Motive for home sellers was unaffordable loan

Darrell Smith states in the Sacramento Bee today:

Dale Kasler writes in the Sacramento Bee today:

Housing starts jumped sharply last month in California and Sacramento from a year earlier, an industry association said Wednesday.

But the California Building Industry Association, which released the statistics, said the increased activity in January might not mean much.

“Given the fact that we’re comparing this month to one of the lowest months on record doesn’t exactly bring a housing recovery to mind,” said association President Liz Snow in a press release. “Still, it’s nice to see some increase in homebuilding activity.”

Some 2,979 housing permits were pulled statewide in January, up 48 percent from a year earlier but down 18 percent from December.

In the Sacramento region, 211 permits were pulled in January. That was up 41 percent from a year earlier. It was also an increase of 23 percent over December.

The figures were a far cry from the boom era. In January 2006, for instance, 707 housing permits were pulled in Sacramento.

Published Friday, Jan. 22, 2010 by Jim Wasserman in the Sacramento Bee:

Sacramento had a median gain last year.

New December statistics paint 2009 as the year when Sacramento County home prices finally ended a dramatic four-year free fall.

Median sales prices for new and existing homes combined rose 0.6 percent in 2009, property researcher MDA DataQuick reported Thursday. The percentage represents a welcome change for thousands of anxious Sacramento County homeowners who saw their values drop 20 percent in 2007 and plunge another 37 percent in 2008.

The newest numbers reveal a 2009 real estate market prodded by government stimulus, more than five months of interest rates below 5 percent and plenty of cheap bank repos in its early months. The year also brought an $8,000 first-time homebuyer federal tax credit and several months of a similar $10,000 state tax credit for buyers of new houses.

Prices for Sacramento County resale homes alone closed at $178,000 for the year, up 2.4 percent from the start of 2009, DataQuick reported. It was a second straight month to beat the previous year – after 41 months of annual losses.

“That’s probably because of the slowdown in (bank repo) sales,” said Bob Bronswick, Roseville-based president and chief operating officer of Coldwell Banker Residential Brokerage. “And if you look at it, our primary market is entry level. There’s been such demand for it, and prices over the asking price. We’ve garnered a lot of multiple offers.”

DataQuick analyst Andrew LePage said Sacramento County sales under $100,000 fell from a year earlier while rising slightly in the $500,000 and $800,000 categories.

The reversal of a long downward trend in prices appeared inside a December report showing that capital-area homeowners closed 40,534 escrows in 2009. The tally was 496 escrows shy of 2008 in Amador, El Dorado, Nevada, Placer, Sacramento, Sutter, Yolo and Yuba counties, DataQuick reported. While robust for a market pocked with foreclosures, job cuts and anxiety, the annual total was one of the lowest since 1998, DataQuick records show.

“Everything I have in escrow right now is a short sale,” said Roseville-based ReMax real estate agent Jaye Crews. Those are sales, increasingly common in distressed newer neighborhoods, in which banks accept offers below what they’re owed. For Crews, short sales and first-time buyers have largely taken the place of her earlier bread and butter – move-up buyers.

The Sacramento Association of Realtors says one in four December sales in Sacramento County and West Sacramento were short sales. DataQuick said Thursday that 50.6 percent of Sacramento County sales were bank repos. That’s down from 71 percent as 2009 opened.

This continued prevalence of short sales and repos shows that the market – while it’s more stable – is still not normal. Collectively, Sacramento, Yolo, Placer and El Dorado counties remain mired in 12.4 percent unemployment.

As 2010 begins, almost 12 percent of the four-county region’s mortgages are late, in the foreclosure process or tied to bank-owned homes, according to First American CoreLogic. That’s a sizable increase from 7 percent at the beginning of 2009, when unemployment was 8.7 percent.

DataQuick reported that 3,450 new and existing homes changed hands in December in the eight-county region, beating 3,183 sales in November. December sales normally rise from November.

While prices have largely stabilized in Sacramento County they’re still under pressure in Placer County, where homes are more expensive. Prices in Placer County finished 2009 down 13.6 percent.

“A lot of stuff is still highly discounted in Lincoln Hills,” said Crews. “We’re definitely seeing stability in markets and places where there aren’t a lot of houses for sale. But, boy, in those new-home tracts even six or seven years old. Ouch.”

