Home Front

Just a note to say this writer will be out of the office this week. In my place, my Bee business colleagues may be stepping in here and there to treat you to some offerings, as they unfold, from the real estate scene. Cheers.

Just reading some reader comments from today's Home Front look at the region's bottom probers and came across a blogger's call out to this KABC report from Orange County on the same subject.

It's a real estate agent down there making the bottom call for TV viewers. He says the signs are pointing in that direction.
Yes, I know: many are dubious about taking a real estate agent's word for it. But he got himself on TV and this is what he had to say.

Thanks, to Southern California's Real Estate Marketing Blog.

The Sacramento County Board of Supervisors is taking up the foreclosure issue at 10:45 a.m. Tuesday, April 29. On its agenda is this
report on Sacramento County foreclosures done by the California Reinvestment Coalition.

I'm posting here before taking a good look inside, but I couldn't help but notice one figure in particular: $7.4 billion in erased home equity to neighbors of all these thousands of foreclosed homes.
The top three holders of foreclosed homes in the county: Countrywide, Wells Fargo and GMAC.
I saw a lot of great maps flipping through this.
It's worth a look.

It seems this week this has turned into the bankrupt builder blog. Here is another one to fall, Illinois-based Kimball Hill Homes, which builds houses in Natomas, South Sacramento/Elk Grove and Rancho Cordova. The builder is also active in Stockton, Modesto and Merced.

Hanley Wood Market Intelligence notes that Kimball Hill sold 92 houses from its Sacramento division last year. You can see its office on Highway 99 driving south through Elk Grove.
All indications are the builder will keep its daily operations going while trying to restructure itself.
Here is the Chicago Tribune story.

I am also including here a reprint of a Nov. 2007 Home Front item when Kimball Hill's chief addressed local home builders. He had an interesting take on home building and the global economy. I also remember him saying how tough it was going to get if the banks didn't loosen credit for buyers. Now it has come true.

Here is the Home Front item

You don't have to go far to see the global economy. It is in your house.

That was the theme of an eye-opening speech last week when Sacramento home builders gathered for a 2007 housing forecast.

The message wasn't that your bathroom faucet in Roseville was probably manufactured outside Beijing. It was about this whole new thing being born in the home building business, a suggestion of better days for builders who survive the next two years.

Credit the global economy, said David Hill, executive chairman of Chicago-based Kimball Hill Homes, which builds in Sacramento and Stockton. Get over the idea of a domestic home building industry that relies on conditions inside the United States to thrive. The world's money is rushing in, he said, transforming the building industry that has so transformed the capital region in recent years.

The Germans and many others are looking at a chance to own a piece of this great economy of ours, he told builders.

Brush up on your foreign language skills, he advised local land brokers. As struggling area builders face prospects of land sell-offs, rich foreign investors will be there to buy.

Hill asked builders to think about who buys homes. Nearly one in three buyers now are recent immigrants -- what Hill called foreign-sourced homebuyers.

And he sounded a warning. They're being made to feel unwelcome in the United States.

We are doing a lot of things in this country to make sure the foreign-sourced buyers can't get citizenship very easily, cannot get documented very easily and are really looked at very suspiciously, Hill said. All I know is there is fewer of them now. And they are subtracted from the demand.

Look who builds our houses, he said, touching a subject many builders do not like to talk about. Hill said 30 percent of new U.S. homes since 2005 are being built by foreign-sourced labor.

Finally, look who is partnering with large U.S. home builders. Hill cited big infusions of foreign investment in publicly traded home building giants that dominate markets like Sacramento. He recalled the biggest buzz in home building last year: the sale of Newport Beach-based John Laing Homes -- which builds extensively in Sacramento -- to a Dubai conglomerate.

Hiss point to area builders: We are now interconnected and changed by things we never thought of before. And that suggests backers and buyers that few builders have considered before.

I believe this will have profound implications for the careers of anybody from 25 to 40, he said. We are no longer delineated by a boundary even when we're building American homes on American soil.

This press release just arrived announcing the newest bankruptcy to hit the Sacramento-area home building industry. We will be online soon with more details.

