CA UT

Union Tribune

Problem mortgages will probably plague some recent home buyers for the rest of the year, but the outlook for new buyers appears relatively promising, with sellers likely to drop prices into 2008, according to experts at yesterday's Sullivan Group Real Estate Advisors quarterly conference.


Associated Press
New townhomes under construction in Davenport, Fla. April's 16.2 percent increase in sales of new single-family homes was the biggest one-month gain since a 16.4 percent surge in April 1993.
Tim Sullivan, the San Diego-based consulting firm's founder, said that with some holders of subprime mortgages defaulting on loans that are resetting at higher rates, the bulk of foreclosures are likely to occur in the next six months and into 2008 before trailing off.

But Sullivan's associate, Peter Dennehy, said only about 4.6 percent of sales involve foreclosures, far less than in the recessionary 1990s and a trend he called “something to watch” but still “manageable.”

And Jack L. Haynes, executive vice president of Countrywide Home Loans, said lenders are moving to deal with borrowers facing disaster. He did not offer any specifics, but his company and some other lenders have moved to work out new repayment schedules to avoid foreclosure.

“We're cleaning it up ourselves,” he said, warning against efforts to impose more lending regulations, such as those being considered in Congress.

DataQuick Information Systems expects to report today that the six-county Southern California region saw defaults rise nearly 159 percent last month to more than 9,200, compared with 3,562 in April 2006, and that foreclosures skyrocketed from 311 to more than 2,800 over the same period. San Diego's defaults rose from 554 to 1,346, and foreclosures increased from 85 to 525, April to April.


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But San Diego was painted as an area less vulnerable to any further major downturns, contingent on the health of the general economy. Reasons include relatively few unsold, newly built homes and new projects; steady if not improving job growth; and an earlier end to the housing boom than other markets where sales and prices are now in decline.

The most recent sales figures for San Diego showed a 13.5 percent year-over-year drop in April, compared with more than 30 percent year-over-year declines reported by DataQuick last fall.

Prices, which had peaked at $517,500 in November 2005 and lately dropped to as low as $472,000 in January, have recovered somewhat to stand at a median $490,000. But they remain 10 percent or more below where they stood a year ago in many neighborhoods.

One worrisome sign – a rise in resale inventories – may represent good news for buyers, Dennehy said. Many sellers have to sell and will lower prices to do so, when a year ago, many were simply testing the market to see if they could get a high price and would not negotiate if someone offered to pay much less.

“That probably will keep pushing prices down this year and next,” he said.

Seeking to contain the gloom that shows up in builder surveys, Sullivan assured his audience of about 100 builders, mortgage bankers and other development-industry professionals. “You'll still be around in five years.”

His advice for how to attract buyers: “Stage” the units to look like nicely appointed resale homes; landscape the front yards rather than offer expensive incentives or upgrades; accommodate buyers who have to sell their existing homes, possibly by buying the homes from them; and advertise specific sales programs rather than just touting a brand name.

One factor on buyers' minds is gas prices, the speakers said. They observed that $4-a-gallon gas could deter many people who previously might have opted for a 75-mile commute from a home in Riverside County to work in San Diego. “Location matters again,” Sullivan said.

Sullivan's expert on Imperial Valley, Adam McAvee, said that market is “struggling” from affordability and commuting issues to the point where the typical new subdivision is only selling 1.3 homes per month.

Roger M. Showley: (619) 293-1286; roger.showley@uniontrib.co

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The Chicago Tribune reports from Illinois. "In an effort to turn around a slowdown in sales of units in his luxury tower being built along the Chicago River, developer Donald Trump on Thursday will meet with reporters to deliver a message: He's got a sale going on. 'We're pricing to sell,' Trump said about his 825-unit Trump International Hotel and Tower now under construction. 'People think we're sold out but we're not.'"

"Of the 825 units in the 92-story tower, 224 condominiums are still for sale. Trump, 60, is hoping that his appearance will help at a time when he claims Chicago's sluggish housing market is hurting sales."

"'There's no question, the market has taken a serious hit and is slowing,' Trump said. 'But it's a great time to buy in our building because we aren't raising prices.'"

