Ditching California
The Los Angeles Business Journal reports from California. “FirstFed Financial Corp., one of L.A.’s oldest and largest financial institutions, was closed late Friday by federal and state regulators. FirstFed has been a fixture in the area since opening its doors in downtown Santa Monica in 1929, taking deposits and offering personal and home mortgage loans. In 1983, the institution began offering adjustable-rate mortgages, which would become a core product offering. Most of the thrift’s recent problems stem from 2005, when FirstFed originated $4.4 billion in single-family loans, primarily option-ARMs.”
“Uneasy with the rapidly growing loan portfolio, the thrift in late 2005 began requiring proof of income for all mortgages, and business dropped by half almost immediately. In an interview in June, Babette Heimbuch, then CEO of the thrift, said she hoped regulators would let the institution continue working out its problems, but she acknowledged the possibility of failure.”
“‘We really feel like we’re getting a handle on this – not to say that we’re not struggling and we don’t have to raise capital, but we feel like we’re getting our arms around the risk,’ she said. ‘I’d hate to see us get wiped out.’”
The Union Tribune. “Bank regulators took over struggling Imperial Capital Bank of La Jolla yesterday, making it the third local bank to fail during the economic downturn. During the housing boom, it gained attention of investors, posting big profits making loans to residential and commercial developers. In 2007, its shares traded above $50. CEO George Haligowski was among the highest-paid local bank executives that year, with a $3 million package that included $42,000 in housing payments, $66,720 for charter-jet travel and $104,000 for club memberships.”
“When the housing market imploded, Imperial Capital began to see spikes in delinquent loans and mounting losses. The bank’s stock price plunged and its shares ultimately traded for pennies on the over-the-counter market.”
The Marin Independent Journal. “Tamalpais Bank, which the Federal Deposit Insurance Corp. ordered in September to write down or sell many of its troubled loans, has sold $37.4 million worth of nonperforming loans, more than half of the $71 million in non-performing assets it reported at the end of the third quarter. The buyer paid $24.1 million for the loans.”
“The SEC filing said that all of the loans sold by the bank were commercial and multi-family loans secured by properties in San Francisco. That is significant since court documents show that Tamalpais Bank loaned $41 million to a San Francisco investment group reviled by San Francisco renters, well after the nation’s credit crunch had begun.”
“During the real-estate boom, the Lembis had no problem borrowing money to make their purchases. Many of the loans made to the Lembi Group were bundled and sold as asset-backed securities. By September 2009, the Lembis had defaulted on all but one of the Tamalpais Bank loans. Richard Newsom, a retired San Francisco bank regulator, said, ‘August of 2007 is when the credit crunch occurred in this country. After that point, the yellow warning signs should have been on for anybody in lending. It isn’t like the collapse in commercial real estate in down business cycles is a surprise,’ Newsom said.”
“Newsom said state-chartered banks typically don’t make loans to a single borrower that are larger than 25 percent of their total capital. ‘Piling up loans of that magnitude after the yellow warning light was on is incomprehensible,’ he said.”
“While the single-family home price in most Bay Area counties increased from a year ago - the average jump was 15.7 percent - Marin’s price dropped 12.1 percent in November. A total of 185 single-family homes were sold in Marin in November at a median price of $694,500; both figures represent drops from the previous month, according to MDA DataQuick. John Rusting, a real estate instructor at College of Marin and certified appraiser in the East Bay, said it’s hard to put much stock in such statistics given Marin’s variety of micro markets and generally higher prices.”
“‘I sincerely doubt the (home) values in Ross are dropping,’ Rusting said. ‘When you look at things countywide, for every 15 sales in Novato and one good sale in Ross or Kentfield, you average these out and it can be deceiving.’”
The Sacramento Bee. “Sacramento may see more foreclosures in 2010 than this year. ‘Clearly, foreclosures will be up next year versus 2009,’ a top Bank of America staffer said. ‘I think 2009 was somewhat of an artificially low number because of (foreclosure) moratoriums,’ said Jack Schakett, head of credit loss prevention.”
“That’s significant locally. Bank of America and its Countrywide affiliates were the region’s top mortgage lender during the most dangerous period of the market – 2005 to 2007. You might think it’s wonderful that banks appear to be – at least temporarily – canceling more foreclosures as they try to modify more home loans. But it only shows what lousy options exist to deal with California’s housing crisis, says Sean O’Toole, who tracks foreclosure statistics. His contention: A modified loan in which your monthly payments fall, but you still owe more than your house is worth, is just the lending industry’s newest form of exotic mortgage.”
“‘The loan modification is great for politicians,’ O’Toole says. ‘It pushes the problem to another day.’”
“That day is five years out, when payments will rise again. Home Front called O’Toole about his argument, asking: ‘So, what should the industry be doing?’”
“‘Pick your poison,’ he said.”
The Contra Costa Times. “As political pressure builds in Washington for the banking industry to do more to help struggling homeowners avoid foreclosure, the call in Eastern Contra Costa County is coming from church-based advocacy groups — and it’s getting louder. Miguel Sanchez is among those who have turned to Contra Costa Interfaith Supporting Community Organization. The 52-year-old father of three has been out of work since the construction industry tanked, just as the mortgage on his Antioch home skyrocketed by $2,400 a month.”
“His initial elation at a temporary mortgage modification offer faded when he realized he couldn’t even afford that figure, and that his payments could balloon in a few years — the same situation that had already pushed him to the brink of bankruptcy. ‘They told me that’s the only choice I got, the one they sent me,’ Sanchez said.”
“Now he is preparing to walk away from the house he worked all his life to buy — but holding out hope CCISCO will have more luck negotiating with his lender. Dustin Hobbs, a spokesman for the California Mortgage Bankers Association said modifying a loan isn’t as simple as signing off on a lower mortgage rate. Because most home loans are securitized — many investors own different parts of each loan — banks must get each one to sign off on any change to the terms. And that takes time.”
“‘There’s no simple solution,’ Hobbs added.”
