Credit and debit or water and fish?...Bill Hatch...6-27-09
With the sounds of families splitting up in our ears, late-model cars disappearing to the repo man, empty houses standing all over town, and an unemployment rate correlated to one of the highest foreclosure rates in the nation, people in Merced are not inclined to weep for the plutocrat growers of Fresno, Kings, Tulare and Kern counties. We have all the water we need for agriculture on both sides of our county (they are provided by different sources) and our unemployment rate is worse than all the counties just listed.
We don't have a water crisis and either do they. We all have a credit crisis. That must have been what directed Rep. Dennis Cardoza, who represents Merced and parts of Stanislaus and San Joaquin counties, together with Rep. Jim Costa, D-Fresno, to plead with the House Financial Services Committee to declare his congressional district an "economic disaster area." Real estate is an absolute disaster with no end to its slide in sight (Merced real estate has lost more than half its value) and farm commodity prices are down and costs of production are up. Merced is the second highest-producing dairy county in the nation and dairies are losing between $30,000 and $100,000 or more, depending on size, per month. Like the Southern California mega-dairies that located here in the last decade, almond orchards have also expanded on investments from outside agriculture, most prominently from real estate profits during the height of the speculative housing bubble. Dairymen and almond growers who did not get their infusion of real estate capital are having credit problems.
There is an excellent truth squad at work to debunk the drought-and-unemployment propaganda campaign foisted upon the media and Congress by interests that want a peripheral canal in the San Joaquin Delta -- developers from Sacramento to San Diego, the governor, and Fresno-based Westlands Water District, to name the most obvious. But there are less obvious interests, generally included in the phrase, finance-insurance-real estate (FIRE). Commercial bankers are Cardoza's top contributors. Independent Community Bankers of America have contributed $10,000 early in the 2010 campaign cycle. In 2004, ICBA was in the forefront of a fight to keep Netherlands-based Rabobank from buying a large consortium of Midwestern cooperative farm credit banks. In the last few years, Rabobank has been buying up community banks or opening its own branches on the Central Coast, in the Salinas Valley, from Roseville to Bakersfield in the Central Valley and in the Coachella and Imperial valleys, all focused on farm credit. Cardoza has a half-dozen Rabobank branches in his district. Three arrived within a few months of the collapse of County Bank, mismanaged to death by some of our fine Merced business and political leaders. Rabobank is the 16th largest bank in the world, it has a AAA rating, a 6-percent stake in Rothschild Freres, it may not yet have as much "community" bad paper as other California agribusiness lenders, it has not bought really stupid community banks like County, and it is poised to pick up assets at cents-on-the-dollar as major sectors of the rural California economy crash.
Tomorrow, Interior Secretary Ken Salazar will hold a "town-hall meeting" in Fresno on the issue of restrictions on Delta pumping caused by court decisions make on the basis of environmental law to protect endangered species. It will be a spectacle of misery, as paid farmworkers parade carrying signs announcing their poverty perhaps including images of the Virgin of Guadalupe, and impassioned west-side growers will denounce environmentalists and environmental law as socialism for starters.
Rep. Nunes, who, along with Cardoza and Costa, arranged the event, will preach a real stem winder the evils of environmentalism. A series of successful environmental suits have slightly curtailed water supplies from the San Joaquin River and from the Sacramento River through the Delta to south San Joaquin Valley growers. Nunes lives in the highest-producing dairy county in the nation. Tulare County is in a farm-credit crisis caused by prices now considerably below costs of production.
All three of the congressmen and the Obama administration are free-market fundamentalists and it would never occur to them that anything less than the invisible hand of this deity had anything to do with the dairy pricing system that is squeezing out all but the largest producers any more than they would believe government should regulate derivatives, credit default swaps, or health insurance companies. Now that the Millennial Rapture has died down a bit, the real fundamentalism appears: the brainless, irresponsible, cowardly, unconscionable dogma of unregulated free-market fundamentalism. There is such a consensus about it in the political classes after 30 years of neoliberal propaganda that we are able to witness idiotic events like tomorrow's without even asking: What is the role of credit in this? Are these fields fallowed for lack of water or for lack of credit? What is the level of indebtedness throughout a water district like Westlands?
We only ask, here in Merced, because we see every day the effects of the credit squeeze. We do not fully understand its cause other than to know it doesn't have anything to do with water or fish.
Nunes has introduced three failed bills to open the Delta pumps and has another one in the hopper. Due to our peculiar agricultural economy, based on publicly subsidized irrigation, a decisive percentage illegal alien farm labor without which the industry would collapse, as well as farm credit and a bewildering array of crop subsidies, Congress may yet come to believe Nunes' persistent brand of the well-known substance and pass one of his bills to further destroy the Delta, its fish, its farmers and the coastal salmon fishery of California and Oregon for the benefit of a few hundred immense agribusiness firms whose systemic environmental destruction is habitual and unredeemable. But what's actually driving Nunes' district to distraction is a credit-and-debt crisis, not a water crisis. But Nunes can't admit that because it violates his dogmatic free-market fundamentalism.
Home loan rates up slightly on debt and inflation fear...Alan Zibel, The Associated Press...6-26-09
Rates for 30-year home loans edged up this week, remaining above record lows reached over the spring.