If you are looking for help with your loan or an alternative to foreclosure there is a free workshop tonight in Sacramento to talk about your options. Here are the details:

PUBLIC INVITED TO FREE WORKSHOP ON
FORECLOSURE AND MORTGAGE DEFAULT

The Sacramento Housing and Redevelopment Agency in conjunction with the Sacramento Regional Partners in Homeownership will sponsor a consumer workshop on mortgage default and foreclosure presented by Chase Homeownership Preservation on Wednesday, April 23, 2008, from 6:30 - 8:30 p.m., at Regency Park Elementary School, 5901 Bridgecross Drive, Sacramento, 95835.

Invited guest speakers are Mayor Heather Fargo and Council Member Ray Tretheway. Representatives from local and national banks and lending institutions, along with home loan and credit counselors will provide one-on-one advice and important information on preventing mortgage defaults and foreclosure.

Homeowners are encouraged to bring their loan documents and financial information. RSVP to SHRA Homeownership Services at (916) 264-1500.

Resource education and information about preventing mortgage default and foreclosure is also available at www.shra.org.

This just in: 47,171 California foreclosures in January, Feburary and March.
DataQuick Information Systems says that is a record.
It is also triple the previous peak during the 1990s downturn - 15,418 in the third quarter of 1996.

The eight-county capital region - Amador, El Dorado, Nevada, Placer, Sacramento, Sutter, Yolo and Yuba counties - showed 9,505 defaults during Jan., Feb. and March. All told, this region has seen about 34,000 home loan defaults since the beginning of 2007 - and we are guessing about 15,000 foreclosures.

That number is still to come from DataQuick. We will be online with it when we get it.

Last week on deadline I had a quick conversation with Mike Lyon, head of Lyon Real Estate, in which he talked about approximately 3,000 homes presently in escrow in El Dorado, Placer, Sacramento and Yolo counties.
He said that number, which they call in the trade pending sales, are at 2005 levels. That means sales volume is at a high not seen since the boom, he said.

And more than half those sales are bank repos.

Here is the press release his firm, TrendGraphix, put out today. It explains in more detail, in his words, what he was saying last week when I caught him for a moment.

Many of you are already very familiar with these ZIP Code charts. For those who are not, this is a way to see what is selling in your neighborhood and how it compared to the same time last year. The prices per square foot tell a lot about how different neighborhoods are faring.

This just arrived at The Bee from a Roseville veterinary clinic.

Two Rottweiler's left without food or water for at least six days.
Found abandoned in back yard of bank repo home.
Male is 7 years, 72 pounds. Female is 9 years, 67 pounds.
Very mild mannered, they understand and obey basic commands (sit, stay, etc).
They appear to be dog friendly, they played with two small poodles.
Very affectionate, will sit in your lap, lick your face, etc.
Loving and people oriented dogs.
Contact Johnson Ranch Veterinary Clinic, Karen Hanson, D.V.M.
9260 Sierra College Blvd. #250 Roseville, Call 916/774-6630

What is Sidney B. Dunmore, the former owner of now-bankrupt Dunmore Homes, thinking?
I had a long phone conversation with him about three weeks ago for the story that is running today in The Bee. My colleague Dale Kasler and I were not able to put even a fraction of what he said into the print version. But here is a lot of what he had to say during the conversation, in his own words.

On what happened to his business

It is a function of what is going on in the economy right now. We are in the worst housing crunch I have ever seen in my career. It is the worst it has ever been ... A lot of people are going through this right now. They are not at the stage we are. They are hanging on. For how long? We were the first ones in. The banks were in disbelief and did not believe what I was telling them about how bad it was, how bad it was going to get. I believe they believe it now.

The timing seemed right, but it turned out to be exactly wrong.
I expanded the business because things were doing fabulous. We borrowed to do that and all of a sudden the market turned down, and it turned down in a way that nobody foresaw.
There are a lot of guys, I won’t name names. Some others I know are in deep trouble, severe trouble. They are hanging on by their fingernails. Will they survive? I hope so.

On selling the family business for $500

We did what we thought was in best interests of company, our employees and our creditors. It was not my first choice. I agonized over that. Hell, the thing has been in my family for 55 years. The last thing I wanted to do was sell the company. There was nothing else I could do to make it work any other way.

