Sonoma Housing Bubble

Pulling the cork out of Sonoma's bubbly housing foolishness

Monday, May 14, 2007

The Downside of The Real Estate Bust...West Nile Virus and Yellow Fever???

They're not exactly building the Panama Canal up in Sacramento but they seem to be facing the same sort of problems. All that stagnant water and warm tempertures.
Where's Dr. Walter Reed when you need him? Instead they're caling in Realtors to help? Ok, I exaggerate. So it's not the Tiger Mosquito, it's the Culex, but they both carry disease.

Thousands of unsold and empty houses in the Sacramento region are fast becoming breeding grounds for mosquitoes.

As the region's housing slump creates more vacant houses and a growing excess of homes in transition between buyers and sellers, Culex mosquitoes that can spread the West Nile virus to birds, other animals and humans are thriving in uncared-for swimming pools, garden ponds and yards flooded by broken sprinklers, said David Brown, manager of the Sacramento-Yolo Mosquito and Vector Control District.

"A 5-gallon bucket can literally produce a thousand mosquitoes a week," Brown said. "Multiply that by the surface of a pool and you see how many mosquitoes can affect an entire neighborhood. These mosquitoes can fly one to five miles."

Sacramento Association of Realtors spokesman Greg Vlasek said there are 9,672 houses for sale in the mosquito district's Sacramento and Yolo counties coverage area alone.

Nearly 1,400 have swimming pools.

Ah, all those empty flipper palaces with their "water features" in the backyard, and large pools and hotubs, at least someone's calling them home, though vermin was not exactly when the RE investors had in mind. Just recently it was possible for anyone with a pulse to get some sort of bloated jumbo no money down suicide loan, why not someone with six legs and a long beak?

Mosquito control officials say late spring rainfall followed by high temperatures yielded an ideal combination for mosquito breeding.

Their aim now is to find and treat as many uncared-for pools as possible with larvicides and fish that eat mosquito larvae.

"Every time a female mosquito lays her eggs, it's 100 to 300 at a time," said Sacramento-Yolo technician Lisa Fitzgerald, spraying larvicide into a filthy green pool at a vacant house in Carmichael on Friday.

"She also puts a scent on the water that says, 'This is a perfect place to come lay your eggs.' "

Fitzgerald didn't know the status of the house along busy Fair Oaks Boulevard.

But it was like more and more houses she sees now -- home to a murky backyard pool that eventually prompted complaints from neighbors.

"There's a lot of houses for sale where the pool isn't being maintained," she said.

"I was at a pool at just a beautiful house. The backyard was just beautiful. Then there was the pool. It was in foreclosure."

Fitzgerald finished spraying, then dumped in a dozen minnow-sized fish to eat larvae that grow into adults in seven to 10 days.

"They'll maintain it until it's drained," she said.

Yeah, kind of like the original owners did.

As real estate agents add mosquito patrol to their duties, there are more than 14,000 homes for sale in El Dorado, Placer, Sacramento and Yolo counties. Most are on the market two months or longer, according to Sacramento-based researcher TrendGraphix.

The bad news is that things are not going to get better anytime soon as the number of short sales and foreclosures grows.

Short-sale spikes have happened before in real estate, most recently in the early 1990s when housing prices in California dropped steeply as interest rates rose and jobs were cut in the defense industry.
What's unusual about the current round of increases, observers say, is that many short sales are tied to the easy-money loans of a few years ago; this time there has not been a wave of job losses or steep drop in property values.
In early May 2006, there were hardly any short-sale listings in Fremont, Hayward, Newark and Union City, said Steve Dhillon, a Realtor with RE Realty Experts in Fremont.
One year later, almost 8 percent of homes on the market in Fremont were listed as short sales, according to data from the multiple-listing service used by Realtors. In Union City, 15 percent of listings were short sales, followed by 10 percent in Hayward and 7 percent in Newark.

All that property going to seed and no one able to qualify to take it off the banks hands.
In recent months, lenders have tightened up standards for 100 percent financing loans in response to the fallout from the subprime mortgage crisis, which has seen increasing foreclosure rates as borrowers fall behind with their mortgage payments.
The tightening of loan underwriting standards for these loans could lead to even more short sales since it will make it harder for borrowers to refinance into a new loan, said Konesky, the Tracy-based Realtor.
"I'm sure (short sales) are going to continue to grow through this year. If you own a house and have no equity, you know you need 100 percent financing again," he said.
Dhillon, the Fremont-based Realtor, doesn't see a slowing of short sales, either.
"As we progress more into the year, the number of short sales should increase, brought on by the upheaval in the subprime market," Dhillon said. "Also, lenders will start to tighten credit requirements, and adjustable mortgages will be resetting to higher rates."

