2-3-09

 
2-3-09
Merced Sun-Star
Merced to lobby for high-speed rail jobs
Committee will advocate plans that bring business, development...SCOTT JASON
http://www.mercedsunstar.com/167/v-print/story/670478.html
Merced renewed its support for California's high-speed rail system Monday with a plan to join a financially backed committee that will lobby on the city's behalf as the project moves forward.
Rail system planners have selected Merced to have a downtown station. Castle Commerce Center may be a maintenance hub for the entire system, creating hundreds of jobs in the county.
Both designations have the potential to draw businesses and other development, which is why the city and county are willing to fight for them.
"The future is upon us," Councilman Jim Sanders said. "Trains and rails are how we're going to get around. Cars will take a lesser role."
Voters in November approved Proposition 1A, nearly a $10 billion bond measure to pay for the project's first phase, which would begin in the Valley.
The 700-mile passenger rail system would connect Los Angeles to the Bay Area, likely through the Pacheco Pass.
The Greater Merced High-Speed Rail Committee, a group of citizens, formed to support the project. Now that it's looking more likely that 220-mph trains will zip across the state, it's asked city and county governments to increase their support by giving cash and having elected leaders join its ranks.
The Board of Supervisors pledged $40,000 to do a study on whether it'd be possible to create a maintenance hub at Castle Commerce Center.
Studies by the California High-Speed Rail Authority show it'd like to see a station in Merced's downtown, though a specific area has not been named. The authority estimates that about 4,000 people could be passing through Merced's station daily.
The city is poised to donate between $10,000 and $15,000 to the committee. The council will vote on the amount during its next meeting.
The committee will have three main tasks: finding a location for the station, lobbying for the maintenance hub and exploring a connection between the BNSF tracks and the Union Pacific tracks so that bullet trains needing maintenance can get to Castle.
The state authority has shown preference for aligning the high-speed rail system with Union Pacific's tracks, though the company has said publicly it doesn't want trains running along its tracks.
Assistant City Manager Bill Cahill reminded council members that, like UC Merced, the high-speed rail system will take years to develop. But as planning gains steam, the city wants to make sure it's left with a station.
Takeover, bankruptcy possible for Merced-based County Bank
CEO Cupp says it's too soon to tell what future holds...CORINNE REILLY
http://www.mercedsunstar.com/167/v-print/story/670493.html
County Bank is open for business and operating as usual, but its CEO could offer no reassurance about the bank's future Monday.
Capital Corp of the West, which owns County Bank, issued a statement Friday night declaring that a loss of $96 million last year caused it to question whether it could remain solvent.
The news spells an uncertain future for Merced's biggest bank and its only publicly traded company. It raises the possibility that it could declare bankruptcy or be taken over or bought by another financial institution, or by the U.S. government.
In an interview Monday, County Bank CEO Richard Cupp said he couldn't rule out any of those prospects.
"We're pursuing every possible option to address the critical capital and portfolio issues the bank is facing," said Cupp, who took over as CEO six months ago. "We continue to be ground zero for the real estate and economic woes of this country, and it is what it is."
Beyond that, Cupp declined to discuss what the bank's future might hold, saying any comments would only be speculation. He said he couldn't answer questions about whether Capital Corp is in talks to sell County Bank.
He added that the bank's depositors shouldn't be concerned, though he encouraged customers to make sure they have the most Federal Deposit Insurance Corp. protection possible, whether their accounts are at County Bank or another institution.
Capital Corp's stock price fell 41 cents Monday to close at 19 cents, a 75 percent decline.
In some ways, County Bank couldn't be in better executive hands. Cupp, a four-decade veteran of the banking industry, has been known for years as a bank savior. He came out of semiretirement last year to lead County Bank, presenting a resume lined with successful turnaround and rescue efforts at a variety of financial institutions.
County Bank, like hundreds of other financial institutions nationwide, has been waiting to find out what TARP -- the federal bailout program -- might have in store for it. The feds haven't been forthcoming and seem at least as confused, at times, as the institutions they're supposed to be helping.
The way TARP is being administered has led to a serious unintended consequence. Financial institutions waiting to find out whether they'll get federal funding have slowed down on homegrown rescue strategies. Waiting for the feds has put a chill on private-equity solutions for banks like County Bank.
One possible scenario -- not confirmed in any way by County Bank officials -- would see the federal government once again embrace credit allocation, as occurred during the Nixon administration. Under that plan, a bank would restrict its lending to borrowers with which it had a natural relationship.
In one hypothetical, a reinvigorated County Bank would lend to borrowers in Merced, Modesto or Turlock -- in hopes of creating jobs -- but not, for example, to a firm wanting to build a plant in Phoenix.
Last week's news puts Capital Corp among the latest companies to fall victim to the global economic recession. Its financial condition has been spiraling downward since the collapse of the San Joaquin Valley's real estate market.
County Bank reported its first annual loss, $3.7 million, at the end of 2007. Since then it's struggled to find enough investors to offset its troubles.
Capital Corp is blaming its cumulative losses on continued declines in the appraised values of real property collateral securing loans in its portfolio; a deteriorating economic environment; downgrades in internal risk ratings; an increase in nonperforming loans; and regulatory reviews.
Last week it said that on a preliminary basis, it would be required to make a provision for loan losses of about $28.5 million in the fourth quarter of 2008, compared with a provision of $11.5 million for the third quarter of 2008.
The company estimated its cumulative provision for loan losses for the year ended Dec. 31 at about $55.4 million. That helped propel its loss for the year to about $96 million, compared with a loss of $2.7 million for 2007.
Capital Corp's mounting problems could lead to "significant regulatory action" against it, officials said.
The bank has estimated it must quickly raise roughly $75 million in new investments to be capitalized at "acceptable levels."
Though bankruptcy is possible, analysts say it's unlikely because regulators probably would step in before that happened.
Customers leaving the bank's Olive Avenue branch didn't seem too worried about the company's future Monday.
"It's federally insured, so I don't think it's a big deal," said Atwater resident Greg Beam, who holds a business account at County Bank. "I'd say I'm definitely concerned about the economy in general. But I think everyone's in trouble, not just County Bank."
Members of the company's board of directors declined to comment Monday.
Founded in Merced in 1977, County Bank has 39 branches in 13 California counties, mostly in the Central Valley.
It employs about 500 people, roughly 150 of them in the Merced area. Capital Corp has laid off at least 20 workers since September.
Responding to what it called false radio reports that County Bank had closed, Capital Corp issued a brief statement Monday morning saying it remained open.
"We're still here," Cupp said. "All of us, at all levels, are working our cans off to meet customer needs and take care of their accounts."
Bank depositors are protected by the FDIC's general deposit insurance rules, under which coverage was raised last year to $250,000 per depositor per insured institution, through Dec. 31, 2009.
The FDIC provides full coverage for noninterest-bearing transaction deposit accounts, including personal and business checking deposit accounts as well as attorney-client trust accounts.
