Suburban Sacramento land rush? Big homebuilders buy up 'finished' lots
By Jim Wasserman jwasserman@sacbee.com
http://www.sacbee.com/topstories/story/2108559.html
Sacramento's new-home sales are still down and out, but some capital-area builders are betting money that the region's suburbs will soon resume their growth boom.
They've begun snapping up ready-to-build home lots at prices ranging from $25,000 to $67,000, setting the stage for a new suburban land rush.
The phenomenon suggests that a real estate market in decline for four years may be resetting for a new business cycle, some say.
Builders looking for land are focusing on "finished" lots, which already have government approvals, streets and utilities.
"They just have to pour a slab and start building," said Kathryn Boyce, Sacramento analyst for Costa Mesa consultant Hanley Wood Market Intelligence.
Capital-area builders say prices for finished lots have risen 20 percent since April as giant public builders muscle back into the region's land game for the first time since 2005.
Boyce said the land rush is greatest in Placer County, followed by Folsom and Elk Grove.
Hanley Wood counts 17,251 finished lots in El Dorado, Placer, Sacramento, Sutter, Yolo and Yuba counties. Many are owned by lenders that repossessed them. Others are owned by development firms that need to raise cash. Investors own still more.
The recent escalation in land prices has led some in the industry to question whether they can make money when so many homes are priced at $250,000 or less.
"Prices might be going up too fast," said Tim Lewis, owner of Roseville-based Tim Lewis Communities.
Lewis recently bought lots at two projects in the capital region and one in Reno – his first in that city. "I'm cautiously looking at projects, but I'm certainly not on a buying frenzy like some of these publics (publicly traded builders) might be," he said.
Even with the recent rise, land prices in the Sacramento region are nowhere near the dizzying levels of five years ago. At the height of the real estate boom in 2004, builders paid up to $150,000 for finished lots in Roseville, and up to $120,000 in Natomas and Elk Grove.
Still, the renewed scouting and buying by building giants has sent a buzz through an industry that has endured prolonged downsizing and financial trauma.
"There is a consensus out there that we are at the bottom or pretty darn close," said James Radler, a Roseville-based land broker with Park Place Land Advisors of Irvine.
Radler and others say publicly traded home builders such as Los Angeles-based KB Home, Texas-based D.R. Horton, New Jersey's K. Hovnanian Homes and Meritage Homes, headquartered in Arizona, are among those looking at lots and buying. Others in the game include private Arizona-based building giant Taylor Morrison. All are among the capital region's top builders.
"These guys need lots," Rad- ler said. "If they don't do deals, they don't build homes, and if they don't build homes they aren't in business."
Most of the builders didn't respond to Bee inquiries, which is not surprising, say those who watch the industry. Said Boyce, "They're trying to position themselves without anybody knowing."
"They all want to be under the radar as much as they can," added Dean Wehrli, vice president and Sacramento analyst for Sullivan Group Real Estate Advisors of San Diego.
During the housing downturn that began after area home prices peaked four years ago this month, many large builders sold off home lots to maintain balance sheets. A few closed down divisions and left the area. Now, though capital-area home building remains sluggish – just 1,764 sales the first half of 2009 – firms are competing again for lots in a market they expect to begin rising as early as 2010.
Industry analysts say big Wall Street home builders, especially, need more lots to keep operations going while waiting for a new cycle.
"They essentially haven't done any buying for four years," said Radler.
The supply of lots is also constrained by the closing of Natomas to new building permits through 2011. That region, popular with buyers and builders for much of this decade, is under a building-permit moratorium until levee fixes bring 100-year flood protection.
Friday, August 14, 2009
Wednesday, August 12, 2009
Sacramento-area prosecutors focus on mortgage fraud crime
Sacramento-area prosecutors focus on mortgage fraud crime
By Chelsea Phua cphua@sacbee.com
About two years ago, El Dorado County District Attorney Vern Pierson hired a forensic auditor and increased training for his prosecutors in the area of real estate fraud and other financial crimes.
He dedicated two prosecutors and two investigators to handle a majority of the fraud cases.
As a result, more financial schemes that in the past might have been dismissed as belonging in civil court are instead being prosecuted as criminal offenses, El Dorado prosecutors and investigators said.
Pierson said his office has made mortgage fraud crime cases a priority. "The magnitude of the loss is so great on the individual victim and also on our economy as a whole," he said.
Prosecutors in the Sacramento area have taken varying approaches to the surge in real estate fraud. Some, such as El Dorado County, have devoted more resources, while others have used existing anti-fraud units.
Nationwide, the number of suspected cases of mortgage loan fraud has increased from 52,868 in 2007 to 64,816 in 2008, the FBI says.
Former U.S. Attorney McGregor Scott said that about 2 1/2 years ago his office started receiving reports of mortgage fraud on an increasingly regular basis.
"It was just a recurrent theme I was hearing over and over again," said Scott, now a partner with Orrick, Herrington and Sutcliffe.
Scott pushed for a mortgage fraud task force that included the Internal Revenue Service, the FBI and the state's real estate board.
As the cases poured in, Scott said his office and the task force realized that "we need to find allies in the region." The task force started to offer training to law enforcement agencies and local district attorney's offices in the investigation and prosecution of mortgage fraud cases.
"We realized we were ground zero here for mortgage fraud in this district," said Assistant U.S. Attorney Matthew Stegman.
The U.S. attorney's office for the Eastern District of California, which handles cases from the Oregon border to Bakersfield, had the most mortgage fraud indictments in the nation during fiscal year 2008, Stegman said.
Training provided by the federal government and organizations such as the California District Attorneys Association is helping smaller district attorney's offices to handle the increasing workload as a result of the mortgage meltdown, said Bob Cosley, supervising investigator with the El Dorado County District Attorney's Office.
Larger agencies such as the Sacramento County District Attorney's Office usually have an established unit that handles real estate fraud and other types of white-collar crimes
"We have a unit specializing in this type of caseload for more than 20 years," Sacramento County Assistant District Attorney Albert Locher said.
