Bakersfield Bubble

BAKERSFIELD BUBBLE MARKET CALL - The bottom is in!

2009-05-06T08:13:00.000-07:00

Former housing bubble BEAR and the man (ME) whole predicted this financial mess says the following:

I am officially calling a bottom in the local housing market and saying its a good time to buy a house, IF you can afford the payments (no more than 30% of monthly income), put down at least 10%, have good credit to afford a low FIXED RATE interest loan and have 6 months of cash reserves (to cushion the blow of the unexpected, job loss, medical bills, etc..).

Will the house prices continue to drop...probably another 5-10%. But if you put down 10% you will be able to cushion the blow.

Right now median house prices are less than 2.6 times median income..during the boom we were at 8.1 times, clearly unsustainable

Final post

2009-01-10T10:13:00.000-08:00

Thanks to all the visitors who come to this site daily.

I have decided to do something else with my free time. I have enjoyed posting on the collapse of our local bubble economy on this site and on the bubble blogs for nearly 4 years. Its time to move on. The economy will suck for sometime and so will the housing market.

I especially want to thank those who emailed me with comments thanking me for saving them hundreds of thousands of dollars (by not purchasing a home) and saving them from financial ruin (I truly appreciate those comments!!).

Good luck and best to all!

Gottchalks to file for bankruptcy?

2009-01-09T13:39:00.000-08:00

Gottchalks update:

Gottschalks employees have been told to quickly cash pending paychecks and to expect a bankruptcy filing as soon as today, the Business Journal has learned.

Employees say the department store chain may also announce the closing of about 15 stores.

Meanwhile, Gottschalks executives have also made contact with at least one major liquidation firm that specializes in going out of business sales for distressed retail operations.

On a more hopeful note, Women’s Wear Daily, a retail trade publication, reported on its website today that Gottschalks has been in negotiations with Everbright and El Cortes Ingles that would call for both to put up $25 million for a $50-million infusion into the company and that a vote on the proposed investment could come as early as today.

El Cortes Ingles is Spain’s largest department store chain and owns about 16 percent of Gottschalks through the Fresno-based retailer’s 2000 acquisition of Harris Co.

Valley dairy industry in bad shape

2009-01-09T05:59:00.000-08:00

Let me be the first to say I have no sympathy for these greedy dairyman!

They are partly responsible for driving up our land and home prices during the boom with their 1031 money. In addition they receive massive goverment subsidies and most of them are very wealthy because of it. Finally, they are horrible polluters of our air and water. I hope 100% of them go out of business and leave town!

Local Bloggers comments:

Comment by takingbets
2009-01-08 07:48:05
my husband talked to a local dairyman yesterday. He said in the 40 years he’s been in business he’s never seen anything like what’s happening now. His pricing for milk and cheese is the lowest he’s ever charged and yet the grocery stores are not passing the lower prices down to their customers. Business has virtually stopped, he is not able to move his products because the end users are not buying like they used to.

Ny Times.com:

FOWLER, Calif. — The long economic boom, fueled by easy credit that allowed people to spend money they did not have, led to a huge oversupply of cars, houses and shopping malls, as recent months have made clear. Now, add one more item to the list: an oversupply of cows.

And it turns out that shutting down the milk supply is not as easy as closing an automobile assembly line.

As a breakneck expansion in the global dairy industry turns to bust, Roger Van Groningen must deal with the consequences. In a warehouse that his company runs here, 8 to 20 trucks pull up every day to unload milk powder. Bags of the stuff — surplus that nobody will buy, at least not at a price the dairy industry regards as acceptable — are unloaded and stacked into towering rows that nearly fill the warehouse.

Mr. Van Groningen’s company does not own the surplus milk powder, but merely stores it for the new owners: the taxpayers of the United States. To date, the government has agreed to buy about $91 million worth of milk powder.

Dairy scum in a dispute:

The Borba cousins — Kern’s leading dairy luminaries — are suing each other over fallout from a $42 million-plus deal they made last year.

In brief, cousins George Jr. and James each seek roughly $3.5 million from the other and lob some nasty allegations along the way, court documents show. The dispute concerns a lease agreement for land used to grow feed.

Dick Cheney is a blind idiot!

2009-01-08T15:20:00.000-08:00

Bush and Cheney start re-writing history:

WASHINGTON – Vice President Dick Cheney says that his boss, President George W. Bush, has no need to apologize to the American people for not doing more to head off the financial calamity, saying no one saw the crisis coming.

During an interview Thursday with The Associated Press in his West Wing office, Cheney defended the administration's performance on an economy that is growing weaker daily and which recently collapsed in spectacular fashion. Cheney said that "nobody anywhere was smart enough to figure it out."
He said Bush doesn't need to apologize because he has taken "bold, aggressive action."

Notices of default set a new record.

2009-01-05T13:44:00.000-08:00

County of Kern Link

1,553 NOD's for December. The highest ever!

I recall one of our posters saying that the bottom was in for NOD's. Not sure if we should have believed him...just saying!

Former real estate moguls luxury HQ sold...blogger (me) nails the FMV!

2009-01-02T13:29:00.000-08:00

The former HQ for the Twin Towers project was sold in late December 2008. The price was $1 million dollars. See the comments from the orginal listing in May 2007:

Bakersfield Bubble said...
10,000 sq ft x 2.00 x 12 = $240,000 expected gross rent. Since the project is not improved and has no tenants I will use a cap rate of 12% = $2,000,000. Then discount 50% = $1,000,000 MAX!

Here are a few stories on this building:

Crisp HQ listed for $4.5 million (5-1-07)

Crisp defaults on HQ (8-28-07)

Crisp building foreclosed (12-27-07)

Padre Hotel Partnership Launches $18M Renovation

2009-01-01T10:32:00.000-08:00

Globe St.com:

BAKERSFIELD, CA-A group called Padre Hotel Partners LP has launched an $18 million renovation of the Padre Hotel. The renovation of the 10-story, 80-year-old hotel at 1813 H St. will rehab the interior in a plan designed to restore the property to its previous popularity.