With so many newer houses being resold, new homes accounted for just 9 percent of capital-area sales in 2009. That’s down from 25 percent market share in the boom that spanned 2002 to 2006.

Many in real estate circles believe 2010 will proceed with less artificial stimulus. The federal tax credit expires at the end of April. And Wednesday, the Federal Home Administration, which insures many first-time buyer loans, announced it will charge higher fees and require higher down payments from buyers with credit scores below 580. At least 40 percent of Sacramento-area loans in 2009 were FHA loans.

My favorite writer in the Sacramento Bee, Jim Wasserman, says: Gov. Arnold Schwarzenegger’s proposed new $10,000 homebuyer tax credit is thrilling the real estate universe, but don’t think it’s a done deal.

Opponents, who include economists and advocacy groups, are weighing in. Their point: it’s a poor use of money in a state that’s whacking community college budgets and health programs for poor kids.

“The experts have all concluded that (credits) are ineffective and largely reward people for homes they would have bought anyhow,” said Jean Ross, head of the California Budget Project, a policy advocate for lower-income residents.

Wednesday, Los Angeles economist Chris Thornberg said the federal $8,000 tax credit is stimulus enough for the California housing market. Thursday, economist Jeff Michael, director of the Business Forecasting Center at Stockton’s University of the Pacific, said he agreed.

Many think the proposal’s popularity with buyers, builders and real estate agents will carry the day. But with deficits still raging, this may be a big fight.

High-performing market

Finally. Sacramento makes a Top 15 list that isn’t about complete dismal failings in its housing market.

Truckee-based Clear Capital this week ranked the metro area 14th nationally among its “highest performing major markets” from Nov. 25 to Dec. 24. These are the veteran hard-hit markets where prices are finally rising now – Detroit, San Francisco, Phoenix, Tampa, San Jose and Sacramento.

Clear Capital shows that prices in El Dorado, Placer, Sacramento and Yolo counties rose 2.7 percent from the third quarter to the fourth – nearly erasing all of 2009’s previous declines. The year here ended with prices down just 0.9 percent from December 2008, it said.

Much credit goes to far fewer cheap repos in the capital region’s sales mix: 38.3 percent at year’s end.

Three comparisons:

• Riverside-San Bernardino’s repo share is 53 percent. Its sales prices are 13 percent below December 2008.

• Phoenix repos are 47 percent of home sales. The year ended with prices 19 percent below December 2008.

• Las Vegas is mired in a 53 percent repo share. As a result, sale prices are 27 percent below December 2008.

Goodbye, big spenders

No wonder this economy feels so slow. Construction workers, who never let a dollar sit in their pockets for long, aren’t earning any.

Sacramento lost 23 percent of its nonresidential construction jobs in the past year. Count 12,500 jobs gone, says trade group Associated General Contractors.

Sacramento ranked 321st among 337 U.S. metro areas for its losses. That’s very bad. And it’s after the region’s home-building industry shed 70 percent of its jobs.

A buyer’s happy ending

It never gets old to hear a first-time buyer’s happiness upon finally scoring after the long, hard search.

This week, Laurel Bane of Sacramento checked in – merrily – after seeing her August frustration replayed in a Bee New Year’s retrospective on the 2009 market.

“Now that I have lived in my brand new model home with designer window coverings, warm paint colors and classic upgraded finishes, I look back on my journey and feel grateful,” she writes.

Late in 2009 Bane bought a model home in Natomas, built by Orange County’s John Laing Homes before its collapse. The seller, she said, was federal mortgage giant Freddie Mac.

When Home Front talked with Bane last summer, she described a “bidding war hell.” She said she’d made six offers since March – and lost every one. “Everything I find is sold within the day.”

This week she shared her happier story to “let others know that the light at the end of the tunnel may brighten with time.”

Dina ElBoghdady said in the Washington Post that The Senate voted Wednesday to renew the government’s $8,000 tax credit for first-time home buyers through the first six months of next year as part of a broader bill designed to extend unemployment benefits.

For the first time, the tax credit program would also enable many homeowners who buy a new primary residence to receive a $6,500 refund.

The measure was attached to a bill that would provide 20 weeks of unemployment benefits in more than two dozen states with jobless rates above 8.5 percent and up to 14 weeks elsewhere. Another provision in the bill would allow businesses that had operating losses in 2008 and 2009 to seek refunds for taxes paid on profits over the past five years.

