Home Front

It occurs to me, that in terms of the housing market, today is a day to celebrate! For today is June 30, last day of the first half of 2008.

 Oh yes, you should have heard all the experts in the last six weeks of 2007, the economists, the analysts, the consultants to the home builders, peering into their crystal balls about the new year. They said 2008 would be difficult, a time of falling home values and rising foreclosures, a time when the much-wished-for bottom would remain elusive.

 They said the first half would be the worst.

After the first half things might - repeat, might - start to show some signs of improvement.

 Even the third quarter might be bad, but it was always possible that during the second half of 2008 we might start to see that the worst was behind us now.

 So today let us bid farewell to the first half of 2008! It was a bell ringer, all right.

 Out in the suburbs we all saw our home values fall like no tomorrow. During the first half we we endured not one, but two discouraging free falls in the stock market - and who knows what today will bring. We saw the bailout of Bear Stearns. Foreclosures reached historic highs with no signs of peaking. Banks and lenders grabbed a 51 percent market share of home sales in the capital region. Builders laid off more staff and several went into bankruptcy.

  Of course, that's only bad news to people who own or are selling houses. The first half of 2008 proved a party for buyers. Investors rushed back in. First-timers found deals. Year over year sales finally rose again in the region for the first time in three years. And there are some who believe we're already at some kind of bottom here in terms of sales.

No one know what the future holds. But the immediate past was just as the experts, analysts and consultants predicted. I say put out the champagne. We've arrived at the end, just hours away now. The first half is history!

Image courtesy of www.ndesign-studio.com

I couldn't help but ask about the origin and purpose of those really loud jackets last week when Tom Kunz, president and CEO of Century 21 LLC., stopped by The Bee's offices for a conversation about the real estate market.

 Friday, we ran an abbreviated version of his response in the print edition Home Front. But the entire longer story was funny, interesting and quite business-like. This is, after all, earth's largest residential real estate firm. (FYI, this picture above is of Kunz on the left giving an award to a pair of Realtors from Australia. Hint, I think you can tell what firm they're with by those loud jackets).

 Here is CEO Kunz's entire answer.

"It's a marketing tool. That's all it really is. When Century 21 was founded in California in 1972 some of the competition in the marketplace was a company by the name of Red Carpet and they had a red coat. And so at the time it was kind of the thing to have.

"Our original colors were maroon and brown. It was something that set us apart and because we marketed it so well for so many years it still stands out. If you watch any TV show or a movie where they want to show a salesperson, a real estate salesperson without a for-sale sign or anything there, they usually call us and see if they can use our coat.

"For a number of years it went away, from about 1992 to about a year and a half ago. Yet it was still recognized as a professional real estate person. When I took the job (in 2004) and we started investigating: do we bring it back, it was one of those hard tasks you have to look at.

"From our agents' standpoint it was either they like it or they hate it. There's no gray area in between. The issue is it doesn't matter if you love it or you hate it. It's a marketing tool.

"When I walk through a neighborhood or get on a plane...I average one and a half to two leads a flight because I dress this way. When I get in because of of what's going on in the industry, when they seem me in this coat they know I work for Century 21 and they want to know: 'What's going on? Is it really going to hell in a handbasket. What's going on?'

It's our Nike swoosh," said Kunz.

(For the record I saw part of the the 1980s movie "War Games" over the weekend. Sure enough, Matthew Broderick's mom was a real estate agent and she wore a gold coat. And who can forget the goofy gold coat scenes in the Adam Sandler golf movie, "Happy Gilmore.)"

Image courtesy of Century 21 

 

 

 

 So I am out taking a lunch walk today in Midtown Sacramento and happen to notice two pieces of paper posted in the windows at 1631 26th St.
  I know the house as the childhood home of Herb Caen, the late San Francisco Chronicle columnist who wrote about the city by the bay from 1938 until his death in 1997.
Sure enough, the paper was what I thought. a foreclosure.
 Caen grew up in the house and often wrote fondly about living in the Midtown neighborhood.
 His family hadn't owned the home for years.
 I called the listing agent Paul Boudier, of Keller Williams Realty in Roseville, who confirmed the foreclosure. The house will come onto the market for sale soon, he said.
"We are going through the process of establishing a price and gauging the market," said the agent.
Caen was born in Sacramento in 1916. His "three-dot" Chronicle column was a staple of San Francisco for almost six decades. Photo courtesy of sfgate.com

Here is the house at 26th and Q streets:

This just in from the AP:

Thursday June 26, 3:17 pm ET

Bank of America plans to eliminate 7,500 jobs after Countrywide deal closes

This morning California Attorney General Jerry Brown filed a lawsuit in Los Angeles County Superior Court against the nation's  largest home loan lender, Countrywide Financial Corp. of Calabassas. He alleges a host of deceptive practices to sell loans without regard to borrowers' ability to repay.

