CA CCT condo auction 200k

Contra Costa


Earlier this year, Eight Orchids was marketed as an upscale, Asian-influenced part of the revitalization of Oakland's Chinatown. Developed by BayRock Residential, the 157-condominium project, priced the 770- to 1,645-square-feet homes starting at $550,888. Now the developer will start auctioning 41 of those condominiums at $245,000 on Sunday.

"We've had several thousand people walking through the property in the last three week, so the response has been outstanding," said Stuart Gruendl, chief executive officer of BayRock Residential.

With home prices and sales softening, an auction has become a more viable option for builders and developers longing to rid themselves of inventory. Earlier this year, Lennar and Pulte Homes sold off condominiums in Benicia and San Pablo, respectively.

In the 94607 ZIP code, four new homes sold ranging from a low of $374,000 to a high of $518,000, each most likely condominiums, according to DataQuick Information Systems Inc. On Trulia.com, a one-bedroom, one-bath resale condominium at Eight Orchids had an asking price of $349,888.

"If these were exceptional properties in an exceptional location they would be selling like hotcakes," said DataQuick analyst Andrew LePage. "Although not much is selling like hotcakes these days."

The development, built in Oakland's Chinatown, is also close to BART and a bustling downtown. The project features a rooftop garden, underground parking,
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walk-in closets and washers and dryers in each unit. Homeowner association dues range from $389 to around $520 a month based on the unit, according to Gruendl.

"They're sensational prices and everyone's going to get a good buy," said Ken Stevens, co-founder and West Coast chief executive office of Accelerated Marketing Partners, the company handling the auction. "The buyers get to set the price."

The auction will take place at 2:00 p.m. at the Marriott Oakland City Center at 1001 Broadway. The Eight Orchids auction information center is open from 10 a.m. to 5 p.m. at 425 7th St. Advance registration for the auction is required. For more information, visit www.eightorchidsauction.com or call 510-451-4000.

FL WSJ condos

Wall Street Journal


The condominium market is about to get worse as many cities brace for a flood of new supply this year -- the result of construction started at the height of the housing boom.

More than 4,000 new units will be completed in both Atlanta and Phoenix by the end of the year. Developers in Miami and Fort Lauderdale, Fla., are readying nearly 10,000 total new units in a market already struggling with canyons of unsold condos. San Diego, another hard-hit region, will add 2,500 units, according to estimates provided by Reis Inc., a New York-based real-estate-research firm.
[Artist's rendering]
Artist's rendering of the Onyx on the Bay complex in Miami.

The new building comes on top of unprecedented supply. The U.S. finished 2007 with a supply of condos large enough to absorb 10 months of demand, the highest level since the National Association of Realtors began the tally in 1999.

The deluge means bad news for developers and potentially lower prices, including in cities such as Atlanta and Dallas that have avoided the worst of the housing bust. If defaults and foreclosures rise, lenders will feel the pain too.

Regulators have been sounding the alarm for weeks about the exposure of small and mid-size banks to commercial real estate, which mostly means construction loans to developers of condos and single-family housing.

Lenders of all sizes have $42 billion of condominium debt on their books, according to Foresight Analytics. In just three months -- between the third and fourth quarters of last year -- the delinquency rate rose to 10% from 5.9%, says the Oakland, Calif., research firm.

The news isn't bad for everyone. Vulture buyers have started to circle, hoping to take advantage of foreclosed properties that banks may start dumping at fire-sale prices. Also, some condos are being converted to rental units, increasing supply for renters and putting downward pressure on prices.

It may seem surprising that anyone would want to add supply to a market whose troubles have been well-publicized for many months. But the economics of condo building encourage developers to bring half-finished projects to completion, even when prices and demand are plunging.

Developers usually put up their own money for a project first, then spend borrowed funds. Once developers have spent their money and have commitments from lenders, they have a strong incentive to keep building to finish the project.

"These developers had millions of dollars tied up and they had them financed so they just moved forward," says J. Ronald Terwilliger, chief executive of Trammell Crow Residential, which builds many rental apartment buildings and also a few condos. "What they hope is that by the time the project is finished the market comes back."

Shelving Projects

However, developers and lenders can more easily shelve projects that are still in the early stages. Many developments nationwide are being canceled, suggesting that by next year or 2010, the number of new condos coming onto the market may slow to a trickle.
[Chart]

One big question hanging over the market is how many of the buyers who have put down deposits during construction will show up to close the deal. Some deposits were as little as 3% of the purchase price. The price of a condo has frequently fallen more than the amount of the deposit, giving the buyer an incentive to forfeit the deposit.

For example, if a buyer put down $50,000 for a unit priced at $500,000, and the value falls to $400,000, the buyer is apt to walk away -- or find some fault with the unit and sue the developer to get the deposit back. Furthermore, some buyers who still want to move in are finding that they no longer qualify for mortgage loans.

In Miami, only 57 units in the 118-unit Onyx on the Bay have closed since August 2007, leaving the remaining 61 units in the possession of the developer, according to Miami-Dade County records. Willy Bermello, the Onyx's developer, could not be reached.

The deteriorating economy isn't helping. "When the world goes to hell in a handbasket, the last thing anyone wants to buy is a condo," says Cathy Schlegel, a mortgage-loan broker in Fort Worth, Texas, whose condo in a high-rise called The Tower sat on the market for 14 months before she finally sold it at a loss in February.

