I am just back from early morning shopping observation in Elk Grove and heard an interesting complaint about pre-dawn etiquette for retailers awaiting the hordes. Early morning shoppers Joanne Hawkins and Gayle Stepanik of Sacramento have one wish for big-box retailers next year: more trash receptacles. The two complained of abundant litter at scenes of their early morning shopping, Wal-Mart in Sacramento and Best Buy in Elk Grove. A visit to Circuit City in Elk Grove confirmed the phenomenon. A small trash receptacle near the front door overflowed with large coffee and drink cups. Coffee had spilled on the sidewalk. An empty can of potato chips lay on the sidewalk. Not pretty.
My colleague Darrell Smith got to cover an actual shouting match at a jam-packed West Sacramento Wal-Mart. Me? Everyone was unfailingly polite at Downtown Plaza, with plenty of elbow room to go around.
One shopper told me she likes to shop there on Black Friday because it isn't too crowded. Probably not what the mall managers want to hear.
What was striking was the lack of frenzy. Shoppers were being careful, deliberate. If the price wasn't right - meaning, if it wasn't deeply discounted - they walked away. If it wasn't something they needed - or really, really wanted - they went somewhere else.
Manuel Vela and Blanca Garcia of Sacramento told that they used to shop late in the season and buy things on impulse. Now they were out early on Black Friday and watching the sale signs closely, and sticking to a budget.
"If I see anything that's on sale, I'll buy it - only if I need it," said Vela, a UPS worker.
"Before, I'd wait until the last minute and not really care (about discounts)," Garcia said.
At the Comic Lounge, a recently-opened comic books and DVD shop upstairs in the mall, owner Roque Yanez opened at 6 a.m., or two hours before the mall officially opened.
He even hired a DJ to turn Black Friday into something of an event. But the morning wasn't off to a good start. He joked that his clientele was probably still "rolling over from Thanksgiving dinner" and hadn't gotten out of bed yet.
Yanez, who's been in retailing for 12 years, said this is the quietest retail climate he's ever seen.
Frugality, bargains and plenty of places to park.
Black Friday unfolded at Sacramento's Westfield Downtown Plaza this morning with less-than-overwhelming crowds and a sense that the economic downturn is for real.
"I'm looking for deals and I'm not buying as much," Deanne Velasco of Rio Linda said as she clutched a KB Toy bag containing a train set for her young son. She runs a crafts business, an industry that she said has been hit hard by the recession.
A little before 8 a.m., the only sense of frenzy was at Forever 21, where 40 or so women were lined up the store's opening. Otherwise, things were orderly, maybe downright peaceful.
Janet Handley of Elk Grove was buying clothing for her two college-age children and acknowledging that things are iffy this year. She's a curriculum director for the public schools in Benicia - a position that she says could be on the chopping block if the district needs to cut back. She's cutting back as a precaution.
"I'm going to do about a third less than what we would normally do," she said.
Robert and Deneen Brown, a Seattle couple visiting family, were done shopping a little after 8 a.m. "We only have three bag," Deneen said. Before, we would have had a carload."
This could be the most dismal holiday shopping season in decades, and the good cheer kicks off officially the day after Thanksgiving.
Actually, as everyone knows, the season has been under way for weeks. The pre-Thanksgiving discounting has been unprecedented, as my colleagues Jim Downing and Darrell Smith reported last Saturday. Some analysts believe all this early promotion could take some of the zing out of the Friday frenzy.
Of course, something even bigger could put a damper on Black Friday: The economy
continues to spiral downward,as this new report today makes clear.
Nevertheless, we'll be all over the story Friday. We'll have reporters fanning out to the area's shopping centers, talking to merchants and shoppers. We'll be blogging and, in the case of the most technologically ambitious of us, even Twittering our way through the day's activities. Look for our coverage throughout the day here at Home Front and at
a special one-day only, everything-must go Black Friday blog we're developing. We'll wrap the whole thing up in a nice journalistic bow in Saturday's paper.
Sacramentans knew a long time ago that the real estate slump was hurting the entire economy. Now Fed Chairman Ben Bernanke is acknowledging that at first, he misunderstood the impact of the subprime meltdown.
