Sonoma Housing Bubble

Pulling the cork out of Sonoma's bubbly housing foolishness

Tuesday, January 30, 2007

One Mans' Dynamite Keg is Another Mans' Castle

Here's one for the fraud files, in remembering the super hot hot hot RE market over in Sacto in the very recent past. I ran across this story in the Bee today.

"James and Beth Fullenwider are living inside a bad dream growing ever more familiar across the Sacramento region: Their 2,400-square-foot house in Elk Grove is slowly slipping away from them.

They can't afford their $3,300 monthly payment.

"If the credit people had really looked at our situation, they would have laughed and said, 'You can't come close to qualifying for this,' " says James Fullenwider, who runs a video production business at home. "We're in a house we have no business being in."

He says the couple didn't read the home loan's fine print. Only after moving into the $500,000 home last August did they learn the loan agent inflated their income to qualify them for the financing. "But we were stupid to do it," Fullenwider says."

Rest of the story here

How many others are finding themselves in the same situation alll over the state, and who will investigate all this fraud, and how many can really plead ingnorance? Are we just living in a state of Idiocracy?

Nearly $1.3 trillion in adjustable rate mortgages -- ARMs -- will reset to higher payments this year, according to mortgage giant Freddie Mac and other financial institutions.
That will cause some payments to rise $200 a month. Others will double or triple.
And once again, who are they asking for comments? Our old friends at DataQuick.
Last week, La Jolla-based DataQuick Information Systems reported 865 foreclosures in Amador, El Dorado, Nevada, Placer, Sacramento, Sutter, Yolo and Yuba counties during the fourth quarter of 2006, nearly doubling from the previous quarter.

DataQuick also reported 3,071 notices of late mortgage payments -- known as notices of defaults -- during the same period. While that was a 16 percent increase over the previous quarter, the rate of growth had slowed somewhat from earlier in 2006.
But, but, I thought those were sales?!!

Sunday, January 28, 2007

One For the Fraud Files?


A reader last summer sent in some details about an open house he visited in Sonoma 660 East MacArthur

The house at that time was priced at $1,395,000 and apparently it is a 1950 cottage turn cliche. He said it was remodeled with all the cliches we have come to expect. The granite countertops, the pottery barn colors and yadda yadda yadda... but there certainly were no solid gold toilets or bathtubs and he said what he found most interesting is what Zillow had to say about it.

Zillow Sez:
660 E Macarthur St, Sonoma, CA 95476
Zillow Estimate:

660 East MacArthur's Market Value Change for 1 yr.

Sales History:
12/24/06: $1,200,000
07/12/2006: $1,258,000

hmmm... in October 2005 this house was sold for $712k

Then sold two months later 12/05 for $600k.

$112,500k LESS just two months later... WTF?

Then a mere 6 months later it was up for sale again with an asking price of $1,395,000 and it sold for $1,258,000...

... and then just 1 month after the $1,258,000 sale it was put up for sale again with the same realty company, (Morgan Lane) low and behold, only the listing agents and the price changed. Listing price was $1,284,500

Then reported by SFGATE in their December 24th 2006 Homes sold report

660 Macarthur again changed hands... 12/06 going down $84,500

Homes sold week of: Sunday, December 24, 2006
660 East MacArthur Street $1,200,000,

Look at the zillow valuations...
January 2002 Value: $221k
January 2003 Value: $280k
January 2004 Value: $300k
January 2005 Value: $400k
August 2006 Value: $669,320

You have GOT to be kidding!!!

Tax Assessment History: 2004
Property tax: $2,218
Assessed value bldgs: $105,939
Assessed value land: + $44,606

Total assessed value: = $150,545

Something is not passing the smell test...

Sonoma House

Saturday, January 27, 2007

Cross Your Fingers & Toes, Click Your Heels Too...

WASHINGTON - New home sales fell in 2006 by the largest amount in 16 years.

"The housing bust is occurring after a boom in which sales of both new and existing homes set records for five consecutive years. The lowest mortgage rates in four decades powered a surge in sales that was bolstered by investors making purchases in hopes of turning around and reselling the properties for quick profits."

"Analysts attributed the big declines in 2006 to a cooling of that speculative boom. That reversal has given the housing industry its toughest downturn since the recession of 1990."

"The slowdown trimmed 1.2 percentage points off overall economic growth in the July-September quarter. Analysts are looking for an equally severe hit in the final three months of the year, with housing expected to be a continuing drag in the first half of 2007."

"David Seiders, chief economist of the National Association of Home Builders, said he looked for home prices to continue to be depressed in 2007 as builders scramble to reduce near-record levels of unsold homes."

"The cutback in building has led to thousands of job layoffs in the construction industry.The report on new homes followed a report Thursday that sales of existing homes dropped by 8.4 percent last year. That's the biggest decline in sales of previously owned homes since 1989."

David Lereah, chief economist for the Realtors, said that 40 percent of home sales in 2005, the peak of the housing boom, represented purchases by investors and people buying vacation homes. "With fingers and toes crossed, it appears that we have hit bottom in the existing home market." said David Lereah.

Atta boy... go ahead and wish really really hard and click your heels three times and repeat, "Real estate always goes up. Real estate always goes up. Real estate always goes up."

You might want to get yourself some ruby slippers too. They won't help anything, but they might make you feel better.

"The boom drove prices up at double-digit rates and caused a stampede of investors = (speculators) into the market who purchased housing hoping to sell = (flip) the homes for big profits."

"The number of default notices lenders sent to Sonoma County homeowners more than doubled in the fourth quarter of 2006, compared with the same period in 2005, and was the highest in nearly a decade, according to DataQuick Information Systems."

"Interest-only loans and mortgages with minimum payment options proliferated in Sonoma County as buyers looked for ways to reduce monthly payments to purchase homes as prices soared."

Friday, January 26, 2007

Sonoma Co. Too Costly to do Business

"American Home Shield is moving almost half of the jobs at its 200-employee Santa Rosa call center to other states, saying it is too expensive to operate a telemarketing facility in Sonoma County."

"Based in Memphis, Tenn., American Home Shield sells service contracts that cover repairs or replacements for heating, plumbing and electrical systems, water heaters and major appliances."

"With the housing market mired in a downturn, American Home Shield has been cutting costs. Home sales have fallen nationwide with California, including Sonoma County, hit particularly hard."

"The home warranty company, a major employer in Sonoma County for two decades, said Thursday it will move all 90 telephone sales jobs in Santa Rosa to call centers in states with cheaper business costs."

"The job losses are another blow to the region's economy. Sonoma County has been losing jobs monthly since the middle of last year and the housing slump has contributed to the weakening."

"It's largely a reflection of real estate. They boomed during the boom. And now that home sales are down, it ripples throughout the economy," said Ben Stone, executive director of the Sonoma County Economic Development Board."

"About 50 jobs at the Santa Rosa center were previously eliminated, mostly by not replacing workers who left the company, spokeswoman Susanna Weston said."
"It was a very challenging year in real estate," she said. "So we looked all over the business to save money without compromising our customer experience. We haven't been hiring a lot of positions."'

"Founded in 1971, American Home Shield moved from Dublin to Santa Rosa in 1986. The company moved into a new West Coast headquarters in the Santa Rosa Business Park in 2005, where it leases a 36,000-square-foot building."

"But the cost of doing business in Sonoma County is two to three times that in the other states, led by rent, commissions, payroll and benefits. "All that rolls up and it's much more expensive," Weston said."

"Sonoma County business costs are 10 percent higher than the national average, Ben Stone said."

"It's a business decision and call centers are usually operated in low-cost areas," he said.

"Company officials led by President Dave Crawford informed sales staff Thursday that the jobs, along with some support positions, would be gone within two months. The workers can relocate to call centers in Iowa, Tennessee or Georgia, and the company is offering assistance with moving costs."

Thursday, January 25, 2007

Foreclosure Increase Ominous or Not?

Sonoma County home sales dropped 25 percent in 2006. Sonoma County faces a 60 percent risk of further (price & sales) declines over the next two years, according to a survey released Wednesday.

Sonoma County had 143 foreclosures 4th Quarter 2005 and by 4th Quarter 2006 we are up to 323. 125.9% But don't give it a second thought. The guys at DataQuick will let us know if we should start worrying.


You know, DataQuick... those guys who count foreclosures as sales and call it all good.

"Risk is based on home prices, employment and the affordability of housing. The county's economy has stalled, losing jobs in recent months. And affordability has worsened because incomes did not keep pace with soaring prices before the recent downturn."

"While the correction was expected, it has been steeper and faster than anticipated. The 323 notices of default sent to Sonoma County homeowners in the fourth quarter compared with 143 during the same period a year earlier."

"The 125 percent increase was the largest since DataQuick began tracking defaults in 1992. It was the highest number since 328 notices were sent in the third quarter of 1997."

"Foreclosure activity has been rising because households facing financial difficulty, often from a job loss, illness or some other trouble, may have more difficulty refinancing or selling homes."

"Historically, only 5 to 7 percent of homeowners in default end up losing their homes, as most either refinance or sell. But 32 percent of the state's homeowners who were in default earlier in the year lost homes to foreclosure in the fourth quarter."

