Sunday, January 27, 2008

Price per square foot down 24% from the peak.

Hat tip fred hooper.

December 2007 numbers based on price per square foot are posted at

The following data is a historic representation of average price per square
foot for single family residences sold between July 1994 and December 2007 in
Kern County.

While average home price is an interesting barometer, price per
square foot is more accurate in determining sales trends. Please keep in mind
that the numbers are derived from currently "worked" sales by the Kern County
Assessor's office and may not reflect recent activity

We are now at $138 per suare foot. That is 24% below the peak of $183 per square foot.

Also, sales volumes are so low you need to go back to February 1998 to find a lower month. This now represents the 16th month, out of the past 18 months where the price per square foot has been in decline (or flat).

These numbers do not include inflation or incentives, if they did the numbers would be even worse. If you look at the chart, the long term trend in price per square foot should be somewhere around $100-$105 per square foot.

Saturday, January 26, 2008

Bakersfield is a catergory 4 market.

The good news is we are not a Category 5 market. Countrywide has tightened credit at the worst possible time for perma-bulls. Hat tip to

Bakersfield has been designated a Category 4 by Countrywide. What does this mean? It means credit has tightened even more than before. Most other formerly hot markets are now designated as Cat 5 or Cat 4. Here are the details:

For Countrywide Purchase Loans:

Soft Market Category 4-5 loans: Maximum financing will be reduced by 5%
Soft Market Category 1-3 loans: Maximum financing will be reduced by 5% if the appraisal or appraisal review indicates any of the following: Declining Market, Oversupply, Marketing time over 6 months.

For Countrywide Home Equity Loans:

Soft Market Category 5 loans: Maximum financing will be reduced by10%
Soft Market Category 4 loans: Maximum financing will be reduced by 5%
Soft Market Category 1-3 loans: Maximum financing will be reduced by 5% if
the appraisal or appraisal review indicates any of the following: Declining Market, Oversupply, Marketing time over 6 months.


Friday, January 25, 2008

The great fiscal stimulus package ... of 1929

Popular imagination has the Great Depression opening with a bang in October 1929. We forget that even by December of that year, the market had no idea what was really in store. After a period of wild, bipolar volatility, stocks had taken two big tumbles (a 12.8% drop on Oct. 28 and an 11.7% fall the next day) while the top bankers and "captains of industry" rushed to shore up the market. By November, the Dow had hit its low for the year at 198, down from the giddy September high of 381.

But, the financial pundits and government leaders of the day insisted, the economy's fundamentals were still strong. Mass unemployment was, some months after the crash, still just something that went on in Germany and Britain. America was strong and merely needed a push to keep the financial markets from harming the broader economy.

With that in mind, Herbert Hoover -- only nine months into his presidency -- assembled leaders from the public and private sectors to create an economic-stimulus package. Among the measures, Time magazine reported at the time, was a promise from Congress to offer bipartisan support for a tax-cut package. The proposal called for $160 million in tax relief -- only about $22 billion if adjusted against the gross domestic product at the time, and therefore much smaller than the plan under consideration here in 2008. Read Time's original coverage of the plan.

Also on the table was an assurance from the Federal Reserve that it would provide cheaper credit.

None of this worked. What was first seen as speed bump to the expansion of American finance became something much larger.

Thursday, January 24, 2008

Conforming loan limit increase

Within the new stimulus package is an attempt to raise the limit on loans Fannie and Freddie can buy. Good idea? No way! Fortunately, with all the massive fraud going on around the country during the speculative run up, a significant portion of the toxic waste was held by lenders like New Century and over a hundred other lenders that went bust. The losers there were the shareholders of those public companies.

What happens when FNM and FRE take on this toxic waste and a new round of unchecked fraud and massive speculation begins? This time the bag holders will be the taxpayers of the United States! You might want to save your $600 check so you can send it back when the bill comes due for the bankruptcy of FNM and FRE.

One important provision temporarily raises the dollar limit on mortgages that can be bought or guaranteed by government-sponsored mortgage giants Fannie Mae and Freddie Mac. The current limit of $417,000 would rise above $600,000 and perhaps as high as $730,000 in the most expensive areas, congressional leaders said.

Bakersfield home prices down 15.25% year over year.