In a story detailing the evolution of the financial crisis, Bernanke tells the New Yorker magazine he was "mistaken early on in saying that the subprime crisis would be contained."
It's a loooong story but worth your time.
Just a smart-alecky question from someone (me) who knows just enough about economics to be dangerous:
As I was watching President-elect Obama today name his director of the Office of Management and Budget, I was wondering why this matters. What I mean is this: At a time when the government is pouring hundreds of billions of dollars into various bailout programs - current Treasury Secretary Henry Paulson just tossed in a fresh $800 billion today to unfreeze the credit markets - does it really matter all that much who's watching the budget?
I suppose it's important to have someone smart minding the store, and I realize that the money spent through regular congressional budget appropriations is different from money simply pumped into the system by, say, the Fed. But I still got a chuckle out of Obama's pledge to have his team go through the budget "page by page, line by line" in order to root out waste.
Just seemed a little quaint, that's all.
Sometimes the economic news is about Citigroup or General Motors or some other giant on hard times. And sometimes it's Sacramento losing a mom and pop.
We learned today that Dog Show Specialties, a pet-supply store north of downtown Sacramento, is closing. The last day is Wednesday.
For some Sacramentans, this is an institution. Dog Show Specialties was founded in Southern California 40 years ago and came to Sacramento 28 years ago (My boss notes that this is 196 in dog years). It's located on Richards Boulevard and is a Great Dane among independent pet stores, with 15,000 square feet of space.
Karen Stinson, who manages the family-owned store with her husband, said the business was already in trouble when the Fix I-5 project closed sections of the freeway for weeks over the summer. "That was horrible," she said. Business never recovered after the freeway reopened, she said.
We'll have a little more on this in Tuesday's paper.
Fannie Mae and Freddie Mac made some big headlines recently with plans to modify more loans in their portfolios - to lower monthly payments to no more than 38 percent of a borrower's monthly income.
Now, the two federal mortgage giants, taken over by the U.S. government in September, are urging all lenders to do the same.
Here is the announcement made just minutes ago and the actual letter to mortgage lenders.
Photo: Jessica Kourkounis for The New York Times
The New York Times reports a story about seniors being stuck in their homes because there is no one to buy them. It's one of the more moving stories I've read about the housing bust and the pileup of homes for sale.
"It's lonesome," Ms. Scher said. "So many other people have passed away or moved away. It's very lonely. The children would love me to come up and I would love to, but I just can't sell."
"It remains to be seen whether we have a short-term stress, or whether we're facing a crisis," said Mr. Minnix, of the Association of Homes and Services for the Aging. "We're into brand new territory here. It is deeper and potentially broader."
Sacramento's Nehemiah Corp. of America, formerly the nation's leading source of down payment assistance gifts, has a few thoughts today on reports of slower October home sales in the U.S. (The National Association of Realtors reported 3.1 percent decline from the same time last year and another big drop in median sales prices).
Congress banned down payment assistance effective Oct. 1, agreeing with contentions that it artificially raised the price of homes for those who could least afford it, and had higher default rates. Nehemiah, and much of the real estate industry, however, has long seen it differently as an important sales tool and opening for those who couldn't otherwise afford a down payment.
Here's what Nehemiah president and CEO Scott Syphax had to say in a statement released this morning:
"As we anticipated, the spike in September home sales was short-lived, driven by hardworking Americans racing to take advantage of seller-funded downpayment assistance (DPA) before it was eliminated on October 1. October housing sales tanked, clearly illustrating the reality we now face in a post-DPA market. Foreclosures are on the rise and banks maintain their stranglehold on credit while lawmakers continue to overlook a simple solution that enables eager families to take advantage of depressed home prices, reducing the glut of homes on the market without spending a single taxpayer dollar. We call on Congress to revisit the important role that DPA has played in providing access to homeownership, and urge them to remove the ban."
Here at Home Front we've been hearing more about home builders retooling to build smaller houses. One reason is they can price accordingly to compete with large numbers of heavily discounted bank-owned houses. We put the question this morning to Kathryn Boyce, Sacramento analyst for Hanley Wood Market Intelligence. She answers in this video:
The recession keeps worsening, and accelerating.
That's the conclusion we can draw from this morning's state and local job numbers.