Graham Downes, principal of San Diego-based Graham Downes Architecture, has partnered with Brett Miller, CEO of Eat Drink and Sleep, also based in San Diego, to form Padre Hotel Partners. Located in the historic area of Bakersfield, the hotel has been redesigned by Graham Downes to “bring life back to this once-popular attraction,” according to the architects. Built in 1928, the Padre was long known as one of the most popular gathering places in Downtown Bakersfield. Elements of the hotel’s 1928 origins will be incorporated into the redevelopment to blend past and present and reestablish the Padre Hotel as a landmark, the developers say.

The completed project will feature 112 guest rooms and suites, a restaurant, a bar, nightclub lounge and a 24-hour café. The renovation will include meeting rooms and event space, fitness and business centers, and other amenities to position the hotel as a business and leisure destination.

CONservative republicans get bailed out and Flying J update

2008-12-30T08:15:00.000-08:00

Ceberus and GMAC get bailed out. Cerberus is run by Dan Potatoe Qualye, John Snow (former Bush Treasury Sec) and about 10 other CONservative republican lobbyists.:

WASHINGTON (Reuters) - The Bush administration on Monday expanded its bailout of the U.S. auto industry, saying it was buying $5 billion in equity in auto and mortgage finance company GMAC and increasing a loan to General Motors by $1 billion.

The action was the latest in a lengthy series of emergency government moves aimed at easing the worst credit crisis since the 1930s and limiting the severity of a year-long recession.

The Treasury Department said it would buy $5 billion in senior preferred equity with an 8 percent dividend from GMAC as part of an effort to ensure the solvency of a company considered crucial to GM's survival.

Flying J Update (& Berry Petroleum):

Flying J's bankruptcy has prompted at least one of Kern's large oil companies to scale back production here and other local suppliers to seek out new customers for crude.

The Big West refinery on Rosedale Highway may even have stopped refining oil -- at least temporarily -- as a result of the Dec. 22 Chapter 11 bankruptcy filing of owner Flying J Inc.

But questions remain as to what the company is doing now that some local oil producers are so worried about being paid that they won't sell crude to Big West.

On Monday, one of Flying J's biggest creditors, Denver-based Berry Petroleum Co., said in a federal filing that Big West last week turned away its oil shipments because of "interruptions in (Big West's) other
relationships."

"They're not refining right now," Berry Chief Financial Officer David Wolf said in an interview. He added that Big West may have shifted to plant maintenance.

For its part, Berry has cut way back on Kern oil production because of Big West's dilemma. On Sunday, Berry's filing said, the company was producing 5,000 barrels a day in Kern instead of the normal 17,000.

Another bubble bursts...another prediction comes true

2008-12-26T22:52:00.000-08:00

Recall my post from Sep 2007 regarding the bubble in Almonds. Keep in mind that 80% of the worlds almonds are grown in the Valley. I sure hope John Madden doesn't lose too much money...

Bakersfield.com:

That said, more than a few growers are sweating over a recent dip in the price of almonds, which had previously risen enough to fuel explosive growth in plantings.

Almonds were Kern County’s fourth largest agricultural commodity last year, according to the Kern County Agricultural Crop Report.

Tejon Ranch Co., the Lebec ranching and real estate development company, said in a quarterly report filed with the Securities and Exchange Commission that it received $1.78 per pound for almonds in September. That’s down from a peak of $3.80 in the last three years.

Today, almonds are going for $1 to $1.25 a pound, said Mike Young, an almond grower and president of the Kern County Farm Bureau.

Unable to find sufficient buyers, Young has been reduced to warehousing nuts, which keep for about a year.

“We’re just experiencing the global economic downturn like everybody else,” he said. “Nobody’s buying anything right now.”

San Joaquin Bank update

2008-12-24T10:36:00.000-08:00

Recent SEC filing by SJB:

On December 19, 2008, San Joaquin Bank (Bank), a wholly owned subsidiary of the Registrant, entered into a consulting agreement with Melvin D. Atkinson (Agreement), who has been an outside director of the Bank since 2005 and a director of the Registrant since its formation in 2006.

The Agreement engages Atkinson to analyze and review the Bank's impaired real estate loans and to negotiate with the obligors under such loans to reduce amounts outstanding. Atkinson will be compensated at the rate of $175 an hour for his services and he will also receive an additional fee equal to 1% of the first $3.0 million received by the Bank and 0.75% of amounts received in excess of $3.0 million. The Agreement is subject to compliance with applicable law and terminable by either party at any time upon written notice.

Recall one of my previous posts where they actually lowered their loan loss reserves at the end of 2007.

Prices now down 50% from the peak

2008-12-24T06:59:00.000-08:00

November 2008 numbers are out. We are now down 50% from the peak. The year-over-year decline is 40%; anyone who told you to buy last year was dead wrong and should be sued...look in the archives for the list of crooks.

Nov 2008 yoy:

Bakersfield -40.2%

Fresno economy is so bad it can't support a crappy minor league sports team

2008-12-22T18:16:00.000-08:00

Minor league hockey team (Chicago Blackhawks affiliate and Bakersfield rival) folds like a cheap suit:

"The board of governors advised us Friday that for financial reasons the Falcons were ceasing operations," McKenna said. "That's a violation of league bylaws, which results in automatic termination. Fresno's ownership came to the determination that it couldn't move forward and decided to fold."

McKenna said Falcons players have been declared free agents and can sign with any of the ECHL's remaining 21 teams.
The Fresno Falcons ice hockey team will cease operations at 5 p.m. today, the club's managment announced.
"These losses have been beyond our expectations," Managing General Partner Chris Cummings said in a statement released by the team. "The horrific economy and the resulting decrease in revenue from season tickets, corporate sponsorships and overall attendance has created a situation this year which is not sustainable and we simply cannot continue to operate."