"Just over half of the loans that went into default statewide during the fourth quarter were made between January 2005 and February 2006. So those loans were made to buyers purchasing homes around the time the market was peaking in summer 2005, Karevoll said."

"Loans from this period also are at greater risk if they are interest-only or mortgages with minimum payment options."

"Interest-only loans and mortgages with minimum payment options proliferated in Sonoma County as buyers looked for ways to reduce monthly payments to purchase homes as prices soared." (70% of 2006 loans in Sonoma County were I/O of some sort)

"But those loans can put buyers in riskier financial positions, especially if they purchased homes with little or no down payment, relying on the market to build home values rather than paying down a loan."

"Exchange Bank does not fund interest-only and option loans. But the bank will package them through outside lenders for buyers who cannot afford more traditional loans with fixed rates and down payments."

'"Just because of the higher-priced homes, that is the product that is in demand in order to qualify," said Colleen Oller, vice president and real estate loan officer for Exchange Bank. "But now we're seeing a downside to that, especially if they're needing to sell. The value of those homes is not what they paid for them and they've got no equity built up."'

'"We're in the midst of an adjusting market right now, and we won't know until spring or summer if this is ominous or not," said Marshall Prentice, DataQuick's president."

Please see Dr. Housing Bubble for cool charts, graphs and great analysis of California's flood of foreclosures.

Wednesday, January 24, 2007

Sonoma County's Stagnant Economy

"Most regions of the country would celebrate the news that the unemployment rate had fallen to 3.7 percent. But there won't be any celebrating in Sonoma County where the jobless rate fell in December because, year over year, 1,300 jobs went away."

The next generation cannot live on successes of the past. Sonoma County remains an expensive place for housing. Responding to the high cost of doing business in California, more employers are sending jobs to other states and to other countries.

"This exodus of jobs and workers over the last eight months testifies to a stagnant economy - which means fewer dollars cycling through the local economy and fewer dollars to support municipal services and nonprofit agencies. In that way, fewer jobs leads to ... fewer jobs. Economists cite the usual suspects."

Foreclosures Surpass Historical Average

"Foreclosure activity soared in Sonoma County at the end of 2006, the latest indicator of stress in the real estate market as more homeowners under financial distress face losing their houses."

"Foreclosure activity rises because households facing financial trouble may have more difficulty selling homes."

"The number of default notices lenders sent to Sonoma County homeowners more than doubled in the fourth quarter of 2006, compared with the same period in 2005, and was the highest in nearly a decade, according to DataQuick Information Systems."

"In the three-month period ending Dec. 31, lenders sent 323 default notices to Sonoma County homeowners, far surpassing the county’s historical average of 228."

Monday, January 22, 2007

Foreclosures Counted as Sales by DataQuick

Today's Bubble News is brought to you by a reader in Shasta County.

You are not going to believe this! I live in Shasta County, California. The local newspaper, the Redding Record Searchlight ( publishes addresses and $ amount of sales monthly. Their source in Data Quick. FORECLOSURES are being posted with the sales and counted as sales
(i.e. lender foreclosure before property is sold to new owner.)

On a lark, I decided to track foreclosures for impact on 2007 sales. The Record Searchlight publishes "Notices of Trustees Sales" (potential foreclosures) in the legal section of the paper. When the lender gets the property back (foreclosure), a "Trustees Deed" is issued. I found foreclosures being counted as sales.

Data Quick does not distinguish "Deeds" (regular property transfer) from "Trustee Deeds" (foreclosure). Both are counted together as sales. For Shasta County
141 sales were reported for November --- 12 were foreclosures. So, in
reality, 129 properties were sold.

Data Quick did not respond to my email. The Record Searchlight contacted Data Quick and confirmed my finding. Data Quick indicated their program, "Prospect Finder Farm Services", has NO function to distinguish Deeds from Trustees Deeds
(foreclosures) and it would be expensive to fix this gross error.

Bottom Line: ALL CALIFORNIA SALES ARE OVERSTATED BY DATA QUICK as they add foreclosures to total sales (

Here are a couple of foreclosure examples which can be checked on which is doing the same thing as Data Quick:

1025 Chardonnay Walk, Redding, CA 96001 shows sold $635,000 on 11/17/06. (Foreclosure currently on the market with Coldwell Banker for $520,000 who listed the lender owned property.)

6740 Southgate Drive, Redding, CA 96001 shows sold $249,474 on 11/13/06. (Foreclosure currently on the market with Bears Den Real Estate who listed the lender owned property for $213,000).

Check this out for your area and let the "blog world" know about this bizarre happening.


Suzanne from Shasta County

Flip Flopped

He's at it again...

$650000 artistic custom home + apt (sonoma)

"price reduced to bottom brack even solid compleatly gutted and rebuilt home new elec,plumbing,air,heat,water,foundation, renovated for builders homme all the bells and wistles granit marbal bamboo custom arches and wood works very classy owner motivated and willing to make minor changes to accomadate buyer this was on market for 899,000 last year"

Read Previous ad here

Sunday, January 21, 2007

Chasing the Market Down....Waiting for Pigs to Fly.

A new class of reluctant landlord's cometh... of course they are waiting for the Great Pumpkin of a Housing Bubble to reinflate and save their sorry a$$es.

"The housing slump, combined with the traditional slowdown in home sales over winter, has led to a surge in the number of rental homes in Sonoma County, said David Rendino, an agent with CPS Property Advocates in Rohnert Park, who specializes in residential investment property."

"Property managers said they are barraged with calls for help in finding tenants and managing properties. Other new landlords are trying to do it on their own."

'"It's been really heating up as people hit winter and pulled property off the market. That's when everybody decided to quit," said Rendino, who also co-owns Liberty Property Management."

"Many never set out to own a rental home, but have become landlords out of necessity. Some are renting their homes to help make their mortgage payments until they find a buyer."

"For a solid eight years, home sales climbed and prices soared, driven first by economic growth and then by low mortgage rates. Prices peaked in August 2005, when the median hit a record $619,000. Since then, housing has been in a steady decline and the price of a typical home has fallen 8 percent."

The slump has created a new class of landlords, otherwise known as.. FBs

"Many likely have tapped equity in one home to buy a new or move-up house, but are stuck with two mortgages because they can't sell their former residence. So they look for tenants and prepare for a financial hit."

"Not everyone can afford the jump. Monthly rents likely won't match mortgage payments for homes purchased within the past five or six years. But some have decided that renting is a better alternative than letting their homes sit vacant waiting for a buyer."

"The Phillipses are in such a predicament and figure they have little choice but to be landlords."I really don't want to have to do it," Trent Phillips said."

"Trent and Selena Phillips are seeking a tenant for the Windsor house they weren't able to sell despite cutting the price $90,000. The couple called it home until they bought a house in Vallejo more than a year ago, when Trent Phillips earned a promotion that requires him to commute to Alameda."

"'We need to get a renter in there because right now I'm paying two mortgages. Every dollar I have coming in is going right back out the window," said Phillips, a Coast Guard chief warrant officer. "We're just barely holding on."'

"A home they purchased just four hours after it was listed in spring 2004 couldn't sell after a pair of six-month stays on the market between summer 2005 and December. They cut the price several times for their 1,900-square-foot, three-bedroom home, from $729,000 originally to $639,500 before pulling it off the market."

"We did almost have it sold at one point, but of course it was one of those contingency deals where the guy who was buying our place couldn't sell his place," he said. "I'm not going to give my house away. I'm not going to take it in the shorts."'

hmm... you don't want to take it in the shorts, but the overblown sense of entitlement tells me you just might.

"Bob and Nona Windus have been trying to rent out his property in Santa Rosa but is having a tougher time than he expected. After trying to sell the home he turned to renting."

"Their house hit the market for $714,000 in August. Windus said a similar house sold for $740,000 four months earlier. Still, the only offer they received was for $600,000."

'"That was the straw that broke the camel's back. We didn't have to sell, so we decided to rent it out," he said."

The Windus' now rent in River, Ore. The couple moved there, in part, to stretch their retirement dollars and don't want to forsake the sizable chunk of equity they would lose if they sold during this current housing decline."

'"I don't want to let it go while the market's in the pit," referring to the recent glut of houses on the market and the slump in sales."

Saturday, January 20, 2007

Oversupplied & Overpriced in Sonoma County

Facts from the latest pressdemocrat. (PR service for the Sonoma County REIC)

In order to get to the facts at all it requred that all Realtwhore spin be deleted.

The very respectability of the paper is not just in serious question, but is non-existent due to the pathological quotes from real estate industry shills lying through their teeth trying to get the last of the Greater Fools to pay them a commission. Yet they put it in print and call it "news."

Also, as a courtesy to those who aren't dim-witted enough to rely on the PD for news, the ridiculous magical thinking and blatant lies have also been deleted. (such as time to sell, and blather about inventory tightening.)

* Sonoma County home prices fell again in December

* 2006 sales hit a 10-year low and prices dropped from record highs

* Prices have fallen six consecutive months in year-to-year comparisons

* Housing has been in a downturn since the median resale price peaked at $619,000 in August 2005, ending eight years of strong sales and record price gains.