The rising supply is a reflection of the picture in 2004 through 2006 -- a time of huge demand for condos. Speculation was rampant as investors believed empty nesters and young professionals seeking an urban experience akin to what they watched on "Friends" would prop up the condo market for years.

Most projects take about three years from the time they are marketed to potential buyers to the time they are ready to be moved into. Deposits help developers get a construction loan that is to be paid off when the buyers close on their new condos years later.

However, cancellations are rising, meaning developers may not be able to pay back their banks. Peter Zalewski, founder of Condo Vultures Realty LLC in Miami, says condo developers he is working with are expecting 20% to 40% of buyers who put down deposits to walk away from the deal. In some areas, such as inland buildings and new projects along the river in Miami "walkaways" are expected to be even higher.

Unlike single-family housing, condos tend to be concentrated in certain areas, meaning the pain is limited to pockets of the country.
[Chart]

In Jacksonville, Fla., developer Cameron Kuhn had planned to redevelop the SunTrust office tower into office condos as part of a larger complex that included residential condos. Now the housing condo tower is on hold, dashing city officials' hopes that the project would help to bring parking, residents and more life to the downtown.

Prices of condos have been steady in some areas and fallen elsewhere. The median condo sales price in the Cape Coral-Fort Myers area of Florida fell 26% to $202,300 in the fourth quarter of 2007 from $273,400 a year earlier.

Prices dropped nearly 20% in Tucson, Ariz., and 12% in the Atlanta area during that time, according to National Association of Realtors data. Inside the newly minted Quantum on the Bay in Miami, prices for two-bedroom units have fallen from the high $700,000s to around $500,000.

One option for a developer is to convert the condos to apartments. However, these projects are usually financed with the presumption that sales of individual condos pay off more than rents from a comparably sized apartment building. Also, lenders typically expect developers to pay off condo construction loans with the millions of dollars they receive when closing on the sales. Such a quick payout isn't possible if the developer is only receiving monthly rental payments.

Mr. Terwilliger says Trammell Crow plans its condo developments with an eye towards converting them into rentals if necessary. But its profits are cut when it does that because the company typically spends more for land and amenities when developing condos, he says.

A project called ATLofts at the mammoth Atlantic Station project in downtown Atlanta presold about 80% of its 303 units in a mixed-use building that had condos above retail space. But the project ran into water-infiltration problems. That gave buyers an out.

The developer, Lane Co., ended up turning about half the units into rentals. The developer of the retail space, Atlantic Town Center, bought the remaining 156 units as condos. Today, only 52 of those have sold, according to Haddow & Co., an Atlanta-based real-estate consulting company. An Atlantic Town Center spokesman predicted the remaining condos will sell "considering the prime location."

As more condominium projects get into trouble, investors are looking to pounce. Some 700 people showed up for a distressed-real-estate conference this past week in Miami where the condo glut was the dominant discussion subject.

Valet parking attendants had to wave participants away from the hotel and toward a parking lot at a shopping center, and attendees overwhelmed the conference halls, forcing many to watch the proceedings on screens in adjoining rooms.

--Peter Grant contributed to this article.

Write to Jonathan Karp at jonathan.karp@wsj.com

CA MN FB on tour!

Mercury News

For some, foreclosed homes may be the embodiment of broken dreams, but for others they can be a sign of hope.

Leala Jammer, 29, of Stockton, went on a foreclosed home tour on a recent Saturday along with 20 other first-time home buyers and investors to looking at 10 bank-owned homes in two hours. She's hoping to find her first house.

She said she and her husband were priced out in the last few years and are hoping for something within their means.

"It's terrible right now," Jammer said. "But I'm so happy because now's the time for new homeowners to get into the market."

Cesar Dias' entrepreneurial spirit is catching fire. Dias, whose brainchild was the Repo Home Tour in foreclosure-struck Stockton, is now being copied from Boston to the Bay Area.

Dias, who started the tour last September with one bus, now has three with two trips scheduled each Saturday from 11:30 to 1:30 p.m. usually with around 10 properties to view. Dias, a Realtor and loan agent with Approved Financial & Real Estate Center in downtown Stockton, said the movement on properties each week varies, but recently there were three offers made on the homes people saw on the tour. "I'm not saying they all got accepted," he said. "But the next week, we see a lot of repeat clients."

Rande and Tracy Ross, a married couple also from Stockton, came on the tour to look at possible investment properties, mainly to rent out.

"We
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would like to rent out to a family that needs a place to live," Tracy, 37, said. "It makes you sad. So many people got into these bad loans because they listened to their agents or mortgage brokers. They thought they were experts."

The Rosses paid more than $400,000 for their home in 2005, and were going to look at foreclosures in their own neighborhood, priced less than $300,000.

"On one hand, you say, 'Oh, my God!' but on the other hand, this could be a good market for buying," she said.

Bill and Darlene Reuss, from Redwood City, were on the tour to look for a second home. With a daughter and grandchildren already living in Stockton, it could possibly be a retirement home, Darlene Reuss said.

She said she saw the foreclosure tour on "60 Minutes" and decided to call and invest in a home. "Real estate is something real that you can use, it's not just a piece of paper," she said.

Other foreclosure tours have sprung up after Dias' success was broadcast on both national and cable news channels. Now the tours are staples in Florida, Michigan, Las Vegas, Phoenix, Dallas, San Diego and the Bay Area, including "Foreclosure Finder Tours" in Brentwood.