The office participates in the Sacramento-area mortgage fraud task force.
"In times of economic downturn, there are more of these kinds of cases that surface," Locher said, but said it's not necessarily because more crime happened.
"When times are flush, criminals can churn enough fraud to cover their tracks," Locher said. "When the tide goes down, you'll see more rocks, but the rocks have always been there."
In Placer County, the District Attorney's Office's elder abuse unit encounters most of the real estate-related fraud cases. About 70 percent of elder abuse cases are financial in nature, Deputy District Attorney Jim Deslaurier said.
The number of cases hasn't fluctuated much in the last few years, but as the population ages, the office might see more of these cases, Deslaurier said.
Yolo County District Attorney's Office hasn't had many mortgage fraud cases referred to the office, said Dan Stroski, lieutenant of investigation in charge of the insurance fraud unit at the District Attorney's Office.
Stroski said the courts seemed apprehensive to hear them because it takes about three years for such cases to make their way through the system. Suspects in such cases also typically do not have an extensive criminal history and end up serving little time.
"That doesn't mean we'll give up," Stroski said.
By Chelsea Phua cphua@sacbee.com
About two years ago, El Dorado County District Attorney Vern Pierson hired a forensic auditor and increased training for his prosecutors in the area of real estate fraud and other financial crimes.
He dedicated two prosecutors and two investigators to handle a majority of the fraud cases.
As a result, more financial schemes that in the past might have been dismissed as belonging in civil court are instead being prosecuted as criminal offenses, El Dorado prosecutors and investigators said.
Pierson said his office has made mortgage fraud crime cases a priority. "The magnitude of the loss is so great on the individual victim and also on our economy as a whole," he said.
Prosecutors in the Sacramento area have taken varying approaches to the surge in real estate fraud. Some, such as El Dorado County, have devoted more resources, while others have used existing anti-fraud units.
Nationwide, the number of suspected cases of mortgage loan fraud has increased from 52,868 in 2007 to 64,816 in 2008, the FBI says.
Former U.S. Attorney McGregor Scott said that about 2 1/2 years ago his office started receiving reports of mortgage fraud on an increasingly regular basis.
"It was just a recurrent theme I was hearing over and over again," said Scott, now a partner with Orrick, Herrington and Sutcliffe.
Scott pushed for a mortgage fraud task force that included the Internal Revenue Service, the FBI and the state's real estate board.
As the cases poured in, Scott said his office and the task force realized that "we need to find allies in the region." The task force started to offer training to law enforcement agencies and local district attorney's offices in the investigation and prosecution of mortgage fraud cases.
"We realized we were ground zero here for mortgage fraud in this district," said Assistant U.S. Attorney Matthew Stegman.
The U.S. attorney's office for the Eastern District of California, which handles cases from the Oregon border to Bakersfield, had the most mortgage fraud indictments in the nation during fiscal year 2008, Stegman said.
Training provided by the federal government and organizations such as the California District Attorneys Association is helping smaller district attorney's offices to handle the increasing workload as a result of the mortgage meltdown, said Bob Cosley, supervising investigator with the El Dorado County District Attorney's Office.
Larger agencies such as the Sacramento County District Attorney's Office usually have an established unit that handles real estate fraud and other types of white-collar crimes
"We have a unit specializing in this type of caseload for more than 20 years," Sacramento County Assistant District Attorney Albert Locher said.
The office participates in the Sacramento-area mortgage fraud task force.
"In times of economic downturn, there are more of these kinds of cases that surface," Locher said, but said it's not necessarily because more crime happened.
"When times are flush, criminals can churn enough fraud to cover their tracks," Locher said. "When the tide goes down, you'll see more rocks, but the rocks have always been there."
In Placer County, the District Attorney's Office's elder abuse unit encounters most of the real estate-related fraud cases. About 70 percent of elder abuse cases are financial in nature, Deputy District Attorney Jim Deslaurier said.
The number of cases hasn't fluctuated much in the last few years, but as the population ages, the office might see more of these cases, Deslaurier said.
Yolo County District Attorney's Office hasn't had many mortgage fraud cases referred to the office, said Dan Stroski, lieutenant of investigation in charge of the insurance fraud unit at the District Attorney's Office.
Stroski said the courts seemed apprehensive to hear them because it takes about three years for such cases to make their way through the system. Suspects in such cases also typically do not have an extensive criminal history and end up serving little time.
"That doesn't mean we'll give up," Stroski said.
Monday, August 10, 2009
Bad June swoon for Sacramento-area homebuildres
August 10, 2009
Bad June swoon for Sacramento-area homebuilders
http://www.sacbee.com/static/weblogs/real_estate/
Ouch! Homebuilders in Sacramento, El Dorado, Placer and Yolo counties reported their second worst sales month of 2009 in June, selling just 197 homes, condominiums and townhouses, the California Building Industry Association reported about an hour ago.These things happen. But the regional sales tally was the lowest since January, when builders sold 163 homes, reported the CBIA, a trade group for state homebuilders.It rather flies in the face of more encouraging news nationally on the new-home construction front. But sales are still very weak here as builders face significant competition from discounted bank repos. These repos still account for more than half the region's sales.Monthly sales totals in the four-county area by month:Jan: 163Feb: 201March: 297April: 290May: 346June: 197 June sales fell 43 percent from May, and were down 57 percent from June 2008, according to Costa Mesa-based Hanley Wood Market Intelligence. The firm compiles statistics for the CBIA monthly sales reports.Statewide, builders reported 2,607 June sales. That was 13.6 percent fewer than in May and down 26 percent from the same time last year. CBIA execs called it weaker than expected and called again for the state Legislature to extend a $10,000 tax credit for buyers of new unoccupied homes in the state. The tax credit, which began in March, ran out in July due to better-than-expected demand. Monday, the National Association of Home Builders, also called on Congress to extend the nation's $8,000 first-time buyer tax credit for another year.Hanley Wood research executive Jonathan Dienhart said today he expects statewide sales to match last year's levels in coming months. But he cautioned in a statement, "It will definitely take a longer time to start mounting a significant recovery with home purchase tax credits due to expire and the broader economy continuing to struggle."Builders in the four-county Sacramento area plus Yuba and Sutter counties sold 1,764 homes the first half of 2009, Hanley Wood reported. That puts them on track to finish well behind last year's 4,847 sales.Top capital builders during the first half of 2009, according to Hanley Wood:1) KB Home of Los Angeles, 161 sales, 9.1% market share. 2) Dallas-based Centex Homes, 143 sales, 8.1% market share.3) Miami-based Lennar Homes, 132 sales, 7.5% market share.4) JMC Homes of Roseville, 123 sales, 7% market share.5) Beazer Homes, headquartered in Atlanta, 112 sales, 6.3 percent market share.Other builders in the top 10: Arizona-based Taylor Morrison, Michigan-based Pulte Homes, New Jersey-based K. Hovnanian Homes, Michigan-based Del Webb and Texas-based D.R. Horton. As an aside, the combined entity of Pulte, Centex and Del Webb - the result of a Centex/Pulte merger to be finalized later this year - accounted for 299 of the region's 1,764 first-half sales, a whopping 17 percent market share.