It's going to be harder and harder to fiind a sucker, (not the winged kind) able to occupy one of these places. So the next time you see your local realtor look for the man/woman carrying minnows. In the near future "staging" might require enveloping the entire structure in mosquito netting.

Wednesday, May 09, 2007

Better Get a Roll of Tums...

....Something Wicked This Way Comes!

Wells Fargo & Co. CEO Richard Kovacevich said in December that ‘I am not a forecaster of the future; I’m a historian. And history says this will blow up. It always has. And there will be some blood on the street.’”

May 9th, 2007 - “Bank of America Corp. CEO Ken Lewis said a so-called credit bubble is about to break after six years of historically low interest rates and relaxed lending criteria.”

“‘We are close to a time when we’ll look back and say we did some stupid things,’ Lewis said. ‘We need a little more sanity in a period in which everyone feels invincible and thinks this is different.’”

Warren Buffett said: "... too many homes were bought by people carrying mortgages with little or no money down who then hoped to flip them quickly for a profit. 'The housing market is sick and it's going to stay sick for a couple of years' he opined."

“The National Association of Realtors said that sales this year will be lower than it earlier forecast. Carl Reichardt, a senior equity research analyst at Wachovia Securities, told that he wasn’t surprised by the lower projections.”

“‘We have seen deterioration in business conditions for the homebuilders that we survey in March and April,’ Reichardt said.”

“And it could still get worse, Reichardt said. ‘The homebuilding business has lost a portion of its customer base as financing conditions continue to compress,’ he said. ‘The housing industry has relatively modest job growth supporting it. If that leg is lost, housing could get worse.’”

William Lyon Homes today reported pre-tax income for the three months ended March 31, 2007 of $5,804,000, down 87%, as compared to the comparable period a year ago. Consolidated operating revenue decreased 33% for the three months ended March 31, 2007.”

Luxury home builder Toll Brothers Inc. said on Wednesday it expected to report lower quarterly revenue and warned that its profit would fall short of its own forecasts, as the protracted downturn in the U.S. home market worsened. ‘Twenty months into this housing downturn, we continue to face difficult conditions in most of our markets,’ CEO Robert Toll said in a statement.”

“‘We no longer expect to achieve the most recent quarterly and annual guidance we provided on Feb. 22,’ he said.”

Richard Dugas, Pulte Homes president and CEO, "told shareholders in Birmingham, ‘The worst may not be behind us.’ Dugas said he saw no signs yet of recovery after the worst housing slump since the early 1980s. ‘I think January and February appeared to be on the road to recovery, but after the subprime mortgage issue hit, consumer confidence took another hit, unfortunately, so I’m not sure there’s any light at the end of tunnel right now.’"

Getting Close to Hitting Home....

As fraud skyrockets it is getting closer to home... countdown until the names in the papers and the hands in cuffs are people we know and recognize from local billboards and shopping carts.

"The husband-and-wife owners of a Vallejo mortgage company and three other people were arrested today for their roles in an alleged $3.5 million real-estate fraud in Alameda County, authorities said."

"Amy Schloemann, 30, and her husband, Karim Akil, 40, also known as Scott Kinney, were named in a 73-count complaint filed in Alameda County Superior Court accusing them of defrauding two mortgage companies, Union Bank of California, local real-estate brokers and citizens from April 2005 to August 2006."

"The Vallejo couple used their company, Hiddenbrooke Mortgage in Vallejo, to create fraudulent home loan applications submitted to New Century Mortgage and Right-Away Mortgage for seven different homes in Oakland, authorities said."

"Also named as defendants are Hiddenbrooke employee Michelle McGuirre, 38, of Martinez; Wonda Kidd, 56, an escrow officer with Financial Title Co. in San Leandro, and Gregory Lamont Orr, 45, of Antioch, the owner of G.L.O. Enterprises, Inc."

"Schloemann, Akil and McGuirre created false documentation for the loans using fake addresses and bank accounts and forged documents purporting to be from Union Bank, authorities said."

"The defendants manipulated the loan-application process to artificially inflate the value of the homes before diverting the proceeds of each sale with Kidd's help, investigators said. Some of the ill-gotten gains went straight to Hiddenbrooke Mortgage, while other proceeds went to G.L.O. and Orr, an associate and business partner of the Vallejo couple, authorities said."

