programs Inc said Hill got the loan at a time when housing prices were exploding, even in this modest neighborhood, and mortgage brokers flooded the area with tempting refinance offers. ‘The predatory lenders took advantage,’ he said.”

The Voice of San Diego. “I left off Thursday telling you I was trying to find out how much those condos up for auction had sold for, the ones that were once hotel suites in National City.”

“I heard Friday from Manoj Chawla, a regional manager at Pacifica Companies, the project’s developer. He said the auction should not be construed as a sign of insolvency at the company. Rather, hiring REDC, the auction company, was a marketing decision for a project that was not selling well, he said.”

“‘We have to do what the market says,’ he said. ‘As you know, housing is not a pretty picture.’”

“He said before the auction on May 17, 50 units had been sold. Add the 32 sold at auction — pending sales, not closed escrows yet — and the 172-unit building is about half sold. ‘We are not enjoying the price reductions — it’s unfortunate,’ he said, ‘but it’s better to have an occupied building than an empty one.’”

“Chawla said the units at auction sold for prices between $145,000 and $325,000. The units being auctioned in the building were once listed between $218,000 and $522,400.”

“Friday, Chawla told me if Pacifica would’ve known how tough the market would be, the project wouldn’t have happened. ‘We would have never converted them,’ he said. ‘That’s the reality. … It’s not a pretty picture. Housing is just tough anymore.’”

“I heard back from Mayor Ron Morrison in National City today with his reaction to the eye-catching banner hanging from BayView Tower in that city, advertising condos for auction bids starting from $59,000.”

“Morrison didn’t mince words. The auction’s over and the city has demanded the company take down the advertisements.”

“‘They’re causing us nothing but heartache,’ he said, ’cause there are people who are saying, ‘Gee, you can’t give condos away in National City.’ Those stupid signs.’”

“Morrison pointed out…the ’starting bid’ advertised is usually a lot lower than what the company will actually let the unit sell for. There’s a hidden reserve price that has to be met before the sale is made.”

“And in the meantime, the sign still hanging there makes it seem like condo prices in the city are scraping new lows, he said.”

“‘We’re demanding they take those signs down,’ he said. ‘It’s nothing but a marketing ploy that has nothing to do with the market, by a company that does this around the United States.’”