* Sales tumbled because a growing number of buyers could no longer afford to purchase homes in Sonoma County.

* Homeowners increasingly are pulling houses off the market in response to slow sales, often after cutting prices and still not drawing offers.

* Total sales for 2006 were 25% lower than 2005. It was the region's lowest sales volume since 1996.

* 2006 monthly prices climbed from March through June before falling from July through December. The first time prices had declined for six consecutive months since fall 1993 and winter 1994.

* Economists have said that prices still had room to fall, particularly because cost increases for buying homes have far outpaced income growth.

"The housing market is oversupplied and overpriced, and with merely average personal income growth, prices have risen far beyond what the market can bear," Sean Maher, research economist with Moody's, wrote in a recent forecast for the Sonoma County Economic Development Board.

* Buyers remain cautious, reflected in the number of sales that fall through. In December, 27 percent of sales pending the end of November were not completed.

Good... when prices come down by the same percentage they have been overpriced, then it will be safe for buyers to return. Until then it is only the most foolish of the fools who are running in to catch a falling knife.

Sonoma County MLS: 2832
Price Reduced ( 958
Foreclosures (
7.9 months supply of homes on the market based on current monthly sales rates

Sonoma Valley MLS: 281
Price Reduced ( 113
Foreclosures ( 45

9.3 months supply of homes on the market based on current monthly sales rates

Sonoma Valley Foreclosures 01-20-07

Sonoma County, Assume the Position

"Sonoma County continued to lose both jobs and workers in December, wrapping up a paradoxical year that saw unemployment rates hover at historic lows in the face of a struggling economy."

"It was the eighth month in a row in which the county has registered lower numbers of jobs and workers than during the same period in 2005, according to figures from the state Employment Development Department."

The county registered 1,300 fewer jobs than it did a year ago in December.

The county has posted job losses of 2,000 to 2,900 a month every month since July.- -

'"The numbers are telling us there has been no real improvement," said Steve Cochrane, senior managing director at Moody's, which tracks the local economy."

"About 1,500 fewer people were employed or looking for work in December, compared to December 2005. These workers may have moved out of the county or quit looking for work, Cochrane said."

'"It seems like Sonoma County is experiencing an exodus of workers along with jobs. That's why the unemployment rate went down - you lost more workers than you lost jobs," said Eric Alexander, an analyst with the state's labor market division."

"Part of the problem is that some of the county's biggest players - wineries, tech companies and tourism - must engage in the global market, where competition is becoming fierce, overall, Sonoma County's economy still faces difficulty, Cochrane said."

'"Global competition is getting tougher and tougher. There's a whole new environment that wasn't there 10 years ago," Cochrane said."

"Sonoma County leads Bay Area home price drop. Home prices fell faster in Sonoma County than any other Bay Area county in December, according to a report Wednesday.

"Housing markets have come down from record highs across California. Some areas have been hit harder, including Sonoma County, with a weak economy and home prices that remain too expensive for many residents."

"Six of the state's 15 most-populous counties saw annual price declines. The biggest percentage drop occurred in San Diego County, where the median home price fell 6.4 percent from the year-ago period."

Sonoma County saw a 6.3 percent drop.

Home Market Hits Skids.

"The number of Bay Area homes sold in December was the lowest in a decade while home prices nudged slightly higher as the once red-hot market continues to cool, DataQuick Information Systems reported Wednesday."

"The slowdown is taking its toll on some homeowners. The number of homes in some stage of foreclosure in December continued to rise in the Bay Area compared with a year ago due to a slowing market and rising interest rates on adjustable-rate mortgages, according to a separate report released Wednesday by, an online foreclosure marketplace. The majority of the foreclosure proceedings involved homeowners who fell several months behind in payments." umm... what other reason would there be for foreclosure?

"Even without rising foreclosure rates, the number of homes for sale has been increasing. That's because buyers are in no rush to buy and many sellers are still pricing their homes as if they were still in the red-hot market of a couple years ago, observers said."

'"Prices remain relatively sticky. They have not fallen." said Chris Thornberg, a principal with Beacon Economics. People are loathe to realize a loss," he said. However, Thornberg expects prices will start falling slightly on a year-to-year basis as early as spring in response to a softening economy."

"Rising foreclosure rates could put more homes on the market for sale at discounted prices by lenders that take back homes, which could help fuel an overall decline in home prices, Thornberg said."

"The number of homes sold in December fell almost 20 percent from a year ago, in line with the size of declines of recent months. The drop extends a streak of monthly sales decreases dating back to April 2005."

"While many in the real estate industry say that the downturn in the housing market is over, Thornberg disagrees."

'"I'm hearing all this nonsense about a soft landing and rebounding in 2007, and that's just incorrect," he said. "It just doesn't work that way -- housing cycles when they pop take years to clear out of the system, not months."'

'"We're still in the middle of the housing-market correction, both in terms of price and volume," said Stephen Levy, director of Palo Alto's Center for the Continuing Study of the California Economy. "I still think we're nearer the beginning or the middle of a longer correction."'

"Brokers attributed the sales slowdown to sellers who set their prices too high and were unwilling to budge. Real estate experts said homes that are selling are those whose owners realize that the market has retreated from its highs of the past five years."

"As more sellers realize that they need to lower their asking price to attract buyers, the median home price is likely to fall further, according to Levy. New-home builders have been quicker to slash prices than individual home sellers."

"Santa Rosa fire investigators have zeroed in on the furnace as the source of a two-alarm blaze that gutted a Bennett Valley town house on Thursday. But it’s still unclear whether the furnace somehow malfunctioned or whether it might have ignited flammable materials that may have been placed nearby, Santa Rosa Fire Battalion Chief Mark Basque said this morning."

The investigation is continuing.

"A two-alarm fire in Larkfield on Tuesday night similarly started in the garage, but the cause of that blaze remains undetermined, Rincon Valley Fire Chief Doug Williams said this morning."

"The owner of the burned unit was identified by neighbors and friends as Ann Schooling, a local real estate agent. She already was at work when the fire was reported about 8:13 a.m."

Gloria Byrne, who lives across Lago Vista Way from Schooling, said her husband heard what sounded like gunshots, "pop, pop, pop."'

'"He looked outside and he said, 'Ann's house is on fire,'" Byrne said. "She spent so much money fixing her place up."'

"Schooling arrived home while firefighters were still working the fire and talked stoically with an investigator, dabbing at her eyes once or twice between taking hugs from neighbors. She declined interviews."

"The Lago Vista blaze brought out 39 firefighters as well as dozens of neighbors - many in bathrobes - who watched flames burn through the multilevel unit at the center of the complex Thursday morning."It's really scary," said resident Susan Styer, who lives down a short hill from the burned building in a separate row of housing."

"Neighbors described flames coming out the windows and roof and sweeping through the attic toward next-door neighbor Pat Angelo's home. An hour later, the view featured charred and sodden chunks of wall, insulation, hoses, pipes and other debris in Schooling's gutted garage and home, where occasional flames still flared and from which steam and smoke rose toward the sky."

"Angelo cringed as firefighters moved into her garage, moving storage units as they tore into part of the wall to check for signs of fire. She was at home and alerted to the fire by outside noises and a neighbor banging on her front door to get her out. As firefighters gained control, they eventually had to take down a second-floor wall at Angelo's place "because there was hidden fire up there skunking around."'

"Pacific Lumber Co., which for more than a century dominated the logging of North Coast redwoods, has filed for bankruptcy protection."

"The historic timber company, which owns vast stands of redwood in Humboldt County has announced plans to sell off 275 company-owned houses and commercial properties in the Humbolt County town of Scotia. Pacific Lumber has struggled for more than two decades to sustain profitable logging operations."

"The company, in filing for Chapter 11 bankruptcy protection, said it was unable to make a $27 million interest payment due today on more than $700 million in debt."

Sunday, January 14, 2007

The Zen of Fence Sitting

'"Eric Ford, 45, is a real estate agent's dream. He's got money socked away for a down payment, he has a good job in biotechnology and he's already qualified for a mortgage. For years, he was also working to turn all that into his first home. Conservative by nature, and somewhat traumatized by the overbidding, multiple offers and iffy mortgages of the past few years, and confident that home prices will continue to drop, Ford has decided to wait."'

'"I kept reading about the market not necessarily being a bubble but that the housing market was seeing the biggest run-up in the past several years," he said. "I don't like to buy at the high point. I'm not a big jump-on-the-bandwagon guy. I knew what was going on, that people were getting out of the stock market and getting into real estate, that the interest rates were low and that tax consequences had changed. There was a lot of speculation. And I expected the housing market to start going down at some point."'

"So when the market started to change last year, Ford stopped looking in earnest and is now waiting to see what the market will do in the next six months. He is what agents call a fence-sitter, a brand of home buyer that has proliferated in direct proportion to the slowing of the market."

'"A lot of people are chit-chatting with friends and the general consensus is that they should wait," said Mary Ellen Dudum of the Alain Pinel office in Walnut Creek. "I'd say maybe as many as 40 percent of buyers are waiting right now."