Most disturbing about County Bank's recent bad news is that it also raises the specter nationally that there may be no practical worthwhile solution that doesn't produce more pain in the financial system.
Our View: GOP adopts Cardoza's idea
Refinancing nation's mortgages at 4 percent is centerpiece of alternative stimulus plan.
http://www.mercedsunstar.com/181/v-print/story/670504.html
An idea that Rep. Dennis Cardoza floated months ago for a reduced mortgage interest rate is gaining support in Washington, D.C., and has potential to be part of the stimulus package.
At a news conference Monday, Senate Republicans made Cardoza's idea the centerpiece of their alternative to the Democrats' stimulus plan.
Cardoza, D-Merced, initially suggested making 4.5 percent mortgages available to all homeowners and subsequently reduced the proposed rate to 4 percent.
He introduced the legislation Jan. 7 as the Housing Opportunity and Mortgage Equity Act.
It would provide qualified borrowers a fixed interest rate for 30 or 40 years.
So far, this is, as Cardoza acknowledges, a big idea and there are many details to be resolved.
It would apply only to owner-occupied units and would be a refinancing of the existing loan amount. If someone borrowed $300,000 for a house now worth only $200,000, the loan would still be for the higher amount.
But the borrower could potentially save several hundred dollars a month because of the lower interest and a fixed rate.
The savings to the consumer would be ongoing, so he or she would likely spend the money, helping to stimulate the overall economy.
The one-time stimulus checks in 2008 did not prove effective; people either saved the money or paid off bills.
Cardoza said his idea is proposing the 4 percent rates be available only for existing homes, not to promote new home construction.
While the homebuilding industry is suffering, the country faces a large inventory of vacant housing.
We're not sure that Cardoza's idea will work and we know that it needs to be thoroughly vetted.
But we like the fact that our congressman, whose region is at the heart of the foreclosure crisis, is advancing a big-picture plan to help some people stay in their homes.
It's tempting to not want to do anything to help banks that provided suspect loans on houses with inflated price tags.
But the larger issue here is stabilizing the housing market and providing homeowner relief.
If Cardoza's idea can help do that, without serious unintended consequences, then it should be part of the big stimulus plan.
Fresno Bee
Americans Lose $1.4 Trillion in Home Values in Q4; More Than was Lost in All of 2007...Zillow.com...Press Release 
http://www.fresnobee.com/556/v-print/story/1172351.html
Eighth Consecutive Quarter of Declines is Worst So Far: Home Values Fall 11.6% in 2008; One in Six Homeowners is Underwater, According to Q4 2008 Zillow(R) Real Estate Market Reports SEATTLE, Feb. 3 /PRNewswire/ Home values in the United States fell for the eighth consecutive quarter, declining 11.6 percent during 2008 to a Zillow Home Value Index(1) of $192,119, according to the fourth quarter Zillow Real Estate Market Reports(2), which encompass 161 metropolitan areas.
The declines mean that U.S. homeowners lost a cumulative $3.3 trillion(3) in home values during 2008, with much of that loss coming in the fourth quarter. Homeowners lost $1.4 trillion during the fourth quarter alone; more than the $1.3 trillion lost during all of 2007. Since the housing market's peak in 2006, $6.1 trillion in home values have been lost.
Foreclosures(4) made up nearly one in five (19.9 percent) of all transactions in 2008. The hard-hit Central Valley in California continued to lead the nation in foreclosures, as more than half of all sales in the Madera, Merced and Stockton metropolitan statistical areas (MSAs) were foreclosures. The New York City metro area and the Grand Junction, Colo., had the lowest rates of foreclosure in the country (both at 3.9 percent).
For the first time, Zillow has also calculated short sales(5). Across the country, 10.9 percent of all real estate transactions in 2008 were short sales. The Lincoln, Neb., MSA led the country in the rate of short sales, with 14.1 percent of all transactions. In the San Jose, Santa Rosa and Santa Cruz, Calif., MSAs, short sales made up more than 11 percent of all transactions.
As home values declined through 2008, more American homeowners have become underwater on their mortgages. At the end of the year, one in six (17.6 percent) of all homeowners had negative equity(6). This number rose from the end of the third quarter, when one in seven (14.3 percent) homeowners was underwater.
Meanwhile, several markets that had been declining at a slower rate than most of the country showed accelerated declines in the fourth quarter. The Seattle, Wash. and Portland, Ore. MSAs for the first time in the fourth quarter experienced year-over-year median home value declines (12.1 percent and 11.7 percent, respectively) that were larger than the national median. In Manhattan, which posted year-over-year gains during the first three quarters of the year, home values declined during the fourth quarter, leaving Manhattan with a year-over-year decline of 5.8 percent by the end of 2008.
"A witch's brew of economic insecurity, foreclosures and tightened lending standards are helping to keep hard-hit markets down and to widen the scope of markets showing declines in home values," said Dr. Stan Humphries, Zillow vice president of data and analytics. "As more markets turn down and markets that were already down go deeper, the pace at which value is being erased from the U.S. housing stock is rapidly increasing, with more value wiped out in the fourth quarter of 2008 than was eliminated in all of 2007. The fourth quarter is the first in which we were able to see the effects of the mounting economic insecurity that picked up steam in the fall of last year. People without jobs, or fearing job loss, typically don't buy homes, no matter how low prices or mortgage rates might be. Public policy, in terms of both job creation and efforts to stem the tide of foreclosures, will have a large influence on when some of these markets find bottom."
Despite the bad news across much of the country, 21 of 161 markets are not feeling the pinch of declining home values. Home values in the Pittsburgh MSA were flat (-0.1 percent) in 2008. In the Fayetteville, N.C. MSA, home values increased 6.9 percent in 2008. The Yakima, Wash., MSA was not far behind, with home values increasing 6.2 percent during the year. Other areas in New York State, the Midwest and the South continue to experience steady or increasing home values.
For more information, including the full national report, 161 local reports and the Q4 Zillow Homeowner Confidence Survey, visit www.zillow.com/reports/RealEstateMarketReports.htm. ...      
About Zillow.com(R)
Zillow.com is an online real estate marketplace where homeowners, buyers, sellers, real estate agents and mortgage professionals find
and share vital information about homes and mortgages, for free. Launched in early 2006 with Zestimate(R) home values and data on
millions of U.S. homes, Zillow has since added homes for sale, a directory of real estate and lending professionals, Zillow Advice and
Zillow Mortgage Marketplace. One of the most-visited U.S. real estate Web sites, with more than seven million unique visitors per month,
Zillow's goal is to help people become smarter about real estate in every stage of the home ownership process--home buying, selling,
remodeling and financing. The company is headquartered in Seattle and has raised $87 million in funding.
Zillow.com, Zillow, and Zestimate are registered trademarks of Zillow, Inc.