"Since January, Trump has sold only eight condominiums in the tower, which will cost about $775 million to develop, he said."

"'With the market in upheaval, price discovery is difficult,' said William Testa, a senior economist at the Federal Reserve Bank of Chicago. 'Developers are reluctant to lower prices but buyers have expectations that prices will fall.'"

"Indeed, Chicago condominium sales declined about 45 percent in the first quarter from the year-ago period, according to Appraisal Research Counselors."

"At the same time, residential developers are planning to deliver a record number of new, downtown units. From 2007 through 2011, they are slated to build 16,300 for-sale residences for an area with about 90,000 existing dwellings."

The Grand Rapids Press from Michigan. "A Dallas-based company added Grand Rapids to its list of Michigan cities with a growing number of foreclosed properties. The company held auctions in Detroit, Battle Creek, Lansing and Jackson earlier this week, and is to do the same in Muskegon today."

"More than 500 properties were up for sale from May 19 through today as part of the event, about 300 of which were auctioned off in Detroit. Hudson & Marshall is hired by lenders to help unload the foreclosed homes."

"Real estate agent Abby Cook said her agency and others are trying to keep pace with the 'unbelievable' amount of foreclosed properties. 'The market is tough right now, and auctions are a quick way of selling off the houses,' she said."

The News Press on Wisconsin. "Bob Arnold, an agent in Mequon, Wis., has noticed the rising number of empty houses in his market. He thinks the trend offers some encouragement because some sellers have enough faith in market trends to take a risk."

"'We're coming out of a gloomy fall market. If they didn't do anything then, they're saying, at least there's a more positive atmosphere out there,' he says."

"Agent Edward Smith represents a Milwaukee house that has stagnated on the market for more than 24 months, plagued by a poor location and other woes. Its price is now $309,000, a far cry from the original $425,000."

The Perry County News from Indiana. "In Perry County the number of foreclosures - and sheriff’s sales - have been on a steady rise, figures show. 'Years ago we might see no more than 10 sales for an entire year. Now we have dozens,' said Sheriff’s Deputy Richard Myers."

"Records provided by the county clerk’s office show 93 foreclosures were filed in Perry Circuit Court in 2006, up from 75 the previous year. Thus far in 2007, 29 foreclosures have been filed, many of them by national lenders who issued large numbers of subprime loans over the past couple of years."

"'A lot of the big companies you’ve heard about are the ones who have a lot of the bad loans,' said Myers, pointing to common names such as Countrywide Home Loans, HSBC, Ditech and Washington Mutual."

"Several of last week’s planned sales were put on hold and will likely be readvertised in The News. Those sales won’t be far off, Myers said. 'It never stops.'"

The Wichita Eagle from Kansas. "The rough winter of 2006-07 slowed the appreciation of homes in the Wichita area to the lowest point in three years. But analysts said it's just a blip."

"Home prices appreciated by 0.22 percent in the first quarter of 2007, according to a study released Tuesday by Wichita State University's Center for Real Estate. That's the slowest quarterly appreciation rate since 2004, said Stan Longhofer, director of the real estate center."

"'Activity certainly wasn't robust in the first quarter, and I'm not quite sure why,' said Connie Simcox, president of J.P. Weigand & Sons. 'Weather certainly has an effect, no question.'"

"So does the widely publicized coastal housing market crash, said Bill Graham of Graham Inc. Realtors, as speculative increases in home values have outstripped demand. 'Bad press from the national viewpoint affects the psyche of buyers everywhere,' he said."

"Wichita-area existing home sales fell 9 percent in the first quarter of 2007, and new home sales plummeted 26 percent, both bearing out the impact of the weather, Longhofer said."

"But the downturn won't take on statistical significance until and if it continues for another couple of quarters, he said. 'If I saw appreciation rates were at an annualized rate of 1 to 1.5 percent for the next three or four quarters, then we've really slowed down.'"