"Dudum, like many in the business, is doing everything she can to encourage people to buy now. Many worry that media reports and word of mouth will cause more people to wait."

"Dudum is helping her brother buy his first house, and said she has teased her brother when he hedges toward waiting."

'"He told me, 'My friends say I should wait,' " she recalled. "I asked, 'Who are these people? Other people who are renting? Get on the bandwagon!' '''

'"Home buyers who think they can just sit there (on the sidelines) and control the market completely, they're losing out on something," said John Gieseker of Prudential California Realty and outgoing president of the San Mateo Association of Realtors."

"Still, fence-sitting is common, and the reasons for waiting are as unique as the people doing it."

"Ford thinks of his waiting as a cleansing of the palate -- a chance to stay out of the market at a time when he expects record foreclosures on people with mortgages that were unsustainable to begin with."

"Serafina Palandech found the house of her dreams in 2005. But she lost the house to someone who paid $75,000 over asking. Heartbroken, Palandech got caught in the market frenzy and started looking at condos -- not what she wanted, but she'd take whatever she could get, she said. Then, she went away for a few months for work. And when she came back the market had changed."

'"It became clear really rapidly how weird the market had gotten," she said. "In April, we would see these houses on the same block, one listed for $850,000 and another listed for $620,000. It didn't make any sense why one house would be so much more expensive than another in the same neighborhood and with the same bedroom count. I felt like, 'What's going on? Something doesn't make sense.' "'

"Then, interest rates changed. Suddenly, the interest-only adjustable-rate mortgage for which she'd qualified became "ridiculous" and unaffordable. She heaved a sigh of relief that she'd dodged that financial bullet."

'"I got caught up in the panic of having to get a house before they were all gone. Now it's more of a buyer's market and I feel more in control of the situation. Now I hope to buy a home and not settle for something that, like, doesn't have a roof."'

"She'll continue watching the market, but she's not going to get caught in the frenzy again, she said. "Thank god I didn't buy something I didn't really want," she says with a sigh."

"Freddie Niem is in an enviable position. Niem lives with his partner, John Minnett, in a loft in San Francisco's trendy SoMa district. The building, built in 2001, was designed by noted architect Stanley Saitowitz. The loft has appreciated from $450,000 to $700,000 since Niem bought it in 2002. After moving in, he realized that the downtown, high-tech neighborhood wasn't right for him."

"Still, after looking with an agent for a single-family home last year, Niem is again on the sidelines, figuring he'll wait another three years to buy again. He's waiting, he says, because he "doesn't trust the kind of market build-up" that's marked the past several years."

'"They say San Francisco is an area where prices never go down, they always go up, but I've seen with my own eyes how sales in our own building have gone down," he said. "Prices went up because people kept bidding, bidding, bidding. It's not like the value itself went up. It's just bidding."'

"Then, after his home being appraised for $700,000 in summer, its value dropped to $649,000 this year. That doesn't seem right to Niem, and he's suspicious. Even though he's benefited from his property increasing in value, he calls the quick and meteoric increase "insane."'

'"I think San Francisco is drawn too high, way too high," he said. "They're out of their minds. If you see a loft increase in value that much in just a few years, it's not because the property itself has increased that much in value. I'll wait for it to go down again." "I want to see how low the prices can drop," he said."

"It's the expected drop in home prices that has Tom Hehir, 47 hopeful. If prices fall the way he expects them to, he's expecting to see record foreclosures. One of those, he's sure, is the Sunset bungalow that he and his partner see in their dreams. Hehir can see it now: A small place, nothing fancy, but in the area near where Hehir grew up so the couple can keep up their regular beach walks."

"Still, Hehir knows that being able to achieve his goal will depend on the misfortune of people who bought in the boom with exotic loans that have become unmanageable. He doesn't wish foreclosure on anyone, but should it happen, he wants to be prepared."

'"It's unfortunate, but something drastically needs to happen to the real estate market in order for many of us to buy. And I think it's happening because of these funky loans."'

Q: "Like many renters in the Bay Area, I thought the rise in home prices in recent years meant that I would never be able to buy. But now that prices are declining, there seem to be a huge number of houses on the market, and sales even at reduced prices are sluggish or non-existent. Is this the time to buy?"

A: "I wouldn't dare offer a one-word answer to that question. However, it appears that the real estate bubble could lose more air."

"In many Bay Area communities, prices have fallen to where they were nearly two years ago. However, to get back down to the long-term trend line, they would need to fall considerably more, perhaps as much as 10 or 15 percent."

"I wouldn't push anyone to buy at current levels. If you buy a house with a 20 percent down payment, and the house's market value then falls 10 percent, you will lose half your investment. That's comparable to what happened when the stock bubble burst in 2000-02."

"Many sellers seem to be in denial, pricing their houses as though the market were still at the top. They remind me of the Nasdaq diehards who refused to believe that their market was collapsing, and stuck with Cisco Systems stock all the way from $80 to $9."

Additional Free Advice from Sonoma Housing Bubble: People who will make money if you buy a house are not the experts you should be consulting before signing up for the indentured servitude pyramid scam that is our housing bubble.

Tuesday, January 09, 2007

2007 Real Estate Blogging Awards!

Last Day to Vote... Voting Ends 1/10/07

Sonoma Housing Bubble has been nominated for a Real Estate Blogging Award by
Category: Best Regional Blog
Recognizes the best real estate blog focused on a local or regional real estate market.

Burbed / Bay Area region, CA
Northern Virginia Real Estate Guide / Northern Virginia region, VA
Sacramento Land(ing) / Sacramento, CA
Sonoma Housing Bubble / Sonoma region, CA
Vancouver Housing Market Blog / Vancouver, Canada


Please cast your vote.

Monday, January 08, 2007

Lead Me Not Into Temptation...

But I Couldn't Resist....How could I not post this?

Behold, a new craig's list advertisement for a house in the lovely, sophisticated Sonoma Valley.

$650000 rock bottom price beutiful customhome + apt detached (sonoma)

Date: 2007-01-07, 8:30PM PST

3 bd 2 1/2 bath plus detached 1br 1 bath apt nice naborhood droped price 250,000 must see to believe all new from foundation up rebuilt hole house to 2006 codes new everything

715 boyes blvd at arnold

Sunday, January 07, 2007

Real Estate Brings Real Pain

Thanks to Speculative Bubble for finding this great article in the

"The housing industry has been held out in the past two years as the economic landing gear stabilizing the nation for a soft landing. But now with its fortunes so changed, many are asking whether the spongy real estate market will drag the economy into recession."

'"We've had an unprecedented run-up in home prices, on the order of 30 percent in recent years," said Economist, Dean Baker, who fully expects the real estate market to give that gain back. He says it's the result of the same kind of "irrational exuberance" that former Federal Reserve Chairman Alan Greenspan cited with the stock market during the heady days of the late 1990s."

"Robert Reich, a former Clinton administration Cabinet member and a professor at the University of California at Berkeley, has been warning all year about a general slowdown caused by the waning housing market. The two biggest sectors of the economy in terms of their impact on jobs and suppliers are the housing and automobile industry."

"Both these sectors are in deep trouble right now," Reich said. "Detroit is awash in unsold inventories. The housing bubble is bursting. If more job losses result, as I expect they will, the problems of these two sectors will spread throughout the economy because consumers won't have the dollars they need to buy everything the economy is producing."

As of the end of 2006 Real Estate accounted for 13% of the jobs in Sonoma County. 40% increase from 5 years ago. During the last 5 years tech and manufacturing were losing jobs. We are still below the number of jobs in 2001 and the non- real estate related jobs we have gained have been lower paying mostly service sector jobs.

With the Housing Market in the toilet and the housing industry accounting for the only measly blip on Sonoma County's job scene, how do you think we will fare when all the gains of the housing bubble are given back?

"Consumers have pulled out an enormous amount of equity from their homes and spent it. That has been a serious boost during the past few years because such a huge portion of the economy is driven by consumer spending, Baker said."

"About $800 billion in equity was taken out of the housing sector by consumers in 2005. This year I expect it'll be about $500 billion, and in 2007 it'll be between $200 (billion) and $300 billion," he predicted.

"As housing-related cash dries up, so does the overall economy. Baker terms it "a significant drop" in economic liquidity."If we go into recession, it'll be because of housing."'

* Employment peaked in Sonoma County in 2001 at the end of the tech boom when the county had 196,700 payroll jobs.

* By 2003, the economic downturn had wiped out 7,600 of those jobs. (we were already in a recession in 2003, yet the housing bubble continued to boil with greater fools still rushing in, and the surge in exotic financing due to the unaffordability of prices is proof in the pudding)

Percentage of Sonoma County homes financed with risky loans
(Interest Only, ARMs, Negative Amortizing Loans)
2003 - 36.8%
2004 - 59.4%
2005 - 69%

* Through 2005, only 2,400 jobs had returned.
"Real estate built up an outsized role in the region's economy during an eight-year housing boom. Housing-related jobs now account for 13 percent of employment in Sonoma County, and soaring prices boosted equity that bolstered consumer spending."

