The Housing Bubble

The Tribune reports from California. “The three men once considered among San Luis Obispo County’s most prolific builders remain mired in debt, and appear unlikely to repay their creditors or return to their former prominence in 2010. Paso Robles’ David Weyrich, San Luis Obispo’s Andy Fetyko and Atascadero’s Kelly Gearhart each gambled on the rising values of the real estate market. However, after its sharp and rapid collapse, they are in deep debt — Weyrich owes more than $60 million, Fetyko $76.5 million, and Gearhart more than $110 million.”

“Much of Weyrich’s prized North County real estate holdings are slated to be auctioned off in foreclosure proceedings, as early as January. Barney Ng, former principal of one of Weyrich’s key lenders, R.E. Loans, told The Tribune that Weyrich had begun to default on his loans more than a year ago. Weyrich had intended to repay his debts with the sale of his real estate subdivisions, Ng said. ‘Mr. Weyrich unfortunately bit off more than he could chew,’ Ng said.”

The LA Downtown News. “As the 222-unit Roosevelt Lofts remains embroiled in Chapter 11 bankruptcy, the project’s developer is looking to hold an auction to sell up to 75 residences as soon as possible. The development’s lender opposes the plan. The Roosevelt, a subsidiary of Milbank Real Estate, filed a motion in bankruptcy court on Christmas Eve requesting a hearing by Jan. 8 for the court to consider a proposal to sell 50-75 units in an auction, according to court documents.”

“In the Dec. 24 request, the Roosevelt attorneys argue that the expedited hearing is needed for the project to capitalize on current market conditions Downtown: ‘The Debtor and [Kennedy Wilson] believe that, while the number of luxury condominium units in downtown Los Angeles that are currently available for sale is low, that number will increase substantially in February or March 2010,’ said the filing.”

“As the Roosevelt ownership has tried to get out of bankruptcy, Bank of America has instead sought to dismiss the Chapter 11 process and foreclose on the property. Attorneys with the firm Buchalter Nemer, who are representing Bank of America and other creditors in the case, argue that the sale of a limited number of units at the Roosevelt would diminish the value of the entire property, in part because it would trigger additional costs for the building owner. As soon as one unit sells, the building owner would then have to fund homeowner association fees for all unsold units, they said in their Dec. 28 opposition filing.”

“‘The Debtor’s justification for rushing to auction is absurdly simplistic when compared to the myriad of market factors and alternatives to immediate individual unit sales that must be considered and analyzed to determine the best strategy for maximizing the value of the Building,’ said the lawyers for Bank of America in the filing.”

The Rancho Santa Fe Review. “Plans to construct The Lilian in Rancho Santa Fe Village are moving ahead ’slowly but surely,’ reported Joe Pinsonneault, owner of the property upon which the project will be built. The Lilian is a mixed-use residential and commercial project (which) includes five residential units occupying 9,492 square-feet, and 4,070 square-feet of commercial/retail space.”

“To help finance the project, Pinsonneault, on Sept. 3, put the commercial property up for sale at $13,950,000. The property, which Pinsonneault said is still on the market, is being offered as a whole, or fractionally, which allows investors to purchase specific parts of the property. A stipulation of the sale, Pinsonneault said, is that the investor must agree that the property be used for The Lilian and nothing else.”

“‘We’re still on track,’ said Pinsonneault, who is currently in negations with several banks to finance the project. ‘We’re doing the best we can to make it all work.’ Noting that the real estate market is turning around, Pinsonneault said, ‘Pricing is in our favor right now.’”

“Architect Allard Jansen said his firm’s work on the project is ‘on hold’ pending financing or direction from Pinsonneault. ‘Right now, finding financing for residential projects is tough,’ Jansen said.”

The Porterville Recorder. “The Lindsay City Council and planning staff discussed the proposed residential development of a 35-acre swath of land in northwest Lindsay. The site, which abuts the City Park, was originally supposed to be high-end subdivision. Before the housing bubble burst, the site— formally referred to as ‘Mission Estates’ — was intended to be the city’s ‘crown jewel’ for expensive homes.”

“‘Lindsay had arrived, we were going to do some great things,’ City Planner Bill Zigler said.”

“Today, the area is vacant. ‘The homes simply weren’t going to sell,’ Zigler said.”

The Bakersfield Californian. “The city of Bakersfield’s months-old effort to speed sales of 15 empty homes in the downtown Parkview Cottages project has so far been slow going — but they’re going. The 74-unit affordable-housing tract was launched during the boom. The Petrinis paid the city $1 for the land in 2003 but soon became distracted by the lure of bigger prospects in the southwest. Completion dates came and went, work left unfinished, and bills eventually unpaid.”

“On top of the 15 empty units — which are in default and are being sold through short sales with no income restrictions — another 30 or so lots remain vacant and are likely to stay that way for years. Twenty-eight units were sold before the market collapse, but the rest have sat empty since February 2008. ‘It’s too bad,’ said Donna Kunz, the city’s economic development director, of the latest delay.”