The average rate for a 30-year fixed mortgage was 5.42 percent, up from 5.38 percent a week earlier, mortgage company Freddie Mac said Thursday.
"Mixed economic reports on the state of the housing market helped hold mortgage rates fairly flat," Frank Nothaft, Freddie Mac's chief economist, said in a statement.
Rates on 30-year mortgages fell to a record low of 4.78 percent earlier this year. But then they rose as high as 5.6 percent earlier this month after yields on long-term government debt, which are closely tied to mortgages rate, climbed as investors worried that the huge surplus of government debt hitting the market could trigger inflation.
Since then, the yield on the 10-year Treasury note has fallen back from an eight-month high of 4.01 percent reached last week to 3.61 percent early Thursday afternoon.
Though there are signs the troubled U.S. housing market is beginning to stabilize, higher rates could threaten or slow down any recovery, since prospective buyers would be able to borrow less money and might decide to hold off on their purchases.
Economists worry that the housing market is so fragile that rates that would have seemed attractive a decade ago are no longer enticing.
Freddie Mac collects mortgage rates Monday through Wednesday of each week from lenders around the country. Rates often fluctuate significantly, even within a given day.
The average rate on a 15-year fixed-rate mortgage fell to 4.87 percent, down from 4.89 percent last week, according to Freddie Mac.
Rates on five-year, adjustable-rate mortgages averaged 4.99 percent, up from 4.97 percent a week earlier. Rates on one-year, adjustable-rate mortgages fell to 4.93 percent from 4.95 percent.
The rates do not include add-on fees known as points. The nationwide fee for all loans in Freddie Mac's survey averaged 0.7 point.
Worse than subprime? Other mortgages imploding slowly...KEVIN G. HALL, McClatchy Newspapers...6-21-09
WASHINGTON -- Call it son of subprime. Experts warn that a new wave of mortgage foreclosures may be coming soon and could rival the default rates for subprime mortgages and slow efforts to find bottom in a prolonged national housing slump.
The mortgages in question are $230 billion of option adjustable-rate mortgages, creative lending products that flourished at the height of the housing boom. In an option ARM, a borrower can opt to pay less than his or her monthly balance due, and the difference is tacked onto the outstanding loan balance.
Many experts had expected an explosion of defaults in the springtime on these roughly 564,000 outstanding mortgages. However, interest rates dropped to historic lows, and that delayed the detonation of what many housing analysts still see as a ticking time bomb.
"They're probably going to default at a rate that makes subprime look like a walk in the park," warned Rick Sharga, senior vice president for RealtyTrac, a foreclosure research firm in Irvine, Calif.
Option ARMs have triggers that reset to a new interest rate based on either a set time frame or when debt exceeds some cap above the loan's value. The spring drop in interest rates allowed many borrowers to escape a day of reckoning because the lower rates prevented a triggering of that cap.
That just postponed the problem, however, because most option ARMs have five-year automatic trigger dates. These loans were most prevalent in states such as California, Florida and Nevada, where home prices have sunk so far that many homeowners are underwater: They owe more than their homes are worth.
The bulk of outstanding option ARMs - a product no longer available to homebuyers - were issued between 2004 and 2007. Monthly payments on these mortgages are due to reset to a higher lending rate between 2009 and 2012.
"They're going to have a loan they cannot afford on a house that's probably way underwater and not have a lot of good options on how to avoid foreclosure proceedings," Sharga said.
While a smaller number than subprime mortgages, option ARMs grew from 3 percent of all mortgages bundled and sold to investors in 2004 to 14 percent by 2007.
They pose risks for the broader U.S. economy because they threaten to add inventory to a depressed housing market and could hasten the blistering pace of foreclosure filings - more than 1 million from March to May alone.
"We can't rebuild housing values when there's a serious risk that another set of mortgages is collapsing," said Elizabeth Warren, a Harvard University law professor who heads a government panel overseeing the spending of Wall Street bailout money.
The Mortgage Bankers Association, representing mortgage lenders, takes a more optimistic view.
"Relative to what the industry was looking at a year and a half ago ... the recast is not going to be the problem people thought it was going to be," said Michael Fratantoni, the vice president of research for the MBA.
If the subprime crisis hit like a heart attack, the option ARM problem is more like a worsening chronic illness.
In a prescient cover story on Sept. 11, 2006, Business Week magazine labeled option ARMs "nightmare mortgages" and warned that it "might be the riskiest and most complicated home loan product ever created."
Subprime mortgages caught the nation by surprise because of their short two-year resets to higher interest rates. Option ARMs reset over a longer horizon and thus are a slowly unfolding nightmare.
"This one, everyone knows it's worsening. Everyone sees it worsening," said Sandipan Deb, a credit analyst in New York with Barclays Capital, a global investment firm.
This long lead time gives lenders and borrowers time to seek alternatives, MBA's Fratantoni said.
Analysts put the current default rate on option ARMs at 35 percent or higher.
Most were sold into a secondary market, where they were pooled with other mortgages and sold to investors as bonds or securities. The number of these loans is quantifiable, but banks aren't required to disclose how many such loans they wrote. It's unclear how many option ARMs remain on banks' books and weren't sold to investors.