(1) The Zillow Home Value Index is the median Zestimate valuation for a given geographic area on a given day and includes the value of
all single-family residences, condominiums and cooperatives, regardless of whether they sold within a given period. The Home Value
Index at the national and MSA levels is calculated using a weighted average of the median home value for each county. It is expressed
in dollars and is for a particular geographic region.
(2) The data in Zillow's Real Estate Market Reports is aggregated from public sources by a number of data providers for 161 Metropolitan
Statistical Areas dating back to 1996. Mortgage and home loan data is typically recorded in each county and publicly available through
a county recorder's office.
(3) Total value lost is calculated by adding all Zestimates in an area at two different points in time(i.e. peak of market, Q4 2007 and Q4
2008) and calculating the difference.
(4) Foreclosures is a legal process by which a bank or lender sells or repossesses a mortgaged property because the borrower does
not meet the requirements of the loan, typically by missing payments. Zillow identifies foreclosures by a Trustee's Deed of Sale, which
is the transfer from the owner to a lender or a private party
(5) A short sale is a sale of a house in which the proceeds fall short of what the owner still owes on the mortgage. Many lenders will agree
to accept the proceeds of a short sale and forgive the rest of what is owed on the mortgage when the owner cannot make the mortgage
payments.
By accepting a short sale, the lender can avoid a lengthy and costly foreclosure, and the owner is able to pay off the loan for less than
what he owes. To calculate short sales, Zillow looks at all properties that have loans and counts the number that were sold for less than
the loan amount. We then exclude foreclosures and divide that number by the number of all transactions in an area to come up with the
percent of all transactions that are short sales. Because there is little public records data regarding short sales these could include
instances when the homeowner sells their home for less than they owe on their mortgage and elect to pay the difference themselves.
(6) Negative equity indicates that the current home value as of Dec. 31, 2008 is less than the original mortgage amount.  To be conservative,
principal payments and equity withdrawals since initial loan origination have been excluded from the analysis, which is consistent with
standard reporting practices.
SOURCE Zillow.com
Will Valley unemployment reach level of early '90s?...Tim Sheehan
http://www.fresnobee.com/business/v-print/story/1171506.html
More people are out of work today in the central San Joaquin Valley than at any point in a decade -- about 121,200 in Fresno, Kings, Madera, Merced and Tulare counties. And experts don't expect relief anytime soon.
Ray Navarro, 41, of Sanger knows better than most. Navarro, a roofer and construction estimator, has been jobless for six months, a casualty of the Valley's burst construction bubble.
He faces increased competition for a shrinking number of jobs as the economic crisis grows.
Experts say the big questions are tough to answer: Could things get as bad as they did in the early 1990s, when the jobless rate reached nearly 20%? When will a recovery begin? Much of that uncertainty has to do with the region's agriculture-heavy economy -- dominated by historically higher unemployment, a less-educated work force and lower wages than state and national averages. Those factors could magnify and prolong the recession's effects here, experts say.
And the Valley's homebuilding industry, which helped fuel an economic recovery then, finds itself crippled today by tight credit, low prices and an oversupply of homes.
The Valley's plight is rooted in national trends that are slow to change, said Heidi Shierholz, an economist with the Economic Policy Institute in Washington, D.C.
"If past recessions are any indication, unemployment is going to continue increasing through 2009 and into 2010," Shierholz said. "It's going to be a long haul. ... There's no quick turnaround on this one."
Unemployment still is below a peak recorded in February 1993, when nearly one in five Valley workers at the time -- more than 133,000 people -- were out of a job. But economists say the accelerating pace of job losses in the region means things will get worse before they get better.
"I've personally never seen it like this," said Joseph Penbera, an economist and business professor at California State University, Fresno.
Between September and December, the number of people without jobs in the five-county region grew by nearly 35,000. The surge sent the region's monthly unemployment rate from 9.9% in September to 13.6% in December.
It's creating a sense of desperation among job-seeking victims of a deteriorating economy.
"I think things are even more frightening now than when my employer and I parted ways," Navarro said last week as he tapped out yet another application letter on a computer at the Fresno Workforce Connection office in Manchester Center.
"It's scary because I know my plight, and I know everyone here is in the same situation."
Navarro said he first sought construction work, then warehouse jobs, something he had done earlier. But after only five interviews in six months, he said, "I'm looking for anything I can get, even if it's minimum wage."
Lines get longer
At the Fresno Workforce Investment Board, which operates Workforce Connection offices in Fresno, Reedley, Firebaugh and Coalinga, executive director Blake Konczal said, "We're seeing a massive upswing in numbers at our service centers.
"We've got people lined up outside the doors when we open in the mornings, and we have to put a strict time limit on the computers so everyone has a chance to use them."
Elaine Craig, executive director of the Madera Workforce Investment Board, sees the same phenomenon. "There is a feeling of anxiety among our clients, a level of fear or even terror we've not seen for as long as we've been here," she said.
A new hotel in Madera was inundated last weekend with 400 applicants for only 22 jobs, Craig said. And, she added, "We're talking about housekeeping jobs or desk clerks, not management jobs."
No quick fix
In the last national recession in 2001, Shierholz said, the economic downturn lasted eight months, but it took 32 months before employers stopped shedding jobs, and 48 months before employment returned to pre-recession levels
"And the 2001 recession was mild compared to what we see now," she said.
What's different is how quickly jobs are disappearing.
"The acceleration we have now we've not seen in the last two recessions," Shierholz said. Nationally, more jobs were lost in the final three months of 2008 than in the first nine months. "It's the largest quarterly job loss we've seen since 1975."
A recent EPI study by Shierholz showed that in November, the United States had about four job-seekers for each unfilled job opening -- twice as many as a year earlier.
"It's getting harder to find employment than to be accepted at some elite universities," the Shierholz report said. "Seeing nearly four unemployed workers for every opening is a sobering indicator of how difficult it is to find a job in today's weak market."
Worse than reported?
Penbera said the Valley's reality is likely worse than what official figures from the state Employment Development Department reflect because they don't include people who have given up their job search and dropped out of the work force.
Because of that differential, Penbera said, "I'd be surprised if the actual rate isn't 1% or 2% higher than what's being reported."
Craig and Penbera both noted that the underemployed -- people who have jobs but cannot earn enough to make ends meet -- also are overlooked in unemployment statistics.
Penbera said he sees a number of factors contributing to the Valley's deteriorating economy and rapid rise in unemployment: the collapse of home values and the slowdown in homebuilding, a growing number of young people coming into the work force, increasing mechanization of agricultural tasks reducing the need for seasonal labor and a relative lack of higher-paying jobs to stimulate purchases of goods and services.
"We have a large inventory of unsold homes, more than anyone could imagine," Penbera said. "If we don't have residential construction, we don't have the potential for the construction industry to absorb these people into the job market."
Things were different in the early 1990s, when the Valley's average annual unemployment rate bobbed between 15% and 17% and the United States was in another recession. Back then, Penbera said, high interest rates, low prices for agricultural crops, the inability of farmers to get credit, a major surge in immigration and a slowdown in construction "all hit at once."