"Schloemann and Akil were arrested today at their Vallejo office by Alameda and Solano County district attorney's inspectors, Alameda County sheriff's deputies and Vallejo police. Kidd was arrested today at her San Leandro office, and McGuirre and Orr were arrested by Martinez and Antioch police, respectively."

Monday, May 07, 2007

Buy at Your Own Risk...

"A young San Francisco couple's dream of buying a fixer-upper in a nice neighborhood at a low price and polishing it into a sweetheart of a home literally collapsed on Sunday afternoon."

"The light blue home on a hill in the Sunnyside neighborhood, full of charm and rotting wood, sold late last year in a court auction for an almost unheard of price in San Francisco: $525,000."

"Bill Zhou and his wife snapped it up and, according to neighbors, began fixing it up with little outside help."

"But the house was in such need of repairs that the real estate agent who had listed it had warned potential buyers to "enter at your own risk."'

"The one-bedroom, 870-square-foot cottage -- built in 1910 -- was featured last year on a Bay Area real estate blog and in a story in the San Francisco Examiner as the cheapest house in the city's pricey market, offered at $400,000."

'"Major Fixer Upper needs everything," read the listing about the home, according to the report. "Buyers and agents beware of unstable building, floors, dry-rot and foundations. Enter at your own risk."'

"At 2:47 p.m. Sunday, as Zhou tried to put in a new foundation, the house at 149 Mangels Ave. buckled with a great crash."

"So thunderous was the sound that one neighbor mistook it for a jet breaking the sound barrier and another likened it to lumber falling out of a lumber truck.

"A front corner of the Zhou house slammed into a neighboring house, breaking a window and leaving cracks in interior walls. A back corner twisted and ended up moving about 20 feet in the other direction, into one of those miniparks that San Francisco has built into urban hillsides.

Zhou was unhurt, and firefighters saved his dog."

'"Unbelievable," said Charles Sterling, 46, one of several neighbors who stood gaping at the wreckage of the house late Sunday behind a police barricade."

'"They're just a wonderful young couple trying to do the American Dream thing and may have gotten in over their heads."'

Tuesday, May 01, 2007

What If They Gave An Auction And Nobody Came.....Except For The Snacks???

That was the story out in Glen Ellen this last weekend when the Chauvet Hotel Luxury Condos went on the block.
We'd been curious as to how that whole auction business was going to play out. There had been so many plans for the Chauvet property, they all seemed to come and go. I was actually surprised that the condo project got as far as it did. A Bad Sign of course was the idea that the prices had been slashed!, slashed! , slashed! ,Sunday! Sunday! Sunday!
Prices were cut down at least 30% prior to the failed sale. It was starting to sound like a monster truck rally, only with granite counter tops and plasma screen TVs and free food.
As the Sonoma IT put it:

There was a crowd of at least 50 people on hand to eat hors d'oeuvres and sip iced tea, but not a single bidder claimed a reserved auction seat and no one came forth to publicly offer the minimum $820,000 for the cheap- est of six three-bedroom apartments in the historic Glen Ellen hostel.

Hors d'oeuvers and iced tea huh???? For what they wanted for those condos I would have expected a whole lot more food, Crystal and a least. Of course some people did turn up. Who wouldn't turn up to watch a trainwreck in slow motion especially if there was grub!! I'm only sorry we had houseguests last weekend, on second thought I should have taken them down there for breakfast, and a show.

Still, the Chauvet partnership remained optimistic the auction would produce some buyers. San Francisco architect and general partner Larry Paul said in March he would be "shocked" if the Chauvet units didn't sell at auction for the minimum bid prices, that ranged from $820,000 to $895,000.

Paul said then the partnership had invested more than $4.5 million in the project, that "carrying costs have just killed us," but that he fully expected the units to sell. The auction itself, which was advertised worldwide, was an unusual venue for selling luxury real estate. Paul compared it to selling fine art or vintage automobiles. "Nobody has any idea what these things are worth," he said in March, partly because there are no comparable properties nearby to price them against.

Despite the lack of bidders on Saturday, general partner Christine Hansson, also of San Francisco, said she wasn't discouraged. "This was a shot at innovative marketing," she said on Monday. "We didn't come out emptyhanded. There were people there who were interested who didn't want their names in the paper, or the price they were willing to pay publicized. Several parties were extremely serious. We're not dead."

Nope, you're not dead...yet. Even a headless chicken can make it around the yard for a couple of laps before it drops.

My Zimbio
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