"We started doing this three months ago in December," said John Case, an associate broker with Intero Real Estate Services "' Delta Communities in Brentwood. "Nobody wants to waste time, money and gasoline. We can get into a home they may not be able to get into without an agent."

Case said that the tour, usually of about 10 properties, covers most of East Contra Costa County's communities including Antioch, Brentwood, Discovery Bay, Oakley and Pittsburg. About three brokers and eight agents are involved and many accompany the tour.

Case said that while there are investors, most of those riding in the vans are first-time home buyers looking for a home.

"The overwhelming interest is in Brentwood, probably because it has taken the biggest hit in price," he said.

Coldwell Banker Fremont and Coldwell Banker Pleasanton began arranging private tours of bank-owned properties last month, but won't be colorfully wrapping a bus, said Will Butler, managing broker. He said their tour is not that popular yet.

"We're not seeing people living in Fremont running to buy a bank-owned property in Tracy," Butler said. "They want to find a place in Fremont that's a great deal."

He said that most interested buyers want amenities and a good bargain. Foreclosed homes are selling about 30 percent less than original asking price in the Tri-Valley and 35 percent lower in Fremont and Newark.

"That's what's attracting people, there are good prices," Butler said. "There are a lot to choose from, it's more or less trying to find the right one for them."

Greg Paquin, president of the Gregory Group, a real estate information and consulting company based in Folsom, said that these foreclosure tours are giving "exposure" to homes that may not otherwise make it to the general public.

"Many of these bank-owned homes can be purchased for less than the replacement costs," he said. "There is a sense that we may not be completely at the bottom, but maybe we're pretty darn close."

Paquin said that new home builders are probably the least affected by foreclosed properties. Buyers wanting a new home may not be tempted by a foreclosure and builders responded to the market by reducing inventory and construction, he said.

Tracy Ross said that Dias' Stockton tour was worth the time and was eager to see more opportunities to buy.

"I would like to see a couple more areas, maybe even the one in San Diego," she said. "We have family there."

Barbara E. Hernandez covers real estate. Reach her at 925-952-5063 or bhernandez@bayareanewsgroup.com. Read her Bay Area real estate blog, Property Lines, at www.ibabuzz.com/propertylines.
FORECLOSURE TOURS

OR BB

Bend Bulletin


Renaissance Ridge, a partially-developed, 210-lot subdivision in southwest Bend might be headed for foreclosure, according to documents filed with the Deschutes County Clerk’s office, but developer Randy Sebastian said he’s working hard to prevent it.

The number of homes going into foreclosure continues to rise in Deschutes County, and Renaissance Ridge would be among the largest casualties to date of the local real estate downturn.

The default notices filed March 7 against Aspen Landing, LLC, a holding company for the subdivision’s developer, Renaissance Homes, say Cleveland-based KeyBank is owed approximately $13.1 million plus interest by Aspen Landing. The Renaissance Ridge subdivision property owned by Aspen Landing is to be put up for auction July 25 in lieu of payment.

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Sebastian, the owner of Renaissance Homes, said he is committed to the development located off of Brookswood Boulevard and plans to refinance it with a local lender within 60 days. The Portland resident, who was in Bend on Wednesday for the opening of his company’s design center at 55 N.W. Wall St., said he is not walking way from the development; rather, KeyBank is getting out of the housing market.

“It’s not a Bend issue, not a Renaissance Homes issue; it’s a lender that wants out of the builder/developer market, and they don’t want to extend their loans,” said Sebastian. “I’ve got my life savings out there.”

In a statement sent to The Bulletin by KeyBank and attributed to Roberta Fuhr, a senior vice president and manager of the Homebuilder Group, the bank confirmed it has initiated foreclosure proceedings on Renaissance Ridge in accordance with Oregon law, adding: “This is an unfortunate situation for all involved. It is never a lender’s preference to foreclose in order to enforce its creditor rights.”

The statement also said that although KeyBank has discontinued lending to builders outside of the 13 states in which it has branches, it will continue to originate loans for home builders in Oregon and other states within its branch banking market.

Sixty-four homes in the subdivision have been built or are under construction. Deschutes County land records — in which the subdivision is legally recorded as Aspen Rim — show that 36 homes have been purchased.

Homes in the development currently range from $369,000 to $590,000. The rest of the development has been subdivided, paved with streets and strung with utilities, but the individual lots are unimproved.

The development has dangled some incentives for prospective home buyers in recent months, including offers to buy down interest rates on home buyers’ loans for up to $14,000, and in February 2007, offering a free Mercedes Smart Car.

It also shaved prices on its homes in February by 11 percent to 20 percent, according to The Bulletin’s archives.

Renaissance Ridge homeowner Bill Ormsby, a Southern California retiree who has lived in the development for a year, said he has wondered about the profusion of empty lots in the development but said he feels confident he and his wife won’t be leaving.

“We’re gonna stay put,” said Ormsby. “It shouldn’t affect us too much.”

Renaissance Homes is also developing a 60-home subdivision near Shevlin Park and a 30-unit townhome development in Bend’s NorthWest Crossing. Sebastian said he has sold units in each of his three Bend developments within the past week and that activity is “still strong.”

“There are some positive things happening,” Sebastian said. “We’re not leaving Bend.”

