November 23, 2006

"Unrelenting housing slump" in Sacramento, CFO says: "We will have perhaps the largest growth drop year to year we've seen in modern times"

This is what Housing Devastation looks like, government-revenues-style. Anyone got 2001 deja-vu yet?

There are no surprises with this Housing Panic. Not a one. It's as if it hath been foretold...

As goes Sacramento goes the fake economies of Phoenix, Vegas, Miami, DC, Tucson, Denver, Detroit, Boston, LA, San Diego, Boise, Albuquerque, Tampa, etc. And they all know it's coming.

An unrelenting housing slump that has driven down the region's home values and sent sales into a tailspin is expected to strike local governments next year, curbing the record growth rates in tax collections that pushed some budgets into the black for the first time in years.

No one knows how much the slowdown will cost local governments, and the decline in growth comes after years of climbing budgets propelled by a private- sector housing boom. But the slowdown clearly has financial experts worried.

"We will have perhaps the largest growth drop year to year we've seen in modern times," said Geoff Davey, the county's chief financial officer.

Davey and others say the trouble is being generated by two key issues:

A dramatic plunge in home sales. New and existing home sales in Amador, El Dorado, Nevada, Placer, Sacramento, Sutter, Yolo and Yuba counties have fallen by 24,000 this year compared with last year.

• The prospect that county assessors will have to lower property taxes for thousands of homebuyers whose home values have fallen below the purchase price.


Anonymous said...

boo hoo, cry me a river.

Anonymous said...

If you really want front row seats to the collapse, follow Merced area Real Estate. A lot of dirt farmers that were paper millionares last year are now poor dirt farmers again.

Anonymous said...

The county/state/school boards are going to do WHAT! Lower assessments. Maybe by court order AND YOU ARE THE JUDGE. Dream on!

Are you forgetting the FIRST commandment of all the elected/appointed parasites: "Times are tough! So what! Why should we suffer!"

Anonymous said...

Yep OC CaL is reporting a 3.4 percent decline this quarter. But folks it is much worse than that because new home builders are bluffing the price with cash back and free upgrades so folks it is actually much worse.

Anonymous said...

Can't speak for PA or other states, but here in Calif, the county assessors WILL lower assesments if requested. . .I believe it is the law. . .I had my assessment and tax lowered in 1993-1997 in Northern California in the last housing downturn. . .my primary residence was lowered, and my rental condo was lowered. . .bought the rental for 155, and value was reduced to 138. . .it took 6 years for the county to bring it up to previous level. . .of course sold in 2005 for 495K!!!!!

Anonymous said...

Question and Observation - Midwest and Sacramento

Just returned from Ohio, and the housing market there is worse than California - it wasn't speculators who got burned, but lots of young couples with McJobs that bought a house with an ARM, and now have lost it. . .my sister in Canton/Akron area said there a many empty house that people have walked away from . . . I saw a huge number of for sale signs in Columbus and Akron/Canton area, and in November when there usually are none. It is interesting that mid-American (and I consider Sacramento mid America also) is much worse off so far than Las Vegas, Phoenix, San Diego, etc. . .perhaps in these former hot markets people are more delusional
???. . .I find the pattern of the bubble bursting to be interesting - from the middle out.

Anonymous said...

Sooooo.... what is wrong with a growth drop??? Everbody has way too much/many widgets that than rerally need anyway!!!

Anonymous said...

oops.... sticky fingers.... really

Anonymous said...

The prospect that county assessors will have to lower property taxes for thousands of homebuyers whose home values have fallen below the purchase price.


YAAAAAA right!

Anonymous said...

I saw a huge number of for sale signs in Columbus and Akron/Canton area, and in November when there usually are none.

Chicago is the same way. I predict there will be snow collecting on the For Sale signs in a month.

ColumbusOH said...

Mark in San Diego, did you say Columbus is worse than Sacramento?

I did not see that, because Columbus housing inventory is up about 20% compared to last year, and the sales was also up about 2% till 3rd quarter year-to-date. But sacremento or most californias were terrible according to

Where did you specifically see in Columbus ?

Anonymous said...