Today, Penbera said, "there's not the same potential for the construction side to get us out."
Craig, whose staff is dealing with the fallout in Madera, said the job losses began in the construction industry, "but now the tentacles are spread out to just about everybody."
Madera County Workforce Investment Board's "rapid response teams" -- counselors and specialists who visit companies that have to close or make substantial layoffs -- have been called out more over the past six months than they have in years.
"It's a sign of the times," Craig said. "We have folks who are very skilled and have a great work history, who have lost an $18- or $20-per-hour job and now they're lucky to find something for minimum wage."
The workforce investment boards in Valley counties not only help job-hunters in their search, they also field requests from employers who have open positions and screen applicants to be referred for interviews.
"We've got regulars who have come to us for years looking for people to fill positions either through attrition or growth. And that's just not happening now," Craig said. At the Madera workforce board, 101 job orders to fill positions were received since July. Ordinarily, Craig said, her staff would expect hundreds more.
'Hyper-Darwnism'
Konczal, at the Fresno workforce board, said companies with jobs to fill are finding themselves awash in applicants.
"They're going nuts with applications from people who are clearly unqualified for the jobs they're posting," Konczal said. "The same technology that makes it easy for someone to submit a résumé also makes it easy for employers -- especially small employers -- to be overwhelmed by the response to their postings."
That means applicants have to work harder to stand out in a sea of job-hunters.
"It's not just Darwinism, it's hyper-Darwinism," Konczal said. "You have to make sure your skills are the most marketable.
"It's a buyer's market, and the buyer is the employer. It's more important than ever for someone looking for work to have a clear understanding of their skill set and how it matches up to what the employer is asking for."
Some displaced workers are going back to school, either to work on a college degree, finish up a high-school diploma or boost their training to enhance their qualifications.
"It is still the case that there are positions going unfilled because there is the lack of a qualified work force," Konczal said. "We have employers telling us, 'The papers and TV are filled with people looking for work, and I can't find anyone.' "
Valley homebuilding at a standstill
Total inventory between Bakersfield, Stockton falls 40% since December 2007...Sanford Nax
http://www.fresnobee.com/business/v-print/story/1171464.html
Homebuilders in the Central Valley have almost stopped developing new lots as they struggle to whittle down inventory of existing properties during the most severe production slump in recorded history.
Total inventory -- which consists of houses under construction, finished vacant units and model homes -- between Bakersfield and Stockton has fallen an impressive 40% from December 2007 to 5,903 units, a seven-month supply, market tracker Metrostudy reported Monday.
Of those, 2,622 are vacant and finished. That is a three-month supply based on current sales levels and isn't that far from the 2.5-month supply considered equilibrium, said Greg Gross, director of Metrostudy's Central Valley division.
"The market has made a concentrated effort to bring inventory levels under control during 2008," he said. "This is an important step if we expect housing prices to rise during the next two years."
But, that isn't enough. The supply of vacant developed lots -- parcels that are ready for a house to be built -- dwindled less than 3% over the last year and is at a five-year supply in the eight counties.
Paring down inventory is crucial because builders are not selling as many homes as before. Builders statewide in 2008 pulled permits for 65,380 houses, condominiums, townhomes and apartments -- down 42% from 2007 and a whopping 69% decline from 2004, the California Building Industry Association reported Thursday.
It was the lowest level of production on record, association officials said.
Gross said lot development has "virtually ceased" as demand has evaporated, and he thinks the new-home market will struggle into 2010.
"Nobody is carving up a vineyard and building streets," said John Bonadelle, a Fresno developer and president of the Building Industry Association of the San Joaquin Valley.
Developers in the northern part of the San Joaquin Valley are struggling more than their counterparts in the Fresno and Tulare regions. As of December, builders in the central San Joaquin Valley had a 1.7-month supply of houses that were finished or under construction, according to a report by Hanley Wood Market Intelligence.
And homes in the Valley are selling faster.
One person for every 32 visitors bought a home after visiting model homes in Fresno County, compared with one home for every 152 visits in Merced County and one for every 132 in Stanislaus County, according to The Ryness Report, another data supplier.
Gross said would-be buyers are facing more challenges. "With regulation in the mortgage industry, buyers now have to prove their ability to repay their mortgages," he said. "Higher credit scores and more stringent documentation are required."
Mike Miller, Fresno division president of Lennar Homes, said an estimated 20% of his deals fall through. That's not significantly higher than normal, but the credit issues have eliminated more prospects.
"We write fewer sales contracts," he said.
Lennar was the largest home-seller in Fresno County last year, with 14.3% of the market share, according to Hanley Wood Market Intelligence.
Centex, D.R. Horton, The McCaffrey Group and Wathen-Castanos rounded out the top five.
While builders have been paring down excess supply, they don't want to eliminate inventory.
Developers want to have some houses available for people who want to move in quickly.
Miller said he has more than 75 houses under construction and will sell most of them before they are finished.
"Out of 100 houses, we might have 20 sold," Miller said, adding that Lennar is one of the few builders looking for finished lots to buy.
Today, builders are competing more against banks selling foreclosures than with other developers, Bonadelle said.
The crushing pile of bank-owned houses hitting the marketplace has driven down prices of existing homes to 2003 levels, according to Zillow, which tracks prices.
The median price of a single-family home in Fresno is $176,850, down 40.6% from its peak in early 2006. Almost 56% of all transactions over the past 12 months were at a loss.
Sacramento Bee
Sacramento hearing on septic tank rules is delayed...Bob Walter
http://www.sacbee.com/politics/v-print/story/1593885.html
A Sacramento hearing on new regulations for new and existing septic systems in the state has been postponed in the wake of statewide protests.
The proposed regulations, set to take effect next year, would force owners of septic tanks to have them inspected every five years at a cost of about $325. Owners of on-site domestic wells would pay another $325 to have the water analyzed every five years.
The rules have been roundly criticized in meetings from Ukiah to Malibu. Last week, a state Water Resources Control Board workshop in Santa Rosa was canceled because of fire safety concerns when an overflow crowd showed up.
Also last week, Placer County supervisors approved a letter of protest to be sent to the state board on behalf of 26,000 septic system owners in the county.
Assemblyman Ted Gaines, R-Roseville, announced Thursday that he would seek to repeal the legislation adopted in 2000.
The Santa Rosa workshop has been rescheduled for two sessions Feb. 9. A Sacramento hearing at the water board, originally set for that date, has been delayed indefinitely, said Gita Kapahi, ombudsman for the board.
The water board also extended the deadline for written comments about the septic regulations until noon on Feb. 23.
Stockton Record
Free-for-all in Fresno...Alex Breitler's Blog
http://blogs.recordnet.com/sr-abreitler
Check out this water forum taking place Wednesday night at Cal State Fresno. Bill Jennings v. Westlands Water District, among other interesting matchups. And the moderator is federal Judge Oliver Wanger, the same judge who imposed water supply cutbacks to protect Delta smelt.