On the origins of the family business

My dad started in 1953. It started in Orangevale. It was very rural and that is where they started. They built starter homes in a project called Kenneth Meadows, and Woodmore Oaks off Fair Oaks Boulevard. Woodmore Oaks Drive is stuff we did.
Then they started doing stuff in the south (Sacramento) area, in the late 60s and early 70s. They were down in Rancho Cordova area, all through there. All the Sunrise Countryside, Sunrise Estates, the whole Sunrise area. That is where we were located.
I started running the company in 1977. My dad retired the first time in 1980. We did fine in those times. We built the company up by the late 70s into one of the top three builders in town. There was MJ Brock and Sons of Southern California and Elliott (Homes) and there was us. We were the largest builders in town.
That was in the late 70s, a big boom time.

On what he is going to do now

That is the 64-dollar question. I do not know right now. I have got to work my way through what we are going through. I am not in charge of the company. I have the land company, two pieces of land, one in North Natomas and one in Granite Bay.
I am trying to assess what I want to do. I look back, a couple years ago in 2004, I was approached by a number of publics (publicly-traded national builders) to buy the company in very, very large numbers. I talked to my banks and employees and everybody was a little freaked out that I would think about that.
Hindsight being what it is, I should have done it and retired.

Honestly, I do not know. What I would like to do at some point is get back in and do what I was doing. I am not ready to retire. I am not a good enough golfer to go out and play golf five days a week. Hopefully, I will be able to have opportunities to do that. I have got some people who are very, very pissed off at me, but I have gotten a lot of calls of support from a lot of people .... This is a bad, bad situation all the way around. I am very upset about the whole thing, as are a lot of people.

On expanding into the Central Valley

We were thinking: where is the next area we can go to that will provide affordable housing? Where you can buy a house at an affordable price and permits and fees are not a killer.
We asked where is the next area? We looked at good land deals in Ceres. We got a great price, built there and sold half of the project to (builder) K. Hovnanian.

And then we looked at Dinuba and Fresno and Bakersfield. Those are growing communities and affordable. People were commuting from Southern California because they cannot find housing. This makes sense.
The timing was just the wrong timing. You hit timing in your business cycles. You are either low on land or heavy on cash and looking around, and now acquiring and expanding. We were in that mode, acquiring and expanding.
We had burned through land we held through the 1990s. What are we going to do next? We have to buy some or we have to expand the company. People like to work where you have a lot of land. It gives them a feeling of job security.

On not seeing the housing bust coming

We went into this in better financial shape that we had ever been in before.
We have never seen pricing drop 30 to 40 percent and sales velocity drop 50 percent. That is not a scenario anybody is building into their business.

Nobody saw it coming. None of the banks, none of the builders. Not the The Fed (Federal Reserve).

When we made decision to shut it, our subs were surprised. They wanted to keep going. I did not want to get in any deeper. I told them I did not want to owe them even more.
We owe a lot of guys money, but I am not getting nasty phone calls and hate mail. I am getting support from people. People have said Sid, you get back into it we will be there with you.
Hopefully, at the end of things I am able to come back and rise from the ashes and do what I love to do. It is not my intention to retire, that is for sure. We will see what times hold and go from there. That would be my hope, that I would be able to do that. I spent 30 years building a reputation that I thought was a pretty good reputation. It took about six months to get it smacked down.

Sacramento Bee photo (2007)
Dunmore Homes image courtesy of Dunmore Homes

Thanks one and all for the e-mails and personal insights about the Sacramento-area rental market in response to a posting about three weeks ago.

The story will run Sunday, but just a few hints ahead of time: Reality kind of surprised us. I expected that 15,000 foreclosures since Jan. 2007 would have to tighten supply and thus push rents up. Instead largely the opposite has proved true. Rents have remained flat and supply remains ample, even expanded.

What gives? The experts told us that investors are buying foreclosure properties and renting them out. And people who can't sell - or refuse to sell at these prices - are renting out their houses. Builders, too, who can't sell condos are putting whole complexes on the market as rentals.

Others weighed in, saying people are leaving the area after losing their homes. A tight economy has more renters moving back in with mom and dad and some of those foreclosed households have actually bought a much cheaper house just before walking away from the one they bought in 2005.