The Mercury News. “In the third quarter of this year, buyers in the nine-county Bay Area purchased nearly 3,000 homes outside the region, up 58 percent from the same quarter last year, typically for prices well below 2008 levels. Purchasing suburban rental property is the hot ticket now, not buying vacation homes. Sales to Bay Area buyers are up from 2004 in Stockton and Tracy.”
The Record.net. “The Stockton area - still trying to recover from the nationwide foreclosure crisis - has joined two other San Joaquin Valley communities near the bottom of an annual list of the top 101 cities best for business. Real estate flipping and the housing downturn were cited as factors contributing to the low ranking of all three Valley cities.”
“MarketWatch said: ‘Stockton has taken it on the chin for a number of years now, and our survey delivers another blow to this city. Just as Bakersfield went through a building craze as home buyers sought solace away from pricey Los Angeles, Stockton provided refuge for those fleeing even costlier San Francisco. But it all caught up starting around 2005, and the region was devastated.’”
The Manteca Bulletin. “Nine hundred city residents lost their jobs in October and November to push Manteca unemployment up to a post Depression high of 14.8 percent. Of those, 400 lost their jobs in November. Among San Joaquin County cities, Manteca has the third highest unemployment rate behind Stockton at 20.3% and Escalon at 15.0%.”
“French Camp, while not a city, had the highest jobless rate in the county with 50.3 percent of its population or 800 people out of work.”
The Modesto Bee. “Shedding jobs that once reliably attracted new residents, California grew at a slower pace this year than all but two other years since 1900, according to state Department of Finance figures released Thursday. The number of new births dropped. The number of new immigrants dropped. And more residents left California for other states than came here from them.”
“California saw a net loss of 800,000 jobs from July 2008 to July 2009, according to the California Department of Labor. ‘What attracts people here is jobs,’ said Dennis Meyers, principal economist for the Department of Finance.”
“Elk Grove resident L.J. Smith is ditching California after 40 years here. He had major back surgery about a year ago, went on medical disability, and was laid off by an insurance company before he was able to come back to work. He spent several months looking for a new job, and finally found one — in Texas. So Smith and his wife told their two teenage children they would be moving. He’s now posting online classifieds trying to sell stuff before his family leaves in mid-January.”
“‘I’ve got a lot of mixed feelings,’ said Smith, who has relatives in Houston and will work a desk job for an oil company. ‘I love California. But we can’t do it here.’”
The Bay Area News Group. “Job losses mounted by the thousands in the Bay Area during November, and the reductions were so severe that they exceeded the employment cutbacks for the entire state of California. Why is the Bay Area still in a deep slump? Some of the root causes are linked to the nature of this recession, which was unleashed by the collapse of the housing and mortgage sectors and worsened by the meltdown of the financial markets and banking industries.”
“‘The East Bay was crushed by the housing downturn,’ said Jon Haveman, a partner and economist with Beacon Economics. Housing-linked woes rippled through the rest of the Bay Area. ‘San Francisco and Silicon Valley were left a little off the hook for that,’ Haveman said. ‘Those areas came into the downturn later.’”
The Desert Sun. “The state lost about 142,000 people to other states. California first began to lose people to other states this decade in 2005. ‘Those areas that benefited most from the housing bubble, when that went away, they’re the ones impacted the most,’ said Dennis Meyers, a principal economist with the state department of finance. ‘It’s hard to say when it’s going to go back to where it was during its peak.’”
The Press Enterprise. “‘The steep slowdown in housing construction is showing up in lower population growth,’ Inland economist John Husing said. ‘The economy rules in a case like this. Why would you come to California to get a job when the unemployment rate is 12 percent?’”
The Redlands Daily Facts. “In the Inland Empire, office vacancies will rise and rents will stay low, while most industrial markets will begin rebounding, according to a forecast released by USC’s Lusk Center for Real Estate. Rick Lazar, president of Redlands-based Coldwell Banker Commercial Lazar & Associates said he does not see the market for office space recovering until the job market, fueled by construction, revives. ‘Office has got the most of any type of product by far and I don’t see the office market picking up steam until the residential market really picks up steam,’ he said.”
The LA Downtown News. “Those searching for bright spots shouldn’t focus on the Downtown Los Angeles office market. Vacancy in Downtown high-rises inched up to 14.6% in the third quarter, compared to 13.1% during the same period in 2008, according to the 2009 Casden Forecast Industrial and Office Report, recently released by the USC Lusk Center for Real Estate. Expectations for the future are dark.”
“‘I think the next two years are going to be very tough for the office market,’ said Richard Green, director of the Lusk Center and a co-author of the study. ‘Downtown L.A. is doing a little better than other sub-regions but it’s not immune. You have things like law firms laying people off, so when their lease rolls over they’ll need less space.’”
“‘It’s the economy, then jobs, then office, in that order,’ Green said.”
“In Downtown in the third quarter, a net total of 94,000 square feet of space came on the market. Year-to-date, 319,000 square feet of office space has gone vacant, according to the USC report. As of the third quarter, there was more than 4.7 million square feet of available space.”
The Burbank Leader. “The sputtering economy is spurring some of the city’s largest downtown developments to explore new options to fill vacancies…as empty storefronts mushroom across the district. An analysis conducted by planners showed a peak parking demand of 952 spaces for the Entertainment Village and the Collection, leaving a surplus of 173 spaces.”
“Despite critics pointing to the 2004 parking study as outdated, board members characterized the amendment as a logical way to deal with the economic slowdown. ‘When the economy is doing great, we’re going to have to look around for some parking because everybody else is out there spending their wads of cash and having a great time,’ said Douglas Drake, Planning Board member. ‘We need to fill every single one of these parking spaces, and right now, we have a lot of empty ones.’”
The LA Times. “Dennis Myers, a state Finance Department economist, said the collapse of the housing market was also a major factor in the slowdown. San Bernardino County, saddled with one of the highest home foreclosure rates in the nation, lost 11,519 residents to out-migration in the last year. The county had been among the fastest-growing in the nation earlier in the decade, gaining 30,000 or more annually. Riverside County, also plagued with a foreclosure crisis, posted its slowest growth rate this decade.”