$68.83 per square foot.

2008-12-22T16:41:00.000-08:00

Prices continue to decline. Here is a little gem for $68.83 per square foot.

KSFCU Foreclosure:

2115 Butterfield, Bakersfield, Ca 93304
3 Bedrooms
2-1/2 Baths
2
Story
2 Car Garage
1,729 Square feet
Sale Price: $119,000

Crude crash claims first major victim

2008-12-22T11:39:00.000-08:00

(UPDATE)Bakersfield.com:

A $200 million revolving line of credit to the Big West subsidiaries from Bank of America, originally set to mature in 2010, was called in Dec. 19, Adams said in court filings, causing Big West to default.

Wasteful ad spender (propoganda spinner) refiner files for bankruptcy protection:

Flying J Inc., an oil company whose operations include the Big West refinery on Rosedale Highway, filed for reorganization bankruptcy Monday.

Operations included in the filing cover about 250 travel plazas, the Big West refining arm and the company’s Longhorn Pipeline unit.

The fuel stops remain open, company officials said in a release, adding the reorganization might be completed without layoffs.

Initial hearings will be held Tuesday afternoon in Delaware district bankruptcy court, where the various companies filed voluntary Chapter 11 petitions.

The largest unsecured creditor of Flying J, which operates out of Utah, is Zion Bank, owed $85.8 million.
Most of the 30 others listed in court documents are oil companies, including Conoco Philips, BP & Oil Co., Valero, Occidental Energy Marketing and others.

Berry Petroleum, which moved headquarters from Bakersfield to Denver in June, is the third largest unsecured creditor, owed $26 million.

Flying J details:

...it faced near-term liquidity pressure from an unprecedented combination of
factors: the precipitous drop in the price of oil and the lack of available
financing from our traditional sources due to disrupted credit markets, said
Flying J President and CEO J. Phillip Adams in the news release. Adams says the
company's employees, customers and suppliers will continue to be paid in the
usual manner.

Flying J Inc. is among the 20 largest private companies in America,
employing more than 16,000 people in the U.S. and Canada.

Fresno California nearing depression.

2008-12-20T08:55:00.000-08:00

Fresno Unemployment Explodes:

Fresno County's unemployment rate climbed in November to 12.1% as a gain in health and teaching jobs failed to offset losses in agriculture, trade, government and construction, the state Employment Development Department reported today.

The jobless rate increased from 11.3% in October and 8.9% in November 2007. Officials noted that agriculture lost 4,500 jobs between October and November, and construction employment declined by 1,300 jobs in the year-over-year period. government also lost 1,000 jobs in that period.

Freno RV dealer throws in the towel:

RV king Dan Gamel, struggling with a lousy economy, closed all but one of his dealerships Friday and laid off 150 employees for three months while he sells motor coaches online and by appointment.

The Camp America store on Shaw Avenue and dealerships on Highway 99 in south Fresno, in Modesto and in Rocklin are closing until spring, Gamel said. The Redding outlet is staying open because the store is profitable, he said.

All the real estate -- totaling 85 acres with much of it on prime frontage -- is for sale.

"It doesn't make sense to be in business the way we are in this economy," Gamel said. "I thought we could make it and hang on, but every month brought a
more dire situation."

Gottchalks update:

Gottschalks Inc. announced this afternoon that it remains in negotiations with a Chinese company to keep the Fresno-based department store chain afloat.

Earlier this week, Everbright Development Overseas Ltd. terminated a deal it had reached in November to provide a $30 million investment in Gottschalks in exchange for a majority stake in the 104-year-old company. In a filing Thursday with the U.S. Securities and Exchange Commission, Gottschalks officials reported that Everbright had terminated the agreement following a due-diligence period that expired Monday.
Retail industry analysts say the cancellation of the November deal is an ominous sign for Gottschalks unless another arrangement can be made very quickly.

Gottchalks update

2008-12-19T13:06:00.000-08:00

Bakersfield.com:

FRESNO — Officials with department-store chain Gottschalks Inc. say a company based in the British Virgin Islands has severed plans to invest $30 million to help them develop a wholesale business and implement direct sourcing and consignment product sales.

Paperwork filed Thursday with the Securities and Exchange Commission shows Everbright backed out of the deal with the Fresno-based chain of 59 department stores.

Tulare Business Journal (no link):

Gottschalks (Pink Sheets: GOTT) tumbled deeper into penny-stock territory Friday morning after a Chinese company backed out of an agreement that would have given the troubled retailer a cash infusion of up to $30 million.Gottschalks traded as low as 14 cents per share Friday morning, down 69 percent from Thursday’s close of 45 cents. That broke below its previous all-time low of 22 cents per share set Nov. 21.

The latest selloff gave the company, which has annual sales of almost $600 million, a market valuation of less than $2 million.Gottschalks, which operates 59 department stores and three specialty stores in California and five other Western states, has lost $32 million in the past seven quarters, including almost $20 million in the first three quarters of this year, as a result of the tough economy and questionable strategic moves.

Industry analysts are now pondering the immediate future of the retailer. If suppliers who were bolstered by the deal's prospects cut Gottschalks off, it could be forced to begin a liquidation with closure sometime next year, said Howard Davidowitz, chairman of Davidowitz & Associates, a national retail consulting and investment banking firm in New York.

"Gottschalks needs divine intervention," Davidowitz said. "They are in a very tough place."

Sr Employee sells some shares earlier this month.

Boycott GM and Chrysler!

2008-12-19T08:40:00.000-08:00

BOYCOTT GM AND CHRYSLER!

$17 billion dollar loan with no provisions:

NEW YORK (MarketWatch) -- The White House announced plans Friday to extend $13.4 billion in loans to troubled Detroit auto makers, with another $4 billion likely available in February, citing the need to avoid "disorderly liquidation" during an already troubled economic period.

$23 BBL. The oil bubble.

2008-12-18T08:09:00.001-08:00

7 year chart...clearly a bubble!

