As the California economy roared in the 1990s and tax revenues poured into a treasury overseen by Gov. Pete Wilson, the state laid plans for a series of new office buildings in Sacramento to spare itself from paying rent to other landlords.

Barely a decade later, the Schwarzenegger administration is launching a process to sell many of the same buildings that were originally touted as long-term money savers for taxpayers. The goal today is more immediate: pay off debt and steer cash into the state’s depleted general fund. It’s among a variety of short-term crisis solutions that include selling surplus state property, moves also being undertaken in cash-strapped Arizona.

In California, 11 state-owned sites with an estimated value of almost $2 billion will be listed for sale in early 2010 to pay off about $1.4 billion in bonds and net another $600 million “to support other critical state government programs,” said state Department of General Services spokesman Eric Lamoureux.

The state wouldn’t move out of the buildings; it would continue to lease them from the new owners.

The sell-off has lit up the skies for brokers in an otherwise downcast office real estate sector, where few buildings are being bought, sold or even listed, especially in Sacramento. It’s likewise called fresh attention to the state’s battered finances and stirred banter about whether it’s smart to sell long-term real estate assets for short-term goals in a weak market.

Many in the real estate industry acknowledge it’s a close call, but believe “beautiful class A” state buildings with a single tenant will command premium prices.

“It’s unfortunate they would sell them. But they definitely have a need for financing right now, for equity to solve this budget crisis,” said Tom Aguer, president of Sacramento-based commercial real estate brokers Aguer Havelock Associates. “It’s a very creative way for them to fix their problem. But in the long term, these are great assets.”

Brokers like Aguer and others among the nation’s leading real estate firms are already assembling proposals and lining up national teams to broker the sales. The state is demanding an experienced partner: a firm that has done five separate deals of $20 million or more in the past seven years, and at least $150 million in total deals in that span.

No one can calculate for certain the fees such a deal could bring a brokerage firm. But it’s widely said in the industry that the higher the price, the lower the commission. Even a commission as low as one-quarter of 1 percent of almost $2 billion in sales could net a firm nearly $5 million.

Specifically, the state is proposing a so-called “sale/leaseback” deal in which buyers of state buildings would rent them to the state afterward.

“We intend to maintain 100 percent occupancy in the buildings just as we have today,” said Lamoureux, whose department manages state buildings. “We’re just looking to sell the property and lease back over an extended term, probably along the line of 20 years or so.”

Brokers say the lease-back provision is likely to stir interest among risk-averse investors known in the trade as “coupon clippers.” Those are big institutional investors such as pension funds and insurance companies.

“There are numerous buyers looking for single-tenant buildings with the long-term leases. It’s a steady income. It’s a low-risk deal,” said Nico Coulouras, vice president in Sacramento for Lowe Enterprises, a Los Angeles-based development and investment firm.

Among the state complexes proposed for sale are some of Sacramento’s biggest buildings and most distinctive landmarks: downtown’s massive East End Complex next to Capitol Park, finished in 2003; the 17-story Attorney General Building on I Street, completed in 1995; and the sprawling 1.8 million-square-foot campus of the Franchise Tax Board, expanded earlier this decade at the city’s eastern edge.

Elsewhere, fixtures of the Oakland, San Francisco and Los Angeles skylines – bearing names of politicians from Ronald Reagan to Hiram Johnson – will also be sold.

Star-spangled camper … a homeless man in a temporary tent city in Sacramento, California Photo: Getty

The continuing fear of job losses in the US means consumers are saving rather than spending – denying fuel to the retail engine of the economy.

EVEN in the affluent US capital, a city that has been relatively insulated from the worst recession since Great Depression, the beggars are visible. They sleep on the street just a block from the White House and at major intersections they wait for fellow Americans to come to a standstill and spare a dollar.

Many carry signs telling their personal story: laid off, returned Iraq vet, lost the house and the job, got sick and no health care.

A year after the US financial markets went into a tailspin, its economy is showing tentative signs of a weak recovery but unemployment continues to rise, though not at the terrifying rate of six months ago, when 600,000 people a month were joining the jobless lines.