The numbers are pretty bad. The state's unemployment rate jumped a half point to 8.2 percent in October, the state EDD said. Sacramento's unemployment also went up a half point, to 7.9 percent.
For an interactive map of California unemployment, county-by-county, worked up by my colleague Phillip Reese, click here.
Both the state and Sacramento area unemployment rates are the highest since 1994.
The fact that things are getting worse probably isn't shocking. But this might be: Howard Roth, the state's chief economist, said the state's rate has risen 2.5 points since October 2007 - the biggest year-over-year increase since the deep recession of December 1982.
It's hard to find much good news out there. I went to a job fair at Arco Arena this week and there was a 10-minute wait just to get into the building.
Later, as I was driving around Elk Grove Auto Mall for a story, I was struck by the huge slug of unsold cars sitting in the lot of the just-closed Saturn dealership. Signs in the front of the lot still advertised a red-tag sale. The auto industry keeps teetering after its top executives made a less-than-successful trip to Capitol Hill for a bailout.
The stock market rebounded today after word leaked about President-elect Obama's Treasury secretary. That's after successive days of eye-popping losses fueled by fresh fears of a full-scale financial meltdown. (By the way, what were traders thinking before this news leaked out? That Obama wouldn't name a Treasury secretary? That he would name Elmer Fudd? I don't quite understand the roller-coaster mentality of the stock market sometimes).
Keep checking here and at The Bee's home page for updates. We'll also have a complete report in Saturday's paper.
The Sacramento-area housing market did it again. Thanks to continually falling prices and a large supply of bank repos, sales held strong in October. That makes it a seventh month in which sales in the region have been stronger than the same time last year.
Sales were down just a little from September. All the details are here in this early online version of the story. More detail in tomrrow's print edition.
The big news is Sacramento County median sales price for new and existing homes has fallen below $200,000 for the first time since April 2002.
For some time we've been following the struggles of General Growth Properties, the Chicago firm developing Elk Grove's long-delayed Promenade shopping mall, and this bit of news doesn't bode well: General Growth has hired a bankruptcy lawyer.
The Wall Street Journal notes that hiring a bankruptcy lawyer doesn't make bankruptcy imminent or even inevitable. But still...remember that two weeks ago General Growth warned that it might be forced out of business.
Analysts tell us the Promenade will get built some day, by someone. It's too good of a location not to go forward (and the exterior of the mall is essentially done). But with market conditions lousy, it's possible the latest scheduled mall opening (late 2010) will slip. The mall's been delayed three times already.
On a personal note, it's hard to imagine the mall industry without General Growth. I covered this company years ago as a reporter at the Des Moines Register, back when the company made its headquarters in Des Moines.
The unemployment news just gets worse. Today the US government said new claims for unemployment benefits jumped to the highest level in 16 years. The number of people continuing to seek unemployment benefits is the highest it's been since 1982, when national unemployment was 10.8 percent (It's currently 6.5 percent).
California's unemployment rate for October will be announced Friday, and we'll have all the news for you as soon as it breaks (usually mid-morning) online and in Saturday's paper. In September the statewide unemployment rate was 7.7 percent; Sacramento-area unemployment was 7.4 percent
If you're unemployed, live in the Sacramento area and are willing to be interviewed about your situation, please contact me at dkasler@sacbee.com with your phone number. Thanks.
It was an especially bad October for The Bee's parent, The McClatchy Co. Total revenue fell 17.8 percent from a year ago; advertising was down 20.4 percent.
Although McClatchy and other publishers have been hammered by a migration of business to the Internet the past two years, the impact of the weak economy can't be discounted either.
"The economic slowdown continues to hurt consumer confidence and as a result negatively impacts our advertising customers," McClatchy CFO Pat Talamantes said in a press release.
McClatchy's stock price fell to $1.51, down 42 cents, on the New York Stock Exchange.
More on this in Thursday's paper but in the meantime, here's the company's press release on the October numbers.
The more you dive into the auto industry, the more fascinating it becomes. As I'm looking into a story on the economic impact of the car industry's problems, one fact really stunned me: Last year, nearly 30 percent of California's new-car purchases were made with dollars generated by home equity loans. That was three times the US average.
The source is CNW Marketing Research, an Oregon car-industry analysis group.
