Thursday, July 30, 2009

Doubling Up

My cousin, who just graduated UC Davis (after 5 years in the military), has been living with us for the last month and a half while sorting out his life ambitions. He did have employment offers in Salt Lake City, where he grew up, but he prefers to find a job in the Bay Area.

To me, this situation illustrates two important trends. 1) As many have reported, demand for housing and rental units will remain tempered, since unemployment forces people to accept less than ideal housing situations. 2) California will never lose its luster, especially for the young and single.

Thursday, July 23, 2009

The Time has Come?

Apparently the time has come......the WSJ has more or less called a housing bottom in Sacramento (with the unemployment wild card).

The reason for my proclamation....back when the bubble began to burst, and with only a couple blog posts to my name, the WSJ was all over Sacramento as the poster child for what is wrong with the housing market. I wrote a post, making a joke about how the WSJ will likely let us know when there are signs of life in the market.......which occurred today on page D1.

They also include the D.C area (Virginia suburbs), where we came from.

Monday, July 20, 2009

Further Bifurcation

Been thinking a bit more about what the next year or two will bring in terms of local real estate trends. They way I see it, the lower end is starting to stabilize. But the higher/desirable end (i.e. areas people would prefer to live) will be broken into two distinct patterns.

In areas with substantial new development (homes built in the last 10 years), such as Elk Grove, Rocklin/Roseville, Folsom, El Dorado Hills, West Sac etc. home values will fall fairly fast. Many homes in these areas were built and bought at or near the top of the market. Thus they are much more likely to see a disproportionate number of foreclosures due to the heavy use of Option-ARM and other affordability products, which puts substatial downward pressure on prices.

Established Sacramento neighborhoods, like East Sac, Arden/Arcade, Fair Oaks, Davis, Land Park etc. will fall at a much slower pace. As a percentage of total homes, there will be fewer buyers who bought at the top (but probably some who HELOC'd themselves into foreclosure). In general though, these owners are much less likely to be upside down.

Eventually, those who would have purchased in a more established neighborhood, will opt for a less expensive newer neighborhood (I know we did). This drain on demand will eventually push down prices, or at least keep them from appreciating in the established neighborhoods.

Friday, July 10, 2009

Making Headway

Just had to share some happy news (it doesn't seem to come often these days). My uncle's wife, who was laid off from a local propane company in August, finally received a job offer. The search has been very difficult. For every position she has applied for, her resume has been one of hundreds. Our whole family is so very relieved to hear this news.

Unfortunately, my uncle the printer, is still being furloughed frequently. As I have mentioned before, I consider printing activity a leading indicator, so I don't think the Sacramento economy is out of the woods just yet, but it does mean at least my uncle's family should be okay....phew.

Sac Bee Editorial on El Dorado County BOS

Below is an editorial from the Sacramento Bee related to rehabilitating housing in El Dorado County. Thought it might be interesting to the blog's readership.

I really don't understand why the BOS rejected the money. It's not like they would be saving the Federal government money. The money has been budgeted and will be spent regardless. I would rather seem my federal tax dollars spent here as opposed to somwhere else.

Editorial: El Dorado should take federal money

Published: Tuesday, Jun. 23, 2009 - 12:00 am
Page 10A Last Modified: Tuesday, Jun. 23, 2009 - 8:05 am

