The Housing Bubble

The Press Democrat. “State law enforcement officials are investigating whether 70 investors, most from Sonoma County, were swindled when they put up $6.4 million for construction loans on Malibu land that may be undevelopable. Many of the same investors also contend they lost $3.5 million on four Sonoma County land deals brokered by the same Santa Rosa lender.”

“They have filed a series of lawsuits against the broker, Charlene Goodrich. ‘We’re out a lot of money,’ said Fred Mann, a Cloverdale retiree and one of the investors.”

“Goodrich has denied the allegations in the lawsuits. ‘They were told in the documents that a portion of it could be used to pay for the land,’ she said. ‘It was a good idea when the market was good. Everyone was making money.’”

The Tribune. “In the latest move by regulators against troubled Paso Robles lender Estate Financial, the state’s Department of Real Estate has accused the company of misrepresentations and ‘dishonest dealing’ when investing in some of its projects.”

“Estate Financial had built a $340 million real estate investment portfolio with more than 3,000 investors-900 of whom live in San Luis Obispo County-over the past 15 years.”

“The firm pooled investors’ money to make high-interest loans to real estate developers.”

The Daily Bulletin. “Due to declining revenue, Ontario officials deleted 25 personnel positions from the city’s 2008-09 operating budget. This downturn is is clearly seen in development-related revenues, which have dropped by 54 percent from the 2007-08 adopted budget.”

“‘The biggest change is revenues are down somewhat, primarily in sales tax and development fees,’ said Greg Devereaux, Ontario’s city manager. ‘In the past few years, we had to worry about keeping pace with the growth.’”

“Rental prices for single-family homes keep climbing in the Inland Empire. But the spike over the last six months wasn’t as huge as some experts anticipated.”

“With a glut of homeowners becoming delinquent on their mortgages in early 2008, some property managers said troubled lenders would foreclose immediately, forcing ex-homeowners to frantically search for rentals to live in, driving up demand and prices for rentals.”

“I thought rates were going to skyrocket,” said Steve Thomas, co-owner of Rancho Cucamonga-based CIG Property Management and Investment. ‘As I get calls from tenants, I think I know why they’re not.’”

“One reason: Some of those delinquent homeowners are moving into apartments while renting out their homes, thus pouring rentals into the market.”

“‘It’s putting properties that would not necessarily be on the market, on the market,’ Thomas said.”

“But he doesn’t expect it to last long. Many of those delinquent landlords will eventually end up in foreclosure, and banks will pull those properties from the rental market.”

The Press Enterprise. “When Wildomar residents wake up today they will stop being county residents and become city folk. As residents and officials celebrate the incorporation, a cloud of financial caution hangs in the air. The housing market collapse and a slowdown in the overall economy have critics concerned about the future of the 24-square-mile city and officials anxiously awaiting a city budget.”

“‘If I didn’t have faith in this community becoming a city and dealing with this economy, I wouldn’t have run for City Council,’ said Councilman Scott Farnam. ‘Who wants to be known as the council that put their city into bankruptcy?’”

“Since the vote…more and more brown lawns — often signs of foreclosures — are seen across the newer tract homes in Wildomar. Farnam is a Realtor, so he sees the foreclosed homes in Wildomar. He said a search on the Multiple Listing Service in the past month showed at least 300 Wildomar homes in foreclosure.”

“Councilwoman Sheryl Ade said although not as many homes are being sold, commercial and office space continues to open in the city. ‘We even have a number of hotels interested in the area. We can be like La Quinta without the golf courses,’ she said.”

“Independence Day will have some competition in Corona, where city leaders this week kicked off a new ‘holiday’ for homeowners. During July and August, single-family homeowners will be able to add rooms and patio covers without paying hundreds of dollars in city permit and plan-check fees.”

“Mayor Jeff Miller proposed the program at the start of his term as a way for residents to combat the loss of home values during the housing slump.”

“‘The intent is to give people a break and help them bring their neighborhoods up,’ City Manager Beth Groves said. ‘In the end, we hope enough people will take advantage to help face-lift entire neighborhoods.’”