Barclays Capital estimates that at least 37.5 percent of option ARMs originated in 2005 remain outstanding, as well as 63 percent of those originated in 2006 and 82 percent that originated in 2007. Deb and fellow Barclays analysts forecast a 38 percent loss rate for pools of option ARMs originated in 2006 and 48 percent losses for those issued in 2007.
Since option ARMs were most popular in states with the largest home price declines, many borrowers owe 30 percent or 40 percent more than their homes' current values.
That puts many of the Obama administration's mortgage relief programs out of reach for them, since these programs aid borrowers by lowering interest rates.
"The problem with these option ARM borrowers is they are already paying a low rate," Deb said, adding that a better solution would involve forgiving part of the loan balance, something that most lenders have been unwilling to do.
The Obama administration, however, has offered financial incentives to lenders that are willing to accept a short sale or deed-in-lieu transfers. Both of these options involve a bank taking back an underwater mortgage, freeing the owner from further payment and allowing for a speedy resale of the property, avoiding foreclosure proceedings.
"These are the kinds of properties that are right out of central casting for those types of procedures," said Sharga, of RealtyTrac.
ON THE WEB
Business Week article from Sept. 11, 2006: http://tinyurl.com/po4qc
Valley's ag and water economics a complex conundrum...Tim Sheehan
The message from farmers is dramatic and direct: drought and federal water restrictions are crippling San Joaquin Valley agriculture -- and threaten America's food supply.
"This is a crisis, and it's a worsening crisis," said A.G. Kawamura, California's secretary of food and agriculture. "The federal government needs to understand this [will have] a major impact on America's food supply, on the nation's food security."
Yet even as growers fallow thousands of acres and lay off workers, farm employment in Fresno County is the highest in a decade -- and agricultural production hit a record value in 2008.
What's going on?
There's no fast and easy answer. Valley agriculture and water economics are too complex for that.
There are stark differences between the east and west sides of Fresno County alone.
In the vast reaches of the west side, sharp limits on water from the Sacramento-San Joaquin Delta have forced growers to plant fewer acres and hire fewer workers. Unemployment rates are above 30% in towns like Mendota, Huron and San Joaquin. Packers and processors have closed as business dwindles.
But on the east side, farmers face fewer water cutbacks. More water means more work -- enough so far, apparently, to take up the slack being felt in the west.
Estimates from the state Employment Development Department show that through May, the number of farm jobs in Fresno County is higher than in any year since 2000.
The number of agricultural jobs in Fresno County averaged 42,100, or about one in eight jobs in the county. That's up 1,200 from the same period in 2008. The state collects figures only for the county as a whole.
Water deliveries cut
The sprawling Westlands Water District this year will receive only 10% of its contracted federal water allocation from the Sacramento-San Joaquin Delta -- the lowest allocation in more than 30 years.
Pumping restrictions to protect the Delta smelt and salmon also make it hard for farmers to obtain surplus water from water districts north of the Delta. Instead, farmers must pump low-quality, salty ground water just to keep permanent crops such as almond trees alive. They need more and better water to produce a viable crop from those trees.
"I'm teetering on a pogo stick out here," said grower Shawn Coburn, who farms several thousand acres, including almonds and wine grapes, on the west side. "Without water, I'm done. ... The people who used to provide food for America can't provide food for themselves."
Farmers in Westlands will fallow more than 100,000 acres because of a lack of water, said Sarah Woolf, a spokeswoman for the district. That is nearly double the 55,000 acres fallowed in 2006, the last time Westlands received its full water allocation. The district encompasses about 600,000 acres, including about 100,000 that are permanently retired.
West-side grower John Harris said his farm payroll for the first six months of this year will be about $3.2 million -- a little over half what it was in 2007, when the current drought began.
"Were it not for ground water pumping and carryover water, these declines would have been even more dramatic," Harris said.
The decline in work has meant hardship for many families. In Firebaugh, local charities gave away about 1,500 boxes of food to needy families last week.
"If there wasn't a need, these people wouldn't be standing in line for hours," Firebaugh City Manager Jose Antonio Ramirez said. "It's embarrassing for them, but it's a necessity."
"Not everything happening out here is related to water, but the majority is," Ramirez said. "We were giving out food before, even when things were better, but maybe only about 300 boxes."
Water limits hit jobs
There's no doubt that water restrictions hurt employment on the west side, said David Sunding, a professor of agriculture and resource economics at the University of California at Berkeley and director of Berkeley Economic Consulting Inc.
Moreover, it's still too early to see effects of the water shortage in employment and farm revenue statistics, Sunding said. He expects the numbers will get worse.
"Peak farm employment only starts to happen around now with the harvest of vegetable crops, tree crops and others through late summer," Sunding said. "We need to see what the data says six months from now."
But Jeffrey Michael, an economist from Stockton's University of the Pacific, believes farmers are exaggerating the effect of federal water restrictions. Unemployment always has been high on the west side, and the recession has taken a heavy toll, he said.
Experts also have long pointed out that farming on the west side faces a growing challenge from minerals in the ground water that build up in soil, eventually poisoning crops.
"The economy is more complex than a lot of folks out there let on," said Michael, who infuriated west-side farmers with a newspaper essay last month in which he questioned the link between west-side jobs and water availability.
Local agriculture officials agree that the east side of Fresno County is helping to make up for declines in the west.
