The Housing Bubble

The Desert Sun reports from California. “California’s middle class has been pinched harder by the Great Recession than workers in the rest of the country. By last year, less than half of families in the state, 47.9 percent, were earning middle-class incomes, between $44,000 and $155,000 annually. In 1980, nearly two-thirds of California families, 60 percent, were firmly middle-class. Palm Springs resident Shelly Saunders’ is one middle-class worker who fell from one bracket to another. Pre-bust, she and her husband owned a construction business, feeding the nearly insatiable demand for new houses.”

“They were earning $20,000 a month, living in their dream home, about to send two kids to college. When the housing bubble burst, they lost the business, the house and their marriage. ‘We were living in a dream world,’ said 55-year-old Saunders.”

“Once considering retirement at age 50, she’s working at Palm Desert Door and Hardware, making $45,000 a year, renting a two-bedroom condo. The kids are close to graduation after putting themselves through school with part-time jobs and student loans. Saunders says the fall from upper middle class to lower middle class has shaken her and her similarly situated friends.”

“‘When we went out to dinner before, it was nothing for someone to pick up the tab,’ Saunders said. ‘Nobody’s picking up the tabs anymore. We’re all scared. Our golden years are gone, baby.’”

The Mercury News. “Gayla Newsome was never part of the elite ‘1 percent,’ but she thought she was doing pretty well for herself, with a good job as the executive director of a nonprofit organization and a home in West Oakland she bought 15 years ago. But in July, she lost that Adeline Street property and for the past several months has been trying to reclaim it. ‘I’m a resident who has decided I’m not going to take this anymore,’ said Newsome, who said she fell behind on a secondary mortgage after she lost her job, sent her two oldest daughters to college and was without work from 2007 to 2009.”

“Newsome joined dozens of others in Oakland on Tuesday for rallies and marches as part of ‘Occupy Our Homes’ day. Similar actions were held in Oakley and other cities throughout the nation as the Occupy movement turned its attention to the foreclosure crisis.”

“Linda Loston said she and her husband, Jerome, sold their home in Hercules and put down a $250,000 payment on a retirement property in Alamo. It took a month before the Lostons realized the bank loan was not what they thought. Their interest rate and principle immediately began to increase instead of decreasing with their payment. Their bank broker told them to ‘ride it out,’ Jerome Loston said. ‘Our story is just one of many,’ he said.”

The San Gabriel Valley News. “Dennis F. Paulaha, who holds a Ph.D in economics from the University of Washington in Seattle, has a plan. It’s a sweeping strategy he says will put more Americans in homes, create more jobs and eliminate the federal debt. The core of Paulaha’s ‘trickle up’ plan would allow the government to offer every U.S. citizen a 30-year mortgage at a 1 percent fixed rate of interest, with interest-only payments for the first two years. That would allow every financially qualified person - not just those in immediate danger of default - to finance a new or existing home, with a $500,000 lifetime limit.”

“‘Instead of a bailout for the banks, this would be a bailout for mortgage holders,’ he said. ‘I haven’t been able to get very far with anyone in Washington. I’ve sent out emails and faxes … and gotten nothing. We’re living in a time when I’m not sure anyone is looking for ideas.’”

“James Joseph, owner of Century 21 Ambassador and Coldwell Banker Ambassador in Whittier, is firmly behind Paulaha’s plan. ‘America has a long history of using the tax code and the American system to help people get in and stay in their homes,’ he said. ‘This is an idea that’s as old as ‘It’s a Wonderful Life.’ This would be good for the country and good for the economy. This is the best idea I’ve heard.’”

“Marty Rodriguez, one of the nation’s top Realtors for Century 21, had a polar opposite view. ‘I think it’s ludicrous,’ said Rodriguez, who owns her own real estate agency in Glendora. ‘We’ve already got people in homes that haven’t made payments in two or three years. So let’s give them more money at 1 percent interest … I’m sorry but I’m just not buying into this. This isn’t what America is made of.’”

“Rodriguez said banks already handed out stated-income loans to people who could ill afford the homes they signed on to buy. ‘We’ve already done this once and you saw what happened,’ she said. ‘People who bought these homes thought they wouldn’t have to go to work and would get everything for free.’”

“When work began on the Grove Station development in eastern downtown in 2007, city leaders envisioned a mini-community where young families, entrepreneurs and retirees could live and work. But hopes were nearly dashed when the housing bubble burst and the project fell into bankruptcy. Later, it was discovered that the sewer system had not been properly installed, causing further delays.”

“Now, more than four years after the project’s groundbreaking, a significantly smaller Grove Station is nearly finished. Most of the residential units will be sold at market rate, but the city’s redevelopment agency has purchased four of them for use as affordable housing. The affordable units, which are being offered for $243,000, have two bedrooms, a den, two bathrooms and an attached two-car garage.”