The Union Tribune. “A report issued Wednesday by the California Reinvestment Coalition says lenders are doing too little too late to help distressed borrowers avoid foreclosure. In the survey of 42 nonprofit loan counseling and legal services offices statewide, 90 percent of those polled said it was ‘very common’ for their clients to have received adjustable-rate loans they couldn’t afford.”

“Today loan servicers ‘continue to turn to foreclosure as their most common response to borrowers in distress,’ the report said. Sixty-eight percent of those who took the April coalition survey said foreclosures are a very common outcome for their clients.”

“Foreclosures in San Diego County hit a record 1,556 properties in May, while lenders started foreclosure proceedings by issuing notices of default on 3,139 dwellings.”

The North County Times. “Downward pressure on home prices in San Diego County is unlikely to ease soon, according to a report released Tuesday.”

“The PMI Group, a mortgage insurer, pegged the likelihood that San Diego County home prices would decline over the next two years at 78 percent, the 13th-highest probability of the 381 cities surveyed.”

“Also, investors are betting that future declines will be significant, according to recent activity on a housing futures index traded on the Chicago Mercantile Exchange.”

“But one local analyst is not buying the futures trading. ‘Look at what the stock market did with all their bets on the housing market,’ said Nathan Moeder, a principal with a San Diego realty analysis firm. ‘Everyone just thought it was going to go up, up, up, and now they just think it’s going to fall, fall, fall.’”

The Marin Independent Journal. “About 2,600 Marin properties have been reduced in value in the county’s biggest reassessment purge of the past several years. ‘We haven’t had large numbers over the last two to five years,’ said Richard Benson, Marin County’s assistant assessor.”

“He said 475 property values were reduced last year, and 421 properties the year before that.”

“Levi Swift, president of the Marin Association of Realtors, was not surprised by recent reductions. ‘It pretty much falls in line with the reduction in property sales and values we’ve seen over the past year,’ he said. ‘It’s not a leading indicator certainly. It’s a lagging indicator, catching up with the reality we already know.’”

“Prudential California Realty is closing its office on Lootens Place in San Rafael along with satellites in Fairfax and Woodacre. Prudential is one of several real estate companies that has closed or consolidated in Marin.”

“‘Rather than holding on to these offices and waiting for them to turn around, we decided to leave,’ said Cathy Harrington, director of marketing. ‘At this time we don’t have any plans to come back to Marin.’”

“As of May 31, the number of homes sold in Marin was down 34 percent from the same period in 2007, according to the Marin Association of Realtors. Levi Swift, president of the association, said the slowdown in sales is due to the credit crunch and failure of the subprime market.”

“‘The subprime market has come home to roost with a vengeance,’ Swift said, adding that the county has a lot of inventory that needs to be sold off.”

“He called the current situation a constriction of the industry that is forcing out agents who are new or dabble in the business part time. Swift said many of the agents who have gotten real estate licenses in recent years were taking advantage of a booming market.”

“‘I would call them opportunistic real estate licensees,’ Swift said.”

From The Argus. “All hands on deck! The Tri-City area’s unique pirate store plans to abandon ship after nearly three years on the stormy retail seas. Owner Don Hatcher said SeaWolf Trading Co. will raise anchor by Aug. 31, when the store’s lease is up.”

“‘We did great the first year, but we’ve been in the swamp for the past year, ever since the foreclosures started,’ he said. ‘We started to immediately see sales start slumping. People come in the store and they’re like, ‘Why are you closing?’ I don’t know if people don’t see what’s happening around them.’”

“Rather than struggle against the tide, Hatcher said he decided not to sink more money into the niche business. ‘We knew going into this that any business is risky,’ he said. ‘We thought we’d try to create something fun in Fremont. A more traditional business would be able to weather the storm better.’”

“Hatcher also was a vendor at last month’s second Northern California Pirate Festival in Vallejo. He said plenty of people attended but seemed to spend less than at last year’s fest.”

“He plans to sell off the décor, including an elaborate treasure cave, as well as the discounted wares before the store is sent to Davy Jones’s locker. ‘At first it’s shocking, you know,’ he said. ‘At a certain point you just kind of accept it and make plans for the next step.’”