Here is the press release from the university:
A public debate on water policy in California and the Central Valley will be moderated by U.S District Judge Oliver Wanger at 7 p.m. Feb. 4, at California State University, Fresno. Agricultural and environmental advocates will face off on the issues.
The debate, which is free and open to the public, will be held in the Satellite Student Union (2485 E. San Ramon Ave. at Maple Avenue). It is sponsored by Fresno State’s Political Science Student Association and the Political Science Department.
As the presiding judge for the Eastern District of California, Wanger has ruled over most of the major water cases recently in the Valley, including the controversy over preserving Delta smelt in the Sacramento Delta. Wanger will provide brief opening remarks, said Dr. Thomas Holyoke, a political science professor who is coordinating the event.
Holyoke said the debate will focus on Valley East Side, West Side and Sacramento-San Joaquin River Delta issues.
“The single most important public policy problem confronting California’s Central Valley today is the availability of water,” Holyoke said. “The declining snowpack in the Sierra Nevada, the falling groundwater table and decisions to restore Chinook salmon in the San Joaquin River and smelt in the Delta will most likely mean considerably less water in the future for Valley agriculture.”
He said the issue also is forcing state and local policymakers to develop a broad new policy to strike a balance between supporting the agriculture economy and ensuring the quality of water and the environment that depends on it.
The forum will also provide an opportunity for the public to express its concerns, Holyoke said.
Valley agricultural community participants are:
Thomas Birmingham, general manager and general counsel of the Westlands Water District,
Kole Upton, former chairman of Friant Water Users Authority
Jim Beck, general manager of Kern County Water Agency
Representing environmental concerns are:
Lloyd Carter, board member of the California Water Impact Network and Revive the San Joaquin and president of California Save Our Streams Council
Michael Jackson, board member and counsel to the California Sportfishing Protection Alliance and Regional Council of Rural Counties.
Bill Jennings, chairman of the California Sportfishing Protection Alliance
San Francisco Chronicle
Jail for 'vile threats' to animal researchers...Henry K. Lee
http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2009/02/03/BA1015MD2Q.DTL&type=printable
A Capitola man has been sentenced to six months in jail for making threatening phone calls to two UCSF scientists who use animals for research, prosecutors said today.
Justin Bhagat Thind, 33, repeatedly called the researchers at their homes in Belmont and San Mateo over a four-day span in September 2007, phoning as late as 1 a.m., said Steve Wagstaffe, San Mateo County's chief deputy district attorney.
Thind made "vile threats," telling the scientists they would die the same way they made the animals suffer, Wagstaffe said.
Investigators tracked the calls to Thind's cell phone. He faces similar charges in Marin County for allegedly harassing other UCSF researchers.
Thind's MySpace page, which is filled with graphic images of animals being slaughtered, lists his occupation as "Revolutionary/Truthseeker/S-kicker/Vegan freak."
He pleaded no contest in December to a felony charge of threatening a government employee and a misdemeanor charge of making a threatening phone call.
At a hearing Monday, Judge Clifford Cretan allowed Thind to surrender May 2 to begin serving his sentence. The judge also placed him on three years' probation and ordered him not to be a member of any animal-rights groups.
Contra Costa Times
Editorial: California residents need to start conserving water now...MediaNews editorial
http://www.contracostatimes.com/opinion/ci_11611517?nclick_check=1
THE MESSAGE from state water officials is clear: Start conserving now. Don't wait.
It doesn't matter where you live. If you aren't part of the solution, you're part of the problem. Don't flush your toilet if you don't have to. Turn off your shower while you soap up. Limit your yard watering. Stop washing your car at home and certainly don't hose down your sidewalks and driveways to clean them when a broom would work just as well. Fix leaky faucets.
Conserve. Conserve. Conserve.
Why? Because, "we may be at the start of the worst California drought in modern history," says Lester Snow, director of the state Department of Water Resources. "It's imperative for Californians to conserve water immediately at home and in their businesses."
And it's time for water districts across the state to start mandating conservation, with stiff penalties for those who don't comply.
California snow pack is only about 61 percent of normal for this time of year. January, usually the wettest month, was a bust — one of the driest first months of the year on record.
Last year at this time, the snow pack was 111 percent of normal, but the driest spring on record led to a second straight year of drought. Now we are probably facing a third.
If the skies don't open in a very major way soon, this drought will be more severe than those of 1976-77 and 1987-92, the worst in modern times.
It's not just the rain and snowfall shortage that's strangling the water supply. With more people and more permanent crops, there's greater demand for water now. Moreover, there's less water feeding Southern California from the Colorado River, meaning that there is greater demand on the Delta to help make up the difference. And we are in the first major drought since many fish species were added to the list of threatened and endangered species.
Our state's lack of restraint in recent years has contributed to a decline in Delta fish populations, including smelt, salmon and steelhead. Now major restrictions on delivery of Delta water are needed to help the wildlife recover.
The consequences of the water shortfall could be devastating. Saving that front lawn will be the least of our worries. As farmers fallow thousands of acres of row crops, tens of thousands of jobs will be lost and billions of dollars of income.
A state already ravaged by recession will face yet another financial kick in the stomach.
Make no mistake. State leaders should have taken more action by now to increase reservoir storage capacity. Farmers should have stopped wasting water by flooding fields and growing low-value crops. Cities like Sacramento should not have been allowed to wait nearly two more decades before installing meters for all customer accounts to ensure residents are charged for the water they use.
There is plenty of blame to go around and much need for drastic policy changes and planning for new facilities. But any new facilities planned now won't save us from what lies ahead this year. Nor can we count on a wet February or March.
The time for action is now. We must take personal responsibility and our elected leaders across the state, through rationing and fines, must insist on it.
Los Angeles Times
Boom in Inland Empire industrial space is beginning to go bust
After years of high occupancy, warehouses are standing empty as retailers collapse and the demand for goods declines...Roger Vincent
http://www.latimes.com/business/la-fi-industrial3-2009feb03,0,3663368,print.story
As the regional economy continues to sputter, vacancy rates are beginning to climb at warehouses and distribution centers for industrial goods, putting the already hard-hit Inland Empire at further risk of decline and threatening facilities in Los Angeles and Orange counties as well.
After years of high occupancy and rapid construction of cargo hubs, immense spaces are now standing empty. Some fell victim to the collapse of retailers such as Mervyns and Wickes Furniture; others are vacant because the huge national falloff in demand for consumer goods has meant fewer imports and less need for storing and shipping them.
Nearly all of these warehouses and shipping hubs are located in San Bernardino and Riverside counties, where a long-running industrial real estate boom is finally starting to go bust.
"We were the hottest market in the country," industrial real estate broker Kevin McKenna said. "Imports were going crazy and the ports of L.A. and Long Beach were booming."
Then, of course, the world economy changed.