Not the first

Renaissance Ridge is not the first subdivision in Bend to receive a notice of default, a legal device used to notify potential creditors that an entity is behind in the payment of a loan.

In May 2007, Umpqua Bank filed a notice of default on a 38-acre plot of land approved for 265 homes in northeast Bend then owned by Proterra Development Ventures, according to The Bulletin’s archives. The bank sold the land in October 2007 for $10 million to the Edge Development Group, which is in the process of developing a subdivision on the property — titled Mirada — with homes ranging from $189,900 to $249,000.

A notice of default is not a guarantee of foreclosure, said Tom Greene, the president of the Central Oregon Association of Realtors. Greene said the vast majority of defaults are remedied before foreclosure proceedings — usually held six months after a notice of default — ever begin.

“Under Oregon law, the occupant of a home has up until five days before (a property) goes to court to make a deal with the bank, to sell to someone else or buy it (outright),” Greene said.

Greene added that should Renaissance Ridge go to foreclosure, homeowners in the subdivision would be legally unaffected.

Softening market

Home sales in the region slowed down during the past couple months, compared with last year.

Combined single-family home sales in Bend, Redmond and Sisters dropped from 470 in the first two months of 2007 to 263 in the first two months of 2008, according to data provided by the Central Oregon Association of Realtors, and housing supplies in those three cities remain at 11, 12 and seven months, respectively, according to the association.

In addition, through March 17, Deschutes County has recorded 265 notices of default, according to county records, which is an increase from the 75 notices recorded in the same period last year. For all of 2007, the county recorded 591 properties that had entered the earliest stages of foreclosure.

Market fears

Elsewhere in Bend, Buena Vista Custom Homes has rented 18 of the 29 homes in its Forum Meadows development near St. Charles Bend since efforts to sell the homes in mid-December at auction failed to produce a single sale, said Mike Higgins, a spokesman for the Lake Oswego-based builder.

“It was done in a loss position, but it was better than the alternative,” Higgins said. “If we can’t sell them, we’ve got to do something. We looked to auction the homes, but it didn’t work. Builders right now are just trying to make the mess go away.”

Homebuyers and builders have moved from overconfidence to fear of a sluggish market that won’t recover, said Peter Storton, the owner and broker of RE/MAX Town & Country Realty in Sisters.

“The next 12 to 18 months will be a reverse of what we have seen,” Storton said. “We have to hang on to the customers that we have and convince people that it’s a good time to buy.”

Greene wondered if all the recent housing turmoil is ultimately a good thing for homebuyers. He said he hates to see people get into financial trouble, but “land prices in Deschutes County got so high, and this is one of those steps in this correction,” said Greene. “It’s like the stock market; that’s basically what’s happening here.”

Jeff McDonald contributed to this report.
Andrew Moore can be reached at 617-7820 or amoore@bendbulletin.com.

NYT Bigger than the Fed

New York Times

Stock markets fell sharply at the opening bell on Monday as Wall Street reeled from a stunning series of weekend developments that confirmed investors’ worst fears about the fragile state of the financial industry.

The Dow Jones industrials plummeted at the start of trading as one of Wall Street’s most storied banks, Bear Stearns, lay on its deathbed and central bankers scrambled to stave off a devastating crisis of confidence in the investment community.

At 9:35 a.m., the Dow was down about 140 points, and the broadest measure of the American stock market, the Standard and Poor’s 500-stock index, lost 1.6 percent, as the index edged toward bear-market territory.Investors remain fearful that a panic in the credit markets — which threw Bear Stearns to the brink of bankruptcy and forced a sale to JPMorgan Chase at the humbling price of $2 a share — could spread to other big brokerage firms with extensive exposure to toxic mortgage-backed securities.

The Federal Reserve launched a pre-emptive effort on Sunday to stanch a worldwide stock sell-off, carrying out a series of emergency measures including a cut to the interest rate at which the Fed lends to banks in the hopes of shoring up confidence in the credit markets.

But the moves did not stop widespread declines in the European and Asian markets, all of which dropped more than 3 percent in overnight trading on Sunday and Monday.

“The problem is bigger than the Fed,” said Meredith A. Whitney, an Oppenheimer financial services analyst. “Trillions of dollars of securities were underwritten on the false assumption house prices could never go down on a national basis. That falsehood has put the entire financial system in a tailspin.”

Hong Kong’s benchmark index lost 5.2 percent and Tokyo’s Nikkei 225 index lost 3.7 percent to close at 11,787.51, after declining as much as 5 percent during the day.

All the major European stock indexes, from London to Paris to Berlin, were down more than 3 percent in afternoon trading.

On Wall Street, the Nasdaq composite index, heavily weighted with technology stocks, shed 1.8 percent.

The euro rose again against the dollar and investors rushed to the relative safety of United States Treasuries. The dollar fell to a 13-year low against the yen, and oil hit a new record, near $112 in Asia before falling back. Gold prices, already at record levels, also rose.

The Bank of England moved to help bolster the liquidity of the financial markets and bring down interbank lending rates by offering $10 billion in three-day loans.

Investors across Europe and Asia tried to figure out who might invest more capital to shore up Western financial institutions caught with heavy losses on their holdings of mortgage-backed securities. Chinese state-run institutions, with some of the largest cash holdings, appeared to be on the sidelines, watching as the prices of financial shares plunged, while Citic announced that it would not proceed with a previously announced deal to acquire a $2 billion stake in Bear Stearns.