"Fresno County is huge, and the east side is working and viable," said county Agricultural Commissioner Carol Hafner. "Even though we have lost some packing sheds, others are picking up the slack and will likely be hiring more than they have in the past."
Last year, Fresno County remained the leading agricultural producer in the state, topping the $5.6 billion mark, the highest total ever. The county saw increases in several crops, including almonds, pistachios, pomegranates, citrus and blueberries. More than 13,000 acres of fruits and nuts were added in 2008.
But Hafner expects no records for 2009.
"The west side is losing acreage, and I would expect the annual crop report to go down," Hafner said. "Production levels are dropping because there isn't enough water."
One economist argues that agricultural employment is an unreliable indicator of economic health because there's no distinction in the state figures between part-time or piece work and a full-time job.
"It doesn't mean the total wealth as a result of those farm jobs has gone up," even if employment has increased this year, said Richard Howitt, a professor of agricultural resource economics at UC Davis.
Steve Patricio, president of Mendota's Westside Produce, agreed.
"The reality is that people on the west side are working less, even though they have jobs," Patricio said. "The total numbers don't tell the whole story."
Patricio said reduced water supplies on the west side have shifted production of some crops such as melons and processing tomatoes to other regions of the Valley.
Within the Westlands Water District, melon acreage has dropped by about 50%, Patricio said. And picking up the slack are growers in other areas who have more water available.
The relative health of other farming areas isn't something to be taken for granted, state agriculture secretary Kawamura warned. Future environmental regulations in the Delta and demands for water to re-establish salmon runs on the San Joaquin River could result in irrigation hardships for farmers beyond the west side.
"I don't think this will be the only area to be affected by regulations," Kawamura said. "The entire east side of the Valley could easily find itself in this same kind of pattern."
Michael said he understands there is real pain in the west-side cities. He's just not convinced that water is primarily to blame.
"I've seen the anecdotes from farmers who say they're letting people go, and that adds up across a lot of farms," he said. "I'm sure the water situation is having huge impacts on the profitability of individual farmers."
Sunding and Howitt agree with Michael that the west-side economy is lackluster even in good times.
"If they gave the west-side farmers all the water they wanted, would all of the problems in these cities be solved? No," said Sunding. "But the point is, it would help."
Affixing blame on water or other economic factors doesn't change the reality for west-side residents, Howitt said.
"The bottom line is, we know that if farmers can't get water, they can't grow the crops," he said, "and if they don't grow the crops, they don't employ farm labor."
"We know we're starting from a basis of high unemployment in these west-side towns anyway, so what this creates is an incremental impact on these people who are already having a difficult time," Howitt said. "It's making life rougher -- by a lot."
Anger alone won't solve the Valley's water woes...Bill McEwen
It was a warm October night, and the hall on 13th Street in Firebaugh was packed with people. They had come to voice frustration about the "man-made drought," fallowed land and lost jobs.
That was five years ago. Little has changed.
Once-fertile land in the Westlands Water District is ruined by salty irrigation water trapped between the soil surface and layers of clay. Farmers scramble for water. Their deliveries are cut because of below-average rainfall and attempts to protect the delta smelt and salmon.
People, again, are mad as hell about lost jobs, food lines and government indifference to poverty on the west side. And agriculture -- along with its political allies -- again is writing an angry narrative of fish vs. people.
It's a sturdy tale, I admit. I've fallen for it a time or two. This script reduces a complex situation to black hats and white hats. And it inspires good people to take action on behalf of the hungry and unemployed.
The problem is, life isn't simple. Anger alone isn't a solution. And idle delta pumps are only partly responsible for 41% unemployment in a town such as Mendota.
Largely unspoken is the fact that foreign competition, retired land and a move to mechanically harvested crops are reducing the need for seasonal farmworkers. Also unspoken is the paradox of the Valley's reliance on agriculture: the world's most bountiful farm belt always has had some of America's highest unemployment. Nine years ago, 30% of Mendota was jobless. Six years ago, it was 36%.
Now, two questions: What will it take for agriculture -- Westlands, in particular -- to shed its reactive, panic-driven skin? And when will our political leadership join with agriculture to focus on sustainable economic solutions?
Westlands, as constituted, isn't sustainable. Not with the state continuing to grow in population, and the Sacramento-San Joaquin Delta turned into an environmental nightmare. The district never again will get all the water it wants.
But, Steve Geil, president of Economic Development Corp. serving Fresno County, says that the west side is poised for an economic turnaround. He envisions energy "farms" -- solar, wind, thermal, biomass -- and, eventually, a nuclear energy plant -- complementing traditional agriculture.
"Fresno is the only place in the world with these six elements -- land, air, water, sun, a metropolitan city and a reliable, convenient transportation system," Geil says. "We can be a center for clean energy jobs."
Geil says the revolution already is taking shape on the west side, with scores of well-paying jobs added to the Firebaugh/Mendota area. He points out that farm jobs are increasing in Fresno County and that the county economy "outperformed" the state economy in March and April.
Granted, Geil is a salesman. But I'd rather buy into his upbeat assessment of the future than to listen to more of the doom-and-gloom-holding-on-to-yesterday mantra of the Westlands crowd.