This year, predictably, home equity is drying up as the fuel for purchases. Only 16 percent of new vehicles are being bought in California with home-equity cash.
Meanwhile, the Big 3 today are still pleading their case to Congress for a bailout. There's also a remarkable op-ed column by former GOP presidential candidate Mitt Romney in the NY Times arguing that it's best to let the automakers file for bankruptcy (You'll recall that Romney's father ran American Motors before becoming governor of Michigan).
An Elk Grove car dealer tells me the biggest problem with bankruptcy is that vehicle sales would vanish because customers would fear that manufacturers' warranties would become worthless. Romney says that can be remedied by having the government stand behind the warranties.
And on it goes...
The Miwok Indians open their $530 million Red Hawk Casino on Dec. 17.
The casino said today it will open to the public at 7 p.m. The Sacramento area's newest gambling palace is located off Highway 50 in Shingle Springs.
Owned by the Shingle Springs Band of Miwok Indians, Red Hawk joins other casinos, including Jackson Rancheria, Cache Creek and the mega-successful Thunder Valley, in the fight for the region's leisure dollars.
Analysts say Red Hawk may experience a less-than-robust opening because of the economic downturn. Much of the gaming industry is slumping, and big construction projects in Las Vegas are being mothballed. On the other hand, there's some belief that the weak economy will keep gamblers closer to home, helping Red Hawk at the expense of the Reno and Lake Tahoe casinos.
A colorful fall afternoon in the neighborhoods: Midtown-style in the City of Trees:
With the heads of the Big 3 automakers and the United Auto Workers testifying before Congress right now about the urgency of a federal bailout, I had an interesting talk with UC San Diego economist James Hamilton.
Hamilton said the role of the auto industry shouldn't be overlooked when we try to dissect the economic meltdown.
He said the economy "was getting along for a couple of years" with a rotten housing market. But things didn't really start to go south until the auto industry began crumbling earlier this year. That helped bring the whole economy to a point that it was vulnerable to the crisis that engulfed the markets in mid-September. Obviously, the mortgage problems were the big catalyst, but the impact of the auto sector's woes were a major factor, too, he said.
More on this soon. We're working on a story on what the collapse in auto sales has meant to Sacramento; it'll appear in the paper in the coming days. Meanwhile, my colleague Mark Glover just reported that another car dealer in the region has folded. This is the eighth to go under this year.
Oh, and by the way - gas prices fell another 3 cents today in Sacramento, to a $2.21, according to AAA. So if you can't splurge on a new SUV or otherwise juice up the economy, at least go fill up the tank in your current car.
DataQuick Information Systems begins its rollout of October home sales with this report from the six-county Los Angeles region.
Highlights:
Gas prices are the cheapest they've been since May 2004 around here. They've fallen a buck in one month alone - a stunning drop by any measure.
So where's the party? Normally this would create a gusher of economic good news. But the housing slump and the financial crisis is so profound, it's unlikely that (relatively) cheap gas will create much of a tailwind.
"The problem is, this is coming too late to prevent the carnage that's already occurred," UC San Diego energy economist James Hamilton told me today. "It's a boost to the economy. I don't know know if it's enough to offset the negative dynamics that are in play."
We'll have more on this in Tuesday's paper, including an analysis on whether car sales will be revived and how long the decline in gas prices will last (Short answer: through New Year's, but then they'll start to move back up).
In the meantime, you might want to look at UC Berkeley economist Severin Borenstein's op-ed piece in today's Bee arguing for a tax surcharge to keep prices from falling too much.
First off....Welcome, Dale Kasler, to Home Front. The real estate - economy interface promises to add a whole new dimension to this blog, which started earlier this year. We've worked on lots of stories together. So watch for this to be a good continuation of that.
Now for the news:
October sales of existing homes reached a seventh straight month of being higher than the same month last year, reports the newest statistics from the Sacramento Association of Realtors and the Placer County Association of Realtors.
In Sacramento County and the city of West Sacramento, sales rose from September, which is pretty amazing given that this is when the market really starts to slow down for the winter.
The trends are all the same, lower prices and higher sales, mostly repos, according to this October news release from the Sacramento Association of Realtors.
Here are the association's summary statistics for the month. Note: 37 percent of sales were under $160,000.
