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Sacramento-area real estate market befuddled the experts
Home Front spent time in the electronic library this week, looking at how experts misjudged the extent of this decline as the housing market began to wobble and shift in 2005 and 2006, even 2007. We aren't trying to pick on analysts who were then swimming in uncharted waters after a long, euphoric boom. The Bee's real estate coverage, too, had its overly sunny moments.
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We feature a lot of real estate experts who misjudged the extent of the downturn - and note that our own coverage was sometimes overly rosy, too, as a result.
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It had occurred to me a couple times as I researched today's column that there were early people saying we were going over a cliff with this housing boom. They were mostly bloggers and not mainstream "experts," predicting this was a disaster soon to unfold. Therefore, in the process that often leads to these kind of business stories, they seemed to have less weight than someone who sold houses for a living or financed them. (There's an MSM confession for you).
But many of these seers proved correct.
From the
Sacramento Bee:
"One bright note is that the (housing) sector that led the economy into this morass is about to turn the corner, perhaps as soon as this summer, and will start to lead us out," said Scott Anderson, senior economist at Wells Fargo & Co.
It's still too early to declare real estate's revival...But 2008 could also be seen as the year Sacramento-area real estate began to show signs of stabilizing, and the idea that housing might help establish a foundation for the economy here is something experts are starting to debate. Prices and inventory are down and sales are up, even as foreclosures continue. Mortgage rates have fallen to their lowest levels in at least 37 years. The correction has been enormously painful, but there are believers who contend Sacramento will be among the first U.S. markets to recover.
From the
Sacramento Bee's Bob Shallit:
We anticipate the capital region will endure higher unemployment (perhaps hitting 10 percent), more hard times in housing, a grim market for commercial real estate and perhaps a bank failure or two...Builders and buyers will continue struggling in 2009, but by midyear we see home prices bottoming out, foreclosures dropping and sales picking up, spurred by declining interest rates.
From
Rocklin & Roseville Today:
I believe we will start to see some stability in the Sacramento housing market. I am not suggesting that we don’t still have some downward pressure on prices but I think we will see, in some areas and in some price ranges, price stability and even some upward movement. I believe we will see buyer’s who took a wait and see posture in 2008 return to the market. At the same time, if we learned anything from our experiences in 2008, we must be mindful that there are likely to be some additional surprises along the way.
From
Home Front:
[In 2008] Dunmore Homes went out of business. Then John Reynen of Reynen & Bardis Communities filed for personal bankruptcy protection. So did C.C. Meyers, owner of Winchester Country Club. And then so did Christo Bardis of R&B. I doubt ever in their wildest imaginings did they imagine it would all some day come to this...Crossing familiar names off my list of real estate industry sources as they disappeared into unemployment. Sacramento County's median price falling back below $200,000. (On the other hand I talked with a lot of happy new homeowners this year. That was the really cool side of the free-falling home prices).
From the
Modesto Bee:
The housing slump will enter its fourth year in January, but Chad Costa sees reason for hope. The Modesto real estate agent said plenty of people will benefit from the reduced prices and mortgage rates. "I think what has to be identified here is that the affordability is back," said Costa, who specializes in selling property that has gone through foreclosure. "That's the upside of this, and you don't hear a lot about that."
From the
Appeal Democrat:
A huge tide of home foreclosures rippled through the nation in 2008, and few communities were battered as badly as the Mid-Valley. Defaults left hundreds of houses from Yuba City to Linda to Wheatland — built and bought in anticipation of profiting from a decade of soaring real estate prices — empty as owners seduced by adjustable-rate mortgages were caught between suddenly higher payments and plunging values for their homes.
From the
Sacramento Business Journal:
Sacramento on Monday announced it has laid off eight workers in the city’s development services department due to falling revenue.
From the
Appeal Democrat:
About 70 workers at Kbi Norcal on Rancho Road in south Yuba County are slated to lose their jobs in the next few months, according to an announcement Monday from the lumber and wall panel plant’s parent company, Building Materials Holding Corporation. BMHC executives...have said they will shut down the Rancho Road plant some time during the first quarter of 2009.
From the
Sacramento Business Journal:
Grubb & Ellis Co. on Monday released its 2009 global forecast that predicts a troublesome year for commercial real estate in the U.S., including Greater Sacramento. “Several forces contributed to the decrease in Sacramento’s investment market in 2008, primarily the unavailability of credit, and this will linger through the coming year,” said Robert Dean, executive vice president and managing director of Grubb & Ellis’ Sacramento office...“The depth and duration of the local residential recession has virtually assured retail’s struggle,” Dean added.
From the
Wall Street Journal:
The commercial market "is going to be ugly for the next 12 to 24 months," said Michael Restuccia, chairman of the San Joaquin County (Calif.) Employees' Retirement Association. "Not just bad, but ugly."
From the
Sacramento Bee:
Commercial real estate is in trouble...Brokers such as [Boyd] Cahill are suffering along with their clients. For a while, they were uneasily holding ground while colleagues in residential real estate were seeing their livelihoods melt away as home sales plummeted. Then the bad economy got drastically worse and the commercial business crashed
...
As "the toughest year" of his career closes, Cahill said the first half of 2009 doesn't look much better. He thinks more retailers will file for bankruptcy protection, adding to vacancies and making it even more competitive to land the few tenants looking for space. The shakeout will strike commercial brokerage firms, too, Cahill said. His company just closed its Sacramento office and pulled staff to Roseville.
From the
Stockton Record:
Foreclosures continue to dominate the existing home-sales market, making up nearly nine out of 10 purchases...[M]edian home selling prices in the city [of Stockton] dropped as low as $130,000 for November - down more than half from $265,000 the previous November.
Lela Nelson of Lela Nelson Realty said December business was hopping as more first-time buyers and investors jumped into the market as ever-dropping prices combined with historically low mortgage rates. In more than 30 years in the real estate business, she said, she has never seen a better combination of low prices and interest rates for buyers.
From the
Stockton Record:
Community Bank of San Joaquin has become only the second locally based bank during the current economic downdraft to receive a warning from state and federal regulators.
...
[P]roblem loans were made before 2007 to builders. In other words, they were made to exactly the kind of borrowers you would expect to be doing business with such a bank, and they were seeking loans when business, especially real estate, was booming...In fairness, no one saw this coming, certainly not the kind of downdraft we've experienced. And with San Joaquin County being the nation's foreclosure capital, the real estate market collapsed here with unprecedented speed and severity.
From the
New York Times:
[T]he ultimate symbol of suburban success has become one more reminder of the economic meltdown, with builders going under, pools going to seed and skaters finding a surplus of deserted pools in which to perfect their acrobatic aerials. In these boom times for skaters, Mr. Peacock travels with a gas-powered pump, five-gallon buckets, shovels and a push broom, risking trespassing charges in the pursuit of emptying forlorn pools and turning them into de facto skate parks.
...
California officials estimate that there are tens of thousands of abandoned pools in the state, with as many as 5,000 in places like Sacramento County, where a building boom in the capital’s suburbs has gone bust.
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