Industrial vacancy in the Inland Empire doubled in the last year, from 6.2% in the fourth quarter of 2007 to 12.4% at the end of 2008, according to figures just released by brokerage Cushman & Wakefield. Hardest hit was the eastern side of the region including the cities of San Bernardino and Redlands, where vacancy has surpassed 22%.
More centrally located industrial properties in Los Angeles and Orange counties are also beginning to feel the pinch, although the modest increases in vacancy rates are still considered healthy by industry standards. Many of those properties are rented to small entrepreneurs who are hunkered down but so far toughing out the economic downturn, industry observers say. Small businesses that do fail are easier for landlords to replace than the large corporate tenants that favor the Inland Empire.
Vacancy in Los Angeles County is 3.3%, up only 1 percentage point from a year ago. Orange County's vacancy is 5.1%, up from 3.2% last year at this time.
Industrial real estate is a lagging indicator of the economy, however, and the full effect of the recession may not be felt for months. Many industrial- property owners in the healthy markets are concerned about the radical change in fortune on the east side of the Inland Empire.
"The big question everybody is trying to figure out the answer to is whether that contagion is going to ripple all the way in" to the rest of Southern California, said John McMillan, a broker at Cushman & Wakefield.
So far the pain is largely confined to Inland Empire distribution centers that serve many of the world's largest companies, said economist Esmael Adibi, director of Chapman University's Anderson Center for Economic Research. Goods shipped in bulk into the ports of Los Angeles and Long Beach are often repacked in smaller units and shipped across the United States.
In recent boom times, developers built warehouses as large as several football fields where goods were moved around inside by robots and fleets of full-sized trucks could dock for loading. Most buildings quickly found tenants.
"All of the building taking place prior to the recession was expansion of distribution centers for nationwide firms," Adibi said.
"Now you don't need as many products to be produced and distributed."
For much of the 2000s, though, it seemed like the needs were endless. Three years ago, there was a net addition of 20 million occupied square feet in the Inland Empire, said broker McKenna, an executive vice president at CB Richard Ellis.
So builders enthusiastically kept building. It takes years to get big warehouses designed, approved and built, however, which meant many structures were still coming up when the market began to cool.
"The recession hit so quickly in most sectors that we were caught off guard," McKenna said. "There was an awful lot of new space in the pipeline." Now almost no buildings are being started in the Inland Empire.
Industrial property construction is always rare in Los Angeles County, where it's hard to find land to build on. A 400,000-square-foot building under construction in Commerce is the only one of its size being built in a market with 700 million square feet of existing space, said Cushman & Wakefield's McMillan.
With the market softening, many Los Angeles landlords are sweetening their offers to tenants by paying more for their interior improvements and giving them a few months' free rent if they sign a lease.
In the Inland Empire, tenants are more aggressive, McMillan said, demanding lower rents.
Competition among investors to buy industrial properties has dropped dramatically because investment financing is hard to come by, said investor and landlord Michael Frankel, a partner at Rexford Industrial. Prices are down at least 15% from a year and a half ago and will probably drop more.
Brentwood-based Rexford specializes in buying well-worn properties in urban markets and improving them so they can garner higher rents. For tenants, Rexford prefers smaller entrepreneurs to large corporations. "Smaller is more reliable. They are resilient," Frankel said, and rely on their rented space to survive.
Fortune 1000 companies these days treat real estate more like a just-in-time commodity that they acquire and shed to suit economic times, Frankel said. "They don't want to be tied longer than the business cycle."
For all the current hardships, boosters say the Inland Empire industrial market is well positioned for a comeback when the economy improves, perhaps by 2010, because of its low-priced housing, ample workforce and desirable location for international shipping.
In Perris, all of the existing industrial buildings are occupied and about 30 properties with a combined 18 million square feet are approved or going through the city's approval process, said Michael McDermott, the city's economic development manager.
With property prices and rents coming down in the Inland Empire, some shippers will find opportunity, said Mike Fox, chief executive of Rancho Cucamonga trucking company Fox Transportation. His business is down about 5%, but he's philosophical about changes in the economy.
"The Inland Empire is going to continue to explode and they will need these warehouses," Fox said. "I think it's just a matter of time."
California's community colleges near the breaking point
As the two-year campuses strain to serve an influx of students, officials worry that a key promise - easy transfers to four-year schools - will go unfulfilled for many...Gale Holland
http://www.latimes.com/news/local/la-me-transfer3-2009feb03,0,3226423,print.story
Facing yawning budget gaps, California's public universities are shifting thousands of applicants into a community college system already swamped by newly unemployed adults and students priced out of other schools.
By holding down enrollment, the shift would help balance budgets at UC and CSU campuses. But officials say the move seems likely to worsen problems at the state's 110 two-year campuses, many of which already face budget shortfalls that have them chopping courses, laying off part-time faculty and cramming classrooms so full that students have to perch on windowsills.
"We hope to serve as many students as we can get in, but we're near the breaking point," said Jack Scott, statewide chancellor of the California community college system.
In particular, many educators fear that an influx of new students will further reduce the ability of many community colleges to prepare students for transfer to four-year schools. The more savvy newcomers may shove aside some of the existing 2.5 million community college students, who are struggling to work toward a university degree from the bargain-priced, but strained, two-year system, officials say.
The concerns are the more pressing because two-thirds of the state's college students, and most of the African Americans and Latinos, are at the two-year campuses.
Even before absorbing displaced university students, California's community colleges are projected to grow at least 4% this year, according to the state Legislative Analyst's Office. A number of colleges say their enrollment may rise by up to 10%.
If students cannot get the classes they need to be eligible for transfer to a four-year college, they could become discouraged and drop out, educators worry. The San Diego Community College District, for instance, had almost 8,000 students on waiting lists for one or more classes before the current semester even began, said Lynn Neault, vice chancellor of student services.
The classroom glut, Neault said, is unprecedented.
Ophelia Walker, who recently returned to school to work on her registered nursing degree at Los Angeles Harbor College in Wilmington, was surprised to find that every science course she needed was closed to new students.
"I'm not too old, but time is very valuable to me right now," Walker, 33, a Carson resident and licensed vocational nurse, said last week. "I don't need to waste it."
The reasons for community colleges' relatively low transfer rates are hotly debated. Two-year campuses serve many masters: returning adults, vocational education students, English learners, slackers trying to put off working and residents looking for a yoga class -- or a girlfriend. Not everybody plans to move on to a four-year college.
Community college officials say that 40% of students who are serious about transferring manage to do it. But the Public Policy Institute of California, in a 2006 study, found that only about 25% of the students who are focused on transferring actually make it.
For many students, trying to assemble transfer credits is like entering a looking-glass world where little is as it seems. Comp 101 might be a prerequisite for transferring to Cal Poly Pomona but not to Cal State Long Beach, a requirement for English majors but not rhetoric students, good enough for the Cal State system but not for UC, or vice versa.