For once, let's get ahead of the game. Let's think more, vent less. Let's behave like adults instead of railing against ourselves and the world.
"We have been a fragmented county for too long," Geil says. "It's almost like we create our own problems. We have to move to a higher level of thinking, where we debate our differences and then come together to support solutions."
Salazar visit must build cooperation to solve state water infrastructure
Interior secretary should approve disaster declaration for Fresno County...Editorial
We hope Interior Secretary Ken Salazar has more to offer the San Joaquin Valley today than the last time we heard from him. In April, Salazar was in California to announce $260 million in federal economic stimulus funding for water projects, but he gave Valley projects a big fat zero. Salazar preferred to hand out checks for Northern California projects that had been signed off by environmental leaders.
The symbolism of April's snub soured us on Salazar. We hope he is beginning to understand that he represents all residents as interior secretary, and not just the environmental community.
In the San Joaquin Valley, which has some of the poorest communities in the nation, the Obama administration so far hasn't done much to help, even while the unemployment rate is at 40% in places like Mendota.
Salazar's last trip to California came at the same time the "march for water" by farmers and farmworkers was being conducted on the Valley's west side. This high-profile event had garnered national publicity, yet Salazar was content to ignore the fundamental water question.
Now the Obama administration has dispatched Salazar to the region as the pressure grows for a solution. He is scheduled to appear at a town hall meeting today in Fresno to discuss the drought's impact on the region and the environmental restrictions that have added to the lack of farm water. Salazar should get an earful from farmers, farmworkers and officials from the small communities that have been devastated by the lack of water.
Salazar's spokeswoman, Kendra Barkoff, said he's anxious to hear from Valley residents because "this is an issue the secretary has been working on for a while." We are stunned to hear that because Salazar hasn't offered much of substance to the farm water debate.
Gov. Arnold Schwarzenegger is pushing the Obama administration to help and last week asked for a presidential disaster declaration for Fresno County. That needs to be approved.
Rep. Dennis Cardoza, D-Merced, and Rep. Jim Costa, D-Fresno, are involved in the planning of the Salazar visit and we are confident that they have been pushing Interior Department officials to offer something of substance to the region. Costa called Salazar's last visit to California "very disappointing" after he handed out the money to other California water projects, but had nothing for the Valley.
We would like to see a balanced approach to the highly contentious water issue from the Obama administration, and hope Salazar has learned from his early missteps on this issue.
It will take cooperation from the state and federal governments to resolve California's water crisis because of the overlapping jurisdictions and the need for state and federal funding to build the needed water infrastructure. We hope the Salazar visit begins that cooperation.
Short sales becoming more of a force in real estate...Sandy Nax, News Blog...6-26-09
Short sales -- in which lenders agree to sell houses before they go into foreclosure -- are picking up steam, and some experts feel they could be a way to help stem the flow of bank-owned properties onto the marketplace.
In a short sale, a bank agrees to sell a house at or near market rate to avoid a protracted, costly and painful foreclosure process. But they historically have been difficult to negotiate, and many wind up falling apart before, or even after, an offer is accepted.
About 43% of all residential listings in Fresno and Clovis are short-sale opportunities (compared with 14% that are bank owned). But getting the deal clinched is another story: In the last 30 days, only 12% of closed transactions were short sales.
Why is this important? People who sell their houses via a short sale don't have a foreclosure on their record and can be back in the home-buying market in as little as 18 months, compared with five to seven years if the house is lost to foreclosure.
Plus, the house is not vacant as long, lenders don't have to pay for foreclosing and reselling, and they don't have to worry about further price deterioration.
In some cases, banks will try to modify a loan before doing a short sale, but borrowers are often too far underwater or unable to make the new payment. In those cases, a short sale is a way to make a "dignified exit in a nonpublic transaction," said Rick Simon of Bank of America.
Fresno real estate agent Patrick Prince says short sales also are better for the neighborhood. The seller tends to stay longer, a new buyer is in place and the house is in better condition.
Local agents attribute the increase in short-sale activity to a declining supply of foreclosures for sale and the competition for those properties.
And some banks are finally starting to realize that short sales are a viable alternative to foreclosure. "Wells Fargo has become one of my favorites," said Prince, who specializes in short sales. "I'm seeing response times in 45 to 60 days, which is fast in my book."
Short sales take so long because lenders must negotiate permission from other parties, such as investors. Many houses also have second loans, which a borrower took out to help make the purchase or get cash. In some cases, borrowers may be asked to contribute money or sign a promissory note, Simon said.
BofA says it is streamlining and improving its short-sale procedures to get more done quickly. "The hope is that a short sale becomes a final way to avoid foreclosure," Simon said. "To that extent, we can speed up the process."
Short sales are likely to increase, but whether they supplant the foreclosure process is debatable.
Right now, short sales exceed foreclosure sales in Fresno, but that might not continue, said Scott Thompson of Sacramento-based Mortgage Resolution Services, which conducts short sales across the country. Foreclosures are piling up, and banks are going to have to release more into the marketplace, maybe as early as this month. They will likely peak in fall or winter, he said.
The next big wave?
People are squirming over the increasing number of foreclosure filings, fearing that could turn into a new batch of foreclosures. But when?
"The reality is that we have very few homeowners being foreclosed on when viewed as a percentage," said Sean O'Toole of ForeclosureRadar, which tracks foreclosure auctions.