“‘There’s a sense that California has limited opportunities and a high cost of living,’ said Hans Johnson, associate director of the Public Policy Institute of California.”
The Salinas Californian. “When it comes to most people’s wallets, job security, home values or 401(k)s, 2009 wasn’t a good year. Jobs were shed. Those with jobs worked fewer hours, earned less money and paid for more of their benefits, such as health care. It’s enough to leave folks too exhausted to celebrate the end of the year that beat the region’s fiscal health so soundly.”
“Dan Eyde, featured by The Californian in June, felt the recession’s double whammy. After losing his job with Oracle this year, he and his wife discovered that their home was ‘under water’ — they owed more on it than it was worth.”
“They fought for months to have Bank of America, which became owner of their loans, modify the mortgage. The Salinas couple won a trial modification but is still waiting to find if — and when — the new loan terms may be made permanent. Eyde has had some nibbles on the job front, but, like many unemployed Californians, has yet to get an offer.”
“‘Here’s to a better 2010,’ he said.”
‘Moody’s Investors Service placed $143 billion of jumbo-mortgage bonds under review for downgrades because of higher loss projections as stock-market losses and pay cuts squeeze wealthy borrowers.’
‘It now expects losses of 3.8 percent on loans underlying 2005 prime- jumbo bonds, with estimates of 8 percent for 2006 securitizations, 10.9 percent for 2007 debt and 12.3 percent for 2008 securities. The revisions were prompted by ‘the rapidly deteriorating performance of jumbo pools in conjunction with macroeconomic conditions that remain under duress,’ Moody’s said.’
‘Moody’s also said it expects the U.S. government’s effort to curb foreclosures to be less effective than it previously expected because the programs have ‘failed to gain traction.’
‘In two of the largest mortgage markets, the New York metropolitan area and Orange County, California, prices likely will fall 29.3 percent and 19.2 percent, respectively, from Sept. 30 levels, the New York-based analysts said.’
‘Prices for the most-expensive homes, in particular, ‘absolutely haven’t’ bottomed, Scott Simon, head of mortgage bonds at Newport Beach, California-based Pacific Investment Management Co.’
Yeah, those jumbo extensions were a great idea, huh? Way to go congress! They should call these guys Moodys Rat-Hole Service.
Everything I just read above and in the California article says RECOVERY to me. Don’t worry about facts. Just believe.
Walmart is selling tin foil hats this xmas season.Actually you get one free if you spend 100 or more.
Want to get that tin foil hat, put it on my head and read the articles saying California real estate is stable and recovering.
http://www.peopleofwalmart.com/
Tinfoil hats wouldn’t really seem odd among the mutants one sees at Walmart.
“Moodys Rat-Hole Service”
Time to fill in for FPSS in absentia:
BwaHaHaHAHAHAHAHAHAHAAHHHAAAAAAAAAAAAAA!!!
Or for FPSS in absinthe….
BWAHAHAHAHAHicHAHAHAHicHAHAHicHAHA
Absinthe makes the heart grow fonder …
Hey dude! Sorry to steal your thunder…
Now that the rating agencies are being sued for their role in giving AAA ratings to garbage mortgage-backed-securities and conflict of interest, they suddenly have a compelling interest in telling the truth. Or at least not lying as brazenly as before.
GREAT…keep it coming landlords here are still clueless about the market.
————————–
‘In two of the largest mortgage markets, the New York metropolitan area and Orange County, California, prices likely will fall 29.3 percent and 19.2 percent, respectively, from Sept. 30 levels, the New York-based analysts said.’
“Uneasy with the rapidly growing loan portfolio, the thrift in late 2005 began requiring proof of income for all mortgages, and business dropped by half almost immediately”.
There you have it, realize that the game is to fast and loose, tighten up and do business properly, wham out of business.
Yep. That’s exactly why **regulators** needed to step in. The banks that tried to responsibly rein in the loose lending would have failed, because all of the business would migrate to the least responsible banks/lenders.
Yes, but if the government didn’t meddle in the housing market by pushing the “ownership society” and push banks to make loans to people who had already shown they were poor credit risks, the bubble never would have reached the proportions that it did. In addition, if the government let irresponsible and reckless lenders fail, the more conservative banks could step in and buy up their assets at the firesale, letting the fools and sleazeballs who made the loans enjoy their well-deserved unemployment.
Agreed, but there is a pretty significant time lag between the irresponsible lending and the consequences of that lending coming home to roost. Lots of stuff can be done in the meantime to cover losses and maximize profits for the executives and commission-based employees. In the meantime, the responsible lenders would have lost significant market share and could very well go out of business, leaving only the irresponsible lenders for a some time. Then, we’re back to “if we let them fail, there’s no one left to lend.” (which I disagree with, BTW)
It’s the time lags that kill. That’s why we need effective and alert regulators who are willing (and allowed!) to step in when things are just getting warmed up.
“‘There’s a sense that California has limited opportunities and a high cost of living,’ said Hans Johnson, associate director of the Public Policy Institute of California.”
Sounds to me like a recipe for economic Armageddon.
Depending on where we’re talking about, Californians have to decide on whether they want a job and have to deal with snow in the winter, or if they want to have sunshine and a poor job outlook. Relocating sucks, but that doesn’t sound like the end of the world either…
I don’t know what economic Armageddon means, but I suspect that the state is trying to force a bailout by making choices at a political and social level that are quickly turning it into a failed state.
Our state can certainly use a breather in terms of the crazy growth of the past 30 years. The population projections for San Diego County by 2020 were frightening and unimaginable (25% increase over our current 3M), especially since our freeways can hardly handle the traffic as it is, and the County is so large (the size of Connecticut) that mass transit is not really an option. If lower population means less congestion, less pollution, less fugly McMansions, less drain on all our resources, then the economic hit is worth it. We’ll just have to live with less excess, and like it!
Totally agree.
Bring on the out-migration!
Just don’t bring the out-migrants to Colorado.
A subset of us here in CA is just biding our time and waiting for the carnage to set in in earnest; egging them on, in fact. The more folks who throw in the towel and return to their places of origin, the more gleeful we become– like dancing around the oak trees swigging wine from a bottle gleeful.