December 2007 numbers are out for California homes. Don't believe the numbers you hear on Kern 1410 on the Saturday morning cheer leading show - where they claim its a good time to buy and prices are very reasonable now and all kinds of other crap. Unfortunately for them(and you) they have been calling the bottom for two years now. They also told listeners to buy in 2004, 2005 and 2006. Anyone who listened to that advice is now underwater by thousands of dollars and will be for many years.

Keep in mind these numbers from DQ don't include the incentives. Also, the sales price numbers include foreclosures which are included as a sale at the overvalued loan amount. If both of these items were excluded and we had just the actual homes sold to individuals; prices would be down 25% or more from their peak.

From DQ

Bakersfield down 15.25% (not including incentives or foreclosure price adjustment)

Friday, January 18, 2008

Mortgage Company Exec Jumps to Death

SF Chronicle:

An executive of a collapsed subprime mortgage lender jumped to his death from a bridge Friday, shortly after his wife's body was found inside their New Jersey home, authorities said.

The deaths of Walter Buczynski, 59, and his wife, Marci, 37 — the parents of two boys — were being investigated as a murder-suicide, according to the Burlington County Prosecutor's Office.

Walter Buczynski was a vice president of Columbia, Md.-based Fieldstone Mortgage Co., a high-flying subprime mortgage lender that made $5.5 billion in mortgage loans and employed about 1,000 people as late as 2006.

However, it has since filed for bankruptcy and now has fewer than 20 employees. The company had recently filed court papers seeking approval to pay about $1.1 million in bonuses that would be divided among Buczynski and other staffers so the company could wind down its lending operations and go out of business.

California unemployment rate rises 27% YOY

From the LA

California's jobless rate jumped to 6.1% in December, up from 4.8% a year ago, prompting Gov. Schwarzenegger today to take steps to combat rising unemployment.

The steep rise in joblessness from 5.6% in November showed that the ongoing housing slump, the fallout from the sub-prime mortgage debacle, and widespread production shutdowns amid the Hollywood writers strike took their toll on the state's economy in December.

Schwarzenegger called an emergency meeting of state officials Thursday. The governor instructed agency directors and department heads to immediately recommend ways to speed the release of $29 billion in unallocated funds from the 2006 infrastructure bonds. He said he wants to speed up construction of roads and schools and levee repairs to stimulate economic growth and "keep more people working."

"The people of California are feeling the hit of the sub-prime mortgage
crisis and housing slump," Schwarzenegger said in a statement today.

Thursday, January 17, 2008

Commercial property problems growing.

From the

Las Vegas Default Highlights Commercial-Property Crunch

The credit crunch that roared through the residential real-estate market is starting to bite commercial projects, too.

Yesterday, Ian Bruce Eichner, the developer of a twin-tower casino resort in the heart of Las Vegas, defaulted on a $760 million loan from Deutsche Bank AG after he failed to get refinancing. The default on the loan supporting the $3 billion Cosmopolitan Resort Casino is a signal of trouble for Mr. Eichner, who gained notice during an earlier real-estate downturn in the early 1990s when he lost several projects in New York City.

Saturday, January 12, 2008

Orange County developer stiffing local contractors?

Remember when the "Shark" came to Bakersfield? Things looked so promising for McAllister Ranch, if you believed all the hype. This project is out in the middle of nowhere. What were these people thinking? Chalk this one up to another developer who believed the hype and is now in deep trouble.

Also, look for Standard Pacific (according to numerous report), to file for bankruptcy protection very soon. The smartest guys in the room, in this case were from Probuilt Homes. They shoved all this land up SPF's back side and walked away with millions. Meanwhile SPF's stock has gone from $50 to $1. More out of town developers who thought they were the smart money, who turned out to be pretty dumb! Notice these guys are also from Orange County.

Bakersfield Californian:

The developer, Irvine-based SunCal Cos., is “adjusting” its construction plans,
a company spokesman said Friday.

When homes will appear — and when McAllister’s showcase golf course will open for public play — remains up in the air amid a lawsuit and a smattering of liens filed against the developer. “We previously had a very aggressive, accelerated construction schedule, but with the current challenges of the housing market, it has become necessary to adjust our timelines,” SunCal spokesman Joe Aguirre said.

Two years ago, SunCal predicted residents might move into the planned 6,000-home community by the end of 2006. As recently as September, the golf course was slated to open in the first three months of 2008.

The Greg Norman-designed golf course at McAllister Ranch is now at the center of a lawsuit seeking to recover $830,530 in allegedly unpaid bills.