Bad June swoon for Sacramento-area homebuilders
http://www.sacbee.com/static/weblogs/real_estate/
Ouch! Homebuilders in Sacramento, El Dorado, Placer and Yolo counties reported their second worst sales month of 2009 in June, selling just 197 homes, condominiums and townhouses, the California Building Industry Association reported about an hour ago.These things happen. But the regional sales tally was the lowest since January, when builders sold 163 homes, reported the CBIA, a trade group for state homebuilders.It rather flies in the face of more encouraging news nationally on the new-home construction front. But sales are still very weak here as builders face significant competition from discounted bank repos. These repos still account for more than half the region's sales.Monthly sales totals in the four-county area by month:Jan: 163Feb: 201March: 297April: 290May: 346June: 197 June sales fell 43 percent from May, and were down 57 percent from June 2008, according to Costa Mesa-based Hanley Wood Market Intelligence. The firm compiles statistics for the CBIA monthly sales reports.Statewide, builders reported 2,607 June sales. That was 13.6 percent fewer than in May and down 26 percent from the same time last year. CBIA execs called it weaker than expected and called again for the state Legislature to extend a $10,000 tax credit for buyers of new unoccupied homes in the state. The tax credit, which began in March, ran out in July due to better-than-expected demand. Monday, the National Association of Home Builders, also called on Congress to extend the nation's $8,000 first-time buyer tax credit for another year.Hanley Wood research executive Jonathan Dienhart said today he expects statewide sales to match last year's levels in coming months. But he cautioned in a statement, "It will definitely take a longer time to start mounting a significant recovery with home purchase tax credits due to expire and the broader economy continuing to struggle."Builders in the four-county Sacramento area plus Yuba and Sutter counties sold 1,764 homes the first half of 2009, Hanley Wood reported. That puts them on track to finish well behind last year's 4,847 sales.Top capital builders during the first half of 2009, according to Hanley Wood:1) KB Home of Los Angeles, 161 sales, 9.1% market share. 2) Dallas-based Centex Homes, 143 sales, 8.1% market share.3) Miami-based Lennar Homes, 132 sales, 7.5% market share.4) JMC Homes of Roseville, 123 sales, 7% market share.5) Beazer Homes, headquartered in Atlanta, 112 sales, 6.3 percent market share.Other builders in the top 10: Arizona-based Taylor Morrison, Michigan-based Pulte Homes, New Jersey-based K. Hovnanian Homes, Michigan-based Del Webb and Texas-based D.R. Horton. As an aside, the combined entity of Pulte, Centex and Del Webb - the result of a Centex/Pulte merger to be finalized later this year - accounted for 299 of the region's 1,764 first-half sales, a whopping 17 percent market share.
Saturday, August 8, 2009
Competition frustrates first-time buyers
Home Front: Competition frustrates first-time buyers
By Jim Wasserman jwasserman@sacbee.com
http://www.sacbee.com/business/story/2090115.html?storylink=pd
Laurel Bane, 28, is a working professional with a down payment in hand. Hunting for her first home in Natomas, she's made six offers since March. And she's lost every house.
"It's been a bidding-war hell," Bane said. "I increased my offer by $12,000 on one, and I still lost out. I was $13,000 over asking price on another and still didn't get it."
Welcome to the punishment being inflicted this summer on first-time buyers. Considered saviors of the region's real estate economy, thousands like Bane are trudging through minefields where their homebuying dreams are repeatedly blown up.
That's because at the lower end of the price scale there are far more potential buyers than homes for sale.
"You make an offer and there's already 30 (ahead of you). And four are cash. I've had clients cry," said Larry Henderson, an agent with Prudential Norcal Realty in Carmichael. "It's a great time to buy a house because of the interest rates and the pricing. The problem is getting an offer accepted," he said.
Horror stories increasingly abound across a Sacramento housing market dominated by repos and short sales.
Home Front is hearing from buyers who expected it to be easy but are being outbid by investors. When they do offer more than investors, the bank often takes the lower bid because it's cash.
Others say offers are made without getting any response.
The only way to compete is to bid well above the listing price. But when appraisals come in below the offer, the deal is killed.
The alternative is short sales, in which banks take less than owed to avoid the higher costs of foreclosures, but they can take months to complete.
Another snag: Home sales increasingly involve "flippers," said Henderson, referring to investors who buy properties that they try to quickly resell for a profit.
But if the so-called flipper hasn't held the home for at least 90 days, the first-time buyer can't get a Federal Housing Administration loan, which requires only 3.5 percent down.
"Minefield? That's an understatement," said Henderson.
For Bane, who's looking for a house below $200,000, it's not been easy.
"I'm just looking for a small, manageable house for myself and one roommate. Yet everything I find is sold within the day," said Bane, a facilities business coordinator at Rancho Cordova-based Vision Service Plan. "We'll write an offer and submit it, and then find it was already sold."