A failed “state” is our DREAM. Then maybe we fringies and moonbats can start over with this amazing place without the political cacaphony of those who are just in it for the money.
Amen Ahansen…
there will never be enough leaving to notice! i mean do you think driving to LAX will ever be easy? maybe $6 gas will do more than this recession.
Having driven to the LAX area or nearby from San Diego no less than twelve times over the past fifteen months, I have to say the driving has become much easier as of late than it was at the beginning of the period. It is still far worse to get around LA than San Diego, though…
ahansen, this one will be dancing in the moonlight when it happens .
We get it on most every night
when that moon is big and bright
its a supernatural delight
everybodys dancing in the moonlight
everybody here is out of sight
they dont bark and they dont bite
they keep things loose they keep it tight
everybodys dancing in the moonlight
dancing in the moonlight
everybodys feeling warm and bright
its such a fine and natural sight
everybodys dancing in the moonlight
we like our fun and we never fight
you cant dance and stay uptight
its a supernatural delight
everybody was dancing in the moonlight
dancing in the moonlight
everybodys feeling warm and bright
its such a fine and natural sight
everybodys dancing in the moonlight
we get in on most every night
and when that moon is big and bright
its a supernatural delight
everybodys dancing in the moonlight
dancing in the moonlight
everybodys feeling warm and bright
its such a fine and natural sight
everybodys dancing in the moonlight
- King Harvest
And CA is a failed state. It needs to divide into several pieces. In our federal republic, states become ungovernable with more than about 15 million people.
Some pundits call for 5 states from the existing California. Sounds right to me. Recall that when Texas was admitted she was permitted to enter as from one to five states - the choice belonging to Texas. For some oddball reason Texas eschewed the additional 8 US senators and entered as one single unitary state.
The State of Jefferson…YES!
YES 2
The problem with “Jefferson” is you would need the assent of both OR and CA. Much more difficult politically.
Well we can take a page out of the first Superman movie on how to split CA.
[pointing to a map of California and the San Andreas Fault]
Lex Luthor: Everything west of this line is the richest, most expensive real estate in the world: San Diego, Los Angeles, San Francisco. Everything on THIS side of the line is just hundreds and hundreds of miles of worthless desert land, which just so happens to be owned by…
[Whaps Otis with his pointer]
Otis: Uhhh… Lex Luthor Incorporated.
Lex Luthor: Now, call me foolish, call me irresponsible, but it occurs to me that a 500 megaton bomb planted at just the proper point would, uh…
Superman: Would destroy most of California. Millions of innocent people would be killed. The west coast as we know it would…
Lex Luthor: Fall into the sea.
Lex Luthor: [Gives a little wave with his hand] Bye-bye, California. Hello, new west coast. My west coast.
[Otis overlays map with new map]
Lex Luthor: Costa Del Lex. Luthorville. Marina del Lex. Otisburg… Otisburg?
Otis: Miss Teschmacher, she’s got her own place.
Lex Luthor: Otisburg?
Otis: It’s a little bitty place.
Lex Luthor: [Angrily] *Otisburg*?
Otis: Okay, I’ll just wipe it off, that’s all. Just a little town.
[Erases Otisburg]
Lex Luthor: We all have our little faults. Mine’s in California.
That’s a great exchange, SFGal!
Governator: I loveded dat movie!
A subset of us here in CA is just biding our time and waiting for the carnage to set in in earnest; egging them on, in fact.
That’s downright schadenfreude-like of you, ahansen!
“A failed “state” is our DREAM. Then maybe we fringies and moonbats can start over with this amazing place without the political cacaphony of those who are just in it for the money.”
Good luck with that. I want front row seating.
ahansen: the gubernatorial aspirations of Meg Whitman scare me. She’s the ex-CEO of EBay. After Craig Newman rebuffed a buyout offer from Ebay a number of years ago, Ebay tried to take over Craigslist by buying the controlling interest. Craigslist blocked them, and Ebay is now suing Craigslist. Newman wants to keep Craigslist free, and is satisfied with the millions in revenue he receives from $25 job ads. Whitman, already a billionaire, wanted to increase her profits by absorbing it. I’m a fan of Craigslist - it’s an efficient, free, locally-based site that allows goods to be recycled. I hope it survives. If Whitman cares more about her company’s profits than the survival of a system that benefits people, I don’t want her in charge of our state’s government.
Ah, the old “Original Californian”, “Tourist go home!” shtick. Having grown up in the South Bay and OC, gone to College on the Central Coast and spending untold time in SF, the East Bay and beautiful mountains, I left in 1994 because I felt more and more like an alien in a strange land.
What was once cut-off jeans and sandals became Guess? and Birkenstocks. It was not the new-arrivals that changed, it was the whole personality of the State and the people. Even the surfers went from a laid-back social group to a hard-edged corporate structure that infected everyone with the “need” for expensive equipment and “cool” rides.
BMWs, Mercedes, and all the other outward signs of wealth became the focus of life for the vast majority of people. The rot that started in California has certainly spread, but no question that the religion of selfish greed and consumption took root in my home State.
I still talk to my childhood friends. I have been secretly horrified when they have bragged to me over the years about the million dollar home they bought with nothing down, or the RV paid for in “cash” taken from a HELOC.
In the beginning I tried to talk sense about finances with them. I had to give up or lose friendships.
Now, 5 years later, I get a few calls a month from friends still in California. They want to talk about bankruptcy, asset protection, mortgage modifications and other ways out of the disaster.
Sadly, few seem to have learned anything. They are simply looking for a reset button so they can get back to consuming, buying and using up more “stuff”.
My former home State went from a semi-paradise to a selfish catastrophe in two generations.
Joe Lawyer, where did you decide to move to?
I remember reading a front page article in the LATimes four years ago about First Fed of Santa Monica. The same Babette was gushing that they were making many loans to minorities and especially to women if they ‘looked good’ like in the classic Jimmy Stewart/Capra movie (help me out here Hbbers). Looks like you should have run full doc on your customers Babette. Send me a picture, maybe we can get you a job pole dancing at ‘Harrys’ !