All across California and the West rent is going up. But for the most part depending on the neighborhood and the type of rental that is not the case here. The Sunday story will explain it all. Thanks all, for the help.

I shot this video of Tapestri Square while walking to work in Midtown this morning from the Broadway light rail station. It is one of those emerging hip new places to live in Sacramento. We wrote a brownstones are coming to downtown story a little over a year ago that featured this project and another called Sutter Brownstones and 27th and N streets.

That one just opened, too, and has reportedly sold six units. I will try to swing by that one and show you its look, too.
Costa Mesa-based Hanley Wood Market Intelligence says Tapestri has sold 6 units in its first release of 13. It plans 58 homes altogether.

P.M. Update..Here is a look at Sutter Brownstones:

It has been a busy week so cheers to Friday, and catching up with some of the news. The Pew Charitable Trusts has released Defaulting on the Dream, a report on what states are doing about foreclosures. I confess to not reading it yet, but The New York Times weighed in with a
story that will provide a fast overview. (If it links to the ad, hit the skip the ad button in the top right corner).

Here at The Bee we expect to have a story early next week detailing the first quarter foreclosure situation in the capital region: Amador, El Dorado, Nevada, Placer, Sacramento, Sutter, Yolo and Yuba counties. Expectations are the numbers will be more of the same: still rising.

We just got the numbers for March from DataQuick and will be updating here and online during the day. A fast look shows 2,522 sales in the eight-county region during March, up from 2,162 in February. So there has been a typical seasonal February to March bounce.

Sacramento County sales in March are up 19.3 percent from February. But DataQuick says the average bounce over the past 20 years has been 36.5 percent. So things are still lagging out there compared to history.

A quick tally shows 6,652 sales during the first quarter in the region - and 5,573 foreclosures. More to come.

There are a lot of policy makers in this capital town who remember the late 1970s as a time when solar power seemed like it would save the world. Architects were working it into their designs and learning about it in school. Old hippies were starting companies to install solar, and it looked to all involved like an inevitable movement.

Then something happened and almost 30 years went by. Now everyone is talking about solar again.

The California Energy Commission has just released
results of a survey on attitudes toward buying an energy-efficient home.
Here are some key findings in the CEC survey, run by Santa Monica-based opinion researchers Fairbank, Maslin, Maullin & Associates:

- More than half of potential home buyers in California say they would buy a new energy-efficient solar home in order to lower monthly electric bills.
- Seventy-four percent said homebuilders in California should make rooftop solar systems a standard feature.
- Those most likely to buy a solar electric system are between the ages of 18 and 49, college-educated and see themselves as environmentalists with a moderate to liberal political outlook.

This is all in the introduction, but results come from two sources. One is a survey from May 18 to May 26, 2007 of 600 recent buyers of single-family homes in San Bernardino and Riverside counties, the Central Valley and the Sacramento region. It has a 4.1 percent margin of error. The survey also took into account several focus groups in Riverside, San Diego, Fresno and Concord.

I had a cup of coffee this morning with Folsom homebuilder Robert Walter, who is promoting a May 8 Green Home Expo being sponsored by the North State Building Industry Association. It is the first by a regional home builder trade group in California and will open at the Sacramento Convention Center.

Walter is soon to start building a energy-neutral house in Folsom, with all the newest energy-efficient extras. He chairs the BIA committee running the event.

The BIA dreamed it up about 18 months ago to educate its builder/contractor members on the newest green-building techniques and public policy-making related to energy efficiency at home.
The event also has sessions for home owners - how to evaluate your energy efficiency at home, how to be greeen on a budget and everything about tax credits for energy-efficient remodeling.

Builders will learn more about utility rebate programs for solar, how to market and sell green homes and how to build a local workforce of contractors skilled in green building techniques. There is also a big exhibit area.

To put it more simply, here is Walter:

A Sacramento home remodeler is on his way to top office in the National Association of the Remodeling Industry (NARI).
William Carter, owner of William Carter Co., has been named president elect of the group, which has 7,700 member companies and is based in Des Plaines, Ill. That puts Carter on the way to being NARI president next year.