"Wichita remains a seller's market, Graham said. 'We're still considerably ahead of where we were last year,' he said. 'We're still getting multiple offers on the prime houses. We're still selling listings at or near cost. But if this trend continues, you're going to have a totally different look.'"

CA SF

The San Francisco Chronicle

As other states adopt stricter regulations on subprime lending practices, California has not rushed to restrict an industry that spent $17.9 million in campaign contributions and on lobbying in the state during the past four years.

A Chronicle analysis of spending by top subprime lenders shows that 65 Democratic and 49 Republican lawmakers in the state have received $1.2 million since 2003. The companies also donated $1.3 million to Gov. Arnold Schwarzenegger and spent $5.8 million on lobbying, according to records on file with the secretary of state. Other state political candidates, political parties and ballot measure committees also received hefty sums.

Regulators and lawmakers across the nation have scrambled in recent months to stem the tide of foreclosures prompted by the crisis in the subprime lending market. But in California, consumer groups say the response among regulators and lawmakers to try to prevent future subprime meltdowns has been timid at best.

The mortgage industry is "very well represented in the political process both through campaign contributions and through lobbying expenses," said Paul Leonard, director of the Center for Responsible Lending's California office. "There is no question that the power and influence of the lending industry has been a major obstacle to having stronger anti-predatory lending laws in the books."

The most generous subprime lender was Ameriquest Mortgage, which gave $8.2 million in political contributions since 2003. The biggest chunk -- $730,000 -- went to the California Democratic Party, while the California Republican Party received $200,000.

Other lenders that have made sizable political contributions are Countrywide Financial, Citigroup, Wells Fargo Home Mortgage, New Century Financial and HSBC.

The subprime market targets borrowers who have little credit history or inferior credit scores. Those consumers are offered loans with low introductory interest rates that last a year or two, then balloon to rates generally 2 to 5 percentage points higher than those offered to borrowers with better credit.

The result is a sharp increase in monthly payments that some homeowners cannot afford.

In the nine-county Bay Area, the number of loan default notices in the first quarter of this year was 6,730, up 160 percent from the same period a year ago. The number of foreclosures in the first three months of this year hit 1,493, up 839 percent from the first three months of last year.

Ed Smith Jr., vice president of government affairs for the California Association of Mortgage Brokers, said the mortgage industry is among the most regulated in the nation and that lawmakers don't need to get involved.

"The market has self-corrected itself," he said. "Many of the mortgage products that were around six months ago are not around anymore."

Smith argued that exotic loans are allowing more people than ever before to achieve the American dream of owning a home. Even with the subprime implosion, more than 80 percent of those loans are still performing, he said.

But the subprime crisis has some homeowners on the verge of losing their houses.

Yvonne Mau, 38, of Pinole, who pulled equity out of her home to build an extra room in 2003 for her elderly father, has since refinanced several times to cover her mortgage payments. To make matters worse, Mau had to quit her job to take care of her father as well as her daughter, who has a learning disability.

Mau's latest loan requires a $4,718 monthly payment for the first two years followed by payments of $6,097.37. She estimates her monthly family income at about $3,500.

"I know we are at fault for stupidity, but these companies shouldn't be doing loans that people can't pay back," Mau said.

Last fall, federal regulators and industry groups recommended improved disclosures to borrowers about their monthly payments; warning lenders against approving loans that borrowers could have trouble making payments on; and advising lenders to better document borrowers' incomes by requiring such forms as pay stubs, tax returns or W-2 statements.

So far, 34 states and Washington, D.C., have adopted those recommendations, which consumer groups say don't go far enough. California hasn't adopted the guidelines yet.

Representatives of the state Department of Real Estate and the Department of Corporations said their agencies have started adopting the federal guidelines, which will include public comment periods before the rules are added.

The process can easily take at least six months, said Tim Lebas, a deputy commissioner for the Department of Corporations, which licenses lending companies. That explanation doesn't sit well with at least one lawmaker.

"It is simply inexcusable," said state Sen. Mike Machado, D-Linden (San Joaquin County), who chairs the Senate Banking Committee and has put the budgets of the real estate and corporations departments under review. "By threatening their budget, they've become more responsive, and we are asking them to adopt these (as) emergency regulations."