Made a bunch of money buying First Fed puts.
Also a foreclosure from First Fed.
Bought Bear Stearn puts at $90, and sold at $60. Should have
hold on and watch it went to $0.
How can we profit from this current bail-out of the banks, and the printing of money by the bankers association “Fed” ?
Corruptions are everywhere in America …
Yes, there’s more money to be made. Timing is the tricky part.
“I don’t know what economic Armageddon means,…”
Here is an article which offers a hint or two. And by the way, California is too big to fail, regardless of whether East Coast economic policymakers who lack bubble detection skills realize or acknowledge it. If you think the Lehman Brothers implosion was spectacular, just wait and see what happens if California defaults on its debt…
California Budget Crisis Diaries: Less revenue, more borrowing
By Hoa Quach, SDNN
Thursday, December 17, 2009
San Diego: empty-wallet
California Budget Crisis Diaries
Let me just apologize for this abnormally sad entry of California Budget Crisis Diaries during such holiday glee. In fact, this is so sad - I’m going to link to a few cheery stories at the end of this entry because I don’t want to leave any of my readers in despair despite the importance of all Californians knowing this information.
So here goes. And keep reading until the very end and promise that you’ll read the happier stories when you’re done with CBCD.
Dwindling revenue: The state’s estimate for revenue has faltered by $1 billion as reported by Reuters.
According to California’s monthly revenue report, November saw a cash flow of $4.9 billion into the state — $439 million below estimates. Additionally, “year-to-date revenues are $1.035 billion below the expected $30.414 billion.”
Declining revenues are based on several problems facing our sunny California.
“The combined shortfall for the two years has been pegged at about $21 billion — the result of a state economy battered by a steep decline in its housing market, weak consumer spending, widespread layoffs and 12.5 percent unemployment,” stated a Reuters analysis of the report.
“The broad economic weakness gripping the most populous U.S. state was reflected in the state Department of Finance’s November revenue report released on Tuesday.”
But other problems exist too, noted the news outlet. Like the problem of politics.
“Some analysts believe California’s budget politics could become so contentious and drawn out that the state may be forced to default on its debt obligations.”
…
I bought a snow thrower. Made one foot of snow not a problem. In fact I did the sidewalk for the whole block to try out my new toy. Also, I dressed with stocking cap to cover whole face, good gloves, galoshes, and complete rain gear for wind chill. I also seem to be getting used to the cold. I really love Wisconsin.
Snow looks great on a Christmas Card. By the time March rolls around, snow doesn’t look so great.
I enjoy a snowy Christmas, but then I want 68-degrees by New Years Day.
I’ve heard Wisconsin is really beautiful. Quite the opposite of most of California…and they have water!!!
We often joke about moving to Wisconsin. If the SHTF in CA, we’ll be getting serious about it.
Try taking a pee with the wind blowing and temp at 0. You’ll come back to rasinburg quick.
“… Also, I dressed with stocking cap to cover whole face, good gloves, galoshes, and complete rain gear for wind chill. I also seem to be getting used to the cold. I really love Wisconsin”
Sheesh…all we need to do with you now is get you deer stand over by Ladysmith, a find a spare cheesehead and put you on that SHORT list for Packers Season tickets !
Ha ha ha
All that was a pretty depressing morning read I tell ya…Can’t help but wonder how badly this might end for California…
On another subject, heard Rockefeller this morning…He said the current tax system is only collecting 70% of what it is owed because of avoidance…VAT is coming folks…Just can’t figure out how to make a bet on it…
“VAT is coming folks…Just can’t figure out how to make a bet on it”…
You sir, are correct! IMHO.
Without a shadow of a doubt, we are going to see increases in ‘fees’ &taxes across the board. States will, because they can’t print money, the federal government will because when all’s said and done that’s where ‘their’ money comes from. The days of trillion dollar spending sprees WILL come to and end and those that do not think so are in complete denial of what awaits them.
So how do you bet it ?? Short luxury stocks ??
That $38 billion dollar tax break that the Federal Government “quietly” gave to Citibank - which just HAPPENED to be a major Obama donor and funded most of his inaugural bash - will have to be made up by the rubes.
Yeah, this was definitely the “money quote”.
Governator: Don’t vorry….bees happy…I vill fix everythings….soon as I cans fix my better half’s tickets…..those leftists are all da same….do da crime…don’t do da times…….Merry Xmas…..more taxes comings…hahahahohoho!
Arnold has his vacation “house” here in Idaho. Should that tell you something? He’s able to bail from high-tax CA in a heartbeat when he leaves office.
She probably gots tickets der too vit der snowmobile…..vat am I going to dus vit her?
Arnold has his vacation “house” here in Idaho ??
Right next door to Ben Stein I suppose…
It’s in Sun Valley. Arnold spends all his free time here. I was told - by an ID legislator who had been there - that Arnold’s Sun Valley “house” looks like a hotel. Five stories. Thirty car garage.
Once Arnold leaves office, I wouldn’t be surprised if he took up ID residency for tax purposes.
God forbid that he run for governor of ID. Of course here he’d run as a Democrat.
I googled Ben Stein Idaho. Stein’s place is in Sandpoint - birthplace of Sarah Palin - which is over 300 miles away from Sun Valley.
http://www.washingtonpost.com/wp-dyn/content/article/2009/12/04/AR2009120402016.html?g=0
Neel Kashkari, the Paulson underling who crafted the $700 billion dollar bailout, has departed Washington D.C. for an off-the-grid cabin in the mountains of northern California. Wonder what he knows that the rest of us probably should wonder about.
Neel now works for PIMCO (surprise, surprise)…
In addition to hiring a top equity team, we have also recognized the need for an experienced person to work closely with PIMCO’s Executive Committee to lead our entry into this and other new businesses over time. Accordingly, Neel Kashkari is joining us on December 14 to lead new investment initiatives. Neel will be based in our Newport Beach office.