*By October 2006 the county lost 3,100 jobs
"Plunging sales led to construction layoffs and job losses in real estate, financing and other housing related areas. "What growth there was ended unexpectedly in May, the first of seven consecutive months the county had fewer jobs than a year earlier. More could follow, economists warn."

"A correction in the U.S. real estate market is under way, says a recent report from UBS, one of the world's largest financial firms.That observation was confirmed by the Office of Federal Housing Enterprise Oversight, which noted a "national deceleration in house prices."'

"Even the Federal Reserve's "Beige Book" report has a fairly grim assessment of the housing market, analysts say."

"Paul Kasriel, Northern Trust's chief economist, thinks that because housing played such an important role in keeping the economy chugging during the last two years, if it is responsible for a recession, that downturn could be particularly severe."

"Kasriel refers to a fairly simple formula: take the dollar value of new and existing single-family homes in 2005 and divide it by the nation's gross domestic product, the total of all goods and services produced in one year. That gives you a ratio of 16.3 percent."

'"That's off the scale," Kasriel said. "The ratio has never been that high. The median is 8.4 percent and the previous high, of less than 12 percent, was in the late 1970s."'

"Real estate prices have been dropping faster than ever before. The National Association of Realtors said last month that the median price in October for existing homes fell to $221,000 nationally, down a steep 3.5 percent from October 2005."

'"That's the largest decline on record since 1968, and the speed of the decline has been breathtaking," Kasriel said. "It's just like a straight line down."'

December 2006
Sonoma County median price fell almost -8 percent.

"OFHEO Director James B. Lockhart said that U.S. house prices are growing at less than 1 percent during the third quarter, providing "more evidence that the long-forecasted national deceleration in house prices is occurring."'

"We do not expect the U.S. economy to pick up again until the fourth quarter of 2007."

Although rates are now still low, "they could easily spike upward again," Reich said, adding that Federal Reserve chairman Ben Bernanke and his policymakers should be seriously considering a rate cut. "That Bernanke and company are still muttering about inflation is itself very worrying."

"Kasriel, the Northern Trust economist, notes that short-term interest rates are higher than long-term interest rates. That is known as an inverted yield curve in financial circles, and is a historically accurate indicator of economic downturns."

Smells Like Trouble...

I was listening to some Sunday afternoon gossip today while checking out open houses in the valley. A couple properties were amateurs who jumped into "flipping" and are now in a lot of pain with vacant houses and multiple mortgages. Right here in Sonoma.

Three other houses were folks who "upgraded" before selling their previous house, and badda-bing it was like a memo just went out and overnight the market changed and now nobody wants to bail them out and hold their bag for them. They are now paying two mortgages every month. Another story was kind of sad if you really stop to think about the loss ramifications of their kind of thinking.

A couple bought one of those built in the 1940's can't lose, real estate only goes up, sure thing, everyone wants to live on the East side of Sonoma houses. They went in for cosmetic fix-it up touches, did a lot of work themselves and slapped a million dollar price tag on it to sell ($1,379,000). They were sure a bucket of money was in the bag.

This house is a repeat offender on the Price Reduced list. 3bd/2.5 bath & 1800 sq. ft.
The latest listing information has it on the market for 219 days and going through 5 price reductions.

The current owners caught a fast falling knife as the market was tanking and paid $1,025,000 in January of 2006. The previous sale of this house was: 1991 for $330,000

Starting price: $1,379,000
Current price: $1,150,000
Total Reduction: $229,000

Zillow says: $996,387

This house has appreciated: 340.8% in the last 10 years. Does that sound reasonable to you? Give me one good reason why a reasonable person would believe this.

Conditions in Sonoma County in January of 2006: (news that was available to the general public if they had been inclined to put down the "you can't lose kool-aid")

Sales had declined -23.2% yoy
Median was up 14.8% (probably BECAUSE of their purchase of this house.)
January was also the fourth month in a row that sales were off by double digits year-over-year. The total sales for January 2006 was the lowest number since 1998.


Maybe it is time to check in and see just where we are in the stage of the bust?

"Can It Happen Again?" -- a book about Booms and Busts was written in 1982 by Nobel Laureate Hyman Minsky. In this book, he described the seven stages of a financial bubble. (commentary below by the controversial Robert Kiyosaki emphasis in green is mine)

Stage 1: A financial shock wave
"A crisis begins when a financial disturbance alters the current economic status quo. It could be a war, low interest rates, or new technology, as was the case in the dot-com boom."

Stage 2: Acceleration
"Not all financial shocks turn into booms. What's required is fuel to get the fire going. After 9/11, I believe the fuel in the real estate market was a panic as the stock market crashed and interest rates fell. Billions of dollars flooded into the system from banks and the stock market, and the biggest real estate boom in history took place."

Stage 3: Euphoria
"We have all missed booms. A wise investor knows to wait for the next boom, rather than jump in if they've missed the current one. But when acceleration turns to euphoria, the greater fools rush in."

"By 2003, every fool was getting into real estate. The checkout girl at my local supermarket handed me her newly printed real estate agent business card."

"The housing market became the hot topic for discussion at parties. "Flipping" became the buzzword at PTA meetings. Homes became ATM machines as credit-card debtors took long-term loans to pay off short-term debt."

"Mortgage companies advertised repeatedly, wooing people to borrow more money. Financial planners, tired of explaining to their clients why their retirement plans had lost money, jumped ship to become mortgage brokers. During this euphoric period, amateurs believed they were real estate geniuses. They would tell anyone who would listen about how much money they had made and how smart they were."

Stage 4: Financial distress
"Insiders sell to outsiders. The greater fools are now streaming into the trap. The last fools are the ones who stood on the sidelines for years, watching the prices go up, terrified of jumping in. Finally, the euphoria and stories of friends and neighbors making a killing in the market gets to them. The latecomers, skeptics, amateurs, and the timid are finally overcome by greed and rush into the trap, cash in hand."

I think ALL of 2006 we were in the beginning of Stage 4. We are now entering the second half below...

"It's not long before reality and distress sets in. The greater fools realize that they're in trouble. Terror sets in, and they begin to sell. They begin to hate the asset they once loved, regardless of whether it's a stock, bond, mutual fund, real estate, or precious metals."

Stage 5: The market reverses, and the boom turns into a bust
"The amateurs begin to realize that prices don't always go up. They may notice that the professionals have sold and are no longer buying. Buyers turn into sellers, and prices begin to drop, causing banks to tighten up."

"Minsky refers to this period as "discredit." My rich dad said, "This is when God reminds you that you're not as smart as you thought you were." The easy money is gone, and losses start to accelerate. In real estate, the greater fool realizes he owes more on his property than it's worth. He's upside down financially."

Stage 6: The panic begins
"Amateurs now hate their asset. They start to dump it as prices fall and banks stop lending. The panic accelerates. The boom is now officially a bust. At this time, controls might be installed to slow the fall, as is often the case with the stock market. If the tumble continues, people begin looking for a lender of last resort to save us all. Often, this is the central bank.
The good news is that at this stage, the professional investors wake up from their slumber and get excited again. They're like a hibernating bear waking after a long sleep and finding a row of garbage cans, filled with expensive food and champagne from the party the night before, positioned right outside their den."

Stage 7: The White Knight rides in
"Occasionally, the bust really explodes, and the government must step in -- as it did in the 1990s after the last real estate bust when it set up an agency known as the Resolution Trust Corporation, often referred to as the RTC. As it often seems, when the government does anything, incompetence is at its peak. The RTC began selling billions of dollars of unbelievable real estate for pennies on the dollar. These government bureaucrats had no idea what real estate is worth."

"In 1991, my wife Kim and I moved to Phoenix, Ariz., and began buying all the properties we could. Not only did the government not want anything to do with real estate, amateur investors and the greater fools hated real estate and wanted out. People were actually calling us and offering to pay us money to take their property off their hands. Kim and I made so much money during this period of time we were able to retire by 1994."

"This is why I say, "I love market crashes."'

Sonoma County on the Edge of Recession

A glimpse into the 2007 outlook for Sonoma County's Economy and Housing Market.

"Sonoma County's economy was one of the weakest in the Bay Area heading into 2007, and housing has dropped sharper than almost anywhere else in the nine-county region."

"Homeowners and builders still face challenges making sales, given both the oversupply of homes and poor job growth, said Chris Peterson, co-owner of Santa Rosa builder Rivendale Homes. Many homes remain too expensive relative to incomes in Sonoma County and a glut of housing is still for sale."

"Housing remains a troubling question mark that will influence the direction of the region's economy."

"The Sonoma County outlook contrasts with the "soft landing" predicted for the California and U.S. economies last month by the UCLA Anderson Forecast."

"The region's economy has deteriorated over the last six months and is showing signs of vulnerability, according to the outlook prepared for The Press Democrat by the Center for Regional Economic Analysis at Sonoma State University."

"Sonoma County is teetering on the brink of a mild recession this year, as job losses and the housing slump weaken the region's economy, according to a new forecast."