As of Thursday, contractors, subcontractors and building supply companies involved with work at the McAllister Ranch property had filed at least 24 mechanic’s liens against SunCal and its affiliate, seeking more than $2.2 million for construction services and supplies, Kern County Recorder’s office records show.

“I understand the developer has shut down the whole project,” said Mike Garcia, owner of Garcia Roofing. Garcia’s company was hired by Bakersfield’s Klassen Corp. to do the roofing for McAllister Ranch’s golf clubhouse, he said.

Garcia finished the roof, but is out $61,980, he said.

“I’ve never lost out on anything this big,” said Garcia, who said he has been in the local construction business for 32 years.

He said he believes the developer failed to pay Klassen Corp.

Thursday, January 10, 2008

The natives are getting restless

SACRAMENTO -- Facing the worst fiscal crisis of his tenure, Gov. Arnold Schwarzenegger today proposed a $141-billion spending plan that would reduce healthcare programs for the poor, close 48 state parks, release tens of thousands of nonviolent inmates early and make substantial changes in almost every area of the state's budget.At the same time, he proposed expanding the state's debt load by more than $40 billion to finance more construction at public schools, colleges and other major institutions.

Schwarzenegger said the reductions were essential to close a $14.5-billion deficit created by the slumping housing sector and other economic factors.

Click to read Public Opinion of the Govenator.

Wednesday, January 09, 2008

Sycamore Canyon Golf Course for sale

The golf course in Arvin is for sale. The sale is no big deal to me, not sure who will pay $8.5 million for a bad golf course. Does anyone think the development potential is really there for this project? From the listing:

Property Description:

The golf course was opened in 1992 as PGA 18 hole golf
course.The course is 160 acres and 7,300 yard championship course with 300 yard
driving range. The course embrce 9 lakes which flows around 13 holes.World
ranking PGA golfer, Jim Furyk, played Sycamore Canyon golf course for1993 PGA
Qualifying First Rounding Course.

The golf course has extra land to be developed for 49 single house and 55 townhomes also 111 unis resort style hotel site within the golf course.The surrounding area is being developed by major developer for 3,000 residential units with community style shopping center and much more.

Sunday, January 06, 2008

Out of town developers find they are the greater fools!

The weak hands are folding, just as the first wave of weak handed homeowners have done. Most of the "developers" (speculators) listed here are from out of town - Sacramento appears several times - soon this contagion will spread to the "stronger" hands. 2008 will make 2007 look like a game of musical chairs, without the chairs - if you are standing right now, when the music stops on your developments finances, there will be no one to take your place. These foolish speculators were paying $100k to $200k for raw land that only 6 years ago was selling for $10k-$20k per acre - what were they thinking?

From the Bakersfield Californian:


Homeowners aren’t the only ones defaulting on property loans these days.

While not unprecedented in California, the sudden crop of developer defaults are apparently a first for the metro area.

“Never in Bakersfield,” said Bakersfield appraiser Gary Crabtree of Affiliated Appraisers.

In the early 1990s, Crabtree said, the Palmdale-Lancaster real estate market cratered because of layoffs in the aerospace industry.

Tom Cook, general manager of Bakersfield paving and grading firm Burtch Construction, said Burtch is owed money by Dunmore Diamond Ridge LLC for work at a southwest Bakersfield project touched by a complicated November bankruptcy filing.

“We haven’t been paid anything at all,” Cook said Thursday about a $900,000 bill submitted in mid-May.


Paladino Hills LLC
Loan amount: $10 million
Location: 80 acres near the northwest intersection of Highway 178 and Alfred Harrell Highway

Dunmore Westport LLC
Loan amount: $20 million
Location: 79 acres at the southwest intersection of Morning and Paladino drives

Loan amount: $5.5 million
Location: 147 acres at the northwest intersection of Paladino and Morning drives.

Reynen & Bardis (Cal Kern) LP
Loan amount: $6.8 million
Location: 58 acres near Morning Drive between 178 and Paladino Drive

• Canyons LLC
Loan amount: $3.3 million
Location: Nearly 847 acres south of Hart Park and Alfred Harrell Highway.

• Other
Loan amount: $5.1 million
Location: 33 acres on the north side of Paladino Drive east of Morning Drive.

Dunmore Diamond Ridge LLC
Loan amount: $30.6 million construction loan
Location: 77 acres on the south side of McCutchen Road between Ashe and Stine roads.