…All these steps are part of PIMCO’s evolution over the last decade that has already taken us beyond being solely focused on core fixed income. By adding active equities to the range of solutions PIMCO provides, our primary aim remains the same as it as been throughout PIMCO’s history: to serve as a trusted advisor to our clients around the world. Importantly, this has not, nor will it distract or detract us from our ongoing management of our fixed income products. It’s an evolutionary process-not a revolutionary event-that has been driven by the needs of our clients, the entrepreneurship of our colleagues, and the robustness of our investment process and platform.
http://dealbreaker.com/2009/12/pimco-hires-neel-kashkari.php
I included that second paragraph because it tells me that the “big dollar” fixed-income guys are seeing inflation in the future, IMHO. This is what I’m referring to WRT the fixed-income investors being forced further out onto the risk curve because of the ultra-low interest rate environment.
Posted a comment with a link that was sent to comment Purgatory.
Neel Kashkari is now working for PIMCO.
Perhaps the Arnold should claim California has discovered massive new oil field reserves and offer to strew some flowers and candy in the streets to get things jumping.
*** Note: A similar plan has worked before***
‘There’s a sense that California has limited opportunities and a high cost of living,’
I’d say it’s a hell of a lot more palpable than a ’sense’ when you can see the evidence of decline and dystopia all around you.
“Nine hundred city residents lost their jobs in October and November to push Manteca unemployment up to a post Depression high of 14.8 percent. Of those, 400 lost their jobs in November. Among San Joaquin County cities, Manteca has the third highest unemployment rate behind Stockton at 20.3% and Escalon at 15.0%.”
“French Camp, while not a city, had the highest jobless rate in the county with 50.3 percent of its population or 800 people out of work.”
If the government actually reported actual unemployment rates, we would be reading reports in the MSM about how 20-25% is currently the worst unemployment rate in the USA since the 1930’s Depression. Instead, we have ludicrously constructed reports that don’t include “discouraged workers”. Meaning, that after being out of work for two years, you are officially “Too unemployed to matter”, “Too broke to count”,and “Too disruptive to our green-shoot B.S.”.
Unemployment is spreading like cancer across this country. Unemployment and mortgage default go hand-in hand. Unemployment and poverty go hand-in-hand.Unemployment and hunger and disease go hand-in-hand.
Government payroll and ivory tower egghead policy makers do not have any answer for unemployment except to put more people on the government payroll or welfare and subsidy rolls.
Their “solutions” only perpetuate and worsen the problems.
Want a real solution? Force every financial institution to mark its so-called assets to current market. This will force all the so-called “too big to fail” banksters into bankruptcy. It will allow housing prices to fall HARD and FAST - and permit truly affordable housing to reappear on the landscape, and encourage capital formation and employment opportunities. It would precipitate massive defaults among the overleveraged - which MUST occur before any turnaround in the economy can take place. Until this happens, we are treating a cancer patient by telling him he is “too sick to fix”.
Nice summery Cblue…
Their “solutions” only perpetuate and worsen the problems.
“Want a real solution? Force every financial institution to mark its so-called assets to current market. This will force all the so-called “too big to fail” banksters into bankruptcy. It will allow housing prices to fall HARD and FAST - and permit truly affordable housing to reappear on the landscape, and encourage capital formation and employment opportunities. It would precipitate massive defaults among the overleveraged - which MUST occur before any turnaround in the economy can take place. Until this happens, we are treating a cancer patient by telling him he is “too sick to fix”.
That is what should and would naturally occur, however in today’s world a little pain and suffering is not acceptable. So, instead ‘we’ will continue down an untenable path that will at some point reach the same conclusion. All debts, public and private must be paid, one way or the other.
If they really wanted to tackle unemployment, they would heavily fine all of the large corporations, small businesses, and homeowners, etc. who are feasting upon illegal alien labor. This would force them to hire legal citizens, and raise wages, and seriously reduce unemployment. Addressing our trade agreements would go even further to protect/create jobs. But, politicians aren’t interested in this at all. The only thing they care about is next years election, and staying in power. They throw a little bone like “extensions” in unemployment benefits which does nothing to address the fundamental flaws in the whole system.
If they really wanted to tackle unemployment, they would heavily fine all of the large corporations, small businesses, and homeowners, etc. who are feasting upon illegal alien labor.
There’s two sides to this. A friend of mine runs a small furniture-making business in Southern California. In the ’90s his corn-fed American employees were running his business into the ground with their laziness, low productivity, and constant workers comp claims. He fired their worthless asses and replaced them with Mexicans (green card holders, not illegals). They worked hard and his business went back in the black and has stayed there ever since. He’s not some greedy mega-capitalist - he’s a small businessman and producer trying to support his family in a very expensive city.
operating phrase is “green card holders”.
French Camp is farm land.
Yep….
It’s returning to the original model of “drive until you can buy”. When prices went out of sight in the bay area people bought cheaper places in the central valley and drove. Then during the boom prices in the central valley went up, too, making the whole thing pointless. Why pay $750K for a house in Mountain Home and then spend four hours a day driving when you can get a smaller place in the bay area for a similar amount of money? Now that the central valley prices are down to $200K again, it’s not so crazy to have a “second job” of driving back and forth on the freeway.
The recent median price increases in the bay area just mystify me. I still think the mid-to-high range will be the next hit.
What ever happened to the guy who commuted from Mariposa to Menlo Park ? Is he in the boobie hatch after driving 9 hours each day ? He won some obscure contest for the longest commute by auto.
Want a real solution? Force every financial institution to mark its so-called assets to current market. This will force all the so-called “too big to fail” banksters into bankruptcy. It will allow housing prices to fall HARD and FAST - and permit truly affordable housing to reappear on the landscape, and encourage capital formation and employment opportunities. It would precipitate massive defaults among the overleveraged - which MUST occur before any turnaround in the economy can take place. Until this happens, we are treating a cancer patient by telling him he is “too sick to fix”.
———————-
Absolutely agree with this, Cobalt. Excellent post.
“Uneasy with the rapidly growing loan portfolio, the thrift in late 2005 began requiring proof of income for all mortgages, and business dropped by half almost immediately.”