Finally, here are the statistics by ZIP Code for Sacramento County and West Sacramento combined.
Now for Placer County. Real estate agents in the suburbs reported fewer October sales than in September. Apparently, a lot of sales there were lower-end, too, as the median price fell below $300,000 to $294,450.
The October details are all here in the Placer County Association of Realtors report.
The Central Valley and its longstanding economic problems are fascinating. You can pick up some of the most readable stories by traipsing around Fresno, Bakersfield and the smaller towns as well.
I bring that up because Jeff Michael, who runs the Business Forecasting Center at the University of the Pacific, recently began a blog on the Central Valley economy. Today he talks about the FDIC's new plan to cure the foreclosure bug, and as we all know the Valley is foreclosure central. Some of the worst foreclosure rates are in Sacramento, Stockton, Merced, etc.
The lower-income areas of Sacramento city and county continue to take the worst brunt of the region's foreclosure crisis. The Sacramento Housing and Redevelopment Agency has the newest details in this third quarter foreclosure report.
A quick summary:
areas of the county, including Meadowview, Parkway, North Highlands/Foothill Farms,
Unincorporated South Sacramento, and the lower-income areas of North Sacramento
(including Robla, Wills Acres, etc.). Foreclosures have also increased in North and
South Natomas since the previous quarter.
several of the following tables contain fewer filings than shown on the previous page.
2008 were located in the City of Sacramento, just over one-third were located in the
unincorporated county, and just under one-third were located in the other incorporated
cities.
My jaw dropped when I saw this Bloomberg item this morning on the struggling parent firm of probably the two biggest names in real estate - Century 21 and Coldwell Banker.
It's the same old issue of trying to stave off default: falling revenue and huge debt loads.
Unbelievable...
Just about anyone in the Sacramento area could have seen this story coming. If you've driven past a shuttered auto dealership, or noticed those empty strip-mall storefronts, or wondered what happened to your favorite restaurant, you know that retail sales are in bad shape.
The latest government numbers, released today, spell it out in gruesome detail. Retail sales experienced a record decline in October, according to the Commerce Department.
The numbers tell me just how broad-based this recession is becoming. It doesn't matter if you still have your job or don't have to worry about foreclosure; you're hunkering down. We'll have more on this in Saturday's paper. In the meantime, if you missed it, you should take a look at my colleagues Jim Wasserman and Jon Ortiz's story in Thursday's paper about the $240 million expansion at the Galleria mall in Roseville.
And, while we're on the subject of big projects with somewhat unfortunate timing, I'm working on a story about next month's opening of the Red Hawk Casino in Shingle Springs. The facility is opening with high hopes, but gambling isn't immune to the crummy economy.
The casinos in Las Vegas, Reno and Lake Tahoe are taking a beating. The question is whether the weak economy will keep Northern California gamblers closer to home - that is, steer them toward Red Hawk and other Sacramento-area tribal casinos - or will prompt them to stay out of casinos altogether. We'll see. My story will run sometime in the next few days.
This is the time of year in real estate circles when industry people gather with consultants and experts and hope that next year is better. I had a good ringside seat for one of these this week when the Sullivan Group Real Estate Advisors of San Diego offered its fall outlook.
It proved that even a bad real estate market is still fascinating. Some highlights - slightly magnified by humor - about what's really going on in real estate:
Our story on CalPERS talked about the impact the housing market is having on the pension fund. In case you're wondering, CalSTRS' real estate portfolio has held up until now, CalSTRS spokeswoman Sherry Reser says.
The portfolio actually increased in value slightly during the quarter ending Sept. 30, to $21.1 billion. That's partly because more dollars were invested during the quarter. It's also because CalSTRS' investments, mainly in commercial real estate, haven't undergone a thorough appraisal lately.
When that happens, sometime in the next year, there will be surely be some decreases in value. But they probably won't be as dramatic as what CalPERS, which has lots of money tied up in residential land, is experiencing. Residential land tends to be extremely volatile.
"We're not in the same boat," Reser said.
More on this in Friday's paper.
Greetings and welcome. I'm joining that Wasserman fellow on the Home Front blog (I know, I should have brought cookies or something for my first day) and will be focusing mainly on the economy. But while the topic is slightly different, there's a good reason my work will appear on Home Front: Real estate and economics are so closely intertwined these days, it's impossible to separate the two.