 The announcement is here. A copy of the lawsuit is attached to the news release.
 
My online story is here and drawing a lot of reader comments. That's not surprising. Countrywide was the biggest lender in the Sacramento region from mid-2005 to mid-2007, according to DataQuick Information Systems.

I called Bank of America, which is taking over Countrywide on July 1. The bank has no comment on the California and Illinois lawsuits.

Image:www.nohoartsdistrict.com

Sacramento's Railyards received all the regional press this weekend for winning $47 million in Prop. 1C housing bond money. Altogether $388 million was granted statewide, including $3.3 million by the Placer County Redevelopment Agency for a Kings Beach housing project.

The state Housing and Community Development Department released this statewide listing of awards this afternoon as well as a media release about getting the money on the street.

Perhaps you're wondering if the government is spending your money wisely. HCD provides this Web site to show where the money is going and what's left to allocate.

 

 

 

      This from Harvard University today and not very cheerful, either:

 New York, NY - The nation is in the throes of a housing downturn that is shaping up to be the worst in a generation, finds The State of the Nation's Housing report issued today by the Joint Center for Housing Studies of Harvard University.

While the falloff in housing starts, new home sales, and existing home sales already rivals the worst downturns in the post World War II era, home price declines and mortgage defaults are the worst on records that date back to the 1960s and 1970s.

"The slump in housing markets has not yet run its full course," concludes Nicolas P. Retsinas, the director of the Joint Center for Housing Studies. "Mortgage rates have barely responded to the aggressive easing of the Federal Reserve, the supply of for-sale vacant units continues to grow, and much tighter underwriting is locking many would-be homebuyers out of the market.

With home prices falling in most metropolitan areas, homeowners are tightening their belts, remodeling less, and staying on the sidelines."

Construction starts for new homes have fallen sharply across California this year as foreclosures have especially battered it and Florida. As the California Building Industry reports in this media bite today, our own Yuba and Sutter counties have seen California's steepest drop in home starts.

From January through May, they're down 77.2 percent from the same time last year. The only regions close - both in the category of 70 plus percent drops - are our neighbors in Vallejo-Fairfield and Santa Rosa-Petaluma. Why? Foreclosures, a glut of unsold housing and high gas prices is a good guess.

The Sacramento region (El Dorado, Placer, Sacramento, Yolo counties) has a 48 percent drop, roughly about the state average.

Statewide, the BIA still predicts the fewest home starts for 2008 since it began keeping records in 1954.

 And Monday, Alan Nevin, chief economist for the Sacramento-based home builder trade group, said prospects for "major recovery" by year's end looks less likely.

He put out a bullish forecast in January, saying the market would start to pick up in the second half of 2008. He admitted then he was being contrary to a lot of more gloomier economists. Now he's scheduled a one-hour address Wednesday at the Pacific Coast Builders Conference in San Francisco. All bets are on eating crow and having to become a gloomier economist. It was a nice try, anyway.

 

Images: Eaglerealty.org, bp3.blogger.com

This morning I took a long ride with Sacramento County Sheriff's Deputy Mark Habecker, seeing a new intersection where the worlds of real estate and law enforcement meet.

The deputy and five others spend much of their time posting eviction notices or ensuring that people are gone from apartments for not paying their rent. But now, rising numbers of foreclosures in the region have given them an extra duty: posting eviction notices and occasionally clearing squatters from houses repossessed by banks.

I will have the full story on this later in the week. Meanwhile, in the video below Deputy Habecker is posting an eviction notice at a two-story house on Bewicks Circle in Natomas. About a week from today he'll return, make sure no one is there and hand over the house to a representative of the bank.

 

Below is Deputy Habecker explaining how foreclosures have change his routine.

 

 

I thought I'd share this, from a reader's email that just arrived this afternoon. With so many foreclosures in this region's it's hard to avoid getting hit.

My fiance and I just found out via a "Notice of Trustee" sale that our landlord (who apparently hasn't been paying the mortgage on our rental since February) that the unit we rent was sold back to the beneficiary of the mortgage.  We are now playing the waiting game (we have not been contacted by the bank - and we don't know which bank now owns the home) to find out when we will be forced to move.  Seems to be lots of conflicting info over how to handle this situation, but the bottom line is good people who are paying rent on time, keeping up a property, and trying to save for a home of their own are also casualties of the recent upswing in foreclosures.  The worst part is, that we found out by accident we were never contacted by our landlord, and had we not accidentally found out we would have probably found out when the bank served us with eviction papers.