Bane had expected she'd be moved into her first home by now. With the federal Nov. 30 deadline for an $8,000 first-time buyer tax credit approaching, she's fretting.
What's roughing up buyers like Bane is a shortage of bank repos – and an unwillingness of most private homeowners to sell at today's prices. For reasons that aren't fully understood, banks have held thousands of repos off the market. The result is bidding wars, especially for homes listed below $200,000.
"I really feel for first-time buyers right now," said Bruce Hammer, associate broker and agent with Keller Williams in Sacramento.
"Usually, within 24 hours, I have multiple offers coming in," said Hammer, who lists repo properties for banks and asset managers. "I almost dread it. My phone rings off the hook with people asking if (the house) is still available."
With defaults and foreclosures back on the rise regionally, Hammer believes a "substantial" new supply of repos may hit the market next month.
"I am hoping that's true because right now, I'm telling you, it's tough on buyers."
In Rocklin, would-be buyer Karin DeFoe said she's just had her fourth offer fall apart. DeFoe, house hunting for her college-age son, said, "We haven't had any luck."
Last month, she told Home Front she's lost offers on three houses to cash investors. All made lower bids than hers.
"All the repos are priced real low to start bidding wars," she complained.
To Bane, it's just plain frustrating.
"We'll go into houses and people are there before us, and people are there after us," she said. "Every house we look at has lines of buyers."
Mortgage protection, anyone?
Elsewhere on the first-time buyer front: The California Association of Realtors says only 385 applications have been approved for its program to help first-timers pay the mortgage if they lose their jobs. Of those, 14 are from Sacramento, Elk Grove and Folsom.
The association is looking for lots more applicants.
"We thought we'd have five or six times that many," said Jim Liptak, CAR president.
The CAR "mortgage protection" program announced in April contributes up to $1,500 a month for six months to first-time buyers who've lost their jobs. It's free and scheduled to run through the end of 2009.
Liptak says 2009 buyers should ask their real estate agents about the program, which is funded by contributions from real estate agents and associations in California and nationally. Approval takes two to three weeks.
In a state where unemployment has hit 11.6 percent, similar deals have been rolled out by home builders and car dealers.
CAR says it has enough funds to cover $1.4 million in mortgage payments for jobless Californians who bought homes between April and December this year. So far, says Liptak, the payments haven't been needed.
By Jim Wasserman jwasserman@sacbee.com
http://www.sacbee.com/business/story/2090115.html?storylink=pd
Laurel Bane, 28, is a working professional with a down payment in hand. Hunting for her first home in Natomas, she's made six offers since March. And she's lost every house.
"It's been a bidding-war hell," Bane said. "I increased my offer by $12,000 on one, and I still lost out. I was $13,000 over asking price on another and still didn't get it."
Welcome to the punishment being inflicted this summer on first-time buyers. Considered saviors of the region's real estate economy, thousands like Bane are trudging through minefields where their homebuying dreams are repeatedly blown up.
That's because at the lower end of the price scale there are far more potential buyers than homes for sale.
"You make an offer and there's already 30 (ahead of you). And four are cash. I've had clients cry," said Larry Henderson, an agent with Prudential Norcal Realty in Carmichael. "It's a great time to buy a house because of the interest rates and the pricing. The problem is getting an offer accepted," he said.
Horror stories increasingly abound across a Sacramento housing market dominated by repos and short sales.
Home Front is hearing from buyers who expected it to be easy but are being outbid by investors. When they do offer more than investors, the bank often takes the lower bid because it's cash.
Others say offers are made without getting any response.
The only way to compete is to bid well above the listing price. But when appraisals come in below the offer, the deal is killed.
The alternative is short sales, in which banks take less than owed to avoid the higher costs of foreclosures, but they can take months to complete.
Another snag: Home sales increasingly involve "flippers," said Henderson, referring to investors who buy properties that they try to quickly resell for a profit.
But if the so-called flipper hasn't held the home for at least 90 days, the first-time buyer can't get a Federal Housing Administration loan, which requires only 3.5 percent down.
"Minefield? That's an understatement," said Henderson.
For Bane, who's looking for a house below $200,000, it's not been easy.
"I'm just looking for a small, manageable house for myself and one roommate. Yet everything I find is sold within the day," said Bane, a facilities business coordinator at Rancho Cordova-based Vision Service Plan. "We'll write an offer and submit it, and then find it was already sold."
Bane had expected she'd be moved into her first home by now. With the federal Nov. 30 deadline for an $8,000 first-time buyer tax credit approaching, she's fretting.
What's roughing up buyers like Bane is a shortage of bank repos – and an unwillingness of most private homeowners to sell at today's prices. For reasons that aren't fully understood, banks have held thousands of repos off the market. The result is bidding wars, especially for homes listed below $200,000.
"I really feel for first-time buyers right now," said Bruce Hammer, associate broker and agent with Keller Williams in Sacramento.
"Usually, within 24 hours, I have multiple offers coming in," said Hammer, who lists repo properties for banks and asset managers. "I almost dread it. My phone rings off the hook with people asking if (the house) is still available."
With defaults and foreclosures back on the rise regionally, Hammer believes a "substantial" new supply of repos may hit the market next month.
"I am hoping that's true because right now, I'm telling you, it's tough on buyers."
In Rocklin, would-be buyer Karin DeFoe said she's just had her fourth offer fall apart. DeFoe, house hunting for her college-age son, said, "We haven't had any luck."
Last month, she told Home Front she's lost offers on three houses to cash investors. All made lower bids than hers.
"All the repos are priced real low to start bidding wars," she complained.
To Bane, it's just plain frustrating.
"We'll go into houses and people are there before us, and people are there after us," she said. "Every house we look at has lines of buyers."
Mortgage protection, anyone?
Elsewhere on the first-time buyer front: The California Association of Realtors says only 385 applications have been approved for its program to help first-timers pay the mortgage if they lose their jobs. Of those, 14 are from Sacramento, Elk Grove and Folsom.
The association is looking for lots more applicants.
"We thought we'd have five or six times that many," said Jim Liptak, CAR president.