One year chart

Kern River Crude hits $25 bbl

2008-12-17T19:17:00.000-08:00

The price of Kern River crude continues to tumble, hitting $25 bbl today.

I have heard of some oil service companies starting layoffs as they think the price will continue to decline.

How much lower will prices go? Anything under $20 per bbl and the shit starts to hit the fan.

California getting closer to bankruptcy

2008-12-17T16:46:00.000-08:00

California freezes $3.8 of projects:

The state's top three financial officials voted unanimously today to freeze $3.8 billion in financing on road, levee, school and housing construction projects throughout California in the most drastic fallout yet from the state's cash crisis.

Among the efforts that will be idled or postponed are a carpool lane on the 405 Freeway between the 10 and 101 freeways and $373 million in repairs and overcrowding relief for Southern California schools, including emergency repairs at nine Los Angeles Unified School District high schools and five Compton schools, according to lists compiled by state agencies.

Cal Pers loses 103% on real estate investments:

At the height of the property bubble, California's giant pension fund, Calpers, made a fateful decision: It aggressively poured money into real estate. As a result, today it's one of the biggest owners of undeveloped residential land in America.

Partly because of these investments, California Public Employees' Retirement System is struggling to avoid one of its worst annual declines since its 1932 inception. Calpers has lost almost a quarter of its assets since July 1, the start of the current fiscal year.

Adios.

2008-12-12T16:08:00.000-08:00

Bakersfield.com:

El Mexicalo, a weekly bilingual newspaper published in Bakersfield since 1980, has closed due to concerns about the slowing economy

Manzano said she chose to cease publication following the Nov. 13 issue because advertisers are cutting back on spending

Bank Failure Friday...Texas Bank:

On Friday, December 12, 2008, Sanderson State Bank, Sanderson, TX was closed by the Texas Department of Banking and the Federal Deposit Insurance Corporation (FDIC) was named Receiver. No advance notice is given to the public when a financial institution is closed.
The FDIC has assembled useful information regarding your relationship with this
institution. Besides a checking account, you may have Certificates of Deposit, a car loan, a business checking account, a commercial loan, a Social Security direct deposit, and other relationships with the institution. The FDIC has compiled the following information which should answer many of your questions.

Bank failure Friday...Georgia Bank:

On December 12, 2008, Haven Trust Bank, Duluth, GA was closed by the Georgia Department of Banking and Finance and the Federal Deposit Insurance Corporation (FDIC) was named Receiver. No advance notice is given to the public when a financial institution is closed.
The FDIC has assembled useful information regarding your relationship with this institution. Besides a checking account, you may have Certificates of Deposit, a car loan, a business checking account, a commercial loan, a Social Security direct deposit, and other relationships with the institution. The FDIC has compiled the following information which should answer many of your questions.

Carl Cole, Racetrack in default and other news

2008-12-11T16:40:00.000-08:00

Carl Cole Update:

As the clock ticks down on former Bakersfield real estate broker Carl Cole’s deadline to legally challenge his license revocation, Cole continues to work at a real estate agency in Thousand Oaks under the name of one of his defunct companies, Points West Group

But Points West, which has one active listing for a house in Oxnard, is not properly registered with the state Department of Real Estate, said spokesman Tom Pool.
When asked if the department was looking into the matter, Pool said he “cannot comment on that.”
As of Wednesday, Cole, 61, is described as an “administrative assistant” on his Web site, http://www.yourecoteam.com./
The supervising broker is a former employee of Crisp & Cole Real Estate, the flamed-out partnership of Cole and former sales agent David Crisp, 29. The Department of Real Estate revoked Cole’s license Nov. 14. Points West Group also entered “revoked” status then, where it officially remains.

College degrees not worth the money?:

Lisa Pinson, 23, earned her communications and media studies degree from Azusa Pacific University in Los Angeles in May, but moved back in with her parents in southwest Bakersfield after she was unable to find employment in her field.

The media are among industries hardest hit by the recession. Publications and broadcasters across the nation are cutting staff.

Pinson is trying to be optimistic, and keeping an open mind about applying for jobs unrelated to her major. She doesn’t regret the field of study she chose.

“I know a lot of people who are art majors and film majors who haven’t got a chance,” she said.

“Even the supposedly safe majors aren’t as safe as they used to be. I know some business majors who are working in telemarketing, so it could be worse.”

Would you buy a car from a dealer when the company is bankrupt?:

General Motors Corp. has hired lawyers and bankers to consider whether to file for bankruptcy protection, said several people familiar with the matter, while Senate lawmakers embarked on a last-ditch effort to break an impasse on Congress's auto-bailout package.

GM management recently tapped bankruptcy veteran Harvey Miller of the New York law firm, Weil Gotshal & Manges LP, to handle what would be one of the largest and most controversial filings in U.S. history. Others involved in the matter include restructuring veterans Jay Alix, Evercore Partners' William Repko and Blackstone Group's Arthur Newman.

Racetrack in default:

A $4.5 million loan taken out against the future Kern River Raceway property last March has defaulted, county records filed last week show. A default is the first legal step in a possible foreclosure.

The project has already drawn numerous lawsuits and liens from construction companies seeking payment for work at the site.

Debt from those is more than $2 million, records show.

The half-mile, paved track broke ground in February 2007. But the sagging housing market blindsided the project when financial backer Alan Destefani, a Bakersfield farmer, had a large sale of ag land fall through that spring.
Since then, racetrack partners have been scouring leads to find financing as the economy has gone south.

California finances get much worse

2008-12-10T12:54:00.001-08:00

The bankers in the previous post said we were at the bottom...:

California’s budget crisis has gotten worse while the Legislature has dithered and taken time off, Governor Arnold Schwarzenegger says.

The state will now be $14.8 billion in the red by the end of the fiscal year in June if nothing is done, the governor says.

The number is new. The last estimate had the red ink measured at $11.2 billion.

