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How to buy a Bank-Owned home, too funny!!
Friday, October 16th, 2009Slow recovery ahead: buck stops in the pocket
Wednesday, September 16th, 2009
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.”
Hanley Wood’s 209 Housing Forecast: seeing a little light now
Tuesday, September 15th, 2009Costa Mesa-based Hanley Wood Market Intelligence held its annual Sacramento housing forecast this morning at the Doubletree – telling about 75-80 members of the region’s struggling home building industry that the signals are still mixed – and projections call for 3,400 home sales in El Dorado, Placer, Sacramento, Sutter, Yolo and Yuba counties this year. (Comparing that to a different category – housing permits issued by local governments over the year to start homes – that has to be the fewest since the late 1960s in this region).
It’s little wonder the ball room is full of shell-shocked building industry types looking for any kind of good news at all. I took notes of both speakers and will offer somewhat of a transcript here of what was said about the national home building scene first, and then the regional scene. The forum was sponsored by the Propane Education and Research Council.
(Check back a little later, we are expecting to be able to upload a PowerPoint here to go along with this)
Boyce Thompson, editorial director of Hanley Wood’s fleet of builder magazines, and editor of Big Builder Magazine, in particular, offered this national overview. (He, by the way, visited with principals of Sacramento’s Township 9 infill project and toured downtown’s successful Sutter Brownstones infill project).
8:06 a.m. Thompson: This is like the third or fourth time I’ve been here. My forecast is going to be decidedly optimistic here today. People are talking about W-shaped recovery..We’ve fallen so far there’s nowhere to go but up. We’ve already started up. I just feel like things are going to get better.
Sacramento has received a lot of national press. Your land market is coming back, with lots of bids on land and that’s one of the tell-tale signs of beginning recovery. I have a way more positive presentation this year..The last three years I have been negative about the housing market. Nationally, our fortunes are all tied to the national financial markets. We’re going to see an uneven market..Some are beginning to recover. Others are still getting worse. Chicago, of all places, still seems to be getting worse.
The recovery is going to be slow. Housing starts usually bounce back in the first two quarters after recession, don’t think it will be so much this time. We are kind of dragging along the bottom, and it looks like we’re having a little bit of a W-shaped recovery, where it bounces down and up and down.
Headwinds: We still have all that unsold inventory. We’ve got 2.2 million extra (new and built) homes that we need to burn through. And the existing home inventory remains too high. A lot of people believe this is the single biggest problem in the market. There are too many existing homes for sale. Nationally, we have a nine months supply, compared to a usual average of 6.4 months.
We expect to get double-digit unemployment by end of year nationally. But the housing market always comes back while job losses are increasing….You still have 80 percent of households in decent shape. It’s not going to take a lot of people to move that metric forward.. It’s the reason the market rebounds before the economy in general does.
The foreclosure problems: The problem is the foreclosure problem is spreading from subprime to prime. There is the danger of anther flood of foreclosures from Alt-A and Option ARM loans. But there are so many government programs now to help people with these loans. It’s hard to tell what will happen. I’m going to punt on that one.
Consumer confidence has improved.Mortgage rates are still incredibly low. We expect mortgage rates to stay in the low “fives” for the next two years as the Fed continues its policies…The other good news is the banks have loosened up somewhat. Over 70 percent in 2008 had seriously tightened credit; now they’re starting to loosen somewhat and builders have found other sources of liquidity, too, somewhat.
Some market are going to recover before others..Texas, the Carolinas haven’t had rampant price inflation so they haven’t had corresponding deflation.Texas and Washington, D.C., have had strong job growth. The healthiest top 10 new home markets nationally are Austin, San Antonio, Washington, D.C., Houston, Oklahoma City, Baton Rouge, Tulsa, Salt Lake City, Dallas Fort Worth and Olympia, WA..
There are four Texas markets in top 10. Baltimore, too, is a place where sales are actually up year over year. It’s an affordable market. New home sales are up 8.4 percent from January through July this year compared to last year.
Compare that to the Central Valley of California. Sales are down 48 percent from the same time last year. But at least that rate of decline is slowing now.
New home sales in Sacramento’s six-county region are down 43.7 percent this year so far from the same time last year. Riverside-San Bernardino is down just 28 percent from last year. That’s amazing.