The CAR "mortgage protection" program announced in April contributes up to $1,500 a month for six months to first-time buyers who've lost their jobs. It's free and scheduled to run through the end of 2009.
Liptak says 2009 buyers should ask their real estate agents about the program, which is funded by contributions from real estate agents and associations in California and nationally. Approval takes two to three weeks.
In a state where unemployment has hit 11.6 percent, similar deals have been rolled out by home builders and car dealers.
CAR says it has enough funds to cover $1.4 million in mortgage payments for jobless Californians who bought homes between April and December this year. So far, says Liptak, the payments haven't been needed.
Wednesday, August 5, 2009
New Land Deals seen
Construction: New land deals seen
By Jim Wasserman jwasserman@sacbee.com
http://www.sacbee.com/business/story/2080102.html?storylink=pd
The real estate market isn't cured yet, but several indicators suggest that it is beginning that long, slow and greatly anticipated climb out of intensive care.
If so – and if the patterns continue – the market here could stabilize, finally reversing the decline that has marked the capital region as one of the worst-hit metro areas in the United States. Sacramento's ill-fated housing boom peaked four years ago this month when home values reached their zenith across much of the region – and then started slipping backward.
Among positive June indicators that have fueled relatively upbeat news in recent days are those that show greater-than-expected U.S. construction activity, especially in the home building sector.
• Even in the capital region, home builders are doing better – starting 374 houses, apartments and condos in June. That was 122 more than in May, the California Building Industry reported.
• Statewide, home builders started 17 percent more dwellings in June than in May, and reported the most construction starts for single-family homes in almost a year, according to the CBIA.
Analysts have warned these improved housing indicators look good primarily because of the ferocity of the real estate downturn. Nobel Prize-winning economist Paul Krugman referred to the indicators Monday on National Public Radio as "just the first glimmer of hope" and warned the economy will remain weak for an extended time.
Foreclosure activity that has saddled the capital region with 41,900 home repossessions since 2007, as well as an 11.6 percent unemployment rate in the state and the region, still applies brakes to excess enthusiasm about the economy.
In Sacramento "we have a lot more decompressing to do," added Sanjay Varshney, dean of the College of Business Administration at California State University, Sacramento. "Normally, I would have said we would have defined a bottom, too, later this year or early next year. I think for us the challenge is the government layoffs have just begun.
"We might be looking at our cycle to be pushed out compared to the national cycle," he said.
Yet, rising construction numbers – even if well below the same time last year – are steering developers and builders into new land deals. One Sacramento-based development operation bought 800 home lots in Reno last week in anticipation of an upturn.
"We're really seeing enthusiasm on the part of builders that we haven't seen in a few years," said Douglas Mull, vice president for land acquisition in Northern California and Nevada for the Lewis Group of Companies of Upland.
A Lewis venture – Lewis Investment Co. of Nevada – paid $6.6 million for lots that fell into bankruptcy court after the original developer, affiliated with CalPERS, invested more than an estimated $20 million readying them for homes. That was LandSource Communities Development, LLC, a multistate real estate portfolio once run largely by Miami-based Lennar Homes. CalPERS lost nearly $1 billion on its investment in the partnership, which filed for bankruptcy in June 2008.
Mull said Lewis plans to sell lots to U.S. home building giants, many of which run Reno operations from headquarters in Sacramento and the Bay Area. Most of the lots are in the suburban 5,000-lot Damonte Ranch community that Lewis helped develop early this decade. Sales stalled during the housing bust.
Mull said Monday that Reno's $20,000-per-lot builder fees are especially competitive for national builders. Fees can run four or five times higher in Sacramento-area cities.
The land executive, reminded of double-digit unemployment and high foreclosure activity in both Sacramento and Reno, acknowledged the road to a rebound is long.
"But there's new home demand," he said. Mull estimated Lewis will take about five years to sell all the lots.
Some other indicators drawing attention:
• California's existing home sales rose 20 percent in June compared with the same period a year ago. Though capital-area sales failed to beat June 2008, analysts and real estate agents blamed dwindling bank repos for sale. They also report fierce bidding wars for repos that remain. June's existing home sales in the Sacramento area marked a peak for 2009, while a once-frightening and prolonged glut of for-sale signs continued to fall.
• Multiple offers have spread now to vacant land for new homes, said Mark Rowson, Northern California president for Agoura-based Warmington Homes. He said, "A year ago nobody was talking. Now, there is movement.
"We've put some offers in, but we have not been accepted," he said. "Offers have come in a lot higher than we've been offering."
Kathryn Boyce, a Sacramento analyst for Costa Mesa-based home-building industry consultant Hanley Wood Market Intelligence, explained: "They're trying to position themselves for the next wave."
• Investors are also returning to home builder stocks. Monday, Michigan-based Pulte Homes reported second quarter losses worse than last year. But the losses were not as bad as the first quarter's, and the company attributed the improvement to markets starting to recover. Share prices on the New York Stock Exchange rose 3.43 percent in Monday trading, to $11.76. Texas-based Centex posted a profit in its first quarter, thanks to a $407 million tax gain. Its stock price was up 3.76 percent Monday to $11.32.
By Jim Wasserman jwasserman@sacbee.com
http://www.sacbee.com/business/story/2080102.html?storylink=pd
The real estate market isn't cured yet, but several indicators suggest that it is beginning that long, slow and greatly anticipated climb out of intensive care.
If so – and if the patterns continue – the market here could stabilize, finally reversing the decline that has marked the capital region as one of the worst-hit metro areas in the United States. Sacramento's ill-fated housing boom peaked four years ago this month when home values reached their zenith across much of the region – and then started slipping backward.
Among positive June indicators that have fueled relatively upbeat news in recent days are those that show greater-than-expected U.S. construction activity, especially in the home building sector.
• Even in the capital region, home builders are doing better – starting 374 houses, apartments and condos in June. That was 122 more than in May, the California Building Industry reported.
• Statewide, home builders started 17 percent more dwellings in June than in May, and reported the most construction starts for single-family homes in almost a year, according to the CBIA.