Real estate essentially fueled Sacramento's economy for a few years, and now it's dragged us into what's looking like a significant recession. We almost take it for granted now, but I was reminded of this linkage earlier this week when I was attending a real estate forecast sponsored by Sullivan Group Real Estate Advisors.
I met a developer from the Reno area named Skylo Dangler, who was complaining in rather salty language (with a name like that, he figured to be a colorful character) about the current leadership in Washington. Specifically, he was upset that Fed Chairman Ben Bernanke had maintained for quite some time that the real estate downturn wasn't bleeding into the rest of the economy. To Dangler, it was quite obvious that the housing market's collapse would cause significant harm to the general economy. Frankly, based on the reporting we've done here for the past two or three years, I'd have to agree with him.
Of course, nowadays the daily news brings fresh reminders of the relationship between real estate and the economy. Our story in today's Bee talks about CalPERS' housing troubles and its effect on the pension fund's shrinking investment portfolio.
Anyhow, thanks for tuning in. We're planning on adding more goodies soon, including some regional economic data. Feel free to chime in with your thoughts.
Bickford Ranch was fighting words for years in Placer County. Before this decade started Miami-based Lennar Communities saw almost 2,000 acres of pastureland and foothills ridges between Penryn and Lincoln - and saw a lovely golf course community. Environmentalists, people in Loomis and rural folks saw a suburban community dropped into their quiet midst and cried foul.
It was war, always war. And ironically now, after years of lawsuits, fights before the board of supervisors and finally, legal settlements and the beginning of the project, its developers have filed for Chapter 11 bankruptcy.
This morning California land development giant SunCal Cos. of Irvine announced its SunCal Bickford Ranch, LLP, had filed for Chapter 11 BK in U.S. Bankruptcy Court in Santa Ana.
This is the interesting part: It's bankrupt because Wall Street investment bank Lehman Brothers imploded in September when the federal government declined to bail it out of trouble. Lehman was the money behind Bickford Ranch. Without it, SunCal had nothing.
You ask how troubles on Wall Street are coming home to roost in the heartland. This is it.
Check out the full story in Saturday's Bee.
Bee Photo by Randall Benton
Check Tuesday's paper for a regional look at JPMorgan Chase's new plan to rewrite up to 400,000 mortgages made by Washington Mutual before it failed last month. Chase is the new owner of WAMU's portfolio and announced last Friday that it will try to keep most of those borrowers in their homes instead of headed for foreclosure.
There's a lot being read into this when combined with Bank of America's recent similar announcement to rewrite 400,000 loans made by its new subsidiary, Countrywide. The mortgage banking landscape is shifting in the wake of all these implosions and the giants that remain seem more willing to modify loans than to foreclose. It's cheaper, they figure.
WAMU and Countrywide were among the biggest lenders in the capital region during the heady last days of the housing boom. Many of their loans were risky and are now millstones around the necks of Sacramento-area borrowers.
Here is a detailed account of what Chase plans to do with these WAMU loans. It has especially good information on how it is going to try to modify those risky pay option ARMS that WAMU so loved to make.
Here is also the Chase news release.
If you're a WAMU borrower, Chase advises you to call the number on your loan statement for more information. Otherwise, the lender will begin contacting people within 90 days - and promises not to foreclose on anyone during that time period.
If you're a Countrywide borrower and want more information on its big loan modification program being rolled out on Dec. 1, call this number at its Homeownership Rentention Division: 1-800-669-6650).
Good luck.
Apologies for the inactivity of recent days. I am back from a week off. So onward now, toward real estate's winter season. I'm sure there will be plenty here in Sacramento to talk about.
For starters, I came across a couple of national news stories over the weekend about increasing government efforts to modify the kinds of loans so many Sacramentans are still struggling with.
One, here from the Washington Post, explains how the Federal Deposit Insurance Corp. is creating a new model for loan workouts in its work with failed California thrift IndyMac.
A second, from the Wall Street Journal, takes a similar look at FDIC efforts at Pasadena's IndyMac and what it means for the nation's problem loans.
These efforts are sure to have some impact here in the capital region. IndyMac was a major lender here during the last couple years of the housing boom.
It's good to be back with you.