"Economists who track the county's economy differ on the probability for recession, but agree the odds are greater than a year ago."

'"The chances are high, certainly over 50 percent," Robert Eyler, who prepared the SSU forecast said. "The housing market slowdown is coming at the same time as a normal business cycle downturn. That's why a recession should take place."'

'"The local economy has been a mixed bag the last few years. It's not growing as fast as it needs to be," Eyler said."

"What growth there was ended unexpectedly in May, the first of seven consecutive months the county had fewer jobs than a year earlier."

"Steve Cochrane, research economist with Moody's, said there is at least a 25 percent chance the economy could dip into a recession."

'"There were a number of large-scale layoffs that we weren't expecting among these tech-based businesses. Even the food and winemaking industry wasn't hiring much," Cochrane said."

"Real estate built up an outsized role in the region's economy during an eight-year housing boom. Housing-related jobs now account for 13 percent of employment in Sonoma County, and soaring prices boosted equity that bolstered consumer spending."

"Plunging sales led to construction layoffs and job losses in real estate, financing and other housing related areas. More could follow, economists warn."

"Housing's surge ebbed in 2005, when the county's median resale home price hit a record $619,000. Then high prices and rising mortgage loan interest rates made homes even less affordable in a region where families already found purchasing houses difficult."

"The price for a typical county home has fallen to $565,000 and may not have hit bottom. Falling prices leave homeowners with less equity to tap for buying cars, home improvements and other spending."

'"All the forces are now ganged up," Eyler said of the chance for a recession."

"Housing's recovery is farther off and continues to pose some peril for the county's economy."That is one of the risks in this coming year," Cochrane said."

"The housing market likely will remain weak into 2008, the economists said."

Hot or Not? -Chicago-based real estate broker Mark Nash, author of "1,001 Tips for Buying and Selling a Home," polled 5,000 real estate agents from around the country for what features turn For Sale signs into SOLD signs?

He found answers to such questions as:
"Will those gleaming stainless appliances help sell your home? How about that spiral staircase?"

"The results: Some old favorites, such as spiral staircases, are definitely out, the agents said. Spiral staircases are a fad whose time has passed, according to the survey and many local real estate agents."

"Now they are a distinct turnoff for baby boomers who make up much of the market for urban condominiums, because they find them hard to climb and descend. They also make it hard to shift furniture from room to room."

"Things that were hot just a few years ago -- are starting to feel dated, or are actually inciting a negative backlash at least among some buyers."

"...bamboo, with its variegated honey tones and unique grain patterns -- is losing popularity. The problem? They just aren't as durable as some other kinds of floors."

'"People see them as a wonderful new thing, but their day-to-day utility is less than hardwood," Fairweather said. "They're not as sturdy, they're much softer than hardwoods, and if you're raising children, they're not so good."'

"Ginger Harden, a real estate agent with the Bryan Group in Vienna, said a buyer who was purchasing an almost-new condo in Reston loved the beautiful bamboo floors. When the transaction closed and the seller's furniture was removed, though, it became apparent that the flooring had faded with exposure to the sun."

'"You could see where every piece of furniture had been," Harden said. "It was a negative to my buyer. . . ."'

"Stainless steel appliances, for example, now draw criticism because some models are hard to keep smudge-free."

"Stainless steel kitchen appliances, not too long ago a must for any kitchen that wanted to be considered luxe, are beginning to get mixed reviews. The real estate agents gave them a thumbs-down, saying that many buyers were irritated by the need to wipe down the steel all the time to conceal fingerprints."

"I'm hearing people say, 'I'm tired of it,' " Nash said. "They say: 'I don't have time to polish it. I have kids. I have dogs. It's too high maintenance.' "

"Glass-front cabinets lose their appeal to some neatness-challenged homeowners who have trouble keeping their dishes arrayed in tidy rows."

"Vessel-style sinks, the sleek bowl-shaped, above-counter bathroom sinks, are still a popular "wow" feature with some buyers, but some real estate agents say they are falling from fashion because they, too, are hard to keep clean."'

'"These fancy sinks are great, wonderful, but when it comes to utility, where do you put the toilet paper and the things you don't want people to see?," said Mark Gude, an agent with Continental Properties in Northwest Washington, who specializes in the D.C. market. "Bowl sinks are on the way out. Shaving in them is not fun -- the gunk, the soap scum, gets everywhere."'

"Knowing what is really hot, vs. what used to be hot but has gone cold, is key to understanding the real estate market today, real estate agents say. Although the inventory of unsold homes has dropped from its summer highs, the National Association of Realtors recently reported that there are 3.82 million existing homes for sale in the country, more than double the number on the market in early 2001, before the real estate boom began."

Saturday, January 06, 2007

Builders Still Dreaming...

Sonoma County reported 1,895 new homes were built in the first 11 months of 2006, down 30 percent from the same period in 2005.

"Because there's excess inventory, there are still significant concessions," he said. "We expect that will drop considerably later in the year. In other words, now is a great time to buy," said Alan Nevin, an economist for the home builder's trade group."

"Prices will remain soft or stable throughout most of California. The state's strong economy, job growth and low interest rates will keep demand steady, he said."

Sonoma County MLS: 2777

Sonoma County Price Reduced: 1004

Looks to me like it is raining knives and a whole lot of FBs are following the market down. Kind of like Sonoma County's version of Mr. Toad's Wild Ride for bagholders. NOT a great time to buy, though Mr. Nevin, who is a paid shill for the industry would have you believe otherwise.

In the words of Graspeer, a poster at Ben's Place:

"When has the Real Estate industry ever said it was not the best time to buy
a house? Prices go up, buy a house, prices go down buy a house, if you already
have a house buy a second house. Spring is the best time to buy a house, unless
its Summer, or Winter or Fall and then is the time to buy a house. Good credit,
Bad Credit, No Credit, its always a good time to buy a house. If you are young
its time to buy a house, if you are old its time to buy a house, if you are
middle aged its time to buy two houses. If you have a job its time to buy a
house, if you don’t have a job its time to buy a house..."

Mr. Nevin might want to look at the reality of Sonoma County's job growth and economy. Here is a dose of reality.

"It seems like Sonoma County is one of the weakest economies in the Bay Area. There's hardly any job growth to speak of. That's essentially the basic building block of the economy," Steve Cochrane, an analyst with Moody's said."

"Home prices fell more sharply in Sonoma County last month than anywhere else in the Bay Area, except Solano County."

"Steve Cochrane, who tracks Sonoma County's economy, said he wasn't surprised by Sonoma County's drop."

'"I've always felt the Sonoma County housing market was at fairly considerable risk," he said."

* Employment peaked in Sonoma County in 2001 at the end of the tech boom when the county had 196,700 payroll jobs.

* By 2003, the economic downturn had wiped out 7,600 of those jobs.

* Through 2005, only 2,400 had returned.

*By October 2006 The county has lost 3,100 jobs

Here is a little bit more this time from Christopher Thornberg.

"This year is predicted to be a bad one for those either looking to buy or sell a home in California. Construction, sales and prices will keep plunging, according to Chris Thornberg of Beacon Economics."

'"I am extremely negative about 2007," Thornberg said. "I see foreclosures going up in 2007. I think prices are definitely not going to bottom out. I think prices will continue to go down slowly."

'"In fact, Thornberg sees the entire California economy for 2007 in a negative light. When asked why, he said "the state is in a completely unsustainable situation."

'“Consumers cannot continue to spend more than they earn," he said."Thornberg said those in the most trouble are newer home owners whose mortgages will re-set this year. The higher interest rates will mean larger monthly payments for many borrowers."

'"There are a lot of people out there who are in trouble, who were promised that real estate could be a no-lose investment."'

By 2005 it was estimated only 7% of Sonoma County residents could afford a median priced home. Job growth and a strong economy were not behind the Sonoma Housing Bubble.

It was pure greed inspired speculation, and people believing they were rich with home equity they could tap and spend forever and ever, because real estate only goes up. Debt = Wealth.

The only thing behind ridiculous pricing and frenzied buying and selling was a mass of fools with an overinflated sense of entitlement. The mantra by mortgage holders and their sycophantic real estate agents and mortgage lenders was that they were special. Sonoma is special. We are the new Sausalito. Everyone wants to live here.

Hmmm... notice that jobs were being wiped out while the housing bubble cauldron boiled... and risky mortgages became all the rage.

Percentage of Sonoma County home buyers choosing exotic financing
(Interest Only, ARMs, Negative Amortizing Loans)
2003 36.8%
2004 59.4%
2005 69%

Let's review: YOY datapoints from

January 2006
Sales -23.2% yoy

Median was up 14.8%

January was also the fourth month in a row that sales were off by double digits year-over-year. The total sales for January 2006 was the lowest number since 1998.

February 2006
Sales -16.3% yoy
Median price up 0.9%

March 2006
Sales -14.5% yoy
Condos were down -34.8% year-over-year.
Median price was up 0.8%

April 2006
Sales -24.6% yoy
Condo sales fell -32.1% year-over-year.
Median price was up 0.9% and was reportedly the third month in a row yoy appreciation was less than 1%.