There;s nobody who doesn’t see the market coming back next year. Even Economist Mark Zandi of Moodys, who is usually a bear, thinks the market will come back in second half of 2010 and be strong in 2011. On the single-family home side, the National Association of Home Builders predicts 2010 will be better than 2008 again.
And for all the trauma there are still successful projects out there that sell eight to 10 homes a month.Most are aimed at at first-time buyers.They target tax credits. The old rules of real estate still apply: a great project in a place where people really want to live. That still works.
Transit-oriented development through this downturn has always done better than the rest.
All these projects were green. Well, it’s not so much green, but energy efficiency. There’s a lot of marketing going around green. You may think people don’t really care about it, but what’s the harm, it seems to be working for people.
Here’s some big winners nationally:
- Mueller row and yard Homes, It’s by Catellus in east Austin. Prices start at 269K. It’s a five-minute drive from downtown.
- TLofts in West LA. CityView is the developer. These are lofts near Santa Monica Boulevard, starting at $415K. They sold 13 in first month in July. These are condos and lofts. There are 18 parking spots where you can charge an electric car and that’s gotten a lot of media attention.
- Paradise at Ironwood Crossing, outside of Phoenix. It’s in Pinal County and the San Tan Valley. The builder is Fulton Homes. It’s selling 21.5 per month. It starts at $115,900 to $148,900. Single family homes.
- Ivy at Woodbury East. This is in Irvine; The developer is The Irvine Co. and the builder is William Lyon Homes..sold 21 homes a month in July to mid August. Starting in the mid 300s. Townhomes. A lot of these places have done price cuts to boost sales.
- Stafford Lakes: Fredericksburg, VA. Builder Centex is selling nine per month, with prices from $255K to $325. They’re single-family homes. That’s neat success story.
8:33 a.m. Thompson: We’ve done a survey of 660 people shopping for new homes in May and June in California, Nevada, Arizona, Texas, Florida and North Carolina.
Shoppers were pessimistic about the shape of the economy, but they were way more optimistic about the shape of their own personal finances. Only 31 percent saw their personal income situation as not so good or poor. A lot were in the market because they could get a lot for their money.
74 percent said they were not concerned about hitting the bottom of the market, but they were still very concerned about losing their job or their spouse losing a job. Sixty-six percent were up to somewhat concerned about job losses. So they don’t want to stretch their finances too much to buy a home. That’s a standard feature of downturns. When it starts rebounding people are really careful about their money. The starter market always comes back first because people feel that’s where they can really get their value.
8:41 a.m: The capital regional market with Hanley Wood’s Sacramento regional sales manager and analyst Kathryn Boyce:
Foreclosures: We’re finally down to 11th nationally. We are at least out of the top 10 now. But notices of default are climbing again. Job growth continues to be negative. We’re expecting 41,000 lost jobs in the region in 2009. We rank 58th of 75 job markets nationally for jobs. Our unemployment is projected to go to 12.9 percent by year’s end.
We’re in the middle nationally for population growth. But 27 percent of people coming to the Sacramento area are from the Bay Area. Proximity to the Bay Area is a really good thing for Sacramento. They’re still relatively holding on for equity of their houses. It hasn’t dropped as much as Sacramento so they’re still able to bring some of the equity into Sacramento.
Our housing permit history is way off from 2008 even. We’re down 50 percent. Overall, based on year to date we’re projecting 3,400 sales for 2009. Sacramento can support about 8,500 sales a year. We stole from the future quite a bit from the hey day when we had our special financing. If they had a pulse we gave them a loan. But now Generation Y is coming in. It’s bigger than the Boom generation.
They want to buy a house, but they’re not looking for big 4 BR and 4BA homes. And they’re holding back on marriage and having children.
Most sales here are in the $200-$300K range followed by $300-$400K. There’s an under-abundance of new houses in the $200K and below range. We need to have some houses brought in there. Our median sales price for existing single-family detached homes is $218K. It’s $330 for new single-family houses. We have to stay with that median income. There are no more rebates for California and no special financing. We need rebates or to lower prices.
Our sales rate: we’re at a dismal 1.5 houses per month. But we’re seeing it increase.