The bill, which passed 98 to 0, should reach the House floor by Thursday, House Majority Leader Steny H. Hoyer (D-Md.) said in a statement. His office said the legislation would then go to the White House for the president’s signature.

The Obama administration has previously supported extending the $8,000 tax credit, and without congressional action the program would end Nov. 30.

Under the bill, first-time home buyers would receive the $8,000 tax credit if they sign a contract by April 30 and close on it by June 30. The plan would also make those who buy a new primary residence eligible for the $6,500 credit if they owned their current home for at least five consecutive years in the previous eight years.

But the measure limits the purchase price of the home to $800,000. It also imposes income caps so that people who make more than $125,000 annually and couples who make more than $225,000 would not be eligible for the program, which is estimated to cost $10 billion.

Sen. Johnny Isakson (R-Ga.), a longtime advocate of the tax credit, praised passage of the bill in his chamber but said the extension would be the last one. “Tax credits like this only work by creating the sense of urgency to take advantage of them,” Isakson said in a statement.

The tax credit and the broader bill in which it is included are part of a series of Democratic-led initiatives aimed at helping the economy and people who have lost their jobs.

The unemployment benefits of more than 1 million people would lapse without this extension, according to the National Employment Law Project, a nonpartisan group that tracks the issue. More than 15 million Americans are unemployed, more than a third of them for longer than six months.

Although the legislation gained wide bipartisan support, it had been mired in bickering for weeks as Republicans tried to attach amendments that Democrats opposed. Party leaders from both sides voiced support for the core measures, including the tax credit.

Supporters of the tax credit, including the real estate industry, say it has energized home buyers and helped increase sales. But critics say the program is too expensive and has attracted mainly people who were going to buy a home anyway.

In the Senate’s measure, taxpayers would be able to claim the credit on their 2009 income tax return for purchases made in 2010.

Staff writer Perry Bacon Jr. contributed to this report also.

Jim Wasserman of the Sacramento Bee writes: A shattered California home building industry received a boost Wednesday when the state Senate voted to extend a popular $10,000 tax credit that fueled thousands of new-home sales last spring and summer.

The Senate voted 35-1 to reauthorize the use of $30 million in credits not awarded during the first program. That should allow the state to give tax credits to about 4,300 more buyers of new unoccupied homes, many of which are in inland areas of California including the Central Valley. Eligible buyers would get a maximum of $3,333 in credits for each of the next three years.

Senate Bill X3 37 goes now to the Assembly, which is expected to consider it next week. It must pass that legislative body and be signed by Gov. Arnold Schwarzenegger to become law. But the Assembly approved an earlier version of the bill by wide margins and the governor has said he favors the buyer tax credit as a stimulus to the economy.

“This tax credit worked so well that in just four months it was gone,” said Sen. Ray Ashburn, R-Bakersfield, author of SB X3 37. “This is a good program that assisted people in buying homes and sharing in the American dream.”

More than 10,600 buyers of new homes were approved for the tax credit before the state Franchise Tax Board stopped taking applications July 2. Many buyers combined it with a federal $8,000 tax credit for first-time homebuyers to claim up to $18,000.

Since July, the FTB has determined that the average state credit will be $7,000, not the full $10,000. That freed up another potential $30 million in credits. According to the bill, buyers who close escrow after the credit is reauthorized will be eligible; but not those who closed escrow on new homes between July 2 and the date the bill goes into effect.

Reaction in the building industry Wednesday was swift.

“We’re very pleased,” said Allison Barnett, legislative advocate for the California Building Industry Association, a builder trade group that sponsored the bill. “The credit has been effective in creating jobs, getting people back to work and getting people back in the sales offices, which is essential for recovery in California.”

Builders contend the tax credit has helped them trim excess inventory, selling thousands of finished, but unsold, homes. Critics, including some economists, have argued the tax credit does little to stimulate the larger economy. And others question subsidizing new-home sales when there is a massive glut of existing homes for sale in California.

Brad Diede, executive vice president of the California Association of Specialty Contractors, said his group lobbied lawmakers statewide to extend the credit. Said Diede, “What we saw was employers putting people back to work after they had to lay them off. It’s stimulating the economy all the way around.”