May 2006
Sales -29.4% yoy
condo sales down -42.1% yoy.
The median price was up 1.8% yoy.

June 2006
Sales -38.1% yoy

Median was up 1.6% year-over-year and was reported to be the fourth month in a row annual appreciation has been less than 2%.

July 2006
Sales -40% yoy
Median was down 2.9% year-over-year

August 2006
Sales -22.7% yoy
The median price was 7% lower year-over-year.

September 2006
Sales -40.1% yoy
Median price -7.3% yoy

Median price fell for the third month in a row.

Except they way worded it was: "it was the third month in a row year-over-year appreciation has been negative."

I have a fundamental problem with this... to say appreciation has been negative implies that yoy appreciation exists in some solid form though just inverted. Appreciation means increase of value.

If prices are falling, you have depreciation. Loss of value. Therefore appreciation does not exist. As in, did you hear that FBs? Appreciation isn't an entitlement. It isn't a solid assumption you can count on like some sort of gumby number on a graph.

(by the way, aren't May, June, July, August, September supposed to be PRIME time for buying and selling real estate? oops... no bubble here.)

October 2006
Sales October's report is nowhere to be found on the site. The reports go from September's numbers to November numbers. What does THAT suggest? Possibly too much carnage in October to report?

November 2006
Sales -28.8%
Median -5.7% yoy

December 2006?
Sonoma County home sales dropped about -27 percent YOY
median prices falling almost -8 percent.

Wednesday, January 03, 2007

Welcome to the Internet Sonoma!

Looks like Sonoma is slowly waking up to the internet. There aren't a lot of listings yet. The newspaper appears to be the main medium still, but those trying to sell and rent properties are starting to use sites like Craig's List to attract Greater Fools and renters.

One thing they haven't come to terms with is that the buyer/renter are the ones with the money they want- and they aren't yet thinking like the buyers/renters in order to attract that money. Smells to me like most of the for sale and for rent ads are still being written by those sipping the "everyone wants to live here" kool-aid. Reality check just up ahead....

Montini development is looking to recruit First Time Greater Fools aspiring to be FBs. From the looks of the listing they have an "income restricted" property they are now hawking online. (no picture of course. Why would they need a picture? Of course the potential buyer would know how lucky they are to even be viewing an ad on craigslist and of course they already want to live here, so no picture is necessary)

Brand New
2/2 near downtown Sonoma (sonoma)
This is an unbeatable opportunity for a first time homebuyer. This is a
brand new 2 bedroom 1.5 bathroom single family residential home in a new
subdivision in Sonoma. Only 5 blocks from the Square! This is for first time
homebuyers only. Certain income restrictions apply. This is the last Below
Market Rate (BMR) home available in a new subdivision. Call today to find out

last below market rate home? Do a little math... what income would a person need to have in order to qualify for traditional financing + 20% down and payments + taxes totaling no more than 33% of the buyer's income? Then maybe one of our reader/researchers can give Montini a jingle and find out just what that income requirement is to buy this place. (please post the income requirements in the comments) ;-)

This next one hasn't woken up from having bubble dreams yet... (no picture... you all know why pictures are not necessary.)

Huge Price
$615000 Custom Built Four Bedrooms 2.5

New Home on a very quite street behind the Sonoma Mission
Inn. Custom tile work in all baths and kitchen. All new stainless steel
appliances. Low maintenance level lot. One car attached garage. House appraised
in June for $655000. Buy at the low end of the market as prices will go up.
(bwahahahahaha!!!!!) Good grief- this one is in an area where they should be offering the buyer money to even consider living there! Huge Price Reduction!!! (bwahahahahaha) Prices will go up! (bwahahahahaha) Buy at the low end of the market!!! (bwahahahahaha) Oh honey, the bottom is so far down you can't even see it yet. 5-10% reductions are nothing but piss in the rain. Heck, even 15-20% reductions off specuvestor bubblemania prices should be printed out and used as toilet paper.

Take in these numbers:

Average Price of Sonoma Valley Home w/% increases YOY
1998 $323,199 ---
1999 $363,568 12.5%
2000 $466,036 28.2%
2001 $567,809 21.8%
2002 $521,079 -8.2%
2003 $624,404 19.8%
2004 $705,801 13.0%
2005 $884,407 25.3%

Median Price of Sonoma Valley Home w/% increases YOY
1998 $250,000 ---
1999 $283,500 13.4%
2000 $345,000 21.7%
2001 $410,000 18.8%
2002 $440,000 7.3%
2003 $510,000 15.9%
2004 $583,000 14.3%
2005 $679,000 16.5%

Keep in mind that historically Real Estate increases 1-2% above inflation. 1998-2000 the gains were due to the tech boom and the many telecom equipment companies that relocated to Sonoma County and brought with them employees that had sold houses in the greater Bay Area that were priced well above the average and median prices in Sonoma County.

Houses in Silicon Valley and SF were worth more because they both are economic hubs, centers of excellence for high paying industries. Their population is more diverse and their median houshold incomes are higher than that of Sonoma County: $53,076. Average wage per job in Sonoma County: $36596. Median income in Silicon Valley: $81,717. San Francisco Average annual household income: $93,900.

There is a wives tale that in Sonoma County we have a LOT of commuters with good jobs in SF and Silicon Valley... guess what? If it were true that there were A LOT it would be reflective in our average household income.

Look Again:

SF Average: $93,900
Silicon Valley Median: $81,717 (average wasn't listed)
Sonoma County Median: $53,076 with the average wage per job being $36,596

Look at the Industries providing employment in Sonoma County:
Educational,health and social services (18.6%),
Manufacturing (12.7%),
Retail trade (11.9%),
Professional,scientific,management,administrative,and waste management services (10.8%)

Where are those high paying jobs?

These years of extraordinary property value appreciation are NOT based on real economic gains or fundamentals. Incomes did not grow, industries have not taken root here and paying the population more. The increase in appreciation was a temporary reflection of the short lived dip into the technology game and pure mania fueled by Flippers, Speculators and Wannabes who are stuck on stupid and believed Debt = Wealth.

In the late 90s Sonoma County was the beneficiary of a temporary influx of new residents that were house rich from selling houses with significantly more value due to their proximity to better jobs and a population that makes more money.

Then the tech boom came to an explosive end and many of those tech companies laid off thousands of employees. Many of those not laid off were relocated to corporate centers or cheaper hubs, and thousands of jobs were outsourced to India. The technology workers that were laid off moved, or commute into tech hubs. There are some residents with high paying jobs that live here, but not a LOT.

* Employment peaked in Sonoma County in 2001 at the end of the tech boom when the county had 196,700 payroll jobs.

* By 2003, the economic downturn had wiped out 7,600 of those jobs, based on average annual employment.

* Through 2005, only 2,400 had returned.

*By October 2006 The county has lost 3,100 jobs

* The Press Democrat study found that 58 percent of the new jobs created between 2003 and 2005 paid below the average wage.

* It is estimated that 60% of the new jobs added between 2001 and 2003 were lower-paying service jobs that are below the county’s average wage.

* 58% of new jobs between 2003 and 2005 paid below the average wage.

Percentage of Sonoma County home buyers choosing exotic financing (Interest Only, ARMs, Negative Amortizing Loans)

2003 - 36.8%
2004 - 59.4%
2005 - 69%

Anyone want to SWAG the 2006 number? My SWAG = 81%

The rest of the record appreciation in home values were due to Alan Greenspan trying to keep the tech bubble crapping the bed from stinking up the economy as a whole.

The Fed injected a major cash infusion by bottoming out interest rates and the Banks zeroing out lending standards to allow for anyone who could fog a mirror to get a lifetime of debt. Poof, big helicopter drops of cash, and the risk is moved off the central banks and onto the backs of the greatest fools who will be the biggest bag holders of this crash. This time the Piper is calling to be paid. What goes up that is not sustainable must come down. Look out below because we will see a reversion to the mean. Soon we will start paying for the past

This one has been on previous price reduced lists...Looks like its been a real goldmine for this builder (sarcasm off)

$650000 investors goldmine (sonoma)
compleatly restored 3bd 21/2 bath + 1 bd 1 bath everything new from ground up on restored house only thing left roughcut redwood fraiming and oak floors this is a well
built home 1 blk from golf granny or rental detached deck fountain whirlpool tub
owner willing to nogotiate any changes that might help the house suit the buyer
715 boyes blvd at arnold

(from 4/2006 price reduced list)
715 BOYES BLVD, Sonoma, CA 95476
Price Reduced: 11/14/05 -- $879,000 to $849,000
Price Reduced: 02/08/06 -- $849,000 to $799,000
Days on Market: 224
Total Reduction: 80k round about 9.1%
Sale History 01/26/2001: $200,000
this one was relisted at $799,000 on 03/06/06 trying to make it look like it too hasn't been sitting...

$725000 NOT on MLS (sonoma)
This beauty is near the Historic Plaza in beautiful Sonoma, CA--but it's not on MLS. You can go to my website ...