 

 

 Federal prosecutors Thursday announced their national crackdown on mortgage fraud - and local offices, including Sacramento, made their own announcements.

 Here is today's Bee story on arrests, indictments and guilty pleas in the Central Valley and East Bay. Much more detail is available in this news release from the U.S. Attorney's office for the Eastern District - covering 34 inland California counties from Bakersfield north to the Oregon border.

 For those who like a closer look, here is DatQuick's close-in view of May home sales, median price paid, and median price per square foot - both this year and May 2007.

The first online May sales story is here.
I've been on the phone much of the morning with analysts who seem very encouraged by Sacramento's strong sales showing. It's harder to find consensus on the longer-range question : can it keep up with still more foreclosures dumping homes onto the market.
 
Some says yes: the buyer pool is deep and broad. Others say so far, so good and have their fingers crossed.

 DataQuick Information Systems just minutes ago released these May sales numbers, showing that sales of all new and existing homes combined in the region were up over the same time last year - for the second straight month.

 Sacramento County, the biggest sector of the capital region's real estate market, led the pace with a 30.8 percent year-over-year gain. In fact, the county has almost singlehandedly pulled the region into positive sales territory. In May, only Sacramento, El Dorado,Yuba and Yolo counties showed year-over-year gains.

 The numbers raise the big question: what's it all mean in terms of recovery? We will post online soon and have lots of analysis in Thursday's paper.

Tom Caruthers, owner of the Sacramento area's Federal Energy Services - which helps line up financing and contractors to rehab foreclosed homes - sends these before and after photos. What a difference after a few thousand bucks and a new owner.

Before


After

Lyon Real Estate released its May sales numbers today for the capital region.
 Highlights:

• Sales of existing homes up 11 percent from April.
• Average sales price is $276,000 compared to $472,000 in June, 2006
• Inventory of unsold homes 16 percent below same time last year.
• We're not at the bottom yet; defaults are still rising.

DataQuick Information Systems also released its May report today for Southern California.
 Highlights from the Southland:

• 37 percent of sales in six-county region are foreclosures.
  
• It's 56.6 percent in Riverside County (very similar to story in Sacramento County).
• Foreclosure activity at record levels.
• Use of adjustable-rate mortgages at six-year low.

 

A city starts with a house and then more houses that become a neighborhood.

How people feel about that neighborhood depends on how it looks.

And part of how it looks depends on the care the city puts into it.

This is a way to say three cheers to the City of Sacramento for this lushly-planted new median island on Center Parkway south of Mack Road. It's filled with freshly-planted trees and thousands of day lilies that give a cheerful aura to the street near Consumnes River College.

The neighborhood has seen its share of distress from the region's housing crisis. The city's efforts show that it's a neighborhood worth caring about. In Home Front's eyes, that adds up to a city worth caring about.

 

I spent several hours this morning with Sacramento contractor John Kukis, prowling around in foreclosed homes. Kukis is a self-described "repo contractor" - a construction niche that's keeping him running and earning money while it lasts. He did the same during the 1990s downturn and goes back to regular home remodeling when the storm passes.

  We're doing a story soon on this born-again contracting phenomenon. Kukis said he spends 12-14 hours a day doing bids and overseeing jobs for real estate agents who are marketing thousands of area homes on behalf of banks that repossessed them.

 Often, banks try to sell "as is." But sometimes it takes $7,000 or $10,000 to spiff up a place: fresh carpet, fresh paint and new linoleum.

Vandals are wrecking bank-owned homes, too, Kukis said.

 We went to one in South Sacramento's Meadoview neighborhood where someone bashed in the back window and hammered on the kitchen and bathroom cabinets. The carpet was dirty and covered in glass. The cabinet doors were all over the place and the walls certainly needed some fresh paint.

There's something rewarding, Kukis said, about finding a place that has endured so much trauma and making it livable again. It's a new side of the region's foreclosure story that's proving good for business. Here, take a tour of one house that's being restored:

Here's Kukis talking about what he does:

I did a post here about six weeks ago speculating that 2008 might turn into a presidential election that hinges on housing. The New York Times weighs in this morning with a similar theme regarding who will do what about foreclosures.

 
I had an interesting interview this morning with two executives with a Southern California developer that just closed escrow Thursday on 510 acres in Lincoln.