The FTB said Sacramento, Roseville and Fresno were among top cities where residents received tax credits.

An earlier version of the bill, carried most of this year by Assemblywoman Anna Caballero, D-Salinas, failed to pass before a September legislative deadline. Many thought the bill was dead. But it was folded Wednesday into Ashburn’s SB X3 37 as part of a special session on water policies.

Ashburn carried the original bill last February to allocate $100 million for buyer tax credits. That was passed to win key Republican votes for plans to close a then-$42 billion state budget deficit.

Jim Wasserman writes in today’s Sacramento Bee: Loan modification firms that promise to help struggling borrowers get their mortgages rewritten have been banned immediately from asking for cash upfront.

Attorneys, too, who specialize in loan modifications are no longer allowed to ask consumers for payment before they perform services. The ban expires on Jan. 1, 2013.

The abrupt change in California law comes after Gov. Arnold Schwarzenegger Sunday signed Senate Bill 94, by Sen. Ron Calderon, D-Montebello. As an urgency measure, the bill takes effect immediately.

Calderon, in an interview Monday, called the signing “a very big victory.”

Schwarzenegger’s action follows massive numbers of complaints to the state Department of Real Estate from consumers who said they paid up to $4,000 upfront to firms that often abandoned them.

Schwarzenegger also moved Sunday on a second mortgage front, cracking down on risky lending that fueled the housing boom. He signed Assembly Bill 260, which prevents mortgage brokers from earning lucrative special fees for originating high-risk loans.

The bill limits the size of prepayment penalties and bans more special fees to brokers for making loans with such penalties. When the new law goes into effect Jan. 1, mortgage brokers will have a fiduciary duty to borrowers, meaning they must put borrowers’ financial interests above their own when making loans.

The bill also bans negative amortization loans. Those are loans that grow larger if a borrower makes only a minimum payment that doesn’t even cover interest costs. Thousands of Sacramento-area borrowers and more statewide are struggling with such so-called pay option loans.

The bill’s author, Assemblyman Ted Lieu, D-Torrance, said, “This bans some of the worst practices in the subprime mortgage industry. These are practices that led to the foreclosure crisis that eventually caused a financial crisis that triggered a recession.”

Most of the loans banned by the bill have already been suspended by lenders, which have greatly tightened credit rules.

In the wake of the mess left by such mortgages, loan modification firms have proliferated, many demanding upfront fees. SB 94 aims to stop abuse of borrowers in trouble.

Loan-modification firms have made relentless pitches to borrowers through radio and television ads, postcards and telephone calls. Many desperate people have turned to them, often coughing up a few thousand dollars for help that didn’t come.

“This is a huge problem, and the signing of this (bill) will help,” said Tom Pool, spokesman for the California Department of Real Estate. He said the department has 1,300 complaints on file and has issued 400 cease and desist orders against loan modification firms. The law banning advance fees aplies to firms in California or elsewhere that solicit clients in California.

The new law also specifies that loan modification firms must tell potential clients they can get the same services for free from government-approved nonprofit mortgage counselors. The firms cannot receive payment until they have performed all services promised in a contract with the borrower. Borrowers must pay the loan modification firm for services provided, even if the firm can’t get the loan modified.

Lawmakers passed the ban on upfront fees with a two-thirds vote, backed by a coalition that included the California Association of Realtors, cities hard hit by foreclosures, organized labor and consumer groups.

The ban on advance fees was made temporary in recognition that many firms follow the rules, said Pool. It also recognizes that the loan meltdown will eventually end.

“We didn’t want to put a permanent ban on legitimate business during a temporary crisis,” he said.

Jim Wassrman writes: The annual real estate forecast season opened this week with an estimate that the end of 2009 won’t be much better than the beginning, and capital home builders will sell just 3,400 new houses, condos and town houses this year.

It’s hardly a wonder that home builders say their powerful industry, so long accustomed to getting its way politically and economically, is in a depression, not a recession.

Such a sales number – shockingly low, projected by consultant Hanley Wood Market Intelligence – hasn’t been heard in this region since the 1960s.

Home Front took out the history books to compare: In 1967, with President Lyndon Johnson in the White House, builders in El Dorado, Placer, Sacramento and Yolo counties started 3,544 single-family detached homes, according to the Construction Industry Research Board. It’s likely they sold roughly the same.