Not on MLS? So how many do you suppose are being kept off the MLS in order to give the illusion that the number of houses for sale are pretty darn close to the same number that sold last year? I know that there are listings where they are indeed for sale but not bearing the scourge of the For Sale sign in the yard. Seems clear to me that anyone who doesn't do enough research to see the reality of the unreal estate market in Sonoma truly deserves the tile of Greater Fool and should get a t-shirt at the closing of their albatross with windows.

The For Rent story looks like it may get interesting real soon. Due to the predictable phenomenon of bagholders following the market down and not being able to find a buyer for their overpriced chitbox they have started to turn to renting.

From reading the ads on Craig's list and doing a little research seems Sonoma is not pet friendly. Some stating emphatically, "ABSOLUTELY NO PETS!!!" There seems to be a little schizophrenia in terms of move-in requirements as well. Some demand that only those with excellent credit need apply and you must pay for the pleasure of having Joe Sixpack ding your credit report with an inquiry. Though there are some that say: "Move in today! No credit check, no references needed!"

The rental market looks to be divided into a few buckets:
1. long time rental properties -most of which have not been updated at all in the last 20-30 years. Similar characteristics are the shabby exteriors, shabby interiors, and only the bare minimum of TLC is detectable on the nicest of the shabby rentals.

2. FBs paying two mortgages and upgrading to a "bigger better" property before selling their previous residence. Many of these properties were on the market and even the price reduced list for the better part of a year. They have been chasing the market down, and now that it is sinking in that they can't unload for their wishing price they are trying to wait out the market and rent out the property. Unfortunately, because these properties were at some point their primary residence and they put just a tad bit of TLC into them they are over-priced as rentals. FBs are expecting to be able to cover their mortgage costs in the rent. Unfortunately, it looks like they didn't buy a house for a price that it would pencil out as a rental. tsk tsk tsk...

3. Flippers who bought at bubble prices and did the cliche granite counters, tile etc... and found their fantasy cash cow they intended to fix and flip is now an alligator that has flipped on them and the carrying costs are killing them. These too are way overpriced as rentals.

Dear Flippers,

Make a note to self... next time you buy property when the shoeshine boy is bidding against you, turn and RUN. The rule for investing to make money is Buy Low, Sell High. Real Estate is not a liquid investment. It is best if you take into account the actual market and buy property that you can afford, or that pencils and you can rent out and cover the costs. Anything more than that and you are taking a loss. Write that down.

Did a driveby of some of these properties and looked up the available addresses from these listings and the property management lists and IT rental listings on Zillow to see when the properties were purchased...

24 out of 30 zillow searches netted properties bought at bubble prices. I stopped searching after that.

Craig's list postings
Displaying: 1 - 57

Jan- 3 $1985 Craftsman country home in Glen Ellen
Jan- 3 $875 Detached Studio Cottage with private yard
Jan- 3 $1750 / 3br - GREAT LOCATION!!! Nice sunny house ready to move in!!
Jan- 2 $950 / 2br - Newly Remodeled Sonoma Apt. With Laundry Room Carport Section 8 O.K. pic
Jan- 2 $900 / 2br - Sonoma Apt. With Porch - Laundry Room - Carport -Section 8 O.K. (sonoma) pic
Jan- 2 $1200 / 2br - 2 bedroom, 2 bathroom CONDO ready to move-in
Jan- 2 $2000 / 4br - 4 BR 2 BA HOUSE "EVERYTHING NEW"
Jan- 2 $1325 / 2br - Great Deal! 2 bedroom 2 bathroom duplex - READY TO MOVE IN TODAY!!! pic
Jan- 2 $1150 / 2br - Duplex pic
Jan- 2 $3000 Sonoma!!! Amazing 3 Bedroom East Side Home for Rent!!! (sonoma)
Jan- 2 $1450 / 2br - for rent
Jan- 2 $1300 / 2br - Spacious 2 Bed/2 Bath Apartment in Downtown Sonoma!
Dec-31 $1275 / 2br - Beautiful newer duplex Great Location pic
Dec-30 $1600 / 2br - Pristine 2B/2B Home in beautiful Chantarelle (Adult 55+) pic
Dec-30 $1850 / 4br - 4 bed 2 bath 1/3 acer. river runs through it pic
Dec-30 $750 / 1br - Apartment in Boyes Hot Springs
Dec-29 $3200 / 3br - Grand contemporary house in East Sonoma on 1 acre
Dec-29 $1700 / 3br - Clean House walking distance from Sonoma Square
Dec-29 $1550 / 3br - house for rent pic
Dec-29 $1900 / 3br - Executive Sonoma Hideaway pic
Dec-29 $1000 / 2br - Apartment For Rent :: pic
Dec-29 $950 / 1br - Amazing Studio with Attached Cottage
Dec-29 $950 / 1br - Huge Alcove Studio with Gigantic Covered Balcony and View!
Dec-29 $3000 / 3br - Sonoma!!! Amazing 3 Bedroom East Side Home for Rent!!! pic
Dec-29 $1000 Peaceful Cottage Fully Furnished. Available Jan. 10 pic
Dec-29 $1200 / 2br - CUTE SONOMA HOME pic
Dec-28 $1195 / 2br - Charming 2 bedroom in Sonoma pic
Dec-28 $1600 / 3br - Home on Spacious Lot pic
Dec-28 $2200 / 4br - Really nice spacious house with HUGE back yard.. pic
Dec-28 $1250 / 2br - LARGE UNIT CLOSE TO TOWN pic
Dec-28 $1260 / 3br - Price reduced in Sonoma!
Dec-28 $15000 / 6br - Renovated historic 10-acre Napa/Sonoma farmhouse estate img
Dec-27 $2600 / 4br - Open House in Kenwood this Saturday pic
Dec-27 $4000 / 3br - Large Private Home w/pool, 2 horse pastures and MORE! pic
Dec-27 $2000 / 5br - Large home with lots of good stuff...
Dec-27 $1800 / 4br - Beautiful home built by the owner, very nice!!
Dec-27 $2800 / 3br - Beautiful, luxurious, gourmet, NEW Townhouse in downtown Sonoma...
Dec-27 $2800 / 3br - All new 2 story house near Armstrong Estates...
Dec-27 $2600 / 3br - Lovely EASTSIDE home in great location...
Dec-27 $2300 / 3br - Very nice house on the EASTSIDE of Sonoma..
Dec-27 $2000 / 3br - Very nice, new home in a desirable location..
Dec-27 $1950 / 3br - Newer home at the end of quiet, private driveway...
Dec-27 $1800 / 3br - Very new and clean house in Sonoma Greens...
Dec-27 $1800 / 3br - Nice big house in a great location in Sonoma...
Dec-27 $1800 / 3br - Very, nice LARGE house in 55+ community...
Dec-27 $1500 / 3br - Bedroom; 1 bath house for rent in Sonoma pic
Dec-27 $1700 / 3br - BIG house with large rooms and extra bonus room...
Dec-27 $1250 / 2br - HALF A MONTHS RENT FREE!!!!!
Dec-27 $1200 / 2br - Nice upstairs duplex unit for rent in Sonoma...
Dec-27 $1025 / 2br - Great downstairs apartment unit close to downtown..
Dec-27 $900 / 1br - Spacious older unit for rent in Sonoma!!
Dec-27 $1100 / 1br - Cute 1 bedroom home in country setting...READY TO MOVE-IN TODAY!!! pic
Dec-27 $900 / 1br - Need a place by January 15th in Sonoma? Look no further!!!
Dec-27 $795 / 1br - MOVE-IN TODAY!!! 1 bedroom apartment, newly remodeled for you!
$1800 3br- 2.5 bath , 2 garage NEWER HOUSE 1996 (short or long term ok)
$1795 / 3br - 3 Bathrooms Trun Key House (Newer Home in Great Downtown Area)

First the Internet, next perhaps our sleepy County and towns within it will wake up to reality. Here is a little taste of it from Christopher Thornberg.

"This year is predicted to be a bad one for those either looking to buy or sell a home in California. Construction, sales and prices will keep plunging, according to Chris Thornberg of Beacon Economics."

'"I am extremely negative about 2007," Thornberg said. "I see foreclosures going up in 2007. I think prices are definitely not going to bottom out. I think prices will continue to go down slowly."'

"In fact, Thornberg sees the entire California economy for 2007 in a negative light. When asked why, he said "the state is in a completely unsustainable situation."'

“Consumers cannot continue to spend more than they earn," he said.

"Thornberg said those in the most trouble are newer home owners whose mortgages will re-set this year. The higher interest rates will mean larger monthly payments for many borrowers."

'"There are a lot of people out there who are in trouble, who were promised that real estate could be a no-lose investment."'

"It seems like Sonoma County is one of the weakest economies in the Bay Area. There's hardly any job growth to speak of. That's essentially the basic building block of the economy," Steve Cochrane, an analyst with Moody's said."

"Home prices fell more sharply in Sonoma County last month than anywhere else in the Bay Area, except Solano County."

"Steve Cochrane, who tracks Sonoma County's economy, said he wasn't surprised by Sonoma County's drop."

'"I've always felt the Sonoma County housing market was at fairly considerable risk," he said."

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