“No one should leave town,” the governor says of the Legislature, now in special session but with few lawmakers actually in Sacramento. “I urge the Legislature to solve this financial crisis immediately.”

Mr. Schwarzenegger says lack of action by the lawmakers, who set spending and taxation levels is making the fiscal crisis worse by the day. “I’m frustrated,” he says. “I cannot make them stay here. I cannot lock them into the building. I do not have those kinds of powers.”

35 years in banking and he has no clue

2008-12-10T08:11:00.000-08:00

There was an economic meeting in town yesterday and I have a few comments on what was said.

Asleep for 35 years:

A banker with 35 years of experience shared his views on the economy Tuesday with local finance industry professionals and accountants

James Lokey is Rabobank N.A.’s president of community banking and the chairman of the California Bankers Association.

In remarks he prefaced as personal, Lokey said consumer confidence needs to improve and the financial industry is on sound footing.

“Eighty percent of the banks, primarily the commercial banks, had nothing to do with the subprime mess,” he said, speaking to a gathering at Seven Oaks Country Club.

My comments - This has never been a subprime problem. This is a massive credit bubble. Credit in all forms...Residential mortgages, Commercial mortgages, credit cards, CDS, CDO's, SIV's, etc... To say that 80% of the banks are ok because they didn't do subprime only goes to show this guys is asleep and I think he represents a lot of bankers. Many could not see this crisis coming and they still have no idea why it happend.

The banking industry in general is well capitalized, Lokey said, and consumer confidence would be much stronger had the majority of commercial banks told
Uncle Sam, “Thank you very much, we do not need your money.”The economy
is in trouble, in part, because consumers aren’t spending.

My Comments - The banking industry is in no way well capitalized. They (Bush/Paulson) thought the TARP would solve this problem...sorry, didn't work. When these banks need more capital next year, this guy will need to eat his words! Consumers can't spend as much because banks are tightening credit as they are hoarding their capital! Credit is tight for car loans, home loans (non-GSE) and business loans...just look at the Fed's loan officer survey.

Cheerleading?:

“Bakersfield is in great shape,” banker Bart Hill said. “The economy’s coming back.”

My Comment - Then why did you just take a significant charge to earnings for loan loss reserves?

“I think we have a ways to go before we turn the corner,” said meeting attendee Floyd Cogdill, director of student services at National University’s Bakersfield campus.

My Comment - Agree.

High end homedebtors are still dreaming!

2008-12-09T20:04:00.000-08:00

Here are a few examples:

This first home is at 2615 EAGLE CREST DR, Bakersfield, CA 93311. It has been on the market for 629 days.

Listing details:

Price Reduced: 05/11/07 -- $1,950,000 to $1,800,000
Price Reduced: 12/03/07 -- $1,800,000 to $1,650,000
Price Increased: 04/14/08 -- $1,650,000 to $1,850,000
Price Reduced: 10/30/08 -- $1,850,000 to $1,650,000

ESTIMATED VALUE PER ZIP REALTY $945,500

House number #2 is located at 11418 HARRINGTON ST, Bakersfield, CA 93311. It has been on the market for 677 days!

Listing details:

Price Reduced: 10/23/07 -- $1,195,000 to $1,095,000
Price Reduced: 02/21/08 -- $1,095,000 to $995,000

ESTIMATED PRICE PER ZIPREALTY $550,000

Old media has died!

2008-12-07T17:01:00.000-08:00

LA Times owner may file for bankruptcy:

Tribune Co. is preparing for a possible filing for bankruptcy-court protection as soon as this week, according to people familiar with the matter, in another sign of trouble for the newspaper industry.

In recent days, as Tribune continued talks with lenders to restructure its debt, the newspaper-and-television concern hired Lazard Ltd. as its financial adviser, as well as legal counsel for a possible trip through bankruptcy court, according to people familiar with the matter.

A Tribune spokesman said the company doesn't comment on rumors or speculation. Tribune owns eight major daily newspapers, including the Los Angeles Times, Chicago Tribune and ...

Kern River Crude (Midway-Sunset) now below $30bbl

2008-12-04T18:25:00.000-08:00

The price of Kern River Crude dropped to $29bbl today. Are we headed to the teens?

It the price continues to drop, I would expect home prices and the rest of our local economy to get even worse.

I have talked to several local well established businesses that are on the brink of going under. I feel bad for their employees, most of them have no idea they are about to lose their jobs. All of the actions by the government have failed (as expected) and going forward will only make things worse.

It's official...recession began December 2007

2008-12-01T09:16:00.000-08:00

NBER website:

Determination of the December 2007 Peak in Economic Activity

The Business Cycle Dating Committee of the National Bureau of Economic Research met by conference call on Friday, November 28. The committee maintains a chronology of the beginning and ending dates (months and quarters) of U.S. recessions. The committee determined that a peak in economic activity occurred in the U.S. economy in December 2007. The peak marks the end of the expansion that began in November 2001 and the beginning of a recession. The expansion lasted 73 months; the previous expansion of the 1990s lasted 120 months.

A recession is a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in production, employment, real income, and other indicators. A recession begins when the economy reaches a peak of activity and ends when the economy reaches its trough. Between trough and peak, the economy is in an expansion.
Because a recession is a broad contraction of the economy, not confined to one sector, the committee emphasizes economy-wide measures of economic activity. The committee believes that domestic production and employment are the primary conceptual measures of economic activity.

The committee views the payroll employment measure, which is based on a large survey of employers, as the most reliable comprehensive estimate of employment. This series reached a peak in December 2007 and has declined every month since then.

Mall losing another tenant

2008-11-26T19:49:00.000-08:00

Bankrupt jeweler leaving the mall:

The Whitehall Jewelers in Valley Plaza mall will close sometime after the holidays, said manager Nancy Viel.