The future looks bright for I-waanabe-aflipper!
Rick Lazar, president of Redlands-based Coldwell Banker Commercial Lazar & Associates said he does not see the market for office space recovering until the job market, fueled by construction, revives. ‘Office has got the most of any type of product by far and I don’t see the office market picking up steam until the residential market really picks up steam,’ he said.”
And residential won’t pick up until prices fall more, the excess supply is absorbed, and there is real, sustainable economic growth not tied to housing or commercial development. The California growth model of the past few decades is broken and isn’t coming back.
the excess supply is absorbed ??
The supply pipe goes far beyond resale listings and builder inventory…There are millions of units of supply in the pipe…Any increase in demand will be met with overwhelming supply and the big builders are positioned the best to deliver it faster & cheaper than anyone…
“…a San Francisco investment group reviled by San Francisco renters,”
The Lemhi Group is the name of that group, and they and their involvement in the bubble and their tactics of getting rent-controlled tenants out of their buildings are profiled in this long but interesting article.
www dot sanfranmag dot com/story/war-of-values
I’m not condoning their tactics, but it shows how the longer rent control remains in place the more seriously it distorts the market.
Bill:
You might as well learn from this. Rent control is just like any encumbrance on a property or an easement a right of way…it goes with the property. If you buy a property with a brook and the city declares it a wetlands area you cant pipe it in period.
What distorts the market is when rents diverge from the norm as what just happened. So crooks and scumbag landlords try and hurry up the process by doing illegal things.
Imagine you have a common driveway and your neighbor puts up a wall so you cant use it…would you get mad and sue? sure you would.
So the landlord bought the house at LESS then full market value because the rents were capped. And over time the old tenants move out or die or move to FL or a nursing home and it frees the apartment for market rent.
Nothing wrong with this…the landlord willingly signed on the dotted line to buy this property knowing this. And if it was a free market house chances are he could never have afforded it.
Hey MetLife sold peter cooper village 11,000 units for 5.1 billion and boy the new owners are in trouble over illegally converting apartments to market rent.
Most people don’t understand that any San Francisco landlord can charge market rents to new tenants. If a 25-year tenant paying $775 a month leaves or dies, the landlord can and will charge an incoming tenant $1500 a month if that is the market rent. Rent control only applies once a tenant has signed an initial lease.
And that is almost the same in NYC…except you only get 20% more on a vacancy unless the rent passes $2000 a month . so the legal dirty way to do it is the find the dumbest tenants you can find, so they wont stay long, then increase rent on every vacancy……they hate people like me….
one other feature family can inherit the lease if they stay with an elderly parent for 2 years and make NYC a permanent residence.. before dying or moving.
how many 40-50 year olds want to move back in with mom just to get the cheap lease…but it does happen
today its mostly gay couples that keep the old rent controlled lease when the partner dies.
——————————–
Rent control only applies once a tenant has signed an initial lease.
You nailed it, aNYCdj.
“Uneasy with the rapidly growing loan portfolio, the thrift in late 2005 began requiring proof of income for all mortgages, and business dropped by half almost immediately.”
Wow. Just wow.
Looking forward to 2010, when that 5/25 Option ARM tsunami hits.
Their whole motto was, loan them the money or someone else will !!!!!!!!!!They got the commissions on the loans and now the taxpayer picks up the losses.
“Looking forward to 2010, when that 5/25 Option ARM tsunami hits.”
Me too!
“Uneasy with the rapidly growing loan portfolio, the thrift in late 2005 began requiring proof of income for all mortgages, and business dropped by half almost immediately”.
They were bound to fail, by conducting business as it was intended. Why they could be sued for discrimination by asking for proof of income. Lending money to people that haven’t a prayer of repaying it, was/is the new norm. Just watch D.C. they do it 24/7.
I think you are on to something there. And for another case in point, imagine trying to compete with one of the Fed’s anointed banks that qualifies for zero interest loans, if you were a lender who had to raise funds in the private market. Washington is picking winners and losers these days, and lots of the losers appear to be California-based…
FirstFed has been a fixture in the area since opening its doors in downtown Santa Monica in 1929, taking deposits and offering personal and home mortgage loans. In 1983, the institution began offering adjustable-rate mortgages, which would become a core product offering.
This bank was founded on the eve of the Great Depression, survived the Great Depression and kept in business for 70 more years through thick and thin. And then total insanity and greed destoyed it.
“They fought for months to have Bank of America, which became owner of their loans, modify the mortgage. The Salinas couple won a trial modification but is still waiting to find if — and when — the new loan terms may be made permanent. Eyde has had some nibbles on the job front, but, like many unemployed Californians, has yet to get an offer.”
I would like to see this fight.
Bank: Pay what you owe under the terms you agreed to.
Homeowners: I am fighting you. Modify our loan. Forgive our debt! Lower our interest! I am fighting you.
Bank. Well, just out of curiosity, what income do you have?
Homeowners: I am fighting you. I don’t have ANY income. Modify our loan. Forgive our debt! Lower our interest! I am fighting you.
Bank. Your are insane. We will give you a trial modification until we can get the sheriff and our lawyers together.
Homeowners: I am fighting you. Make it permanent at a low teaser rate. I don’t have ANY income. Modify our loan. Forgive our debt! Lower our interest! I am fighting you.
LOL
Excellent, 2banana!
Lol also. ahansen , glad to see you still here . Guess your waiting for the surgery date . I was telling someone the other day about the “Bear Lady ” who is also a great writer who posts on our blog .Its just so fitting that this blog would have a person who survived a bear attack ,of all things . Is that a Universal message ? Anyway ,your
amazing and everyone is rooting for you .
It’s dawning on me that probably a full majority of the FBs going through the loan modification process know full well they will never get approved. They’re doing it just to buy time and delay the foreclosure process, so they can live rent free as long as possible.
And the lenders, FED and Treasury are in unholy alliance with the FB’s since to move forward quickly with deleveraging is all of their worst nightmares at this point.