This year, considering that 85 percent of sales regionally are single-family homes, they’ll sell about 2,900. Add in the townhouses and condos and you get the 3,400.

“Sacramento can support about 8,500 sales a year,” Hanley Wood’s Sacramento analyst Kathryn Boyce told a gathering of about 75 to 80 area home-building industry reps. “We stole from the future quite a bit from the heyday when we had our special financing. If they had a pulse, we gave them a loan.”

Stimulus aid for high-rise

Here’s some better economic news. Federal stimulus funding is bringing $10 million to restore an empty residential high-rise at Seventh and I streets in downtown Sacramento.

“We were high-fiving each other. It’s not every day you get $10 million in a competitive grant project,” said Nick Chhotu, director of public housing at the Sacramento Housing and Redevelopment Agency. The money is headed to a thorough face-lift for the 12-story Riverview Apartments owned by SHRA. It’s a senior complex built in the late 1970s at 626 I St. The building has been empty for two years.

Plans are to start construction late next year after getting up to $6 million more in federal funds. The building, with 108 rooms for people 62 and older, needs new windows, a new electrical system and new plumbing, a job that will run well into 2011, said Chhotu.

The Public Housing Capital funds are provided through the American Recovery and Reinvestment Act of 2009.

Mixed-use to cut driving

How much do residents of Sacramento’s eastern suburbs and foothills love their cars? Plenty. They lead the region in driving, averaging 75 miles a day. But another forecast on the PowerPoint circuit last week suggests they’ll be driving a lot less by 2035.

The next generation of drivers, in Placer County especially, will live in neighborhoods with a greater mix of uses, said Mike McKeever, chief of the Sacramento Area Council of Governments. He told a gathering of Urban Land Institute-Sacramento members that shopping, home and work will be closer together as cities like Roseville and Rocklin urbanize more.

El Dorado Hills and its environs will have “more jobs in the foothills to balance houses,” McKeever said.

And look, too for still less driving in the Sacramento-West Sacramento core, he said.

Consultant on Net radio

Look who’s talking now on Internet radio. It’s long-time Sacramento-area building industry consultant John Schleimer. He has a new VoiceAmerica Talk Radio Network show, “Housing in America.” The show debuts Monday at 2 p.m. PDT.

Schleimer, owner of Roseville-based Market Perspectives, will launch with a show on the federal government’s Making Home Affordable loan modification program. Guests include a U.S. Treasury Department official and New York Times economics reporter Peter Goodman.

Guests on coming shows, running weekly at the same time, include economist Mark Zandi of Moody’s Economy.com and National Association of Home Builders Chairman Joe Robson. The show streams live on the Internet. Details: Google VoiceAmerica and click on “hosts.”

Jim Wasserman writes that last month, Sacramento County marked the fourth anniversary of its housing boom high with a median sales price of $180,000 – a whopping 53.5 percent less than in August 2005, property researcher MDA DataQuick said Thursday.

The county’s August sales tally of 2,061 new and existing homes likewise fell well short of 3,800 in August 2005.

Now, four years later, these DataQuick numbers reveal the long, hard fall taken by the capital region, a descent defined by billions of dollars in lost home equity, more than 42,000 foreclosures and a marked slowdown in home sales.

A reversal of fortune that began in Sacramento County during the late summer of 2005, then quickly spread to seven other area counties, made Sacramento one of the first big U.S. housing markets to spin out of control. The aftermath still plays out in 2009.

“Everybody says buy a house. It’s the best investment of your life,” said Scott Seacrist, 30, who bought a small home in Sacramento’s Elmhurst neighborhood in March 2006. “If I lived here 20 years, it would be the best investment.”

Seacrist, like thousands of area buyers four years after the boom crested in Sacramento County, owns a home that’s worth less than he paid.

“We love our house,” said the married schoolteacher, noting that “it has a lot of charm.” But a sustained housing downturn that came after moving in has provided its occasional bouts of anxiety.

No wonder, economists say.

“The bubble we saw was a once-in-a-century kind of event,” said Dr. Sanjay Varshney, dean of the College of Business Administration at California State University, Sacramento. “You seldom see all the conditions in place simultaneously that allowed it.”