At the end of May, a record 111,824 foreclosures statewide were scheduled for sale, but only 16% were actually sold, compared with almost 50% a year earlier.
O'Toole said 40% of the delays were postponed at the request of the lender, and 33% were delayed due to mutual consent between lender and borrower.
"That clearly demonstrates that lenders are indeed delaying foreclosure in the majority of cases on their own accord," O'Toole said.
Barring dramatic happenings, that wave has to crash to the shore at some point. That would increase the supply of houses for sale and minimize the bidding wars that characterize the foreclosure market.
Falling prices have helped boost sales for months, and the pace is continuing in June. About 1,875 transactions are pending in Fresno and Madera counties, but an uptick in interest rates could dampen some of the enthusiasm.
Army Corps levee tree rules rattle Sacramento flood agencies...Matt Weiser
If a tree grows on a levee, is it bad?
According to a recent scientific review, there's no way to tell by reading federal policy.
In 2007, in the wake of Hurricane Katrina in New Orleans, the U.S. Army Corps of Engineers began enforcing national levee maintenance policy in California for the first time. The policy allows only grass on levees; trees and shrubs are banned.
The corps' rules have caused alarm in the Central Valley ever since, where trees and shrubs growing on levees provide the only remaining riverside habitat. Critics say removing that vegetation poses not only huge fiscal and environmental burdens, but would also drastically change the region's iconic scenery.
The levee maintenance policy has never been applied uniformly in California. In fact, local Army Corps officials have worked with the state for years to plant more trees on levees.
The corps commissioned a scientific peer review of its policy last year. Finished in December, the corps provided The Bee a copy last week.
"The policies and guidance lack scientific foundation, as evidenced by broad anecdotal assumptions and lack of (non-Army Corps) literature citations," the three-member review panel wrote. "The document is from the single perspective that vegetation on levees is bad and should be removed. Some vegetation may help stabilize … levees."
This echoes the consensus of a science symposium on the subject hosted in 2007 by the Sacramento Area Flood Control Agency. Numerous experts said there was little proof that trees threaten levees. On the contrary, they cited a large body of research that trees may actually strengthen levees by binding loose soils together with their roots.
The federal policy relies largely on field experience rather than scientific studies to justify its conclusions.
The corps stands behind its policy and rejects the critique of its scientific merit.
"We don't agree with that at all," said Eric Halpin, Army Corps special assistant on dam and levee safety. "Our primary mission is to keep public safety forefront, and not everyone has that mission. Certainly the folks that are solely focused on the benefits of trees don't have that focus."
The peer reviewers also criticized the corps for failing to consider experience from other regions of the nation and world. The corps has stated previously that the policy is based on conditions and experience in the American Midwest, which differ greatly from California.
In California, levees were built close together after the Gold Rush, intentionally narrowing the rivers to flush out sediment deposited by hydraulic mining.
That was shortsighted: It not only gave rivers less room to flood, but eliminated virtually all riverside habitat.
Today, the only habitat left along hundreds of miles of Central Valley rivers grows on the levees themselves.
No one knows how many trees grow on California levees. A cursory survey in 2007 found 5,100 trees growing on just 25 percent of the levees in Sacramento. This represents a tiny fraction of the 1,600 miles of Central Valley levees affected by corps policy.
Last year the state Department of Water Resources reported the results of a trial inspection using the new criteria. It found that 64 of 107 levee maintenance districts would fail inspection, compared to just six under the old criteria.
Failure means the loss of federal money to rebuild levees after a flood.
Gil Labrie, a levee engineer in Walnut Grove, said removing trees poses an enormous burden on levee maintenance districts, which struggle to fund basic upkeep now.
"We couldn't even get there," he said. "That would be very expensive."
The peer reviewers said the corps also failed to consider other pros and cons of tree-covered levees. There is evidence, for instance, that plants may prevent erosion.
One example: recent research at UC Davis shows that native shrubs "lay down" against the soil during a flood and prevent erosion, while causing little restriction in flows. The shrubs also sheltered juvenile salmon from currents, allowing them to remain in preferable habitat.
The research focused on floodplains, but similar results may be possible on levees.
"It definitely highlights that there are attributes of plants we should be taking advantage of in our designs that we've ignored in past, and we can't really ignore in the future," said Stefan Lorenzato, watershed program manager at DWR and lead author of the study.
State and local officials have worked with the Army Corps to develop a temporary exclusion from the rules. Finalized in March, it allows trees to remain on levees as long as branches are pruned 5 feet off the ground to ensure access for inspections.
The exemption lasts until 2012, when state law requires the Central Valley Flood Protection Board to adopt a comprehensive new flood management plan for the region.
At that point, the state will likely seek a permanent variance from the corps rules. What that will require is unknown, said Jay Punia, the board's executive officer.
"We have dodged a bullet on a temporary basis," Punia said.
Halpin said the corps is willing to consider the variance. It is also conducting additional research on its own to refine the vegetation policy.
Levee Vegetation Policies...U.S. Army Corps of Engineers, California Levees Roundtable
Los Angeles Times
No end to foreclosures is in sight...Lauren Beale
Reporting from Washington — Even with the Obama administration's loan modification and refinancing programs moving forward, the end of the foreclosure glut is not around the corner, a panel of government officials and consumer advocates told attendees of the recent National Assn. of Real Estate Editors conference.