The declines in Tokyo came even as the Japanese central bank, the Bank of Japan, moved to shore up financial markets by injecting $4.1 billion into short-term money markets. Asian stocks have also been hurt by the weakness of the dollar, which erodes the value in local currencies of overseas profits and forces big exporters like Toyota and Sony to raise prices in foreign markets.

Stock markets in Asia’s two emerging giants, China and India, suffered the biggest losses on Monday. The Shanghai A share market was down 3.6 percent in late trading, the Hang Seng Index in Hong Kong was down 5.2 percent and the Shenzhen A share market was down 6.4 percent. Investors in the China region were troubled not only by the ongoing financial troubles in the United States but also by a weekend of news reports of unrest in Tibet and adjacent Chinese provinces.

“Local investor sentiment is not good — the Hong Kong market is really caught in the middle between happenings in China and the United States,” said Ricky Chan, a stockbroker at Phoenix Capital Securities Ltd. in Hong Kong. With the Shanghai market declining, he said, “plus with the turmoil in Tibet, the local market is quite nervous at this point in time.”

In India, the Sensex 30 index in Bombay plunged 5.1 percent by early afternoon. The index had climbed 47 percent last year on an often speculative boom fueled to a considerable extent by foreign investment.

But India also imports nearly all of its oil, and now faces rising costs with crude oil close to $110 a barrel; this has contributed to a weakening of industrial production, up just 5.3 percent in January from the same month a year ago, and rising wholesale prices, up 5.11 percent for the week ending March 1.

Officials for the China Investment Corporation, China’s $200 billion sovereign wealth fund for domestic and overseas stock purchases, declined to comment on whether American financial companies had any appeal in the current credit market difficulties. Analysts were skeptical that the Chinese would step in while markets remain in turmoil.

“I would think the Chinese will be very careful,” said Hong Liang, a Goldman Sachs economist who specializes in China.

Investments by China’s sovereign wealth fund, the China Investment Corporation, and by Chinese state-owned entities have had a dismal track record so far in the financial sector.

The China Investment Corporation’s maiden investment as it was being organized last spring was a $3 billion nonvoting stake in the initial public offering of the Blackstone Group, the American private equity company. Acquired for only a 4.5 percent discount to the initial offering price of $31, or $29.605, the investment has already lost nearly half its value as the stock has plunged, closing at $15.78 on Friday.

The Blackstone investment has been an embarrassment for the Chinese government because its price was widely reported at the time of the deal — in contrast with bond purchases by China’s central bank for the country’s foreign-exchange reserves, which are managed with the strictest secrecy.

CA MN

Mercury News


Two newly built homes are on the market on the same street in the same development. One is a bank-owned property offered at $1 million, and the other is listed by homeowners at $1.5 million. Guess which one received 10 offers and has a sale pending?

You're right. And most of the buyers didn't care that it was a foreclosed property.

In the new housing landscape, home sellers can no longer ignore the bank-owned properties in their neighborhood, experts say, because in many cases they are setting the market price -- better for the buyer, but worse for the seller.

"The buy-down isn't working, the free car isn't working," said Joe Davis, a real estate agent with Hometown GMAC Real Estate in Pleasanton and the listing agent for the $1,074,900, five-bedroom, three-bath home. "Price is working, period. If there's an REO (or bank-owned property) or short sale on your street, then consider that when you list your house."

But many may not be considering the stark reality of having a foreclosure in their neighborhood. Last month, RealtyTrac reported 11,139 homes in California were foreclosed on, or almost three times the number of homes sold in the Bay Area.

Trulia.com, a real estate search engine, compiled listing data for both REOs and those generated by other sellers. The data, which encompasses all of February, shows that Marin, San Francisco and San Mateo counties had the largest gap between median asking prices and prices for foreclosed homes. The median
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list price in San Francisco was $809,500, while the average REO was $616,743, a difference of 24 percent. In San Mateo, the median listing price was $799,000, and the median REO was $626,500, a 22 percent difference.

Differences were smaller in counties where foreclosed properties were common. Contra Costa and Alameda counties had listing prices 12 and 9 percent higher, respectively, than foreclosed properties, while hard-hit San Joaquin County actually had listing prices 6 percent below median bank-owned home prices.

Similarly, cities dealing with large numbers of foreclosures, such as Oakley, Fairfield, Tracy and Manteca, also had listing prices competitive with foreclosed homes in the neighborhood. San Jose and Daly City homes were essentially priced the same as foreclosed properties.

Luke Currier and Ed Jeffry, founders of the National Association of Responsible Loan Officers, said that while many lenders will ignore a foreclosed property in an appraisal, more than a few can't be overlooked.

"If within a quarter-mile radius there are 15 REOs, at some point in time they become what is the norm, and that's what's happening to a lot of people," Currier, of Pleasant Hill, said.

Jeffry, who helped a client buy a home in Inglewood in Southern California, said that both she and the seller agreed to $525,000. But when it was reappraised, it was found to be worth $499,000.

"It's almost to the buyer's advantage to cancel the sale and rent for three months," he said. "Real estate is all about making money on the buy."

And many buyers are threatening to walk away from deals if they feel they are paying too much.