Analysts have warned these improved housing indicators look good primarily because of the ferocity of the real estate downturn. Nobel Prize-winning economist Paul Krugman referred to the indicators Monday on National Public Radio as "just the first glimmer of hope" and warned the economy will remain weak for an extended time.
Foreclosure activity that has saddled the capital region with 41,900 home repossessions since 2007, as well as an 11.6 percent unemployment rate in the state and the region, still applies brakes to excess enthusiasm about the economy.
In Sacramento "we have a lot more decompressing to do," added Sanjay Varshney, dean of the College of Business Administration at California State University, Sacramento. "Normally, I would have said we would have defined a bottom, too, later this year or early next year. I think for us the challenge is the government layoffs have just begun.
"We might be looking at our cycle to be pushed out compared to the national cycle," he said.
Yet, rising construction numbers – even if well below the same time last year – are steering developers and builders into new land deals. One Sacramento-based development operation bought 800 home lots in Reno last week in anticipation of an upturn.
"We're really seeing enthusiasm on the part of builders that we haven't seen in a few years," said Douglas Mull, vice president for land acquisition in Northern California and Nevada for the Lewis Group of Companies of Upland.
A Lewis venture – Lewis Investment Co. of Nevada – paid $6.6 million for lots that fell into bankruptcy court after the original developer, affiliated with CalPERS, invested more than an estimated $20 million readying them for homes. That was LandSource Communities Development, LLC, a multistate real estate portfolio once run largely by Miami-based Lennar Homes. CalPERS lost nearly $1 billion on its investment in the partnership, which filed for bankruptcy in June 2008.
Mull said Lewis plans to sell lots to U.S. home building giants, many of which run Reno operations from headquarters in Sacramento and the Bay Area. Most of the lots are in the suburban 5,000-lot Damonte Ranch community that Lewis helped develop early this decade. Sales stalled during the housing bust.
Mull said Monday that Reno's $20,000-per-lot builder fees are especially competitive for national builders. Fees can run four or five times higher in Sacramento-area cities.
The land executive, reminded of double-digit unemployment and high foreclosure activity in both Sacramento and Reno, acknowledged the road to a rebound is long.
"But there's new home demand," he said. Mull estimated Lewis will take about five years to sell all the lots.
Some other indicators drawing attention:
• California's existing home sales rose 20 percent in June compared with the same period a year ago. Though capital-area sales failed to beat June 2008, analysts and real estate agents blamed dwindling bank repos for sale. They also report fierce bidding wars for repos that remain. June's existing home sales in the Sacramento area marked a peak for 2009, while a once-frightening and prolonged glut of for-sale signs continued to fall.
• Multiple offers have spread now to vacant land for new homes, said Mark Rowson, Northern California president for Agoura-based Warmington Homes. He said, "A year ago nobody was talking. Now, there is movement.
"We've put some offers in, but we have not been accepted," he said. "Offers have come in a lot higher than we've been offering."
Kathryn Boyce, a Sacramento analyst for Costa Mesa-based home-building industry consultant Hanley Wood Market Intelligence, explained: "They're trying to position themselves for the next wave."
• Investors are also returning to home builder stocks. Monday, Michigan-based Pulte Homes reported second quarter losses worse than last year. But the losses were not as bad as the first quarter's, and the company attributed the improvement to markets starting to recover. Share prices on the New York Stock Exchange rose 3.43 percent in Monday trading, to $11.76. Texas-based Centex posted a profit in its first quarter, thanks to a $407 million tax gain. Its stock price was up 3.76 percent Monday to $11.32.
Monday, August 3, 2009
Nation's economy appears set for upswing
Nation's economy appears set for upswing
By Kevin G. Hall khall@mcclatchydc.com
http://www.sacbee.com/business/story/2074069.html
WASHINGTON – The worst U.S. recession in 70 years should end over the next three to six months, judging by data released Friday that showed that the economy's contraction eased considerably from April through June.
The Commerce Department reported that the economy shrank at an annualized rate of 1 percent in the year's second quarter, less than most analysts had expected, and far less than the dramatic 6.4 percent shrinkage in the first quarter, a figure revised downward Friday from the initial estimate of 5.5 percent.
Independent economists think that the economy now is poised to grow, albeit slowly.
"The key point is that this is the last negative (growth) report in the Great Recession, signaling the end of the downturn. The economy won't come roaring back, but at least it's back," said Mark Zandi, the chief economist for Moody's Economy.com, a forecaster in West Chester, Pa.
Several factors augur well for the near future. Recent reports on home and auto sales have shown improvement.
"Leading indicators of activity are pointing up, and the housing sector appears to be stabilizing," Commerce Secretary Gary Locke said in a statement.
Adding to the hopefulness is the stock market, which enjoyed its best July in 20 years – and its best month since October 2002.
The Dow surged 725 points or 8.6 percent for the month, with most of the gains arriving in bursts in the final 15 days. The Dow has risen four of the past five months.
Businesses did cut their stockpiles of goods at a record pace in the second quarter, but even that carries a silver lining, the Associated Press reported.
With inventories at rock bottom, businesses will likely need to ramp up production to meet customer demand. That would stimulate the economy in the current quarter.
AP reported that some economists think that these factors could push growth in the July-to-September quarter to a more vigorous rate than previously forecast – possibly 3 percent annual growth or higher.
President Barack Obama credited the $787 billion economic stimulus plan that passed earlier this year for the emerging signs of recovery.
"This and other difficult but important steps that we've taken over the last six months have helped us put the brakes on recession," he said at the White House. "I am guardedly optimistic about the direction that our economy is going, but we've got a lot more work to do."
Many uncertainties remain.
The first-quarter improvement was fueled, in part, by an 11 percent boost in federal government spending, along with a decline in exports that was far less harsh than in the first quarter.
Consumer spending, which powers two-thirds of U.S. economic activity, remained weak. Real personal-consumption expenditures fell 1.2 percent in the second quarter, after increasing 0.6 percent from January through March.
