When carpenters can no longer afford to buy the houses they built

A lesson certain to be unlearned in California: When finance, insurance, real estate, large landowners and politicians create a housing bubble like the one we have been through, the only form of economic growth permitted to survive is construction. Thefore, when the bubble bursts, so may the economy itself. The Invisible Middle Finger of the Market has flipped off California.

3-1-08
San Diego Union-Tribune
Carlsbad for-profit You Walk Away assists those facing foreclosure...Emmet Pierce
http://www.signonsandiego.com/uniontrib/20080301/news_1b1mortgage.html
You Walk Away LLC has found a way to profit from the ongoing mortgage crisis, but co-founder Jon Maddux says the Carlsbad-based company also is providing a valuable service to borrowers who took out risky adjustable-rate loans during the fevered housing boom.
Launched in January, the business helps distressed homeowners navigate their way through the foreclosure process for a fee of $995. Although it has served about 200 clients so far, Maddux says the potential market is largely untapped. An estimated 1.8 million adjustable subprime loans are scheduled to reset to sharply higher interest rates nationwide over the next two years...“The contract goes both ways,” Maddux said. “The mortgage has a clause that says if they don't pay, the bank gets the house back. When they made the loan, it was risky. It allows for Plan B if (borrowers) can't afford the home anymore or they have to make a decision whether to put food on the table or make the mortgage payment. . . . We try to help protect the homeowner.”
Economist Edward Leamer, director of the UCLA Anderson Forecast, said the creation of a company that helps borrowers go into foreclosure reflects “a collective erosion in borrowers' commitment to service their loans"...“People are walking away just because it was a bad investment.”
Martin McGuinn, a San Diego attorney who represents lenders and loan servicers in foreclosures, called the trend disturbing. “From a lender's standpoint, the worst thing in the world that could happen is for people to simply walk away from their property,” McGuinn said.
January foreclosures in San Diego County totaled 1,305, up 32 percent from December and up nearly 257 percent from January 2007. Notices of default, the first step in reclaiming mortgaged properties, totaled 3,109, up 21 percent from December and up 145 percent from a year earlier...Gabe del Rio, president of the Housing Opportunities Collaborative, a nonprofit consortium of homeownership and housing counseling agencies, said distressed borrowers have other alternatives besides harming their credit through foreclosure.
Information on foreclosures is available at no cost online or from the nonprofit groups he works with, he said. “A foreclosure is the worst outcome that could happen,” del Rio said. “There are other steps you can take.”
As loan defaults have surged, lenders have become more willing to negotiate, he said. In some cases, they will take back homes and forgive the remaining debt to avoid the expense of the foreclosure process. “You are basically settling with the lender,” del Rio said. “You are saying, 'I will give you back the collateral if you release me with from my debt.' You are not just skipping out.”
Another option is a short sale, in which a lender agrees to allow the borrower to sell the home for less money than the amount that is due on the loan... “All the critics out there, what do they recommend?” Maddux asked. “If they can't sell and they can't refinance and a loan modification puts them in a similar situation, what is their option?”
You Walk Away offers reliable foreclosure information, he added. If borrowers “did it themselves, they could save some money, but there are too many mistakes that could cost you well over $1,000.” The company operates in California and six other states where Maddux and co-founder Chad Ruyle have agreements with attorneys who address local foreclosure laws...

Los Angeles Times
California job growth slows to a crawl
The state added just under 15,000 positions in 2007 and January saw another shrink in employers' payrolls. Training programs and other initiatives will be pursued, officials say...Lisa Girion and Ken Bensinger
http://www.latimes.com/business/la-fi-jobs1mar01,1,2772012.story?ctrack=...
Here's more evidence that California is losing its struggle against recession: The state shed 20,300 jobs in January, more than the other 49 states combined for the month, a government report showed Friday.
That comes on top of more bad news. California's job engine sputtered nearly to a halt last year, adding just under 15,000 positions, or 0.1%, to the state's payrolls, according to the Employment Development Department's revised annual figures, also released Friday.The state's job losses in the first month of the year swept across several sectors, with construction, information and financial services among the hardest hit...In all, 15.2 million people were employed in California in January. The state's unemployment rate held at 5.9%, unchanged from December's revised rate and up from 5% in January 2007.
The figures show California's hard-hit home-construction sector was a drag not only on the state economy but also figured prominently in the U.S., posting its first job losses in more than four years in January.The U.S. economy as a whole dropped a net 17,000 jobs during the month -- fewer than California alone, meaning that California's losses were offset by gains elsewhere. The nation's unemployment rate edged lower to 4.9% in January from December's 5%.Economists said the latest figures showed that the state economy was sluggish at best and might be headed toward recession...

Press-Enterprise
Inland construction jobs in freefall, state employment records show...JOSH BROWN...2-2908
http://www.pe.com/localnews/rivcounty/stories/PE_News_Local_D_jobs01.39a...
The crippled housing market sent the Inland region last year into the biggest jobs freefall on record, state figures released Friday show. Riverside and San Bernardino counties lost 7,300 jobs in the past year, the vast majority of losses in home construction-related fields.
The new state figures represent a dramatic revision to the state's estimates in December that showed the Inland region had gained 32,400 jobs during the previous 12 months. Regional economists long had expected a downward revision to the numbers after reports were heard of the construction industry hemorrhaging jobs...