DataQuick reported another month of uncertainty on the housing front. The researcher counted 3,375 closed escrows in August on new and existing homes in Amador, El Dorado, Nevada, Placer, Sacramento, Sutter, Yolo and Yuba counties. That was down sharply from 3,815 in July and marked a third straight month of lower sales than the same time last year.

There were 3,998 closed escrows in August 2008, DataQuick reported.

The firm noted that sales similarly fell from July in the Bay Area and Southern California. Its analysts attributed the drop to “a thinning inventory of foreclosure properties and financial uncertainty among potential homebuyers.”

For months, first-time buyers in the capital region have expressed increasing frustration at being outbid on a dwindling supply of bank repos.

“In Sacramento County, foreclosure resales were 50.4 percent of sales in August,” said DataQuick analyst Andrew LePage. “That’s the lowest since 43.8 percent in December 2007.”

Would-be buyers are nervous, too, about jobs as capital-area unemployment has reached 11.8 percent. LePage said, “It’s not as if the job market is creating huge demand.”

Four years ago, such a bleak scenario seemed improbable to experts at all levels. But it became real as median sales prices peaked at $387,000 in Sacramento County – after doubling in four years – and then rolled backward. The median, a point where half sell for more and half less, has fallen by more than 50 percent in Sacramento, Sutter, Yuba and Amador counties and more than 40 percent in El Dorado, Placer and Yolo counties.

The steepest peak-to-trough mark in Sacramento County came in February, when the median price fell to $160,000, down 58.6 percent.

The smallest decline is 35 percent in Nevada County, where there are fewer new homes and the “lowest percentage of bank-owned homes in the region,” said Linda Kaneko, executive with Paul Law Realty in Grass Valley.

DataQuick records show 2005 highs of $501,000 in Nevada County and $474,000 in Yolo County. Yuba County reached $351,500, while Placer County touched a boom high of $525,000. Sutter County peaked at $339,000. El Dorado County’s high was $531,250. Amador County crested at $425,000.

This story is taken from Sacbee / Business / Real Estate :

Legislation to extend California’s maximum $10,000 new-home buyer tax credit to thousands more buyers has stalled, failing to pass during the Legislature’s weekend rush to adjournment.

Assembly Bill 765, a priority for home builders in the capital region and statewide, was among many pushed aside by bigger final-hour issues, backers said Monday.

“With the prison reform package still being negotiated and water discussions going on, things like that kind of got pushed to the back,” said Willie Armstrong, chief aide to Assemblywoman Anna Caballero, D-Salinas, the bill’s author. “It’s unfortunate.”

The legislation’s status was unclear Monday. Armstrong said it could receive a vote during special sessions being considered later this year.

But that provides little certainty to first-time new-home buyers still hoping to combine a maximum $10,000 state tax credit with a federal $8,000 homebuyer tax credit.

The state tax credit hasn’t been available since July, and the federal tax credit expires Nov. 30.

“We need it,” said Dennis Rogers, an executive with the Roseville-based North State Building Industry Association. “We’ve been pushing on people that a state credit will work. It has worked.”

The program, which proved more popular than expected, moved thousands of buyers off the fence, state home builders contend. But critics call it a taxpayer subsidy to buyers and question its expansion while the state has a glut of unsold existing homes.

Statewide, 10,659 Californians who bought new unoccupied homes between March 1 and July 2 this year will get credits up to $3,333 off their state taxes in each of the next three years. All new-home buyers after that July 2 cutoff date remain ineligible.

Roseville and Sacramento ranked among the top 10 cities for recipients.

The state Franchise Tax Board has mailed letters to recipients, notifying them of their exact credit amounts, said spokeswoman Brenda Voet. The average credit is expected to be about $7,000, leaving about $30 million of the original $100 million allocation unclaimed, according to the tax board.

That estimate prompted the building industry to press for an extension of the tax credit program to at least 4,300 more recipients.

The Caballero bill, which had easily passed the full Assembly and reached the Senate floor, would have enabled a fresh round of new-home buyers to apply for the credit almost immediately, if passed and signed by Gov. Arnold Schwarzenegger.

If passed during a special session and signed, the clock would begin running again, said the tax board. Buyers must apply within one week of closing escrow. “If they pass something, we’re prepared to implement it just as we did before,” Voet said Monday.