Among the factors slowing progress are loan servicers still gearing up for the task, the recession, re-defaults and for-profit foreclosure prevention firms handing out misinformation.
With about three-quarters of mortgage servicers onboard, the loan modification program "is not performing up to expectations yet," Deputy Treasury Secretary Seth Wheeler said. About 150,000 trial modifications have been completed and, as servicers work to beef up their staffing and training, tens of thousands are in the works. The goal is to rework 9 million mortgages over the next several months, Wheeler said.
Economic conditions, however, are working against refinancing, said John Walsh, chief of staff of the Office of the Comptroller of the Currency.
"The continued decline in home prices of course makes refinancing more difficult," Walsh said. And unemployment is "only beginning to take its toll now."
The agency is tracking data and will report on progress at the end of the month. A 52% failure rate was reported in the fall for mortgage modifications.
David Berenbaum, executive vice president of the National Community Reinvestment Coalition, called on the media to stop running ads by "for-profit racketeers who charge on average $2,900 to consumers for poor advice." Examples he cited included counsel to not pay the mortgage or contact the service provider. HUD-approved counselors will help consumers for free.
Organizations administering foreclosure-mitigation counseling services include NeighborWorks America, a congressionally chartered nonprofit network of more than 240 community development and affordable housing organizations.
Kenneth D. Wade, chief executive of NeighborWorks, said there needs to be "transparency on results" and more information on people who are getting assistance "to see what's working."
If the new programs can keep up with the changing nature of the nation's housing problems, he said, they "have a better chance at working."
Hard times? Depends on where you live
Nationally, some areas have hardly been touched by the economic downturn. Southern California is not one of them....Alan Berube. Alan Berube is a senior fellow and research director at the Brookings Institution's Metropolitan Policy Program and coauthor of the new report, "MetroMonitor: Tracking Economic Recession and Recovery in America's 100 Largest Metropolitan Areas" (brookings.edu/metromonitor).
Are we experiencing the worst economic downturn since the Depression? In most California cities, it looks that way. In most Texas cities, probably not.
That's one story emerging from a new Brookings Institution analysis examining the performance of the nation's largest metropolitan areas over the course of the current recession.
Notwithstanding the attention lavished on the national economic figures emanating from Washington each week, we're not undergoing one uniform recession nationwide. The effects on our 100 largest metropolitan areas -- the combined city/suburban labor and housing markets that collectively represent three-quarters of the U.S. economy -- have ranged from glancing blow to body slam.
Let's start with the Riverside-San Bernardino metro area. As of March 2009, jobs there are down nearly 8% from their peak, and home prices have dropped 28% in the last year alone. On these and other indicators, Riverside ranks among the five hardest-hit metro economies in the nation. The Los Angeles and Oxnard metro areas rank among the bottom 20 in a broad index of recent economic performance.
By comparison, the economy in San Antonio is humming. Jobs are down less than half a percent from their peak, and home prices have risen over the last year. Austin, Dallas, Houston and even the border cities of McAllen and El Paso have seen only small effects from the downturn.
How can these areas perform so differently? It turns out that a lot depends on what a metro area's firms and workers do, and what its housing market did in the lead-up to the crash.
In the nation's manufacturing belt, which rings the Great Lakes from upstate New York to eastern Minnesota, many metro areas have suffered job declines over multiple decades. This recession has accelerated those losses dramatically in areas that depend most on the auto industry. Detroit, for instance, has lost a stunning 12% in just the last five years. In Ohio, Toledo and Youngstown have been similarly battered.
But at the other end of the region, Rochester, N.Y., is faring relatively well. It still has a lot of manufacturing jobs, but they're in areas in which demand has remained fairly strong, such as imaging technologies and healthcare devices. And the area benefits from the presence of major universities -- nationally, the education industry has added jobs over the course of the recession.
A similar story plays out across the metropolitan map based on underlying economic specialization, both positive (Pittsburgh in healthcare; Washington in government) and negative (Orlando in tourism; Charlotte in banking).
Meanwhile, the Sun Belt was home to the building and lending boom that eventually turned sour and shook the foundations of the world economy.
In Riverside, the outer parts of Los Angeles County and nearly every metro area in the Central Valley, home prices rose rapidly during the first half of the decade. In Modesto, a house that sold for $175,000 in 2000 was valued at $359,000 by 2006, and one-third of jobs added during that period were in construction and real estate. When the subprime mortgage crisis emerged in 2007, whole segments of the Central Valley's economy crashed -- as did those in much of the state of Florida and some Western cities, such as Las Vegas and Phoenix.
Yet not every Southern and Western metro area got caught up in the bubble. A $175,000 house purchased in Houston in 2000 was valued at just $200,000 by 2006. That meant less speculative lending, and less fallout from the mortgage crisis. Indeed, while home prices nationally dropped about 6% over the last year, they rose by 5% in the Houston area.
The uneven downturn points to the likelihood of a highly uneven recovery. Washington shouldn't hang the "Mission Accomplished" banner when national jobs, GDP and home-price figures begin to improve, but rather when a broad-based set of metro economies see persistent gains. Ensuring such a recovery will probably require more than the general monetary and fiscal policy measures applied thus far.
