Thursday, March 20, 2008
If I had it to do over again today, this blog might be called "Boom to Bust" as that phrase certainly describes what's happening out here in the Golden State of California.
[Don't worry, having had one very bad experience with an attempted name change last summer, that's not going to happen. Besides, that moniker has been ably taken by Boom2Bust anyway.]
The media is now full of stories about the rapidly deteriorating situation here in the West. About 30 teachers are set to receive pink slips near here and reports came last week that 20,000 teacher layoffs are expected statewide.
All of this stems from the housing boom that has now gone decidedly bust.
You may have heard about that.
Yesterday, a report in the Modesto Bee (a town now in fierce competition with nearby Stockton for the title, "Foreclosure Capital of the World") had some comments by local realtors about the situation improving ... kind of.
Northern San Joaquin Valley home sale prices plunged again in February, dropping to levels not seen since early 2004.It's important to note that an improving situation for realtors - selling more properties now that banks are slashing prices on their growing inventory of foreclosures - is very different from an improving situation for the rest of the state.
But for the first time in many months, Modesto real estate brokers are practically giddy with enthusiasm over jumps in pending sales and prospective buyers.
"We're selling homes priced below $200,000 on a daily basis now," Melo said. "First-time buyers and investors are entering the market, and they're getting steal-of-a-deals."
Melo said 70 percent of pending sales are for bank-owned houses that had been foreclosed on. He said banks are willing to slash prices dramatically just to get those houses off their books.
If you haven't yet heard about the dire predicament Governor Arnold Schwarzenegger now faces, maybe this report at Bloomberg today will help:
Sacramento may eliminate up to 600 jobs in the city's first staff reductions in half a century, and the police and fire departments in the California capital may have their budgets cut by 20 percent. The culprit is the collapse of the U.S. housing market.This is a very comprehensive piece and, to be honest, I couldn't get through the whole thing because it was thoroughly depressing.
California, the birthplace of the subprime mortgage industry, is paying the highest price of any state as the housing meltdown persists. Its gross domestic product will drop 1.5 percent in the first half of 2008, the most in the U.S., analysts at Lexington, Massachusetts-based Global Insight Inc. estimate.
The state had the most foreclosure filings in the U.S. last year and the biggest fourth-quarter decline in prices, according to RealtyTrac Inc., an Irvine, California-based seller of data on defaults, and the Office of Federal Housing Enterprise Oversight in Washington.
"The depth and magnitude of what's happening in the real estate market is really, really grim," said Russell Fehr, Sacramento's finance director, in an interview.
California, the most populous U.S. state and accounting for almost one-seventh of gross domestic product, will lose $25 billion in personal income by the end of 2008 and property values will fall by $630.7 billion, according to forecasts from economist Jerry Nickelsburg at the University of California, Los Angeles, and the U.S. Conference of Mayors.
A 59-year old retired engineer, Harry Subers, put it best when reflecting on buying real estate near the peak a few years ago. "Everything would have been fine if the bubble didn't pop," Subers said. "We're resigned to the fact that we're going to lose the house."