"Buyers don't mind appraisers coming in less, and sellers don't have a choice," said mortgage broker Jay Damato of Elite Financial in Walnut Creek. "It happened the other way, too. (In the housing boom), it would appraise for a higher price, and sellers would say, 'Too bad, make up the difference.'"

Mike Tabacco, a certified residential real estate appraiser in Walnut Creek, said that in some areas there are few nondistressed properties to appraise.

"Since October in Antioch, there were only 13 sales in the $500,000 to $600,000 range, and nine of those were short sales and foreclosures," he said.

Tabacco said he has appraised property that came in with a lower value than the offer. He said the lender and agents sat down and renegotiated the deal.

Cicely Tippery, a real estate agent with Coldwell Banker Amaral & Associates in Brentwood, knows all about bank-owned properties. She sells them to first-time home buyers and investors alike.

"I think REOs might price themselves due to their condition," she said. "Their condition tends to be more deteriorated and not as well-taken care of."

Tippery said that while foreclosed properties compete with one another, they are becoming competition for the average homeowner, and not always for the better.

"(REOs) are generally not in good condition, so it may take $10,000 to $20,000 less to bring it up to the level of the house next to it," she said. "Buyers need to be educated here; they need to figure out what's fair."

Tippery also is aware that pricing the foreclosed properties competitively has an impact on the surrounding neighborhood.

Davis, who also sells bank-owned properties, said that speculation fed the foreclosure market in San Ramon. The client who lost the home had bought three houses in the master-planned community of Windemere, he said.

While some sellers have expressed animosity at his property's lower price, he said builders are also cutting prices and adding incentives.

"Personally, I recommend to all my clients not to sell right now," he said. "Right now is the best time to buy.

Barbara E. Hernandez covers real estate. Reach her at 925-952-5063 or bhernandez@bayareanewsgroup.com. Read her East Bay real estate blog, Property Lines, at http://www.ibabuzz.com/propertylines.

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CA MN FB

Mercury News


Juan Medina, who spent 30 years working at U.S. Steel in Pittsburg, has no equity on his house here and an adjustable-rate mortgage for which the interest-only payment has gone up to $5,500 a month.

"I'm retired," Medina, 62, said. "I tried at least 20 different lenders and there's no equity in the home."

Although the notice of public auction was slated for Feb. 26, it was postponed until April 9. The home, according to estimates on ForeclosureRadar, has lost about $27,258 in equity, and Medina is one of the 8.8 million homeowners who now owes more than the house is worth.

For the first time since the Federal Reserve started tracking the data in 1945, the amount of debt tied up in American homes exceeds the equity homeowners have built.

The Fed reported Thursday that homeowner equity actually slipped below 50 percent in the second quarter of last year, and fell to just less than 48 percent in the fourth quarter.

And the housing industry's woes only seem to be getting worse.

Also Thursday, the Mortgage Bankers Association said foreclosures hit an all-time high in the final quarter of last year. And pending U.S. home sales -- those in the gap between when a buyer signs a contract and when the deal closes -- came in below analyst expectations for January and remained at the second-lowest reading on record.

"There is no sign that we're near the bottom in the housing market," said Douglas Elmendorf, a senior fellow at the Brookings Institution
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and former Fed economist. "Housing prices will probably fall for a year, two or three to come."

The trifecta of reports illustrates a housing market caught up in a "very negative, reinforcing downward spiral," said Mark Zandi, chief economist at Moody's Economy.com.

Home equity, the percentage of a home's market value minus mortgage-related debt, has steadily decreased even as home prices and homeownership rates jumped earlier this decade. That was due to a surge in cash-out refinancings, home equity loans and lines of credit and an increase in no-down-payment mortgages.

Now, declining home prices are eating into equity, and economists expect the figure to drop even more.

Economy.com estimates 8.8 million homeowners, or about 10 percent of homes, will have zero or negative equity by the end of the month. Even more disturbing, about 13.8 million households will be "upside down" if prices fall 20 percent from their peak.

Jay Damato, broker and owner of Elite Financial in Walnut Creek, said the housing downturn is the worst he has seen.

"Mostly in the 1990s you had to put 10 percent down, so if prices went down to 10 percent you were still even," he said.

Most homeowners have spent all their savings and may have even used their credit cards to make mortgage payments, so without equity they can't afford to refinance.

He said he's also working on doing "short-refis," which are similar to a short sale, where the bank agrees to sell a home at a loss rather than foreclose. The new refinancing would mean a bank would agree to a loan for what the house was worth instead of what is owed.

"You have borrowers now that need help now," he said. "Three or four weeks may be too late."

Experts believe foreclosures will rise as more homeowners struggle with monthly payments as the interest rates on their mortgages adjust higher. Problems in the credit markets and eroding home values are making it harder for people to refinance their way out of unmanageable loans.

The threat of so-called "mortgage walkers," or homeowners who can afford their payments but decide not to pay, also increases as home values depreciate and equity diminishes. Banks and credit-rating agencies already are seeing early evidence of it.

But not everyone believes banks and lenders are doing all they can to alleviate foreclosures.

Bryce Ellsworth, a real estate broker with Windermere Ellsworth & Associates in Brentwood, said that short sales, a step before foreclosure when banks sell homes at a loss, are difficult to close because of banks' "unwillingness" to work with buyers.

"There is no service, no accountability and (banks) are unwilling to bend in 90 percent of the circumstances to the detriment of themselves, the economy and housing markets," he said.