What is this BS about a trial modification without qualifying ,but later down the road you have to qualify or they will take it away ? Sounds to me like a set up for no qualifying ,but than again it just could be that they can[’t get speedy service with CDO’s Didn’t they think about the problems it would cause if you broke up a loan note and needed
the agreement of that many parties ?
“His initial elation at a temporary mortgage modification offer faded when he realized he couldn’t even afford that figure, and that his payments could balloon in a few years — the same situation that had already pushed him to the brink of bankruptcy. ‘They told me that’s the only choice I got, the one they sent me,’ Sanchez said.”
It sure is tough for people to process the idea that at no point past, present, or future could they ever actually afford the place they are living in.
…never could afford the price they were paying for the place they were living it.
There is a distinction, IMHO. Many people actually bought regular homes they would have been able to easily afford before the credit bubble; but with all the speculation, fraud, and easy money, they were competing with people who had nothing to lose. As a result, families were **overpaying** what they should have paid for the house that they **should have** been able to afford under normal circumstances.
“It sure is tough for people to process the idea that at no point past, present, or future could they ever actually afford the place they are living in.”
And the U.S. government is doing everything it can to avoid this nasty bit of reality as well…ergo one modification program after the next, foreclosure moratoriums, 3.5% down payment FHA loans, blah, blah.
The U.S government is doing its best to keep housepayments flowing into the banks. They do this by instilling hope to FBs. If given enough hope FBs will do their best to hang on to their alligators instead of walking away.
one neighbor of mine in north phoenix was selling furniture today. i never saw them often and never met them before. my other neighbor told me they paid 270k for the house 3 years ago and it has been a rental but has been empty now for atleast 7 months. i looked on realtytrac.com and could see it goes to auction in january. anyhow, i stopped by to see how the house looks and if they had a kitchen table for cheap. anyhow, lots of furniture but nothing i could use. we got talking and i told them i’m across the street…they said you probably got a deal. i said oh yeah…without elaborating on the 81k i paid. they told me they plan to rent it…i know the truth it will be REO soon! maybe, i’ll try to get that on too if it goes for under 81K! lol they seemed nice but 270k for a house in phoenix from 1974 is a joke…even if it was totally redone! that is an example of the absurd nature of the bubble and the ensuing mania!
“one neighbor of mine in north phoenix was selling furniture today.”
My parents live in Sedona, and one of their neighbors did this as well..lives down the street and has a couple of “investment” properties as well…was selling anything & everything in the driveway last weekend.
Has anyone heard from Olygal?? Olygal are you out there? I haven’t seen your posts here for sometime now. I know you weren’t feeling well, I hope you’ve recovered and that all is well.I miss your posts.
I miss her also Best Wishes.
Olygirl, you have my email address. Please email me.
I’ve always worried that she was captured by the “saints” and is languishing in some de-de-programming re-education camp.
Or she may have been kidnapped by a roving band of polygamists and joined some kind of Big Love colony by force…
You say that like it’s a BAD thing….
Yikes…Olygal is sick or ill ?
Stop That and Get better…Right Now Olgal !!
Hugs
Oly is now Eddie the troll. At least that is what I am hoping. Either way, if we could get Oly back and lose Eddie it would be a nice Christmas treat for us all.
My worst opinions about humanity will be realized if it turns out that sweet Oly was somehow transmogrified into Eddie the troll king.
There are many things in this world I’m not too sure about. However, I can state with absolute certainty that Oly and Eddie are two very different individuals.
And I can state with certainty that I was just trying to entertain you all and get under Eddie’s skin by suggesting otherwise.
Some posters in here seem to take a fiendish delight in trying to get under Eddie’s skin. Personally, I don’t get it.
“Oly is now Eddie the troll. At least that is what I am hoping. Either way, if we could get Oly back and lose Eddie it would be a nice Christmas treat for us all.”
Negative on that one…I already ventured under the bridge and checked Eddie’s beak and toe claws for High Sparkle Rainbow Lip gloss and Red Red/Rouge rouge toenail polish …and he’s definitely NOT Olygal Material !
“‘I sincerely doubt the (home) values in Ross are dropping,’ Rusting said. ‘When you look at things countywide, for every 15 sales in Novato and one good sale in Ross or Kentfield, you average these out and it can be deceiving.’”
Real estate appraisers can also be deceiving.
Caifornia to offer cash for appliances
Sat, Dec 19, 2009
http://abclocal.go.com/kabc/story?section=news/state&id=7179849
After carefully reviewing the posts on this thread, I have come to the obvious conclusion that the California downturn is over. And if you believe that, I have some beachfront property I would like to sell you…
can i get the first-timer tax credit? Will you take commercial property in trade? I have a bridge, it is in brooklyn.
“And if you believe that, I have some beachfront property I would like to sell you…”
I DO believe you and I WILL buy your beachfront property. Thank goodness I can now buy it from you for 45% of its 2005 value!
Speaking of California’s trainwreck, I now see an extreme amount of real estate selling for under 100,000 in Fontana and Riverside. Those same places were selling above 350,000 less than 2 and a half years ago. That means the desireable areas like Pasadena and Arcadia have to get hammered hard and good in the very near future because people will just move east where there’s a Metrolink line and pockets of good neighborhoods and schools will have to form in the IE. That’s when we get to see what this collapse is really going to evolve into!!!
I never expected to see myself typing this, but it almost appears that some residential real estate investing opportunities are beginning to materialize, at least in parts of CA where prices are below $100K (something I have not seen since living here now for nearly two decades). Of course, there is no hurry here, as it makes sense to wait and see how far down the bottom of the collapse is located before acting. Just think of any real estate investors who thought Detroit area homes were a steal at $30K, only to learn later on that they would soon sell for closer to $10K!
PB, I bet you’ve also authored a number of letters to a certain “laddie” magazine that start off with “I never thought this would happen to me, but….”
” I was peering into the windows of a boarded-up foreclosure when a car pulled up and an attractive young female realtor got out saying she would do anything to sell this house…” -need to spice up this blog.
For your sake I hope it’s furnished..
Granite countertops will suffice for this story.
I am a bear, not a Tiger. Know thy animals…