The Housing Bubble

The San Francisco Chronicle reports from California. “From her snug one-bedroom condominium near San Francisco State University, Lea Azucena has watched family members struggle against foreclosure. But Azucena is not worried about losing her home, even though she recently lost her job. The payments on her fixed mortgage are so modest that she knows she can get by on unemployment insurance while she seeks work. Azucena credits her sense of security to the pre-purchase counseling she received from the Mission Economic Development Association.”

“‘I couldn’t be in a safer spot than I am,’ said Azucena, who purchased her 560-square-foot condominium unit near the Daly City border on Halloween 2007.”

“In 2006, MEDA counseled nine families threatened by foreclosure, said Jane Duong, MEDA’s homeownership program manager. In 2008, the group helped 155 such families. Across the bay, at the Home Ownership Center operated by Oakland’s Unity Council, 945 clients had foreclosure concerns, up from 31 in 2006. ‘The numbers have just grown exponentially,’ said Sheri Powers, homeownership manager at the Unity Council.”

“The most pernicious mortgages, said Powers, an attorney and former bank loan officer, were the negative amortization loans. Borrowers who opted for that plan effectively dug themselves deeper into debt each month. That’s what happened to a close relative of Azucena’s, who is now in foreclosure proceedings.”

“‘People in the industry knew that these loans spelled trouble,’ said Powers. ‘For Alan Greenspan to have the nerve to say that he had no idea? Give me a break; lowly loan officers like myself knew.’”

“Azucena…was desperate to have a home to call her own. She grew up in San Francisco after her family gained asylum in 1980 after fleeing El Salvador’s civil war. She attended high school in El Salvador, college in Southern California and then returned to San Francisco for the Genentech job. But Azucena’s rental apartment was sold out from under her and she found herself couch surfing.”

“‘I started to feel that owning a home was not a luxury - it was a must,’ she said. She attended a MEDA workshop, started saving for a down payment, and Duong helped her find first-time home-buyer assistance from city and state programs.”

“‘In coming here so young and being displaced from my country, it became a mission to find a sense of home,’ she said.”

The Manteca Bulletin. “Foreclosures dominated the news — and the economy — in Manteca. Just over 1,000 homes that went back to bank ownership during the year were sold at prices averaging $180,000 less than they were purchased for three to four years earlier.”

“Median prices of existing homes dropped over $116,000 in Manteca during 2008. They are down $181,000 off the market’s peak of $429,000 in 2005.”

“At the start of 2008 when foreclosures started shaking many people’s confidence in the economy, The First Assembly of God Church under the leadership of Pastor Mike Dillman did what qualifies as a leap of faith and a modern-day economic miracle all wrapped up into one. They had bought a home on North Grant Street that had become the poster home for the foreclosure mess. Vagrants had taken the house over, ripping apart cabinets for firewood, stripping copper from the walls, and urinating on the floors. Walls were marked with graffiti. The neighborhood was under siege.”

“The congregation bought the home vowing to fix it up, resell it, and spend the proceeds on charitable undertakings. People thought they were nuts. There was no way the house could be worth the effort. Some even called the Bulletin saying the pastor was leading his church down the wrong path and into financial ruin.”

“By mid-spring the miracle had taken place. The house had been repaired, updated, spruced up and sold for a tidy profit. ‘This is truly an opportunity that only comes along once in a lifetime,’ Dillman said after the church bought the home.”

The Recordnet. “Steven A. Rosso, longtime president and chief executive officer of Stockton-based Pacific State Bank, has resigned his position, citing personal reasons. The chairman of the board, Stockton physician Harold Hand, said Rosso was under no pressure to leave because of bank losses last quarter. ‘This is a tough time for banks, and we lost a little money,’ he said, adding that the bank - and hopefully, the whole economy - will do much better next year.”

“Plummeting mortgage interest rates combined with declining home prices are boosting sales, Stockton real estate brokers report. Ben Balsbaugh, residential sales manager for PMZ Real Estate in Stockton, said sales continue to be strong.”

“‘The lower interest rates, combined with lower home prices, have brought many first-time home buyers into the market,’ he said. ‘We are seeing many investors entering the market as well.’”

“Foreclosures continue to dominate the existing home-sales market, making up nearly nine out of 10 purchases. In terms of sheer unit sales, Stockton brokers have reported…their best sales year ever as median home selling prices in the city dropped as low as $130,000 for November - down more than half from $265,000 the previous November.”