Another Sacramento remodeler, Nick Kress of Standards of Excellence, also got a national post. He was appointed vice-chairman of the NAR national awards committee.

Both are long-time members and former presidents of the NARI Sacramento chapter.

Forbes Magazine again ranks the 10 riskiest real estate markets in America. Guess which one is number seven?

Who are the people in this picture? Those holding certificates are some of the newest homeowners in Sacramento - people who built 35 of their own houses under the direction of nonprofit builder Mercy Housing California. The project is called Glenwood Homes, near Stockton Boulevard and 50th and 51st avenues. The homes were built under the Mercy Mutual Self-Help Housing program - and a lot of sweat by their new owners. Salute....

Photo courtesy of Mercy Housing

Last week we reported that the first quarter of 2008 saw the fewest new-home sales in more than a decade in the Sacramento region. Total sales: 1,304.

Here is a list of sales by the top 10 builders during the first quarter in El Dorado, Placer, Sacramento, Sutter, Yolo and Yuba counties. The source is The Gregory Group, a Folsom-based consultant to the home building industry.

1) Centex Homes, Dallas, 228.
2) Beazer Homes, Atlanta, 131
3) D.R. Horton, Fort Worth, 113
4) Lennar Communities, Miami, 87
5) Morrison Homes, Bradenton, Fla., 74
6) Meritage Homes, Scottsdale, Ariz., 67
7) KB Home, Los Angeles, 59
8) Del Webb, division of Pulte Homes, Bloomfield Hills, Mich., 58
9) JMC Homes, Roseville, 45
10) K. Hovnanian Enterprises, Red Bank, N.J., 45

... Just back from Capitol Mall in downtown Sacramento and an interview at 555 on the regional apartment market. Walking from the 8th and Capitol light rail stop provided a good view of the two big office buildings going up there.
Home Front pleads guilty. It cannot go past a construction site without gawking.

U.S. Bank Tower

Bank of the West Tower

This came in my mail at home a couple of days of ago.
Anyone know what this is about? In this market as in most things by mail or phone I follow the old adage: if it seems too good to be true it probably is.

Transferred executive looking to buy a home in your neighborhood.....

Dear friend,
We are a firm that relocates transferred executives from around the country and are looking to quickly purchase a luxury home in your area. (Blogger's interruption: Luxury, that killed me). We noticed your home and would like to know if you are interested in selling.

The letter asks the receiver to contact the writer's assistant Pat at 970 area code to give the necessary information we need to make an offer on your property.

P.S., it says. If you are serious about selling, please do not hesitate to contact us as our window of opportunity is closing quickly. Finally, says this letter: We are not Realtors. We are not looking to list your home. We are very serious buyers.

Anyone else getting these?

Have you walked away from your house yet? Been surfing Web sites that tell you how to do it and not to worry so much about consequences?

These are not idle questions in regions like Sacramento, much of the Central Valley and that whole swath of instant California suburbia that calls itself the Inland Empire. There are thousands upon thousands of people in these places who go to bed each night wondering why they make $3,200-a-month house payments for a house that has lost $150,000 to $200,000 in value and might take years to come back.

Many are in their late twenties and early thirties who see their friends paying $1,300 for a nice apartment and taking trips to San Francisco. They, meanwhile, have a mortgage on their shoulders that demands every last penny, and for what? A house that is still losing value.

For what it might be worth here is a
column by real estate writer Kenneth Harvey of The Washington Post that ran in another epicenter of this issue - Florida - this morning. It outlines the price of walking away and provides food for thought. Good luck.

One morning last summer the phone rang here at the office and on the other end was a Sacramento woman concerned about the tone of our real estate reporting. She thought we were negative and needed to write more about the positive things happening in the market.
It happened that she had recently listed her house for sale.
I listened and she made points about it being hard enough to sell without the newspaper scaring away buyers.

Then I happened to ask where she was moving.
That started one of the more goofy episodes of journalism I have been involved in over 30-some years. (And in my cub days at The Fort Wayne Journal-Gazette I wrote a 1975 story about a family pet rabbit in Indiana that liked to watch television. It still hurts to remember).