Something else has happened in America as well. The era of easy credit that fuelled two decades of mostly spectacular growth is over, not just on Wall Street. The American consumer has started saving. Mortgages, personal loans and even credit cards are harder to get. Consumer credit was down 5.2 per cent annualised between April and June. Revolving credit, which includes credit cards, was down 9 per cent.

The turbocharged consumer market that powered the American economy since the 1980s has run out of puff. These combined, related factors – people don’t spend if they fear for their jobs – are likely to define the US recovery. It will be slow and painful.

The jobless rate rose to 9.7 per cent in August and is expected to peak above 10 per cent in the months ahead. It is already there in at least 15 states and some economists predict it could be five years before the US economy generates enough jobs to overcome those lost and to employ the new workers entering the labour force.

This fear of job losses is likely to keep consumers’ wallets in their pockets. Without a return to spending – retail sales make up 70 per cent of the US economy – it seems inevitable the recovery will be slower than in the past.

So what are the positives? Retail sales have shown signs of improvement and the federal stimulus package is working its way into the economy.

The retail figures for August were up 2.7 per cent, the biggest jump since January 2006, and vehicle sales up 11.9 per cent.

Excluding vehicles, retail sales were up 1.1 per cent – the comparable figure in July was a 0.6 per cent decrease – but the boost was due in part to higher petrol prices at convenience stores. Most analysts are cautious about popping the champagne corks too early and will wait for a stronger spending trend to emerge.

In the housing market – which helped spark the crisis – there are tentative signs of stabilisation. Home foreclosures dipped slightly in August from July but are still 18 per cent above a year ago. The highest foreclosure rate is in Nevada, with one house in 62.

On home prices, the Case-Shiller Index has shown increases for May and June after 37 months of decline. The number of home sales has risen too.

”The only doubts about it are the market is rather abnormal now with all these foreclosure sales,” said Robert Shiller, who helped develop the index.

Falls in house prices have been huge – in some markets as much as 50 per cent. Many Americans, perhaps a quarter of those with mortgages, owe more than their homes are worth.

The Obama Administration’s ability to stimulate the economy further is severely curtailed by its huge budget deficits – and Congress has run out of patience with financial bail-outs.

“I don’t think we are out of the woods yet,” President Barack Obama said this week. “We need to be careful about taking the crutches away from the patient too early.”

That $190,000 figure is 2009’s highest – well up from bottoming out at $167,000 in March.

The median sales price first fell below $200,000 in August, 2008.

The higher number almost certainly reflects the continuing fall in the really cheap repo share of this market. Bank repos feel again to 47.6 percent of sales, while short sales – in which a bank accepts less than owed to avoid costs of foreclosing – went up again to 18.8 percent of sales.

That makes “distress sales” about two-thirds of all sales.

The number of single-family home sales also fell a bit. August’s 1,683 closed escrows were down 8.9 percent from 1,848 in July – and are down 10 percent from 1,871 the same month last year.

 Here is the  summary of statistics.

And here is a look by ZIP Code.

The big question: Will this new wave of growth create a more urban, compact Sacramento, as many community activists and politicians hope? Or will it follow the time-tested pattern of past booms in the late 1970s, the second half of the 1980s and the first half of this decade, pushing ever-larger homes farther into farmland?

Perhaps it’s easiest to expect more of the same. Suburban development has for decades been Sacramento’s main growth industry, aside from state government.

During this decade’s housing boom, builders constructed 156,000 homes, condos and apartments in the Sacramento region – largely on empty land in suburban cities. Much of this last wave of housing on former farmland has proved especially vulnerable to shredded values and foreclosures – a fate far less common in established neighborhoods closer to jobs.

Still, signs of change were starting to emerge even before the housing market fell apart. Loft-style housing projects were popping up all over Sacramento’s central city. And construction had begun on two 53-story condominium towers on Capitol Mall.

So might visions of mid- and high-rise living in downtown Sacramento take off where they left off – just as it seemed the city was reaching a new level?