“Despite these requirements and several others that can be found in the application packet, Mayor Curt Morris said ‘a huge number of people’ have added their names to interest lists. But many of those people signed up for the homes nearly a year ago, so the city is once again advertising the homes and reaching out to those who have previously expressed interest. ‘The recession really hit a lot of people,’ said Diana Kasuyama, housing programs manager for San Dimas. ‘Some of those people who were on the list have changed their plans.’”

The Sacramento Bee. “With sales of new homes near historic lows, Sacramento builders remain in survival mode, but a few say they expect to see demand slowly pick up next year. Sacramento’s five-year housing bust has toppled some of the biggest names in the industry – firms that were once a backbone of the region’s economy. According to DataQuick, builders in the Sacramento area sold just 2,363 new homes in 2010, an 85 percent decline from the 16,000 homes a year the industry produced during the 2004-2006 boom years.”

“Sacramento’s 2010 new-home sales figures are probably the lowest for the region since the early 1950s, said Greg Paquin, a Folsom-based housing industry consultant. ‘I don’t think things will get worse than last year,’ he said.”

The Victorville Daily Press. “Although the San Bernardino County population is growing at a faster rate than the rest of the state, local growth remains much more subdued than before the recession. However, the growth comes primarily from a natural increase — a higher number of births than deaths — rather than people moving to the state. ‘Traditionally, a good portion of California’s growth had been coming from immigration,’ Chief Economist John Husing of the Inland Empire Economic Partnership said. ‘What happened was the recession. People are pretty much staying wherever they are.’”

“San Bernardino and Riverside counties are seeing about one-tenth of the growth the Inland Empire saw during the boom years of the last decade, according to Husing. He said the Inland Empire had previously prospered because of the rapid population growth that brought in more income and consumers.”

“‘What has stopped is exactly that,’ Husing said, adding that it’s partly a result of the housing market collapse. ‘A lot of people can afford to buy a house, but they don’t because they are simply afraid to move. … Essentially, we are in a period of pause.’”

“But Husing remains positive, though he said the growth won’t happen anytime soon. ‘Once the housing crisis is over and fear has been removed from the marketplace, we will see people moving to places like the High Desert,’ he said. ‘They’ll come back because of the affordable housing.’”

The Santa Maria Times. “There used to be a saying in certain regions of the state, and it went something like this: Welcome to California. Now, go home. The phrase was so popular, someone put it on a bumper sticker. Rather unfriendly, but somehow amusing.”

“Not so much anymore. California is in the midst of redefining itself, based on changing demographics. The 2010 census revealed that the previous decade was the first 10-year period in more than a century during which the majority of Californians were actually born here.”

“We still have that climate, and the beaches, and the mountains. What’s becoming increasingly scarce are good jobs and affordable housing — a reality not lost on tens of thousands of Californians who have flown the coop in the past decade. Since 2005, more residents have left California than arrived here from other states.”

From CBS News. “As a freelance photographer Duane Conder knows his way around a camera. That’s come in handy now that he’s selling a lot of what he owns on eBay. He’s getting ready to move. Duane and his family have lived in their home near San Diego for 11 years. ‘It was like someone turned off a spigot. Where did the work go? It was like literally you woke up one day - and there was no work,’ Duane said.”

“The dot-com boom drew them from Texas to California, and now the prolonged job bust is forcing them out. California’s unemployment rate is 11.7 percent. Duane can’t find work and last week the bank foreclosed on his family’s home. ‘I feel like it’s the land we need to get out of very fast,’ Duane said of California.”

“The Conders are moving back to Texas where unemployment is lower, at 8.4 percent. In 2010, Texas gained nearly 75,000 new residents, while California lost nearly 130,000. The biggest state to state shift in the country was people leaving the Golden State and heading to the Lone Star state. Jobs are just one reason for the migration. Housing is another. A somewhat typical 3-bedroom home in Los Angeles just sold for more than $1 million, yet in a suburb of Austin, Texas, a somewhat typical 4-bedroom home sold for $380,000. The people who bought it moved from California.”

“Bill Gaiennie moved his family and his computer consulting business from California to Austin. They traded in a 1-bedroom apartment for their 4-bedroom home. ‘If we would have stayed in California, in order for us to make it in an area where we would want to live, we would need to be a two income family,’ Bill said. With the lower cost of living and no personal income tax in Texas, Bill’s wife Jessica now stays home with their daughter. ‘We go to gym we go to swimming lessons we do it all and if we lived in California we couldn’t do that,’ Jessica said.”