Sales of durable goods – big-ticket items such as large appliances and wide-screen televisions – shrank 7.1 percent from April to June after expanding at a 3.9 percent annual rate in the three previous months.
The job market appears unlikely to do much to increase that spending in the near future.
Although the size of job losses has fallen in recent months, the Fed says that unemployment – now at a 26-year high of 9.5 percent – will top 10 percent at the end of this year. Businesses likely won't boost hiring until they're certain the recovery has staying power.
Vincent Reinhart, a former top economist at the Federal Reserve who is now a scholar at the American Enterprise Institute, said that the continued rise in joblessness will "test bank balance sheets. That'll test business models generally. … A lot of manufacturing and retail activity doesn't look good when the unemployment rate is above 10 percent."
Economists also worry about commercial real estate.
"The commercial real estate problems are a big worry for the financial system and thus the rest of the economy. … As rents and prices decline, given all the vacant space, commercial mortgage holders will default on their loans, causing big write-downs at banks and other financial institutions," said Zandi, of Economy.com.
Still, the recent economic improvement as well as the easing pace of job losses, could help consumers sense that they are finally in a position to rebuild their nest eggs, and families may eventually start to feel comfortable spending again.
"I don't know when it'll happen, but the savings rate will plateau at some point," Greg McBride, a senior financial analyst at Bankrate.com, told the New York Times. "Consumers will strike that balance between living within their means but still living life."
By Kevin G. Hall khall@mcclatchydc.com
http://www.sacbee.com/business/story/2074069.html
WASHINGTON – The worst U.S. recession in 70 years should end over the next three to six months, judging by data released Friday that showed that the economy's contraction eased considerably from April through June.
The Commerce Department reported that the economy shrank at an annualized rate of 1 percent in the year's second quarter, less than most analysts had expected, and far less than the dramatic 6.4 percent shrinkage in the first quarter, a figure revised downward Friday from the initial estimate of 5.5 percent.
Independent economists think that the economy now is poised to grow, albeit slowly.
"The key point is that this is the last negative (growth) report in the Great Recession, signaling the end of the downturn. The economy won't come roaring back, but at least it's back," said Mark Zandi, the chief economist for Moody's Economy.com, a forecaster in West Chester, Pa.
Several factors augur well for the near future. Recent reports on home and auto sales have shown improvement.
"Leading indicators of activity are pointing up, and the housing sector appears to be stabilizing," Commerce Secretary Gary Locke said in a statement.
Adding to the hopefulness is the stock market, which enjoyed its best July in 20 years – and its best month since October 2002.
The Dow surged 725 points or 8.6 percent for the month, with most of the gains arriving in bursts in the final 15 days. The Dow has risen four of the past five months.
Businesses did cut their stockpiles of goods at a record pace in the second quarter, but even that carries a silver lining, the Associated Press reported.
With inventories at rock bottom, businesses will likely need to ramp up production to meet customer demand. That would stimulate the economy in the current quarter.
AP reported that some economists think that these factors could push growth in the July-to-September quarter to a more vigorous rate than previously forecast – possibly 3 percent annual growth or higher.
President Barack Obama credited the $787 billion economic stimulus plan that passed earlier this year for the emerging signs of recovery.
"This and other difficult but important steps that we've taken over the last six months have helped us put the brakes on recession," he said at the White House. "I am guardedly optimistic about the direction that our economy is going, but we've got a lot more work to do."
Many uncertainties remain.
The first-quarter improvement was fueled, in part, by an 11 percent boost in federal government spending, along with a decline in exports that was far less harsh than in the first quarter.
Consumer spending, which powers two-thirds of U.S. economic activity, remained weak. Real personal-consumption expenditures fell 1.2 percent in the second quarter, after increasing 0.6 percent from January through March.
Sales of durable goods – big-ticket items such as large appliances and wide-screen televisions – shrank 7.1 percent from April to June after expanding at a 3.9 percent annual rate in the three previous months.
The job market appears unlikely to do much to increase that spending in the near future.
Although the size of job losses has fallen in recent months, the Fed says that unemployment – now at a 26-year high of 9.5 percent – will top 10 percent at the end of this year. Businesses likely won't boost hiring until they're certain the recovery has staying power.
Vincent Reinhart, a former top economist at the Federal Reserve who is now a scholar at the American Enterprise Institute, said that the continued rise in joblessness will "test bank balance sheets. That'll test business models generally. … A lot of manufacturing and retail activity doesn't look good when the unemployment rate is above 10 percent."
Economists also worry about commercial real estate.
"The commercial real estate problems are a big worry for the financial system and thus the rest of the economy. … As rents and prices decline, given all the vacant space, commercial mortgage holders will default on their loans, causing big write-downs at banks and other financial institutions," said Zandi, of Economy.com.
Still, the recent economic improvement as well as the easing pace of job losses, could help consumers sense that they are finally in a position to rebuild their nest eggs, and families may eventually start to feel comfortable spending again.
"I don't know when it'll happen, but the savings rate will plateau at some point," Greg McBride, a senior financial analyst at Bankrate.com, told the New York Times. "Consumers will strike that balance between living within their means but still living life."
Sunday, August 2, 2009
Homebuyers gain an edge with Internet searches
Homebuyers gain an edge with Internet searches
By Jim Wasserman jwasserman@sacbee.com
http://www.sacbee.com/business/story/2067432.html
In the colorful, centuries-long history of house hunting, when have so many buyers come to the table knowing so much about prices, neighborhoods and school test scores?
Probably never. Credit an average 16 weeks spent browsing the Internet before buyers contact a real estate agent to get serious. Fifteen years into the World Wide Web, home searches once defined by riding around in agents' sport-utility vehicles – a process in which agents knew all and a buyer knew little – have been thoroughly recast.
Buyers – 84 percent of whom use the Internet for house hunting, according to a California Association of Realtors study – have taken on much of the information gathering formerly done by agents, who occupy the middle of a transaction and typically get a commission of 6 percent of the sales price, 3 percent for the seller's agent and 3 percent for the buyer's agent.