  Upland-based Lewis Group of Companies plans 2,000 homes on the site just west of
Lincoln Crossing, the big 2,900-home project that mostly sold out during the housing boom.

 Even they aren't sure when construction begins. 2011 at the earliest, they figured. The market will tell them when to start, they said.

What's most amazing: this is the first big forward-looking land deal I've heard in a long while. Most developers and builders that make news are trying to unload their land - or keep the banks from repossessing it.

 This privately-held developer, known for deep pockets and long view, is betting that job growth will resume in Placer County and make a market for more housing. They said most of the people who move into their development are going to be commuting to Roseville and other places along Highway 65 - NOT to downtown Sacramento.

I'll have the whole story in tomorrow's paper.

We keep looking for these little signs that the real estate market isn't going to stay in the doldrums forever. This appears to be one of those signs. Here's the Lewis logo:


Images: www.farm1.static.flickr.com
www.vvnaacp.com

A lot of you out there in the trenches selling houses
may not have heard this earlier in the week:

 The U.S. Department of Housing and Urban Development is again (a third time in less than a decade) trying to ban the down payment assistance gifts developed and championed by Sacramento-based Nehemiah Corp. of America.

We'll have more on this in the print edition of Home Front tomorrow. In the meantime, here is the HUD version of events, followed by Nehemiah's response.

Reading the media accounts and blogs it didn't seem HUD was given great odds of prevailing. Agree or not with the program, one thing Nehemiah and similar providers of down payment assistance have been able to do is rally the political and business sectors for support.
 
The New York Times had this account.
The Wall Street Journal also covered it here.

Not as much as it claims, according to the Office of Comptroller of the Currency, in reading this dispatch from the Housing Wire.

                                                                                                    New York Times photo
Hope Now is the much-publicized effort by the Bush Administration and the mortgage industry rolled out late last year to freeze interest rates and help people stay in their homes.
 
  It was announced just three weeks after Gov. Arnold Schwarzenegger announced his agreement with subprime lenders to work harder to save people from foreclosure. 
 
We wrote about that effort's lack of spectacular results here in May.

About three months ago Hope Now Executive Director Faith Schwartz came to The Bee for a  Q&A. She counseled patience and said the industry was ramping up to help people as fast as possible. Apparently, the OCC believes otherwise about the results of it all.

The Mortgage Bankers Association said last week in a press conference they believe Hope Now has helped in some places, notably the 20 states where foreclosure starts have leveled off and started to fall. It would be nice if that started to become a trend in California.

For sure, this is not something that would-be home buyers want to hear.
 This morning, government-backed mortgage giant Freddie Mac announced that interest-rates for the benchmark 30-year fixed-rate loan jumped to 6.32 percent.
 
That's highest in eight months. Just last week rates averaged 6.09 percent.

 Bottom line, someone taking out a $250,000 loan this week is paying $37.32 more a month than the person who got the same loan last week. It's not the end of the world, but it's not what you want to hear while you're sitting at the loan officer's desk.

 Freddie Mac officials attributed the jump to fears that the Federal Reserve is going to start raising interest rates again to fight inflation.

The Placer County Association of Realtors releases its May statistics here for existing home sales.  Two things jump out:
 
 1) Fewer sales than the same time a year ago. April had more than in April 2007.
 2)  Placer County remains much more expensive than Sacramento. The suburban county, which isn't seeing near the extent of bank-owned real estate as in neighboring Sacramento County, shows slightly less than 10 percent of its sales priced below $250,000.
  More than half of May sales in Sacramento County are below $250 K.

 If you like numbers, check out the link: PCAR has plenty for you to pore over. Normally, Home Front wouldn't be so obsessive about numbers. But these days people are like ancient soothsayers, looking for signs and omens to divine the region's real estate future: bottoming out, still slipping or something like that Bill Murray movie: Groundhog Day.

Image courtesy of www.kara.allthingsd.com

The Wall Street Journal takes note of Sacramento Association of Realtors May Sales Report  in a real estate blog post today -  "Foreclosures Make Up Majority of Sales in Sacramento."

  The SAR says almost two-thirds of May sales were bank-owned homes.
 
  Lots and lots of comments from across the country on this entry, analyzing what it may or may not mean that we're a bank-owned real estate town now. Including this one from a Sacramentan:


  The Sacramento Association of Realtors May statistics show  37 percent of sales were for houses under $200,000.

  Make that 56 percent for houses priced $250,000 or less.

The ZIP Code breakdown is here.

Image courtesy of vickilloyd.files.wordpress.com