We have 1.9 months overall of standing inventory. There’s just not that much standing inventory out there anymore. That’s a great thing…You have 10 months inventory out there total. We’re seeing builders picking up land, we’re seeing Tim Lewis, Meritage, Homes by Towne and K. Hovnanian picking up lots. We’re hearing now again about paper lots having some value.
Cancellations: We’ve had a downward trend. There isn’t a renters mentality any more. Buyers cant come in without a percentage down. The people walking into these subdivisions are committed buyers. They are actually looking for a house.
Our top 10 builders represent half the sales market and only one is a privately-owned builder, JMC.
8:52 a.m.: The existing home market: Boyce: We now have 34.4 percent affordability for new homes and 78 percent affordability for existing homes. It’s a big range there. We’re going to be soft until we lower prices.
The notices of default are coming back and we’re seeing here what might be another huge wave, depending on who you talk to, that there might be another wave of foreclosures coming.
The gap between the median is huge. It’s $189k for single family median for existing.
There are 94,000 lots out there and 18% are finished lots. The bulk of the lots are in Placer, Sacramento and Yuba Counties.
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Land values: We are having issues with land values. If you add in impact fees from our municipalities it them just right out of whack.. I know the North State Building Industry Association is working with municipalities to lower fees.
Our outlook and conclusion: We have a potential light in the economy. Demand is still weak, but it is turning. We’ve seen unemployment drop in July, but it’s still up, and its still up higher than other places around the country. The stock market is rebounding. The Fed will continue to buy mortgage-backed securities. But there is still a large overhang of foreclosures and we expect Sacramento’s mortgage delinquency rate to be 12.2 percent by the year’s end. California’s could be 14.2 percent by the end of the year.
Finally, it’s a wild card if the municipalities will lower fees or not. We’ve seen a couple of them doing it, but we’ve seen a couple of them say no. In terms of consumer demand, the first-time home buyer stimulus was a plus. The impact was good for first half of 2009. We’re hearing talk of the National Association of Home Builders going to Congress asking for a $15,000 tax credit for all buyers. That would replace what we have in California because I don’t believe (the state of) California is going to be able to pick up that demand again.
When the housing crash ends, how will Sacramento grow?
Sunday, August 30th, 2009Some day this housing crash will end. Judging from history, Sacramento’s ranks of developers will snap right back into growth mode – building a fresh wave of new homes.
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.
July sees rise in home sales
Tuesday, August 25th, 2009Home sales increased 12 percent in July in California compared with the same period a year ago, while the median price of an existing home declined 19.6 percent, the California Association of Realtors reported today.
It marked the 11th straight month that existing home sales in California outperformed sales in the year-ago period, and the fifth straight month of rising median prices.
“The federal tax credit for first-time buyers played a critical role in the purchase decision of many buyers,” said James Liptak, CAR president. “Nearly 40 percent of first-time buyers said they would not have purchased a home if the tax credit was not offered.”
CAR said closed escrow sales of existing single-family homes in California totaled 553,910 in July at a seasonally adjusted annualized rate, up from 494,390 in July 2008. The statewide sales figure represents what the total number of homes sold during 2009 would be if sales maintained the July pace throughout the year. It is adjusted to account for seasonal factors that typically influence home sales.
The median home price in California in July was $285,480, down from $355,000 in July last year, but up from $274,740 in June.
In the Sacramento region, CAR said the median home price in July was $183,840, down 16.1 percent from a year ago. CAR said July home sales in the region were down 6.7 percent from a year ago, but up 6 percent over June this year.
Suburban Sacramento land rush? Big homebuilders buy up ‘finished’ lots
Friday, August 14th, 2009Sacramento’s new-home sales are still down and out, but some capital-area builders are betting money that the region’s suburbs will soon resume their growth boom.
They’ve begun snapping up ready-to-build home lots at prices ranging from $25,000 to $67,000, setting the stage for a new suburban land rush.
The phenomenon suggests that a real estate market in decline for four years may be resetting for a new business cycle, some say.
Builders looking for land are focusing on “finished” lots, which already have government approvals, streets and utilities.
“They just have to pour a slab and start building,” said Kathryn Boyce, Sacramento analyst for Costa Mesa consultant Hanley Wood Market Intelligence.
Capital-area builders say prices for finished lots have risen 20 percent since April as giant public builders muscle back into the region’s land game for the first time since 2005.