Looking ahead, analysts believe the next wave of residential growth in the Sacramento region – perhaps still several years off – might be different. It’s likely to roll in with expensive gasoline, higher home energy costs and lenders’ continued insistence on tight credit.

State and federal policies governing the flow of public money increasingly favor more compact, transit-friendly types of development. And as baby boomers age, they are expected to move down to smaller housing units.

All these forces could mean more people in the next wave of growth will live in smaller homes, and more may live downtown. But no one should underestimate the ethos of the Central Valley: People here like yards and space.

The sales tally included 3,495 existing homes and 320 new homes in Amador, El Dorado, Nevada, Placer, Sacramento, Sutter, Yolo and Yuba counties, according to the La Jolla-based researcher. Six of every 10 closed escrows were in Sacramento County, said DataQuick.

July sales beat June’s 3,758 total. But it was well below 4,126 closings in July 2008.

It’s the second straight month that sales have fallen below last year, when a massive supply of discounted bank repos fueled a sharp uptick in sales to first-time buyers and investors. The share of repo sales, which exceeded 70 percent early this year, fell below half in Sacramento County in July, according to the Sacramento Association of Realtors.

A dwindling share of repos drove up the county’s median price again in July to $180,000, DataQuick reported. That’s after two months holding steady at $175,000.

More significantly, the rate of year-over-year price declines greatly slowed again in July in Sacramento County, with prices 14.3 percent below the same time last year. For much of the past two years Sacramento County’s median prices – where half the homes sell for more and half for less – have slipped 30 percent or more from the same time a year earlier.

Regional highlights from DataQuick for new and existing homes combined:

• Sacramento County reported 2,318 sales, up from 2,284 in June. The $180,000 median price compared to $210,000 in June 2008.

• Placer County reported 617 sales, up from 598 in June. The county’s median sales price of $295,500 was down 14.3 percent from $345,000 last year.

•El Dorado County’s 237 sales were up from 218 in June. Its median price, $330,000 was down 15.4 percent from $390,000 in July 2008.

• Yolo County’s 240 sales were up from 225 in June. The county’s $281,500 median price was down 3.9 percent from $293,000 the same time last year.

• Sutter County reported 110 sales, down from 123 in June. The county’s $160,000 median price was down 21.2 percent from last year’s $203,000.

• Yuba County’s 113 sales were also down from 136 in June. The $155,000 median price was down 15.5 percent from $183,500 in July 2008.

• Nevada County reported 151 closed escrows, up from 143 in June. The county’s median sales price, $320,000, was down 14.1 percent from $372,500 the same time last year.

• Amador County’s 29 sales were down from 31 in June. Its $197,250 median price was down 32.6 percent from $292,750 in July 2008.

Regionally, the number of for-sale signs also fell for a 23rd straight month in El Dorado, Placer, Sacramento and Yolo counties after peaking at 16,262 in Aug. 2007. Sacramento-based researcher TrendGraphix reported 6,572 homes on the market in the four counties as July ended, the fewest in four years.

TrendGraphix said 14 percent of the for-sale signs were tied to bank repos and 27 percent to buyers seeking short sales, where banks accept less than owed to avoid the higher costs of foreclosing.

The real estate service Trulia also reported this week that 27 percent of Sacramento-area listings have cut prices, with the average drop being 11 percent.

A July report showed sales of 3,495 existing homes in Amador, El Dorado, Nevada, Placer, Sacramento, Sutter, Yolo and Yuba counties, according to San Diego-based researcher MDA DataQuick.

Buyers also closed escrow on 320 new homes to push July’s regional sales tally to 3,815, up slightly from 3,758 in June.

The rise failed by a long shot to match the U.S. sales increase from June to July. The National Association of Realtors called it the fastest monthly gain since 1999 and a sign that the market “has decisively turned for the better.”

In the capital region, however, where the housing market is struggling to regain its footing, this year’s July sales were lower than the 4,126 sales reported in July 2008. By comparison, there were 2,906 area sales in July 2007 and 3,275 in July 2006. In July 2005: 6,159.