In addition, the requirements for a student to earn an associate of arts degree and to be eligible to transfer to a four-year school are not necessarily interchangeable. And financial aid is yet another bewildering, highly bureaucratic, thicket.
"Students are enrolled in the wrong courses in order to transfer, they're taking courses without sufficient guidance and they don't know the process or calendar by which you get things accomplished," said Marc Cutright, director of the Center for Higher Education at the University of North Texas, who is also on the staff of a new institute there dedicated to the study of transfer students.
"It's a bureaucratic perfect storm," agreed Estela Mara Bensimon, director of USC's Center for Urban Education, who has studied community college transfers.
Many schools that do better at easing the university pathway have transfer centers and counseling staffs to help students navigate the maze of requirements. But counselors are in short supply at many community colleges, experts have found.
The faculty senate for the California Community Colleges recommends a ratio of 370 students for each counselor. The actual ratios run as high as 1,700 to 1, said USC education professor Alicia Dowd, who participated in the transfer study with Bensimon.
It's no coincidence that Santa Monica College, which has the highest UC transfer rates of any community college, also has one of the biggest counseling staffs, with 60 full-time and 40 part-time advisors, said Dan Nannini, coordinator of the college's transfer center.
"We put a lot of resources into counseling," Nannini said. "It's absolutely integral to students' understanding the process, and getting the right information so they're eligible for transfer, and also for confidence purposes."
In recent years, both Cal State and UC have tried to improve the transfer pipeline, accepting higher numbers of community college students through priority admissions and contracts in which the requirements for transfer are spelled out.
Susan Wilbur, UC's systemwide director of admissions, said UC President Mark G. Yudof has ordered a study of how to smooth the transfer route. "It's incumbent on us . . . to make sure these students are not lost during this difficult time," she said. Cal State Chancellor Charles B. Reed also has made the issue a focus.
But "will there be enough slots?" asked Stephen Handel, director of community college initiatives for the New York-based College Board. "If California continues in rough shape, obviously all bets are off."
Increasingly, such schools as Los Angeles Trade-Tech Community College are telling students that four-year degrees are necessary, even for technical jobs.
On a recent afternoon, David Esparza, Trade-Tech's transfer center director, counseled Rochelle Bullette, 45, a culinary arts student who wants to attend Cal State to become a dietitian. "She came here for culinary arts and decided it wasn't enough," Esparza explained.
Bullette, dressed in a white chef's jacket, laughed, rubbing imaginary bills between the fingers of both hands. "You decided you want more money?" she was asked. Bullette nodded yes. "I'm going to keep it real," she said.
Like many community college students, Bullette has hopscotched around community colleges in the Los Angeles area. "I started off with business, accounting," she said. "Then I went to Southwest [Los Angeles College]. I don't know what I was doing at Southwest. Then I came here and it stuck."
Campus-shopping will increase as students shut out of classes at one location sign up at another, complicating their journey, experts said.
Esparza studied a printout of Bullette's academic record. "You're going to have a big block to transfer," he said.
"Is that good?" she asked. Esparza assured her it was. "Yay! Yay! Yay!" she said, punctuating each cheer with a fist pump.
The transfer center director said it is not unusual to see students who don't realize they are close to accumulating enough units to be able to transfer.
"I just saw a student with 87 transferable units, close to 100 overall," far more than the 60 required. "He never spoke to a counselor at all" before, Esparza said.
Omari Trice, 30, transferred from Trade-Tech to UCLA. Now, he counsels Trade-Tech students about how to follow a similar path. Even more than information, they need support, he said.
"Students who come to two-year colleges generally don't think they can make it," Trice said. "I dispel certain myths about transferring: 'UCLA is made for white people.' 'I'll never make it there.' 'I can't possibly pay for it.' It's a social ceiling."
Trice almost got lost in the eddies of his own transfer journey. He received a photography certificate from Trade-Tech but was disappointed by how little it helped in the job market, he said. After visiting Africa with Habitat for Humanity, he returned to the community college and then transferred to UCLA, where he is majoring in black history.
"The sky's the limit," he said.
CNN Money
ADM ethanol production sinks 21%
Oil price crash and down economy sends overextended producers reeling.
http://money.cnn.com/2009/02/03/news/companies/adm_ethanol.
reut/index.htm?postversion=2009020313
CHICAGO (Reuters) -- U.S. ethanol producer and grain processor Archer Daniels Midland Co. said Tuesday nearly 21% of U.S. ethanol production capacity has been shut due to weak demand and poor margins.
U.S. ethanol plants with a production capacity of 10.2 billion gallons per year are currently operating, down from a peak of 12.9 billion sometime mid-to-late last year, ADM Executive Vice President John Rice said on a conference call with analysts.
U.S. capacity to make the alternative fuel rocketed last year as companies raced to build plants amid generous government incentives designed to begin to reduce the country's dependence on oil imports.
The oil price crash and credit crunch, however, proved too much for some producers. Many also have struggled with volatile prices for corn, from which most U.S. ethanol is made.
Even with the tough times, a few plants are still opening as producers hope that U.S. mandates for traditional ethanol, which are set to increase every year until reaching a peak of 15 billion gallons per year in 2015, will help fuel demand to recover.
"We are on pace to finish our ethanol plants," Rice said about ADM's two new distilleries.
ADM's numbers on national idled plant capacity were more aggressive than those from the Renewable Fuels Association, an industry group . After ADM (ADM, Fortune 500) released its numbers, the RFA revised its operating ethanol plant capacity downward to just under 10.3 billion gallons annually, from 10.37 billion gallons.
After filing for bankruptcy protection in October, VeraSun Energy Corp. has shut 12 out of 16 ethanol plants. The company, which used to be the second largest U.S. producer of the fuel, suffered from costly hedging bets on the price of corn and the credit crunch.
Since then a string of plants have filed for bankruptcy protection, including a subsidiary of Panda Ethanol Inc., Northeast Biofuels and, last week, the private Wisconsin distiller Renew Energy LLC.
"Will we see the same growth in the ethanol industry we saw last year? No, and that's not necessarily a bad thing," said Matt Hartwig, an RFA spokesman.
He said many of the downed plants were in "hot idle," meaning they can be fired up to work at full rates within a few days, if demand rises. "If the economy rebounds ... ethanol will move forward," he said.
Under the 2009 U.S. Renewable Fuels Standard, refiners and fuel blenders are required to blend 10.5 billion gallons per year of traditional ethanol into gasoline in 2009.
If U.S. capacity to make the fuel falls short, it could mean the country will import more ethanol from Brazil. If ethanol supply gets too tight, the U.S. Environmental Protection Agency has the power to waive federal mandates.
Foreclosures dominate home sales
Repossessed homes and short sales make up a large percentage of sales in many real estate markets...Les Christie
http://money.cnn.com/2009/02/03/real_estate/foreclosures_
dominate_housing_market/index.htm?postversion=2009020307
NEW YORK (CNNMoney.com) -- Real estate values around the nation have collapsed, and sales of foreclosed and "underwater" homes now dominate many housing markets, according to a report released Tuesday.