The store’s entire inventory has been drastically reduced as part of a liquidation sale.
Asset recovery firms Hudson Capital Partners LLC, Great American Group LLC, Silverman Jeweler Consultants Inc. and Gordon Brothers Group LLC are overseeing a court-ordered liquidation sale of Whitehall Jewelers Holdings Inc., which operates 373 jewelry stores in 39 states.

Fixed rate mortgages hit 5%

2008-11-25T14:17:00.000-08:00

Fixed rate mortgages hit 5%. This is only for conforming mortgages, not Jumbos (over $417k)

Will this spur a new round of buying?

Will this put a floor under the market?

Prices are back to 2003 levels...Is now the time to start looking again?

Local Ashley Furniture gets bankruptcy protection

2008-11-24T20:36:00.001-08:00

More local retail pain:

The owner of the Bakersfield branch of Ashley Furniture Homestore received
Chapter 11 bankruptcy protection this month.

"If somebody orders something at Ashley, they will get that product,” he said. “We have gotten bankruptcy court orders to make sure that happens.”

Creditors named in the Nov. 10 filing include GE Commercial Finance, which is owed $940,000, documents show.

The downturn in the retail market and the tightening of the credit market prompted the filing, Mebby Van Ostrand said. She and her husband opened the Ashley store in August 2006.

Median home price now $146,500.

2008-11-24T17:17:00.000-08:00

Their not making anymore land....Now is a good time to buy...You know, real estate only goes up...lies, lies, lies

Median home prices now at early 2003 levels:

Bakersfield homes are now selling for less than $100 a square foot, a price point not seen since early 2004, November sales analyzed by local appraiser Gary Crabtree show.

What’s more, November’s median price has so far dropped more than $14,000 from October’s number to $146,500.

Another mall retailer is going out of business, last one out turn off the lights:

Howe’s Hallmark Shop in Valley Plaza mall, a 20-year-old business, will launch a going-out-of business sale starting at 5 a.m. Friday.
It’s sad,” said owner Pat Howe. “A lot of people come to the mall specifically to see us.” The 3,800-square-foot shop will remain open through the New Year. Howe expects to close around Jan. 20.
A combination of higher rents and the slow economy made the decision unavoidable, Howe said.

2 more Friday Bank Failures (3 total today)

2008-11-21T18:49:00.000-08:00

2 more Banks fail today (3 total):

U.S. Bank, National Association, Minneapolis, MN, acquired the banking operations, including all the deposits, of Downey Savings and Loan Association, F.A., Newport Beach, CA, and PFF Bank & Trust, Pomona, CA, in a transaction facilitated by the Federal Deposit Insurance Corporation.

The combined 213 branches of the two organizations will reopen as branches of U.S. Bank under their normal business hours, including those with Saturday hours. Depositors will automatically become depositors of U.S. Bank. Deposits will continue to be insured by the FDIC, so there is no need for customers to change their banking relationship to retain their deposit insurance coverage.

Customers of both banks should continue to use their existing branches until U.S. Bank can fully integrate the deposit records of the organizations. Over the weekend, depositors can access their money by writing checks or using ATM or debit cards.

As of September 30, 2008, Downey Savings had total assets of $12.8 billion and total deposits of $9.7 billion. PFF Bank had total assets of $3.7 billion and total deposits of $2.4 billion. Besides assuming all the deposits from the two California banks, U.S. Bank will purchase virtually all their assets. The FDIC will retain any remaining assets for later disposition.

The FDIC and U.S. Bank entered into a loss share transaction. U.S. Bank will assume the first $1.6 billion of losses on the asset pools covered under the loss share agreement, equal to the net asset position at close. The FDIC will then share in any further losses. Under the agreement, U.S. Bank will implement a loan modification program similar to the one the FDIC announced in August stemming from the failure of IndyMac Bank, F.S.B., Pasadena, CA.

Gottchalks now owned by Communist China

2008-11-21T17:14:00.000-08:00

Crappy retailer and current tenant of our local mall, whose stock is worthless, was "purchased" by the Communist Chinese.

Gottchalks throws in the towel on America?:

West Coast department store chain Gottschalks, which has been consistently in the red, is getting a $30 million cash infusion from a company with strong ties to the Communist government of China.

Gottschalks Inc. (Pink Sheets: GOTT) of Fresno says it has signed a definitive agreement for up to a $30 million investment in the company by Everbright Development Overseas Ltd., which is set up as a British Virgin Islands corporation.

For the money, Everbright gets 40 million shares of Gottschalks common stock, to be issued at a price of $1.80 per share, which will amount to approximately 75 percent of the company's common stock.

Community fails

2008-11-21T15:22:00.000-08:00

Bank failure Friday...if only it was 2005 again and everyone was a real estate mogul:

On November 21, 2008, The Community Bank, Loganville, GA was closed by the Georgia Department of Banking and Finance and the Federal Deposit Insurance Corporation (FDIC) was named Receiver. No advance notice is given to the public when a financial institution is closed.

The FDIC has assembled useful information regarding your relationship with this institution. Besides a checking account, you may have Certificates of Deposit, a car loan, a business checking account, a commercial loan, a Social Security direct deposit, and other relationships with the institution. The FDIC has compiled the following information which should answer many of your questions.

Ca unemployment rate at a 14 year high

2008-11-21T10:20:00.000-08:00

I sure hope the State and local governments adjust their budgets, its going to get much worse!

California Unemployment soars:

California's unemployment rate rose dramatically in October to 8.2%, its highest
level in 14 years, the U.S. Department of Labor reported this morning.
The increase from 7.7% in September was larger than the national increase in joblessness; the U.S. unemployment rate jumped four-tenths of a point, to 6.5%, in a tally reported earlier this month. California's unemployment is the third-highest in the United States, exceeded only by Michigan and Rhode Island at 9.3% each.
Seasonably adjusted unemployment rose 2.5% between October 2007 and October 2008, representing a loss of 101,300 jobs in the Golden State, the Department of Labor said.

City and County are run by fools!