July marked the second straight month in which sales dipped below the same time a year ago. Last year a massive supply of bank repos fueled a sales boom by first-time buyers and investors. The boom has faded as repos fell to 58.7 percent of July sales, the lowest share in 15 months, DataQuick reported.

A dwindling supply of cheap repos drove Sacramento County’s median price higher – to $180,000 – in July, DataQuick reported. That’s after two months at $175,000, and well up from February’s low of $160,000 in a county that’s home to about six in 10 of the area’s home sales.

DataQuick said 38 percent of Sacramento County sales were below $150,000. Homes priced at $400,000 and higher were 6.6 percent of July sales.

Significantly, the rate of year-over-year price declines slowed in Sacramento County. July prices were 14.3 percent below July 2008. For much of the past two years Sacramento County’s median price – where half of homes sell for more and half for less – slipped 30 percent or more from the same month a year earlier.

“We’re coming off that period when we had the steepest slides,” said DataQuick analyst Andrew LePage. “It’s going to get easier and easier to get to single-digit decline from a year ago unless we see foreclosures and job losses ratchet up.”

Foreclosures in the region, indeed, rose in the second quarter of 2009. The unemployment rate in the region has climbed to 11.8 percent and to a record 11.9 percent in California, the state reported.

July’s median sales prices in Sacramento County are back to what they were in September 2001. Then, the county’s median household income was $44,928, according to Claritas, a demographic research company. Today, it’s $57,847, suggesting a market again well matched with incomes and even overcorrecting after its housing boom excesses.

Prices are back to October 2002 levels in Placer and Sutter counties and mid-2003 in El Dorado, Yolo and Yuba counties.

“It’s affordable by all our natural price measures,” said Dean Wehrli, a Sacramento executive with San Diego-based Sullivan Group Real Estate Advisors. “I would say we’re in the middle of the overcorrection.”

Wehrli said today’s median price for existing homes in Sacramento County is about the same as if the boom had not occurred and prices rose 3.4 percent a year since 2000.

But it’s still not easy to buy, complain first-timers trying to snag bargains.

“I’ve been in this since March. I’ve been outbid. I’m bidding $30,000 over the asking price. And still, cash just walked in and took it,” said Dianna Starr of Sacramento. “People I know say it’s a buyer’s market. No, it’s not.”

Starr, outbid by investors on several foreclosed homes in the $135,000 range is trying now to buy a short sale listing. That’s an equally frustrating problem for buyers.

In short sales, a bank agrees to a sales price below what it’s owed on the house. Complications abound.

Starr said in her case the main mortgage lender wants to sell, but lender JPMorgan Chase has balked at taking a loss on a home equity line of credit.

“I’m doing everything I can,” said the medical transcriptionist at Solano State Prison. “I’m a hard-working person that can’t catch a break.”

Regionally, the number of for-sale signs in El Dorado, Placer, Sacramento and Yolo counties fell for a 23rd month. Sacramento researcher TrendGraphix reported 6,572 homes on the market in the four counties as July ended, the fewest in four years.

The California Franchise Tax Board announced this morning it will pull the plug on its fax machine at midnight tonight, accepting no more applications for a $10,000 tax credit for buyers of new unoccupied homes in California.

Early Wednesday, the FTB said it has received 11,925 applications for the popular tax credit – 75 short of its 12,000-application limit.

The state tax agency said last month it would take 2,000 extra applications for the credit because many received are duplicates, invalid or incomplete.

The tax credit program, launched March 1 to move statewide home builders’ excess, unsold inventory, proved more popular than expected. The FTB said it has already issued 4,808 certificates for nearly $45 million worth of credits. Officials expect to process and award all the credits by the end of August.

Home builders have shifted their focus to efforts to add $200 million more to the original $100 million allocation. But that’s proved more difficult than expected in a rancorous budget climate. Some economists have criticized further allocations as a stimulus for home building when the state’s larger problem, they argue, is an excess of unsold existing homes.

The California Building Industry Association, a trade group for residential builders and suppliers, maintains that each $10,000 tax credit adds $16,000 to state government revenues and $3,000 to a local government because of the economic activity generated.