Just in case the regulators don't respond, Machado has introduced a bill, SB385, that would require the state to adopt the federal guidelines. Other legislative proposals include:

-- SB223 by Machado, which would make coercing an appraiser to falsely inflate the value of a property illegal.

-- AB512 by Assemblywoman Sally Lieber, D-Mountain View, which would require lenders and brokers that do business with borrowers who speak languages other than English to provide loan documents in those languages.

-- AB1538 by Assemblyman Ted Lieu, D-Torrance (Los Angeles County), which would create a fund to refinance loans of certain subprime borrowers who face foreclosure.

But it's uncertain how much support those bills will get.

One Republican lawmaker said last week that the effort should be focused on educating and informing consumers about mortgage loans.

"I think we have enough regulations in the books," said Assemblywoman Bonnie Garcia, R-Cathedral City (Riverside County).

Garcia helped initiate last week a state education campaign that includes a new Web site for consumers and a series of town hall meetings around the state to give borrowers facing mortgage woes tips on what they can do to save their homes.But consumer advocates say current efforts by lawmakers and the Schwarzenegger administration are far too little when compared to measures in states such as Ohio, Minnesota and Maine.

Those states have introduced or passed bills that aim to ban prepayment penalties on certain types of loans and require lenders to consider borrowers' ability to make mortgage payments for the entire life of the loan, not just when the low introductory interest rates are in play. In Maine, legislation has been introduced to ban certain loans that could result in higher principal because required monthly payments don't even cover the interest on the loan.

CA lompoc

Lompoc Record

http://www.lompocrecord.com/articles/2007/05/22/news/news02.txt

The number of homeowners in Santa Barbara County who have fallen behind in their house payments has quadrupled over the past two years as the real estate market has cooled and many low, introductory mortgage interest rates have risen.

Across California, meanwhile, the number of notices of default - issued when a homeowner is late on mortgage payments, and the first step toward foreclosure - have hit the highest level in almost 10 years, according to DataQuick, a San Diego-based real estate information service. And foreclosures statewide increased more than 800 percent from the first quarter of last year to the first quarter of this year.

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In Santa Barbara County between 2005 and 2006, notices of default more than doubled, increasing by 110 percent, from 400 to 841, according to officials in the county clerk-recorder-assessor's office.

For 2007, default notices more than doubled again, from 841 to 1,978.

“Almost every neighborhood has one home in trouble,” said Wendy Teixeira, president of the Santa Maria Association of Realtors.

The number of sales involving properties that are owned by the lender is increasing, she added.

Santa Barbara County officials estimate that 1,978 homes will go into default this year and 765 properties will be taken by lenders.

Officials also estimate that 885 properties will be sold by lending institutions. (The number of properties sold in a given year may exceed the number taken by lenders due to carry-over from the previous year, officials said.)

Last year, county officials saw 841 notices of default and 129 properties taken by lenders. That year also had 293 properties sold by lenders.

In 2005, there were 400 notices of default in the county and 24 properties went back to the lender, according to county data, and 116 properties were sold by lenders.

A notice of default is the formal notice given to a homeowner that the mortgage lender is proceeding with foreclosure until the loan is brought current, said David Brown, a Los Olivos-based real estate broker who is also president of a local chapter of the California Association of Mortgage Brokers.

If the loan stays in default for 90 days, then the lender can post a notice of trustee sale, which tells the borrower that the lender intends to sell the property unless the loan payments are brought up to date within another 21 days, Brown said.

According to county officials, April 2007 made the top 10 list of highest-volume months since 1989 for notices of default and trustees' deeds - when a lender forecloses and takes ownership.

The years from about 1990 to 1997 saw a sharp increase and then gradual decline in notices of default, trustee deeds and trustee sales, when Southern and Central California were in an economic slump.

However, observers note that the economics surrounding the current spike in foreclosures and potential foreclosures differ in important ways from the 1990s.

This time, interest rates are lower and there haven't been the immense job losses and unemployment that the area experienced in the '90s, according to local economists.