Anyway, I am talking about the story last July of Cathy Del Brocco and her search for a $150,000 house in one of the best towns in America. It really hit a nerve in expensive California where $150,000 might buy you a shack in the woods. And do not think it includes a kitchen sink.

It turned out she had seen a Money Magazine story that called
Holland, Mich., one of the top five retirement towns in the U.S. And after checking out Las Vegas, Orlando and Midtown Sacramento and then ruling them out, she flew to Holland and looked at houses. She did not know a soul there; it was a move based on a magazine recommendation.

I wrote this story about her, which was discovered in Holland and led to invitations from the mayor to lunch when she arrived and all kind of other surprises. Two Michigan newspapers wrote about the Californian giving it all up to move to Holland. The town was already swelling with pride that Money Magazine had noticed it; now it had a Californian coming because of that.

Cathy Del Brocco became a kind of celebrity there.

Her only problem was she lived in Sacramento and could not sell her house to save her life. In the end it took her nearly nine months.

She called late last week and said she had finally sold it and was moving to Holland. She thought she was probably forgotten there after all this time.

No. The mayor again offered an invitation to lunch and a tour of the city. He said he would reserve her a Dutch costume and hoped she could sit as a guest of honor on the city float in the May Tulip Parade.

Most amazing at all, she never found a $150,000 house.
The whole time she had to cut her price in Sacramento to sell somebody in Michigan was doing the same. She bought a house for $114,000.

The full story runs Friday in the print version of Home Front. Who knows what will happen when you pick up the phone.

Photo courtesy of www.infomi.com

These are times to test the fortitude of mortgage bankers. Their loans are going bad, the financial system is scared to death to let them make more and the knives are out in Congress and state capitals.
Lawmakers everywhere are dreaming up a thousand new ways to increase regulations and tighten the grip on their business.

I just had a short interview with Dustin Hobbs, spokesman for the California Mortgage Bankers Association. The Capitol is awash in bills and amendments to those bills to change the landscape of mortgage lending.

There are bills to make them try harder to avoid foreclosing on their borrowers and bills to ban them from steering borrowers to loans that get bigger instead of smaller. The bills, as their supporters say, are about bringing back common sense to lending and restoring accountability for bad loans throughout the global financial system.

As always in politics, no one is opposed to that. It is the details that worry mortgage bankers. In a nutshell, they are arguing that too much regulation can make the current credit crunch even worse by making the investors even more reluctant to provide capital.

Hobbs argues that this could make it even harder for people to get home loans and prolong the housing slump.

There are counter views to that, of course, and all sides are aggressively working your California lawmakers beneath the Capitol dome. I am hoping to go a little further into this in the Friday Home Front column this week.

In the meantime, Hobbs offers a look at what the industry is thinking in this video:

Capitol photo courtesy of wedrivecalifornia.com

In the space of 90 minutes this morning, I have received a call and e-mail from real estate brokers about vacant houses being stripped by thieves.
From Ed Favinger, broker with Realty World, Franklin Real Estate Group and Haven Properties Management in Citrus Heights:
- I have now been involved in two transactions where a house is vacant and thieves have come in and stolen all the copper water lines from the house.

In one case it cost my sellers over $5,000 to fix it. Rapid Rooter plumbing also informed my seller that when they came to his house to give him a bid, they had just finished a job across town with the same problem.

I am now in escrow on a home and the listing agent just informed me of the same thing is happening here. I am representing the buyer in this transaction.

I wonder how many other homes in this area are affected and where in the hell do these thieves sell this stuff?

And this from commercial real estate broker Mary Collins in Rio Linda (calling by cell phone from Interstate 80): A week ago a real estate agent posted a bank-owned sign in front of the house next door to me. Last night thieves came in and stripped it.
That house lost 50 percent of its equity overnight because of that sign. They take the lighting, the copper and the air conditioning.

I asked both how owners can protect themselves:

Don't put bank-owned out front, said Collins.
Added Favinger:
I would put a really heavy duty lock on the crawl space.
I would let the neighbors know on each side of the house and across the street when they might expect to see a trade person there.
I might even put some kind of loud alarm system on the crawl space entry.
Make sure your home owner insurance is up to date and covers this kind of thing.