2008-11-20T06:31:00.000-08:00

Why does the County need a new building for its retirement plan? What a waste of taxpayer money!

Taxpayer dollars down the drain:

The board of the Kern County Employees' Retirement Association approved the purchase of 1.25 acres of ground across from the Park at River Walk Wednesday for the construction of new offices.
Escrow on the land is expected to close on Dec. 2, said Dan Robinson of American Realty Advisors, who handled the transaction for KCERA.
The land cost somewhere around $800,000 said KCERA boss Ann Holdren. Efforts are underway to hire an architectual firm to design the new office and a contractor to build it.
Currently KCERA inhabits offices on the first floor of the Kern County Administrative Center on Truxtun Avenue.

No surprise on the next story, the city has been behind the curve for sometime on the coming tsunami of declining tax revenues.

City now $14 million in the hole.

Hit with declining revenue, city officials have frozen more than 100 jobs.

“But that’s not nearly enough to deal with the situation that we face,” City Manager Alan Tandy told the City Council Wednesday. The city’s sales tax has declined, and the city now expects to bring in $2.1 million less in sales tax than it budgeted for just six months ago, said Finance Director Nelson Smith.
And sinking property values have led to zero growth in property taxes, with an expected decline next year, Smith said.
The city will also stop setting aside money for its future health-care liabilities, Tandy said. But that saves the city a total of about $8 million — and the city needs to cut about $14 million.

Now everyone wants some free money

2008-11-16T07:51:00.000-08:00

Things are getting worse!

State of Illinois not paying its bills:

State owes $4 billion in unpaid bills

Illinois’ backlog of unpaid bills has hit a record $4 billion, and Comptroller Dan Hynes said Thursday the situation is “potentially catastrophic” if allowed to continue.

In a letter to Gov. Rod Blagojevich and state legislative leaders, Hynes said the backlog will hit $5 billion in March, and it will take his office 20 weeks to pay bills once they hit his office. Often, state agencies hold on to bills for days or weeks before handing them over to the comptroller for payment.

Already, Hynes said, his office has had to expedite payments to two vendors who threatened to cut off services to the state unless they were paid. One provides food service to a state prison, and the other supplies gasoline to state police cars.

Texas Teachers pension has lost $25 billion, since September:

AUSTIN — The Teacher Retirement System of Texas has seen about a $25 billion market value drop since Sept. 1 in the nation's widening financial meltdown, making additional benefits next year for retirees appear unlikely.

Bill Harris, the system's chief investment officer, said however that 275,000 retired teachers and beneficiaries covered by the fund shouldn't fear a change in current benefits.

"These are short-term conditions. We are a long-term fund," Harris said.

Cities of Philadelphia, Atlanta and Phoenix begging for free money:

WASHINGTON (AP) - Three big city mayors asked the federal government Friday to use a portion of the $700 billion financial bailout to assist struggling cities.

The mayors sought help with their pension costs, infrastructure investment and cash-flow problems stemming from the global financial crisis.

The mayors—Michael Nutter of Philadelphia, Shirley Franklin of Atlanta and Phil Gordon of Phoenix—made their request in a letter to Treasury Secretary Henry Paulson.

Nutter said cities are facing an economic crisis not seen since the Depression and need help just like financial institutions.

"I want to make sure that cities and metro areas are at the table, that their voices are being heard, that our challenges and problems are well understood, so that we can get relief," Nutter said.

San Jose has tin cup out:

As cities around the United States start to scramble for a share of the $700 billion federal bailout package, San Jose Mayor Chuck Reed said Friday that he's working with leaders of other large California cities to make sure they're not left behind.

The stimulus package Congress passed last month wasn't designed to dole out money to governments, so it's far from clear whether San Jose will get a piece. But with $1.6 billion in unfunded retiree health care obligations, plus $500 million worth of local and regional road work to be done and $750 million in federal help sought to bring BART to the South Bay, Reed noted the city has a full slate of needs.

There are numerous other links/stories of Insurance companies, Home Builders, Retailers, Governmental entities, Auto companies, etc... All asking for something for nothing. What a sad country!

Carl Cole, Suncal and some rumors

2008-11-14T22:06:00.000-08:00

Former Principal and realtor Carl Cole strikes out:

Real estate agent Carl Cole’s bid to keep his license was denied Thursday by the California Department of Real Estate.

But Cole can seek relief through the courts, department spokesman Tom Pool said Friday afternoon.

Cole now has about a month to file an appeal with the state Superior Court.

“We’re really on another 30-day clock,” Pool said.
Attempts to reach Cole and his attorney Glenn Kottcamp Friday afternoon were unsuccessful.

Suncal is run by morons( I know you guys visit, so nothing personal):

4,000-home SunCal development in Castaic and three other projects were placed in involuntary bankruptcy by the Irvine developer Wednesday, bringing a total 15 SunCal developments into federal bankruptcy court.
Wednesday’s four filings were classified as involuntary because lender Lehman Brothers hadn’t consented, said Joe Aguirre, spokesman for SunCal Cos.
Lehman has arranged funding for all 15 sites, including Bakersfield’s McAllister Ranch.

Rumor Mill - Latest rumor is Castle and Cooke is laying off a lot of employees. Maybe they will start lowering the price of their homes?

California finances in bad shape!

2008-11-11T11:31:00.000-08:00

California is $28 billion in the hole:

California’s budget woes, which project the current budget is running more than $11 billion in the red, could be seen as the good old day if nothing changes, warns the nonpartisan Legislative Analyst’s Office on Tuesday.
California’s struggling economy signals a major reduction in expected revenues and when combined with rising state expenses, the state will need $27.8 billion in budget solutions over the next 20 months, says the LAO.
“The state’s revenue collapse is so dramatic and the underlying economic factors are
so weak that we forecast huge budget shortfalls through 2013‑14 absent corrective action,” it says. “From 2010‑11 through 2013‑14, we project annual shortfalls that are consistently in the range of $22 billion.”
The LAO says it is imperative that the Legislature attack the budget problem ggressively, making permanent improvements to the state’s fiscal outlook.
“If the state has any hope of developing a fiscally responsible 2009‑10 budget, it must begin acting now,” it says.