Loan amount: $4 million
Location: About 72 total acres on several parcels near Cottonwood Road around Casa Loma Drive and Watts Drive, including former golf course land switched to residential use.

• Cottonwood Villas LLC
Loan amount: $2 million
Location: 40 acres north of Cottonwood Road between Planz and Pacheco roads.

• Poplar Pointe LLC
Loan amount: $9.9 million construction loan
Location: 10 acres on the northwest corner of Filburn and Poplar avenues.

• Eagle Meadows of Wasco 77 LLC; Eagle Meadows of Wasco 75 LLC
Loan amounts: Two loans of $2.1 million apiece
Locations: 77 acres of ag land at the southeast corner of Gromer and Magnolia avenues; 75 acres of ag land near the southwest corner of Palm and Filburn avenues.

SunCal Mission Lakes LLC
Loan amount: $74.3
Location: About 515 acres north of 7th Standard Road northwest of the intersection with the Calloway Canal.

• Desert Star Communities LP and related companies
Loan amount: $11.4 million construction loan
Location: 23 acres at the northwest corner of 35th Street West and Orange Street.

Thursday, January 03, 2008

1) Builder reality check 2)2008 Predictions 3)Foreclocures reach a new record

1) Builder reality check:

Before we review the rosy BS forecast from the California Building group (aka building spin machine), lets look back at their 2007 forecast which turned out to be nothing but hot air :

The new home market will slowly return to what the CBIA says are historically normal levels.CBIA Chief Economist Alan Nevin forecasts that housing starts for single-family homes, condominiums, and apartments should total between 155,000 and 170,000 this year, about the same or slightly lower than in 2006.

He says it will be a “perfectly tolerable year” for builders.

That’s well short of the 220,000 new housing units the state says are needed to meet population growth, according to the CBIA.“I see a nice stable market, certainly not anything like the craziness of 2005,” Mr. Nevin says of the Central Valley north of Bakersfield.“But the market is growing. I look at places like Modesto and Merced and I see a stable growth there because the employment base is growing,” he says. “So you’ll see a nice steady type of market in the northern Central Valley.”

Do I need to go back and look at what really happened? Do we need 250 links to prove how wrong this was? Why does the media take this mind numbing drivel as anything except the load of crap that it is!

Now we get to this years forecast:

“By mid-2008 the housing industry will show signs of growth,” says Mr. Nevin. “Continued population growth, a reduction of existing inventory and a return to normalcy in the credit markets are a recipe for a more positive 2008. As a result, we are projecting a slight increase in new home sales over last year.”

We project that the home building business will improve modestly in 2008 as smaller homes are once again produced. We project 17,000 units of single-family housing for 2008 in the San Joaquin Valley,” he says.

Multifamily production has traditionally been negligible in the San Joaquin Valley, typically accounting for no more than 10 percent of output. “We see no change in that picture and project 3,000 units of multifamily units permitted in 2008,” Mr. Nevin says.

Statewide, Mr. Nevin predicts that new-home sales will increase in the second half of 2008, leading to the construction of more than 80,000 new single-family homes this year, up from about 70,000 last year. He also expects production of condominiums, apartments and town homes to increase to about 46,700, compared to about 44,000 in 2007.

2) 2008 Predictions (hat tip Lander):

Bakersfield Californian:

I don't think it's as lousy as everyone puts on," said Ray Karpe, the immediate past president of the Bakersfield Association of Realtors, a local trade group....

And, he predicted, home prices will reverse direction, and start an incremental climb. "I think home prices, home values, will creep up," Karpe said.

Based on what? The need to make a sale?

In the next 60 days the inventory levels will start to increase, credit which is already tight will get tighter and the foreclosure levels will continue to rise on a year over year basis. Also, what is wrong with declining home values - this will make them more affordable and will be better in the long run for a sustained period of economic growth and not a boom/boom cycle where the outcome is mostly a losing game.

3) Foreclosure reach an new record:

From the Bakersfield Californian: (be sure to check the PDF files for the detailed charts)


Foreclosed properties also hit annual and monthly highs. A total 3,007 properties foreclosed last year compared to 408 in 2006. The next closest year was 1998’s total of 2,683. December’s count of 421 foreclosed properties set a new monthly record and continued a quickening pace since the beginning of the year, when 103 foreclosures were recorded.