Officials with the UCSB Economic Forecast Project note that foreclosures may not seriously harm the overall economy but they will affect home sales, keeping them slow for a while.

The increase in defaults and foreclosures may cause lenders to tighten their standards, making it harder for people to get loans, said Dan Hamilton, with the UCSB forecast.

If that is the case, the slow-down may last longer than the usual two-year real estate cycle, he said.

Mark Schniepp with the California Economic Forecast added that part of the problem is that the recent lending environment has made it “too easy for people to get in over their heads,” alluding to the popularity of sub-prime and other “exotic” adjustable loans.

Statewide, lending institutions filed 46,760 notices of default between January and March, which is up by 23.1 percent over the previous quarter, and 148 percent increase over the first quarter of 2006, according to DataQuick Information Systems.

Foreclosures statewide totaled 11,033 for the first quarter, up 81.5 percent from the previous quarter and up 802 percent from 1,223 from last year's first quarter, according to DataQuick.

DataQuick officials noted many homeowners can avert foreclosure by bringing the loan current, refinancing, or selling the home and paying off what is owed.

However, 40 percent of homeowners statewide who went into default last year lost their homes in the first quarter. That figure was 9 percent a year ago.

Malia Spencer can be reached at 739-2219 or mspencer@


http://www.santamariatimes.com/articles/2007/05/22/news/featurednews/news01.txt

Santa Maria Times


When the real estate market began cooling in 2005, it was like a pebble thrown into a pond, spreading through the Central Coast economy.

The slow-down since then is almost a textbook example of how the sputter and cough of an economic engine can put the brakes on all the businesses it's pulling behind it.

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Some economists and industry experts predict the current slowdown will continue to or through 2008; others say they are already seeing signs of recovery.

Understanding how an artificially inflated housing market heated and cooled northern Santa Barbara County's economy can give an idea of how it may help it recover - at least in the short term.

Superheated industry

In 2000, local housing prices skyrocketed. Median home prices doubled and even tripled in some areas in just five years.

People with jobs in San Luis Obispo and Santa Barbara, where home prices were out of reach for those with median incomes of $50,000 to $60,000, flocked to the North County, especially the Santa Maria area.

But slow-growth policies and attitudes in San Luis Obispo and Santa Barbara somewhat stagnated those economies, according to analysts with the UC Santa Barbara Economic Forecast Project.

That led to fewer people buying homes in northern Santa Barbara County, and sales slowed. Prices leveled off and, in some cases, dropped.

The economic ripples spread, first to businesses tied directly to real estate.

“When sales of existing homes start falling, the Realtors, title companies - there are lots of people involved - their income slows,” explained Bill Watkins, executive director of the Economic Forecast Project.

Existing homes stayed on the market longer and fewer homes sold, making it harder on real estate agents who jumped into the business when the market was hot.

“It used to be a lot easier,” said Wendy Teixeira, president of the Santa Maria Valley Association of Realtors. “You'd show two houses and write an offer on the hood of your car. Now, it takes two or three months to sell a house. It's challenging for beginning agents.

“As an association, we've not seen a rapid decrease in members,” she added. “But definitely, when you have 500 agents and 90 closings last month, a lot of people are not going to get paychecks.”

Beyond lenders, escrow companies and termite inspectors, homeowners spent fewer dollars fixing up houses to make them more attractive to buyers, who would then fix them up more.

“When you're selling a unit, you spend money on it,” Watkins said. “When you're buying a unit, you spend money on it. So the big hardware companies, the national ones, are seeing a sales decline. Their income is down, and they're laying off workers - or not replacing them.”

As business slowed, workers spent less, affecting everything from restaurants to car dealers to retail stores, and the lower demand for homes also affected the construction industry.

“In the market that we had, which ended about 18 months ago and was abnormal - superheated - builders didn't start construction on units until they were sold,” explained Jerry Bunin, government affairs director for the Home Builders Association of the Central Coast.

“Now we're in a normal market,” he continued. “A lot of units that were built are not selling, which creates a standing inventory, and that's slowing construction.”

The slowdown in development, in turn, had an impact on the construction industry.