The report, from Zillow.com, a real estate Web site, revealed that with foreclosures soaring, nearly 20% of the nation's home sales in 2008 were of bank-repossessed properties. Another 11% were short sales, in which homeowners owed more in mortgage debt than their homes were worth.
Madera, Calif., had the highest percentage of these distressed sales: 54.6% of all transactions there were foreclosed homes, and another 3.4% were short sales.
In Merced, Calif., 53.4% of sales were foreclosures and 4.8% were short sales. In nearby Stockton, 51.1% were foreclosures and 5.4% were short sales.
"As more markets turn down and markets that were already down go deeper, the pace at which value is being erased from the U.S. housing stock is rapidly increasing," said Stan Humphries, Zillow's vice president in charge of data and analytics.
"More value [was] wiped out in the fourth quarter of 2008 than was eliminated in all of 2007," Humphries said.
About $3.3 trillion in home equity was erased in 2008, with $1.4 trillion of that wipeout coming in the fourth quarter alone, according to Humphries. More than $6 trillion in value has been lost since the market peaked in 2005.
Those equity losses have put many homeowners underwater, where they're extremely vulnerable to foreclosure. These owners can't tap home equity for the cash they need to pay bills when they run into rough financial patches, and they often find it impossible to refinance - lenders will not loan more than the property is worth.
In the United States, 17.6% of all homes are now underwater, according to Zillow, as are 41.2% of all mortgages for homes bought in the past five years.
The worst-hit cities are in the once-booming Sun Belt. In Las Vegas, 61.4% of all homes are underwater.
Because so many homes are worth less than their mortgage balances, an increasing number have to be sold short. But short sale transactions can take a long time to complete, because lenders have been having trouble keeping up with the flood of requests.
"The speed of short sales is a function of the resources being allocated to them by lenders, and those resources are being stretched to the limit," Humphries said.
That means lenders may not act on approving short sales for months. The deals cannot go forward without their approval, because the banks must agree to forgive the difference between what they're owed and what the sale brings in.
As the time it takes to arrange short sales lengthens, they become harder to complete.
Time and money wasted
One example of how price declines can doom a short sale occurred recently in Phoenix. Curtis Johnson, a real estate broker there, worked with a health care worker whose hours were being cut and who could no longer afford her mortgage. She fell behind and decided to sell.
Johnson was able to find a buyer willing to pay $183,000, and got an approval form the lender. The owner confidently moved out, got a new place and started a new life. But the lender folded and the mortgage went to a new servicer, who took six weeks to approve the deal.
"Unfortunately, the buyers who were approved were no longer interested because the real estate market had dropped significantly," Johnson said. "They wrote a new offer, considerably lower then the first, and it was time to start over."
Two more offers eventually fell through before a new buyer was found and the owner's bank approved the price, this time at $163,000. On the day of that closing, however, the parties discovered that the buyer's lender had run out of funds and dropped out of the deal. The home went to foreclosure auction before another sale could be arranged.
The house is now on the market for $139,900.
"[The house is] listed for less than what would have been received had the bank been willing to work with us, and still has not yet sold," Johnson said.
Distressed sales like that depress the market for all homeowners. Regular sellers in cities dominated by foreclosures have to adjust their prices downward to compete.
The percentage of homes sold for less than what their owners originally paid has leaped up in the past couple of years. In the United States as a whole, 34.6% of the sales made in 2008 were done at a loss. In Merced, 71.6% of all sales last year were for less than the seller paid. Stockton, Modesto and Las Vegas all had in excess of 68% of all homes being sold at a loss.
Foreclosures beget more foreclosures by adding inventory to the market, which depresses prices, which increases foreclosures, according to Humphries.
"The vicious cycle continues," he said.
Pending home sales rise in December
The number of sales contracts signed increased by 6.3%, as buyers respond to fire sale prices driven by a record number of foreclosures...Les Christie
http://money.cnn.com/2009/02/03/real_estate/December_
pending_home_sales/index.htm?postversion=2009020312
NEW YORK (CNNMoney.com) -- Plunging home prices and low mortgage rates pushed homebuying activity higher in December, according to a regular industry report released on Tuesday.
The Pending Home Sales Index, from the National Association of Realtors, measures the number of sales contracts signed each month. It rose 6.3% in December to 87.7, after dropping 4% in November to a record low of 82.5.
The index was 2.1% higher than its December 2007 level.
"Significant uncertainty still clouds the housing market despite improved affordability conditions," said Lawrence Yun, NAR's chief economist, in a written statement. "For a sustainable housing market recovery, and a sustainable economic recovery, we need a significant housing stimulus for qualified borrowers,"
Sales of homes that were repossessed in foreclosure proceedings contributed significantly to the index's improvement. Repossessions and short sales, when homes are sold for less than what borrowers owe on their mortgage, now account for more than 30% of all U.S. home sales, according to real estate Web site Zillow.com.
Sales activity gained the most traction the South, where the index jumped 13% in December. The Midwest was also much higher at 12.8%. The Northeast, however, slipped by 1.7% and the index in the West fell 3.7%.
Home sales also benefited from a drop in mortgage interest rates during the month. The 30-year, fixed-rate loan averaged 5.29% for the month, with the average borrower paying a fee equal to 0.7% of the mortgage principal. That was, by far, the lowest that mortgage rates had been all year.
Cheaper real estate
The lower mortgage rates helped push housing affordability to record levels.
NAR's Housing Affordability index improved to 158.8 in December, up more than 29% year-over-year. That makes buying a home more affordable than any time since NAR started tracking the measure in 1970.
A household earning the median U.S. family income can now afford a home of $277,000, according to NAR. That's well above the national median home price, which was $198,600 in 2008.
Home prices have softened as foreclosures have soared, up 81% in 2008, according to RealtyTrac, the online marketer of foreclosed properties. That has added a lot of distressed homes to housing inventory, sending prices spiraling down for almost all sellers.
But home sales are still sluggish, according to Pat Newport, real estate analyst for IHS Global Insight, because lenders are still reluctant to fund many mortgages.
"What's holding up sales right now," he said, "is that the banks are still not lending to those with less than the best credit."He said most banks are turning down a large percentage of the purchase applications that they receive.
Bob Moulton, president of mortgage broker Americana Mortgage Group, said he's having trouble getting any loans approved by lenders. He recently had a client with a mediocre credit score of 630 who was putting 30% down ,and had substantial documented assets and income.
"The big commercial lenders wouldn't even look at him," said Moulton.
Also hurting sales, of course, is a lack of confidence among buyers amidst the uncertain economy, which has been marked by continuing job losses.
"Housing activity remains weak compared with potential demand," said NAR President Charles McMillan, a broker with Coldwell Banker Residential Brokerage in Dallas-Fort Worth. "The market is fragile given the economic backdrop."