A variety of mostly similar Web sites now enable buyers to browse homes for sale, probe a home's transaction history, gauge its tax bite, compare area values and even see, via aerial photos, whether the neighbors have planted grass in the backyard.
This maturing of real estate Web sites has raised questions about where 519,000 California agents and brokers fit in and opened some debate about the size of their commissions. At least one online brokerage is trying to redefine the agent pay structure to gain business by making it cheaper to buy and sell.
Still, buyers and agents alike say the sheer complexity of buying and selling homes is keeping the current system largely intact. House buying as a click-here and do-it-yourself job is still much in the realm of fiction. Today, only about 5 percent of real estate sales occur solely between a buyer and seller, said Glenn Kelman, chief executive officer of Seattle's Redfin, an online brokerage aiming to simplify home buying.
Even the most Web-savvy buyers balk at trying to close a deal without an agent.
"I can buy $100,000 worth of stock with the click of a mouse. But I can't buy a $100,000 house without going through a ton of paperwork," said Adam Bradley, an Elk Grove information technology staffer. Early this year, he found an attractive listing online and went so far as to make an offer without actually seeing the house.
"We submitted an offer based on the pictures and the Google map showing me an overhead and a street view, and then we went out and saw it that weekend," he said.
But Bradley turned to an agent to navigate the daunting process of buying the house and closing escrow in May.
Many agents, especially younger ones, say the Web is enhancing, not damaging their careers.
"Last year I had 26 transactions and 14 came from the Internet," said Erin Attardi, 30, of Lyon Real Estate. Agents traditionally have gotten clients from referrals or from doing open houses.
"Most of my business comes from the Internet," said Attardi, of Sacramento. "It comes by way of my blog. I get a lot of business from Trulia. I get a little business from Zillow. But mainly it's my blog. People follow me on Twitter or find my Facebook page."
Said Attardi, "I got my license at the end of the housing boom. I knew I wasn't going to be getting any referrals. This was my strategy from the beginning."
Even as the Internet lessens buyer dependence on real estate agents, it's also making it easier for them. A 2009 Home Buyer Survey conducted by the California Association of Realtors showed that buyers who used the Internet, on average, visited 13 homes with an agent. Buyers who didn't use the Internet needed an average of 25 visits before deciding.
Chris Saizan, 26, a Keller Williams agent in Elk Grove, said he's established a relationship with a Bay Area real estate search site, movoto.com, that brings "four or five phone calls" daily. Among clients closing escrow this month are a couple from Fiji who searched the Sacramento housing market from thousands of miles away.
Saizan pays Movoto 30 percent of commissions from clients it sends his way. But that's just one site among many where his listings appear.
By Jim Wasserman jwasserman@sacbee.com
http://www.sacbee.com/business/story/2067432.html
In the colorful, centuries-long history of house hunting, when have so many buyers come to the table knowing so much about prices, neighborhoods and school test scores?
Probably never. Credit an average 16 weeks spent browsing the Internet before buyers contact a real estate agent to get serious. Fifteen years into the World Wide Web, home searches once defined by riding around in agents' sport-utility vehicles – a process in which agents knew all and a buyer knew little – have been thoroughly recast.
Buyers – 84 percent of whom use the Internet for house hunting, according to a California Association of Realtors study – have taken on much of the information gathering formerly done by agents, who occupy the middle of a transaction and typically get a commission of 6 percent of the sales price, 3 percent for the seller's agent and 3 percent for the buyer's agent.
A variety of mostly similar Web sites now enable buyers to browse homes for sale, probe a home's transaction history, gauge its tax bite, compare area values and even see, via aerial photos, whether the neighbors have planted grass in the backyard.
This maturing of real estate Web sites has raised questions about where 519,000 California agents and brokers fit in and opened some debate about the size of their commissions. At least one online brokerage is trying to redefine the agent pay structure to gain business by making it cheaper to buy and sell.
Still, buyers and agents alike say the sheer complexity of buying and selling homes is keeping the current system largely intact. House buying as a click-here and do-it-yourself job is still much in the realm of fiction. Today, only about 5 percent of real estate sales occur solely between a buyer and seller, said Glenn Kelman, chief executive officer of Seattle's Redfin, an online brokerage aiming to simplify home buying.
Even the most Web-savvy buyers balk at trying to close a deal without an agent.
"I can buy $100,000 worth of stock with the click of a mouse. But I can't buy a $100,000 house without going through a ton of paperwork," said Adam Bradley, an Elk Grove information technology staffer. Early this year, he found an attractive listing online and went so far as to make an offer without actually seeing the house.
"We submitted an offer based on the pictures and the Google map showing me an overhead and a street view, and then we went out and saw it that weekend," he said.
But Bradley turned to an agent to navigate the daunting process of buying the house and closing escrow in May.
Many agents, especially younger ones, say the Web is enhancing, not damaging their careers.
"Last year I had 26 transactions and 14 came from the Internet," said Erin Attardi, 30, of Lyon Real Estate. Agents traditionally have gotten clients from referrals or from doing open houses.
"Most of my business comes from the Internet," said Attardi, of Sacramento. "It comes by way of my blog. I get a lot of business from Trulia. I get a little business from Zillow. But mainly it's my blog. People follow me on Twitter or find my Facebook page."
Said Attardi, "I got my license at the end of the housing boom. I knew I wasn't going to be getting any referrals. This was my strategy from the beginning."
Even as the Internet lessens buyer dependence on real estate agents, it's also making it easier for them. A 2009 Home Buyer Survey conducted by the California Association of Realtors showed that buyers who used the Internet, on average, visited 13 homes with an agent. Buyers who didn't use the Internet needed an average of 25 visits before deciding.
Chris Saizan, 26, a Keller Williams agent in Elk Grove, said he's established a relationship with a Bay Area real estate search site, movoto.com, that brings "four or five phone calls" daily. Among clients closing escrow this month are a couple from Fiji who searched the Sacramento housing market from thousands of miles away.
Saizan pays Movoto 30 percent of commissions from clients it sends his way. But that's just one site among many where his listings appear.
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