I'm in San Diego and getting your property tax lowered based on lowered values is routinely done. I've done it as a broker for many clients in 1993/1994, but in Calif., the assessor can jump them back up in excess of the annual 2% increase required by Prop 13 when they feel the values have increased again.

On a separate note, don't buy the sale comps data. I'm seeing builders and others offering kickbacks unbeknownst to lenders that represent an effectively much lower sales price, but more importantly FRAUD!!!

Anonymous said...

So glad to see you mentioned Boise in your analysis. You are absolutely right. We are currently in the middle of a major housing collapse (which of course is unacknowledged for the most part by local realtors and media). I know of at least one developer out here who is sitting on $60,000,000 in vacant homes.

There are about 4000+ homes for sale in the greater Boise valley (not so good a number when the whole states population is right around 1 million). The housing inventory is not significantly being reduced even though residential building has come to relative stand still since last year. Developers have been offering "1 day only sales" where they will discount a home up to $55,000. The developers know beyond a doubt what is coming unfortunately the public here in general is still ignorant. Many of the recent residents have come from California and they of course believe real estate only goes up.

I am perplexed about Boise. The median salary is something around $26,000 per year and yet not so extrordinary homes last year were selling for 10 to 15x that amount. Where are the jobs to support this? Answer: They are not here!!! The only people making any real money last year were realtors, mortgage lenders, and developers. Home construction was are job growth. Now that is gone. It is looking very bleak for home sellers.

It just makes no sense. I have known people who have come out here from surrounding states excited about the "cheap" housing and left the next year selling their house for a loss once they found their standard of living actually went down. Idaho is a "right to work state" --- what that really translates into is government sanctioned low wages that guarantee 95% of the workers here with families will survive just above poverty level.

The second thing I don't understand is why there is a significant amount of commercial building happening here even though there is already a tremendous vacancy in those buildings. Just who do they think is going to fill those buildings? It is like the residential bubble all over again in commercial building.

The strangest thing of all is everyone thinks the housing vaccumm is going to be filled by tens of thousands of people all at once rushing to Idaho even though there are very, very few decent paying jobs. Any people in surrounding states here the spin the tremendouos influx of people from out of state will save the economy and housing market?

Metroplexual said...

Kudos Keith,

Albuquerque is on hard damn place to spell.

I am also surprised by the noncoastal implosion currently underway. Paul Krugman, when speaking of the housing bubble used the term for bubbly areas as the "zoned zone" and the the non bubble as the "flatland" (no offense Boise").
"In Flatland, which occupies the middle of the country, it's easy to build houses. When the demand for houses rises, Flatland metropolitan areas, which don't really have traditional downtowns, just sprawl some more. As a result, housing prices are basically determined by the cost of construction. In Flatland, a housing bubble can't even get started."

I think he just did no go one step further about the McJobbers buying houses, but I guess you would have to have had the data. I find it just fascinating how this thing is unravelling. NOt to start any flame war but does it not seem that red states are "flatland" and that they appear to be the ones going through the correction the fastest? Just a thought.

Anonymous said...

Sacramento! Who cares?

Anonymous said...

In regards to Boise....

It is a mess here. My wife and I moved here about six months ago and decided to rent for the first year to decide if we wanted to stay or not.

I lived in Boise from 1998 to 2000 and loved it, except I was single at the time, and Boise is not a good place to be a single guy.

We moved here from Denver, which neither of us liked due to it's sprawl, and general lack of character. Yes I know, Boise...Boise is however a Pacific NW town, and has many of the regions quirks, which we like. We met and lived in Seattle for five years.

When I lived here before, if you were paying $175k for a house, you were getting a house that would be $400k in Chicago (where I moved from).

It was disconcerting when we moved here to realize that buying a house would be out of our reach, and then I discovered this blog.

Since then we have witnessed houses that had been on the market before our arrival (in May of this year) that have dropped as much as $50k, and they are not selling.

My poor boss has a house on the market that is not selling, even though it is nice..

The developers here committed the great sin of thinking that past performance will mean the same in the future. Meridian (a suburb of Boise) has seen record growth in recent years, and developers built for that continued growth...the result? Thousands of brand new McMansion on the market for $400k...whole subdivisions of new homes which are not selling....and those who are trying to sell are not.

Anonymous said...