A massive loss in home equity could even mean some Americans won't have enough money to retire. On average, housing is Americans' single largest asset, representing 39 percent of a household's total net worth.

Jerry Ruzick, 58, a former computer programmer diagnosed with colon cancer, knows it's only a matter of time before he loses his San Pablo house he shares with his partner.

"It's hopeless," he said. "We just dug our hole and eventually will lose this house."

Ruzick put a second mortgage on his house to pay for medical bills and his partner has stopped working as a chef to act as his caretaker. Ruzick has skipped two of the past few payments.

"We don't have any money for this second loan," he said.

Ruzick, who is taking morphine to deal with pain, said that each day is a trial and he has accepted that he may lose what has been his home for the past 25 years.

"It will be decided, one way or the other," Ruzick said. "I don't have much hope in the future."

Last month, Congress passed a $168 billion economic stimulus package with provisions aimed at helping homeowners refinance into more affordable loans. The Federal Reserve has also slashed interest rates in hopes of spurring growth. On Tuesday, Fed Chairman Ben Bernanke suggested that lenders reduce loan amounts to provide relief to beleaguered homeowners

"At the end of the day, these efforts will be insufficient," Zandi said. "Policy makers will need to be more aggressive and put taxpayer money on the line to stem this."

Medina said he hasn't made a payment for six months and has been denied twice for a loan modification due to financial hardship.

"The house is the only thing I have," Medina said. "For me, the American Dream is gone."

Barbara E. Hernandez covers real estate. Reach her at 925-952-5063 or bhernandez@bayareanewsgroup.com. Read her blog at http://www.ibabuzz.com/propertylines. The Associated Press contributed to this report.

CA 2CCT

Contra Costa


Ruby Aldana-Bonite said she believes the new agreement by Fannie Mae and Freddie Mac to only buy mortgages with independent appraisals could help "keep everybody's noses clean."

"A lot of times, orders would be dangled in front of you, 'If you come in at this value, we have more work for you,'" she said. "It's not right."

The accord announced this week between the country's two largest mortgage purchasers and New York Attorney General Andrew Cuomo will likely benefit independent appraisal firms and could force lenders to close or sell off their appraisal operations.

Cuomo's office investigated billions of dollars of home loans that Fannie and Freddie bought from lenders. He says lenders have pressured appraisers to inflate the listed value of homes, contributing to a national mortgage crisis that is forcing families into foreclosure.

Aldana-Bonite, of Benicia-based Aldana-Bonite Appraisals, said that although she favored the new rule, there would be few changes for independent real estate appraisers.

"Banks have already gotten rid of in-house appraisers now and are now using a third party," she said. "And that's good if they're not getting that pressure from the loan officer and you're not pressured or leaned toward a certain value."

With the cost of a home appraisal running about $300 to $400, the industry has reaped billions in revenue during the recent housing boom.

The agreement ends the practice of lenders using their in-house staff for initial
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home appraisals and prohibits the use of appraisal-management companies owned or controlled by lenders.

Lenders that own such companies include Wells Fargo & Co. and Countrywide Financial Corp. Appraisal-management firms act as intermediaries between lenders and appraisers.

Rob Denton, owner of Denton Valuation in Walnut Creek, said it was a bit premature to speculate on what will happen to the appraisal industry because there are few safeguards for appraisers.

"I would like to see an independent agency or another department of a financial institution whose income or profits are not based on the origination of loans to oversee appraisals," he said. "That's the problem."

Denton said that "appraisal shopping," or when mortgage brokers and loan agents called multiple appraisers to find one who agreed to their price, was common in the housing boom.

"The feds are suggesting that when you are prompted by a broker to reach a certain value, those people should be reported," he said. "But there doesn't seem to be any clearinghouse for doing that. ... We're not going to accept work under those premises, but there are no avenues for corrections."

The American Society of Independent Appraisers said in a statement Tuesday that the Virginia-based trade organization favored the agreement but plans to take advantage of the 90-day comment period to point out areas of concern. The new regulations will become effective Jan. 1, 2009.

Jay Fishman, chairman of the appraiser group's governmental relations committee, stated, "This concern is ... the independence of the appraiser has less to do with where the appraiser is employed or who hired the appraiser, and much more to do with whether there are substantive and enforceable prohibitions against pressuring appraisers."

The trade group representing mortgage brokers, which can designate specific appraisers, protested the agreement and threatened legal action.

The agreement "will increase costs to consumers by removing thousands of small-business competitors from the marketplace," Roy DeLoach, executive vice president of the National Association of Mortgage Brokers, said in a statement.

Barbara E. Hernandez covers real estate. Reach her at 925-952-5063 or bhernandez@bayareanewsgroup.com. The Associated Press contributed to this report.






The conservators who are running Cal State 9 said Wednesday they have begun to shop around the failed credit union.

The idea behind such a transaction is to continue to protect the assets of Cal State 9's members and to maintain the company's financial stability, according to the National Credit Union Administration. That group is managing Cal State 9 through the conservatorship, Melinda Love, a regional director with the credit union administration, stated in a letter posted on the Cal State 9 Web site.

"This week, NCUA representatives came to a decision to pursue the combination of Cal State 9 with another credit union," Love stated in her letter to the credit union's members.

Concord-based Cal State 9 would be combined with another credit union through a transaction that would enable the buyer to purchase some or all of Cal State 9's assets and assume some or all of the company's liabilities, including insured deposits.