The Tehachapi News. “As the year 2009 unwound, the Greater Tehachapi real estate market perked up. Bernie Connolly, co-owner and associate broker of Coldwell Banker Best in Tehachapi, said a third-quarter comparison in sales shows a big jump. ‘A lot of the sales were foreclosures and short sales,’ he said. ‘Most of the activity has been at the lower end of the market.’”

“The average sale price dropped in that same year-to-year comparison of third quarters, to $197,550 in 2009 from $240,100 in 2008 - a decrease in price of 17.7 percent. The lower prices mean opportunities for people who, until recently, would have been priced out of the market.”

“‘For years it was so heartbreaking. The children couldn’t buy,’ said Tammy Wallace, Realtor with Town and Country Realty. ‘Now they can.’”

The Record.net. “Sales of existing homes in San Joaquin County dipped in November, bucking state and national trends. County sales remained stagnant, industry professionals said, because of a lack of inventory. Keller Williams Realty agent Jack Mossman said the local slowdown is no surprise because of what industry professionals call a ’shadow inventory,’ meaning banks have not released all of their foreclosures onto the market as a way to keep prices from declining further.”

“‘Inventory is still low, at least until January, where we’ve gotten an indication from Bank of America that we’ll see more foreclosures,’ mortgage broker Jerry Abbott said. ‘We’re still in a market where there are buyers, but agents are flooded with offers.’”

From News 10. “As 2009 winds down, so are the hopes of millions of homeowners of holding on to their homes. As of the beginning of December, less than 32,000 home loan modifications had been approved nationwide in nine months. Analysts estimate that 1.7 million Americans will lose their homes to foreclosure in 2010.”

“Loan modification specialist Mitzi Robinson says there are some basic rules to speed up the process, starting with keeping weekly track of the application status. That means calling the lender and keeping a log of each and every conversation. Robinson said much of the success of modification rides on who you get on the phone.”

“‘One of the things I have a problem with and I have to do frequently is hang up, because I get somebody on the phone who doesn’t like me,’ said Robinson. ‘If you’re a borrower on the phone with, you know when you’re on the phone with someone who wants to help versus somebody who doesn’t want to help, hang up and call back. There’s no harm in that.’”

The North County Times. “To gauge the depth and breadth of the Great Recession and the austere holidays facing many area families, a visit to Daisy Street in Escondido offers an understanding that a sheaf of statistics cannot deliver. The drop in housing values, the implosion in banking and the retreat of consumers has combined to threaten the underpinnings of the nation’s economy —- the middle class.”

“Two years ago, houses sold for $400,000 and more on the street; now they are worth half that.”

“740 Daisy St. —- The woman who lived here fell behind in the mortgage payments, is in the process of moving and asked that her name not be used. Stitching together two part-time teaching jobs and collecting alimony from her former husband allowed her to make the payments on the house and support her children —- until the recession overturned her life.”

“She lost one of her jobs and her former husband lost his job, which ended the family’s medical coverage. ‘I went through all my savings,’ she said. She paid $460,000 for the house three years ago, taking out an interest-only first loan, and, a second loan. The combined monthly payment was $2,600.”

“She’s moving into a rented mobile home and has cut spending on everything except basic needs. ‘No more eating out, no movies, no new clothing,’ she said.”

The Redlands Daily Facts. “Industry insiders…say the recession has stripped revenue from those who make a living inducing customers to ‘make it rain’ money by tossing wads of dollars at exotic dancers in clubs across the Inland Empire and throughout the country.”

“‘This year there has been a rebound and it is still (down) around 10 to 30 percent,’ said Larry Kaplan, executive director for a trade association representing more than 3,800 adult nightclubs throughout the nation.”

“Anecdotal evidence of Kaplan’s estimates abounds at Inland Empire venues, where operators of clubs like Fantasy Topless in Colton, Bare N Legal Showgirls in Pomona and the Villa Theatre in Ontario said they have seen a drop in business compared to years past. ”

“Dissipating attendance has forced club owners to shift marketing strategies in order to survive. In the Bay Area, clubs have had to re-invent themselves because the crowds of white-collar, Silicon Valley customers with fat money rolls are no longer there. ‘Clubs are getting customers who are not spending (that kind of money),’ Kaplan said.”

“Those who run businesses that send exotic dancers into private homes said the downward trend in clubs holds true for their trade too. ‘I’ve dropped about 30 to 35 percent,’ said Michael Stickler, who runs the Chino-based Risque Kitty.”

“It’s not only tough for business owners, but also for the dancers, who work as independent contractors and have been chased by a bruising economy from one battered industry to the next. Stickler said some dancers are former teachers, nurses and real estate agents.”

“Mitchell McDonald, a manger at Larry Flynt’s Hustler Club in Redlands, said an influx of new dancers there has helped business tick up about two percent, compared with this time last year. ‘It’s probably the best lineup of women I’ve had,’ he said. ‘New girls keep the customers coming in.’”