The Press Enterprise. “Brian Gerard, who runs a one-man executive search operation in Los Angeles and specializes in recent graduates, said it used to be a good month when he could place between 15 and 20 people in jobs. Now he’s lucky to get three or four, and Gerard worries about how he’s going to pay his bills. ‘I’ve been doing this since 1984, and this, without any hesitation, is the worst job market I have ever seen,’ Gerard said. ‘The other people who do the same type of work are having the same problem.’”

“The market is different for headhunters who find experienced managerial people, said Art Gage, who has run an executive search firm in Riverside for 32 years. Gage specializes in senior management positions and said that market is solid right now. There’s job movement at those levels, in part, because some executives are so discouraged by the spiraling economy that they’re fed up, Gage said.”

“‘They’re saying ‘This isn’t fun anymore,’ Gage said of retiring executives. ‘They’ve been doing it for 30 years, and they’re saying they don’t want to go through another one of these downturns.’”

“CulverCareers, a San Diego-based job placement service with an office in Riverside, has an advantage because it’s a national operation, so it can match clients with applicants from all over as long as they’re willing to relocate, said Jerry Muntz, a recruiter in Riverside. But business is slow, Muntz said. The Riverside CulverCareers office has lost half its staff to attrition, and companywide, employment is down about one-third.”

“Muntz agreed that there are opportunities to fill senior-level openings, but the employers are looking for long-term commitments. Entry-level placements, which were bountiful in Inland Southern California only a few years ago, are a fraction of that now. ‘A recent graduate used to have a half-dozen choices,’ Muntz said. ‘Now it’s down to one or two for entry-level. It is very tough right now, especially in the Inland Empire.’”

The San Gabriel Valley Tribune. “After a year of layoffs, tightening credit, mortgage defaults and Wall Street woes, business leaders and operators around the San Gabriel Valley are hoping for a new year of better news. We talked to some of them this week, and they all echoed similar themes: that government bailout money would help not just Wall Street, but businesses and their employees on Main Street. And they hoped for a new year in which consumers will regain their confidence in an increasingly accessible credit market.”

“Here’s what they actually said. ‘My hope for the new year is three-pronged: Number one, that the bailouts will convey its effects starting in January or February so that retail can start turning things around. No. 2, that the small businesses that are struggling can benefit from the bailouts….Some small business are barely staying open. My hope would be that they could show a profit - that they wouldn’t have to worry about closing their business. Third, that the unemployment rate will decline, and we see less people laid off from jobs.’ - Gary Lawson, executive director of the West Covina Chamber of Commerce.”

“‘An economic upturn…and some relief out of Washington to folks here who are trying to contribute to the economy. It would be nice to see some of those significant taxpayer dollars going to bailout the economy make it to local business people who really are the bedrock of the economy. I’d like to wake wake up on Jan. 1 and find out this recession was some kind of a joke….’- Paul Little, CEO of the Pasadena Chamber of Commerce.”

“‘It’s all about stabilization of the economy. We want people to keep working, jeep spending money and keep their jobs. That’s what I’m hoping for. As a result that homeowners - those who can afford it - will be able to modify their loans, and keep their houses and keep their families together….And for those that can’t that they get a speedy recovery. - Marty Rodriguez - Real estate broker, Century 21, Glendora.”

The Daily Breeze. “Prices of homes in the Los Angeles metro area dropped 27.9 percent in October compared with a year earlier, according to the Standard & Poor’s S&P/Case-Shiller Home Price Indices. The study’s 20-city survey showed a record annual price decline of 18 percent for October. The 20-city composite is down 23.4 percent since its peak in mid-2006.”

“The Standard & Poor’s study came a week after a similarly downbeat survey was released by the Los Angeles-based California Association of Realtors. That earlier release for November showed that South Bay home prices fell 17.2 percent, compared with November 2007, to a median price of $530,000.”

“Carson led the way with a drop of 41.2 percent for November to $300,000. Gardena also suffered a steep drop of 29.2 percent to $310,000.”

“The beach cities saw a price drop of 16.8 percent to $872,500. Redondo Beach was the seventh priciest city in the survey with a median price of $667,500, down 10 percent. Other cities considered pricier than Redondo Beach, such as Manhattan Beach, did not make the list as individual communities because they did not register at least 30 home sales for November. Torrance’s price slide was 17.1 percent to $512,500.”

“‘Median prices declined across all regions of the state in year-year terms, with the largest declines occurring in areas with higher concentrations of distressed sales,’ CAR chief economist Leslie Appleton-Young said.”

“Appleton-Young added that for the first time since early 2002, the statewide median price for only existing, single-family detached homes fell below $300,000, registering at $285,680, a 41.8 percent drop from the previous November.”