“The whole industry is falling down, and you can see some (contractors) are a little panicky about what's coming,” said Robin Hayhurst, executive director of the Santa Maria Valley Contractors Association.

“This (downturn) is not as easy as the last one,” she said. “We had a pretty good 10-year ride.”

Some companies have laid off employees, and others are working fewer hours each month. A few are taking jobs in areas like the San Joaquin Valley, where construction is still going strong.

“The labor pools are thinner than they were,” Hayhurst said. “There is definitely less work, but it's not a crisis. ... Depending on their specialty, some have had to go out of the area to work.”

Bunin noted construction activity runs in cycles, and developers generally are able to go with that flow.

“The building community is really used to this,” he said. “They don't like it. It makes them nervous. But they're used to it. Lots of builders prepare for this.

“If it continues for a long period of time, that's a different story,” he added. “But nobody is going out of business, and there is nobody being close to that that I've heard of among the people we represent.”

Economic impacts

Still, the slowdown in the housing market and its effect on other businesses is evident in some of the statistics gathered by the UCSB Economic Forecast Project:

Northern Santa Barbara County's gross regional product in 2006 was about $8 billion, a 4-percent increase from the $7.7 billion in 2005. By comparison, the area's gross product climbed 6 to 8 percent per year from 2002 to 2005.

Employment growth was virtually flat in 2006. Allowing for jobs lost, an estimated total of 124 jobs were added in Santa Maria, for a growth rate of just 0.2 percent.

The median family income for Santa Barbara County in 2006 was $65,800, up from $64,700 in 2005. But adjusting for inflation, that represented a 2.5-percent drop, based on the buying power of a dollar in 2000.

In Santa Maria, the median family income was even lower, hovering around $50,000, with about 15 percent of the population living below the poverty level.

Retail sales growth in Santa Maria suffered correspondingly. Rising steadily from about $600 million annually in 1995 to about $1.3 billion in 2005, sales remained virtually flat in 2006, rising about 1 percent.

But industry observers say hope is in sight.

Picking up the pace

Although the housing market may not return to the superheated levels of the last five years, there are signs it is picking up again.

“These cycles typically last two years or 14 months, and this one started rather dramatically in 2005,” Watkins said, noting he doesn't expect an economic lag. “Once construction starts, the money gets spent fairly quickly and it starts moving around.”

New home construction is rising.

Data from the Construction Industry Research Board shows 255 single-family residential building permits were issued countywide in the first three months of 2007, or about 20 percent more than the same period in 2006.

Almost all of those - 166 units - were in Santa Maria.

“The historic trends show the city of Santa Maria doing 55 percent of the total in the county,” Bunin said. “This year so far, it's 65 percent. Last year, it was 26 percent.”

Existing home sales are seeing a rise, and loan applications also are increasing.

“We're just now starting to see (loan volumes) come back on the upswing,” said Mike Hahlbeck, president of the North Central Coast Chapter of the California Association of Mortgage Brokers.

“That's traditional for this time of year, but we started the year slower than usual,” he continued. “People are wanting to get pre-approved, to refinance, to switch from one type (of loan) to another.

“Once that starts to happen, it usually starts to bring stability. People start shopping at the hardware store, the furniture store, the landscaping company.”

Although interest rates took a slight jump at midday Friday, Hahlbeck expects them to hover in the 6- to 6.25-percent range unless there is a major change in global conditions.

And he doesn't expect any rise in rates to deter homebuyers: “I don't think a slight rise in interest rates will make people not want to buy.”

In fact, some say this may be a good time to buy a new home. Since some housing prices are down, buyers will pay less property tax. Buyers also can lock in a good interest rate and take advantage of tax write-offs.

“The last time we hit a peak (in housing prices), we had a $220,000 median,” Bunin said. “That fell to $180,000, and if you bought your home (at the peak) as a speculator, you took a loss. But if you still had that home today, it would be worth more than half a million dollars. ... We're telling people this is a good time to buy.”

Mike Hodgson can be reached at 739-2221 or mhodgson@

santamariatimes.com.