For instance, the work of the president's auto recovery team will be crucial for helping a dozen or more metro areas wracked by the decline of the Big Three, which may not ever fully bounce back from this downturn.
It will not be enough to simply steer more federal grant dollars to these communities. Instead, a longer-run vision for what these metro areas will do in the new economy -- how best to make use of their existing business and technological capabilities, worker skills and place-specific institutions like universities and civic organizations -- should guide investment. So too should a strategy for achieving more rational growth patterns that reflect the population and job loss these areas have suffered over decades.
In Riverside, Modesto and other metro areas heavily affected by the housing crisis, we must evaluate whether new programs to help homeowners avoid foreclosure are stabilizing housing prices, and whether the stimulus package is helping to reduce vacant and abandoned properties.
Large, economically diversified cities such as Los Angeles and San Francisco may recover as the housing market stabilizes and consumer confidence rebounds. The Inland Empire, Central Valley and other metro areas that over-relied on housing for recent growth may take longer to adjust, and public policy may have to actively assist in stimulating new business investment and worker training.
Stabilizing the macro-economy is a necessary first step. More purposeful steps to reinvigorate metro economies are now needed to put the country back on the road to sustainable long-run growth.
New York Times
It’s Time to Learn From Frogs...NICHOLAS D. KRISTOF
Some of the first eerie signs of a potential health catastrophe came as bizarre deformities in water animals, often in their sexual organs.
Frogs, salamanders and other amphibians began to sprout extra legs. In heavily polluted Lake Apopka, one of the largest lakes in Florida, male alligators developed stunted genitals.
In the Potomac watershed near Washington, male smallmouth bass have rapidly transformed into “intersex fish” that display female characteristics. This was discovered only in 2003, but the latest survey found that more than 80 percent of the male smallmouth bass in the Potomac are producing eggs.
Now scientists are connecting the dots with evidence of increasing abnormalities among humans, particularly large increases in numbers of genital deformities among newborn boys. For example, up to 7 percent of boys are now born with undescended testicles, although this often self-corrects over time. And up to 1 percent of boys in the United States are now born with hypospadias, in which the urethra exits the penis improperly, such as at the base rather than the tip.
Apprehension is growing among many scientists that the cause of all this may be a class of chemicals called endocrine disruptors. They are very widely used in agriculture, industry and consumer products. Some also enter the water supply when estrogens in human urine — compounded when a woman is on the pill — pass through sewage systems and then through water treatment plants.
These endocrine disruptors have complex effects on the human body, particularly during fetal development of males.
“A lot of these compounds act as weak estrogen, so that’s why developing males — whether smallmouth bass or humans — tend to be more sensitive,” said Robert Lawrence, a professor of environmental health sciences at the Johns Hopkins Bloomberg School of Public Health. “It’s scary, very scary.”
The scientific case is still far from proven, as chemical companies emphasize, and the uncertainties for humans are vast. But there is accumulating evidence that male sperm count is dropping and that genital abnormalities in newborn boys are increasing. Some studies show correlations between these abnormalities and mothers who have greater exposure to these chemicals during pregnancy, through everything from hair spray to the water they drink.
Endocrine disruptors also affect females. It is now well established that DES, a synthetic estrogen given to many pregnant women from the 1930s to the 1970s to prevent miscarriages, caused abnormalities in the children. They seemed fine at birth, but girls born to those women have been more likely to develop misshaped sexual organs and cancer.
There is also some evidence from both humans and monkeys that endometriosis, a gynecological disorder, is linked to exposure to endocrine disruptors. Researchers also suspect that the disruptors can cause early puberty in girls.
A rush of new research has also tied endocrine disruptors to obesity, insulin resistance and diabetes, in both animals and humans. For example, mice exposed in utero even to low doses of endocrine disruptors appear normal at first but develop excess abdominal body fat as adults.
Among some scientists, there is real apprehension at the new findings — nothing is more terrifying than reading The Journal of Pediatric Urology — but there hasn’t been much public notice or government action.
This month, the Endocrine Society, an organization of scientists specializing in this field, issued a landmark 50-page statement. It should be a wake-up call.
“We present the evidence that endocrine disruptors have effects on male and female reproduction, breast development and cancer, prostate cancer, neuroendocrinology, thyroid, metabolism and obesity, and cardiovascular endocrinology,” the society declared.
“The rise in the incidence in obesity,” it added, “matches the rise in the use and distribution of industrial chemicals that may be playing a role in generation of obesity.”
The Environmental Protection Agency is moving toward screening endocrine disrupting chemicals, but at a glacial pace. For now, these chemicals continue to be widely used in agricultural pesticides and industrial compounds. Everybody is exposed.
“We should be concerned,” said Dr. Ted Schettler of the Science and Environmental Health Network. “This can influence brain development, sperm counts or susceptibility to cancer, even where the animal at birth seems perfectly normal.”
The most notorious example of water pollution occurred in 1969, when the Cuyahoga River in Ohio caught fire and helped shock America into adopting the Clean Water Act. Since then, complacency has taken hold.
Those deformed frogs and intersex fish — not to mention the growing number of deformities in newborn boys — should jolt us once again.