It's rare that the left and the right find common ground in El Dorado County, but that's what happened the other day.
A conservative Republican real estate agent and an activist Democrat affordable-housing advocate both urged El Dorado County supervisors to accept $1.6 million in federal stimulus funds to rehabilitate foreclosed homes.
The supervisors refused, arguing that stimulus money would lead to more government intrusion into society.
Initially, the supervisors rejected the federal grant 4-1 without even bothering to schedule a staff presentation on the proposal. When local contractors and real estate industry representatives raised a fuss, they reconsidered.
But the board majority of Jack Sweeney, Ron Briggs and John Knight voted "no" a second time. Supervisor Norma Santiago favored taking the funds all along. Ray Nutting, who'd voted with the majority the first time, wisely switched sides after listening to his constituents.
The $1.6 million would have allowed El Dorado to rehabilitate and resell between eight and 18 homes to families with low and moderate incomes.
Workers would have been paid the prevailing wage, supervisors noted, which in California means the union rate, which makes projects more expensive. But anything built with government funds in El Dorado, including roads, dams, overpasses and schools, requires union wage rates. Why get squeamish about that now?
Judy Mathat, a real estate agent and activist Republican, told the supervisors she agrees that government intrusion into the economy is dangerous. Nonetheless, she urged them to accept the funds. Her industry has been devastated by the housing collapse. The funds would have helped contractors, plumbers, painters and others in her industry keep their own homes from sliding into foreclosure.
To spurn federal help now, with the county in an economic slump, was just foolish.

Unexpected Dis-Utility

By far, the worst thing about moving has been dealing with all the utilities. The only utility that seemed to get it right was our trash bill.

I didn't account for any additional savings or expenses from utilities into our rent/buy decision. Unfortunately, so far there have been several unanticipated expenses, and hours of wasted time.

1) El Dorado Irrigation - We didn't receive our first bill, then when the second notice came, it had a late fee that they wouldn't waive (over 2 years of prompt payment at the other house meant nothing to them). Apparently it's my fault if I don't get the bill. To top it off, the bill was much more expensive. If a house has no record from which to base the sewer charge, they just charge the area average.....again, our over two years of below average use at the other house meant nothing. Incredibly frustrating.

2) Comcast (Internet, TV, Phone) - I don't even know where to begin....Comcast has been an absolute nightmare to deal with. At the rental, we had the AT&T U-verse set up which was considerably less expensive compared to Comcast.
  • The original installer was so anxious to get to his next appointment he closed out the ticket before I had phone service....which then took me 2.5 days and multiple phone calls to get settled. This was a major issue for me as I work out of the house.
  • They have yet to cap all the lines in the front of our house, even after several calls.
  • They won't list their bundled services separately on their bill (so I can be reimbursed by my work), so we have to pay extra for that privilege (ridiculous).
  • To top it all off, their service is very spotty, phone calls get dropped, Internet goes out for long periods of time during the workweek.

I have about had it with them, and plan to switch to AT&T & Dish service next month. Unfortunately their U-verse is not offered here, otherwise we would have started with that.

3) PG&E - For some reason, the lady on the phone changed the service into our name the day I called, as opposed to the day we closed escrow. Major inconvenience trying to get that straightened out, but at least it didn't cost us extra.

A lesson in frustration to say the least.

Monday, July 6, 2009

Is High End Relative?

There has been much emphasis in the bloggosphere about the fact that subprime was only the beginning of our troubles. With warnings of huge defaults of Alt-A, Option ARM , and even Prime loans soon to come (yes I am mixing products and types).

We are now seeing big increases in the defaults of these products and types of loans. There seems to be a general consensus that the lower price ranges have more or less bottomed....but the mid to high end are still to take a big hit.

However what I want to know, is what exactly is mid to high end? Is it relative to all the homes in a metro area?.....say 350k for Sac. Or is it relative to the entire stock of housing in California?...say an 650k home in one of the coastal cities.

I wonder about this, because what might be considered a high end price range in the Sac Metro area, is probably just a starter home in many of the Coastal cities (LA, SF, San Diego, Orange County, Santa Barbara, etc.).

Basically I want to know how much of the forecasted doom and gloom applies to Sacramento and other cities in the valley (i.e. Stocton, Merced, Fresno, Bakersfield), versus the cities along the Coast of our financially doomed state.

A Failed Friendship - Hurt by Housing?

This post has been removed....I needed to write about a very hurtful experience I recently went through...but have realized, it was probably not a good idea to post it.

Sorry all.