Boyce said the land rush is greatest in Placer County, followed by Folsom and Elk Grove.
Hanley Wood counts 17,251 finished lots in El Dorado, Placer, Sacramento, Sutter, Yolo and Yuba counties. Many are owned by lenders that repossessed them. Others are owned by development firms that need to raise cash. Investors own still more.
The recent escalation in land prices has led some in the industry to question whether they can make money when so many homes are priced at $250,000 or less.
“Prices might be going up too fast,” said Tim Lewis, owner of Roseville-based Tim Lewis Communities.
Lewis recently bought lots at two projects in the capital region and one in Reno – his first in that city. “I’m cautiously looking at projects, but I’m certainly not on a buying frenzy like some of these publics (publicly traded builders) might be,” he said.
Even with the recent rise, land prices in the Sacramento region are nowhere near the dizzying levels of five years ago. At the height of the real estate boom in 2004, builders paid up to $150,000 for finished lots in Roseville, and up to $120,000 in Natomas and Elk Grove.
Still, the renewed scouting and buying by building giants has sent a buzz through an industry that has endured prolonged downsizing and financial trauma.
“There is a consensus out there that we are at the bottom or pretty darn close,” said James Radler, a Roseville-based land broker with Park Place Land Advisors of Irvine.
Radler and others say publicly traded home builders such as Los Angeles-based KB Home, Texas-based D.R. Horton, New Jersey’s K. Hovnanian Homes and Meritage Homes, headquartered in Arizona, are among those looking at lots and buying. Others in the game include private Arizona-based building giant Taylor Morrison. All are among the capital region’s top builders.
“These guys need lots,” Rad- ler said. “If they don’t do deals, they don’t build homes, and if they don’t build homes they aren’t in business.”
Most of the builders didn’t respond to Bee inquiries, which is not surprising, say those who watch the industry. Said Boyce, “They’re trying to position themselves without anybody knowing.”
“They all want to be under the radar as much as they can,” added Dean Wehrli, vice president and Sacramento analyst for Sullivan Group Real Estate Advisors of San Diego.
During the housing downturn that began after area home prices peaked four years ago this month, many large builders sold off home lots to maintain balance sheets. A few closed down divisions and left the area. Now, though capital-area home building remains sluggish – just 1,764 sales the first half of 2009 – firms are competing again for lots in a market they expect to begin rising as early as 2010.
Industry analysts say big Wall Street home builders, especially, need more lots to keep operations going while waiting for a new cycle.
“They essentially haven’t done any buying for four years,” said Radler.
The supply of lots is also constrained by the closing of Natomas to new building permits through 2011. That region, popular with buyers and builders for much of this decade, is under a building-permit moratorium until levee fixes bring 100-year flood protection.
Repo business soars as Sacramento area home sales slump
Tuesday, July 7th, 2009At the beginning, Alejandro Maybuena lost the Sacramento house he bought in April 2005 for $350,000. At the end, in early 2009, Kim Gish bought it for $109,000.
Stories like this have happened more than 40,000 times in the Sacramento area. Still, the tale in particular of one house in California’s capital region shows the sweeping change in a real estate industry that once involved mainly a mom-and-pop seller, a buyer and two real estate agents.
Today, an alternate universe – the repo business – dominates. And business is very good.
As the U.S. foreclosure crisis grinds on, the detailed work of processing, repairing and selling thousands of homes repossessed by banks is real estate’s new gold. In the past year, repo-related business has rapidly grown to national scale, fueling job growth in Colorado, Texas, Ohio and elsewhere to service the meltdown in markets like Sacramento and the Central Valley along with Phoenix, Las Vegas and Florida.
The nation’s housing collapse also has upended the pecking order of local real estate agents. Former top earners are on the sidelines, unable to move expensive homes. The new royalty is making good money in a real estate economy where things fall apart, where trackers can count almost a half-million repos on the U.S. market.
For Alejandro Maybuena, 60, and his wife, a three-bedroom house near Sacramento’s southern edge in 2005 represented a long-delayed accomplishment – their first house.
Remember how you felt when you purchased your first home.
Applications for home-buying tax credit to be cut off today
Thursday, July 2nd, 2009They’re almost gone.
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.