"This transaction, known as a 'purchase and assumption,' represents the most financially sound decision and is in the best interest of Cal State 9's membership," Long wrote in her letter.

Despite Cal State 9's troubles, the state-ordered conservatorship has enabled the credit union to keep its doors open and to protect the assets of its members.

Still, the backdrop for any deal is the dreadful financial condition of Cal State 9. Losses at the credit union have accelerated dramatically.

During all of 2007, the credit
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union lost $61.6 million. In September, the credit union's losses totaled $45.9 million over the first nine months of the year. In June, Cal State 9's losses totaled $9.1 million. During 2006, Cal State 9 posted a profit of $9.5 million.

Cal State 9's woes were fueled by the credit union's venture into home equity loans. When the mortgage meltdown shredded the economy, Cal State 9 was saddled with a rising number of delinquent loans.

By year's end, Cal State 9 was burdened by nearly $68 million in real estate loans that were delinquent by more than one month, according to a regular quarterly report the credit union files.

The National Credit Union Administration said it believes a transaction could be completed by early this summer.

Discussions have begun with credit unions that could undertake a deal, said John McKechnie III, public and congressional affairs director with the credit union administration. The group's officials did not identify the possible candidates.

"These situations are rare," McKechnie said. "The National Credit Union Administration would manage whatever assets and whatever liabilities would remain" once the deal was concluded.

The nature and amount of the residual assets or liabilities would vary on a case-by-case basis.

"Our agency's first interest is to preserve all of the assets of the members," McKechnie said.

Credit unions pay a deposit and insurance assessment into the National Credit Union Share Insurance Fund, which is like the FDIC fund to insure bank and thrift deposits. That fund provides the financial support to allow the credit union administration to handle assets and liabilities as necessary.

Cal State 9 is the second East Bay credit union in recent months to stumble into a quagmire of housing-related mortgage failures and red ink.

Pleasanton-based Sterlent Credit Union is attempting to combat a loss of $4.8 million during 2007 and millions of dollars in delinquent mortgages. That company continues to operate as usual and is protecting its members' assets while it attempts to stabilize its operations.

That same message of assurance is being delivered to Cal State 9 customers.

"We want Cal State 9 members to know that their funds are insured, the doors are open and come on in," McKechnie said.

CA OCBJ CCT

Orange County

Mortgage brokers are buzzing over the latest bad news for the local housing market: Wells Fargo has designated all of OC and L.A. as “severely distressed”—putting the two counties in the same bottom category with San Diego and the Inland Empire. Wells becomes the first major lender in OC to completely eliminate stated income, stated asset (“liar”) loans, even for highly qualified borrowers. Jason Grange of Premier Mortgage Lending says other lenders are sure to follow: “There are officially no more lenders offering 100% financing in OC ...

Most borrowers can expect to put down 10% or even 15%” ...

Contra Costa

A Southern California developer has pulled the plug on a planned multiuse project on San Pablo Avenue near the Del Norte BART station in El Cerrito.

The Mayfair Block project, brought forth by the Olson Co. in 2005, originally was planned to include about 10,000 square feet of retail space on the ground floor, and 58 condominiums above, in the area between San Pablo Avenue, Cutting Boulevard, Kearney Street and Knott Avenue. A city official said El Cerrito had approved the project, but the developer backed off in November because of the housing slowdown and escalating construction costs.

"Everything looked fine, and then the housing slowdown began," said Mitch Oshinsky, El Cerrito's community development director. "Olson, like other developers, started slowing down and stepping back from projects. They had stepped back from a number of other projects but kept (the Mayfair Block) project active. Eventually, they came back and had to let that project go as well."

A representative for the Olson Co. confirmed that the developer would not continue with the project but declined to comment further.

The area where the Mayfair Block project was planned is divided into three parcels, one owned by the city's redevelopment agency and two owned by private parties. Oshinsky said Olson had requested changes to the project from both the redevelopment agency and one of the private owners.

According to Oshinsky, Olson asked the city for a reduction in a public safety fee to
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which it had agreed, which the city refused. He said the developer also made changes to the physical appearance of the project, which the city was not happy with.

Olson also asked to reduce the number of condominiums from 58 to 51, Oshinsky said, to which the city and redevelopment agency agreed. Oshinsky said he believed Olson was interested in more reductions to the housing element, which the city was not willing to grant.

"We got the sense that they wanted to reduce it further, and I don't know by how much, but it seemed like it was going to be significant," Oshinsky said. "Because it's right across the street from BART, it is one of the areas that seemed appropriate for smart growth, for transit-oriented development, and some level of density, so that people can walk to public transit and all of that.

"If you go to a smaller project without that many units across the street from BART, it's just not the optimal kind of development to foster environmental quality."

Oshinsky said Olson also sought concessions from one of the private property owners. Oshinsky said he did not have details about what those concessions were, but the owner was not willing to grant them.

There have been no new plans or applications submitted to the city for the area, according to Oshinsky, but one of the private property owners has listed the land for sale.

Ray Devlin, a commercial broker representing the landowner, said he is marketing the property and hopes to sell it soon. He said there has been "considerable interest" in the property. The land is listed on the Internet for $3 million, but Devlin said the owner is looking to get more than that.

Reach Shelly Meron at 510-243-3578 or smeron@bayareanewsgroup.com.