Valley Plaza Mall owner on the verge of collapse

2008-11-11T07:47:00.000-08:00

Valley Plaza & GGP:

Valley Plaza is located approximately 110 miles north of Los Angeles, in Bakersfield, the gateway to northern, southern and eastern California. Valley Plaza is the preferred shopping destination of residents of central California with a trade area expanding an average of 28 miles in each direction.

Mall Owner Is Warning of Default

Ailing mall owner General Growth Properties Inc. warned Monday in a government
filing that its failure to refinance or extend $1 billion in debt due this month could trigger default on billions of dollars in debt and its ability to continue operations would be in "substantial doubt."General Growth has $900 million in debt coming due Nov. 28 on two luxury malls on the Las Vegas strip. It has another $58 million in bonds due on Dec. 1.
From the GGP 10-Q on the economy:
Deteriorating economic conditions will have an adverse affect on our revenues and available cash, and may also impair our ability to sell our properties. General and retail economic conditions continue to weaken, and we expect this weakness to continue and worsen in 2009 as the economy enters a recessionary or near recessionary period. Consumer spending recently declined for the first time in 17 years, the unemployment rate is expected to rise, consumer confidence has decreased dramatically and the stock market remains extremely volatile. Given these expected economic conditions, we believe there is a significantly increased risk that the sales of stores operating in our centers will decrease, negatively affecting their ability to make minimum rent payments and increasing the risk of tenant bankruptcies. In addition to the direct adverse effect of tenant failures to pay minimum rents and tenant bankruptcies on our operations, these events also negatively affect our ability to attract and maintain minimum rent levels for new tenants. These circumstances negatively affect our revenues and available cash, and also reduce the value of our properties, reducing the likelihood that we would be able to sell such properties, on attractive terms or at all.

Fresno is feeling the pain too

2008-11-08T07:29:00.000-08:00

Idle development:

Some of the streets are in, but there isn't much else at Tierra Vista, an idle 44-lot subdivision in Dinuba that is a casualty of Estate Financial Inc.'s downfall. The Paso Robles company is in bankruptcy, and its principals have been arrested.

Mother and son Karen Roxanna Guth, 65, and Joshua Morris Yaguda, 40, both of Paso Robles, were charged with 26 felony violations of the California Corporations code, including selling securities to investors using false statements and failing to apply investor money to specifically designated property. The charges capped a six-month investigation.

The San Luis Obispo County District Attorney's Office also filed an enhancement alleging excessive taking of money totaling at least $3.2 million. That could add four years to any prison sentence, said Daniel Hilford, assistant district attorney.
The company issued more than 544 loans totaling $318 million and reportedly had about 2,700 investors, many of them living along the Central Coast and in Southern California. About 100 loans are in foreclosure, and the rest are in default, according to bankruptcy trustees.
The implosion of Estate Financial is being felt from Madera to Bakersfield. The company issued more than $15 million in loans using San Joaquin Valley real estate as collateral. Much of the money was used to acquire land and lots and prepare them for development.

Plant Closure:

About 115 workers at a Fresno container plant are expected to lose their jobs over the next 12 months in a "phased-down closure," officials said Thursday.
Missouri-based Smurfit-Stone Container Corp. is shutting down its cardboard manufacturing plant at 2525 S. Sunland Ave., in the Calwa neighborhood, as part of a consolidation of its regional operations, said Tim Rowden, a company spokesman.
The Calwa plant produces corrugated cardboard sheets used to make boxes. Earlier this year, Smurfit-Stone purchased a 90% interest in Calpine Corrugated, which operates another plant, one that makes boxes, less than five miles away in Malaga.

Yard sales:

It's a good half hour before sunrise as Annie Rini sifts through piles of clothing and stacks of dishes spread on tables outside a northwest Fresno home.

It's the first of more than a dozen garage sales Rini will hit before 11 a.m. on a crisp fall Saturday. She doesn't do it just for fun.

"This is so out of necessity," said Rini, who paid $2 for a ceramic platter and an orange Tupperware bowl with lid.

Like Rini, more and more people are shopping at garage sales to save money in a bad economy. And more people are putting their belongings up for sale for gas money or to pay bills

And their college football team should start playing high school teams:

Fresno State knew Nevada was bringing its pistol. Too bad the Bulldogs don't own a bulletproof vest.

Nevada packed its pistol offense and the nation's second-ranked running game into Bulldog Stadium on Friday night and proceeded to blast holes in Fresno State's defense as the Bulldogs lost 41-28 in front of 33,207 fans and a nationwide television audience on ESPN2.

The Wolf Pack racked up 600 yards of total offense, including 472 on the ground.

Down goes Security,,,Down goes Security

2008-11-07T17:19:00.000-08:00

Two on one Friday:

Security Pacific Bank, Los Angeles, California, was closed today by the Commissioner of the California Department of Financial Institutions, and the Federal Deposit Insurance Corporation (FDIC) was named receiver. To protect the depositors, the FDIC entered into a purchase and assumption agreement with Pacific Western Bank, Las Angeles, California, to assume all of the deposits of Security Pacific.

The four branches of Security Pacific will reopen on Monday as branches of Pacific Western. Depositors of the failed bank will automatically become depositors of Pacific Western. Deposits will continue to be insured by the FDIC, so there is no need for customers to change their banking relationship to retain their deposit insurance coverage. Customers of both banks should continue to use their existing branches until Pacific Western can fully integrate the deposit records of Security Pacific.

Over the weekend, depositors of Security Pacific can access their money by writing checks or using ATM or debit cards. Checks drawn on the bank will continue to be processed. Loan customers should continue to make their payments as usual.

Down goes Franklin... Down goes Franklin

2008-11-07T16:17:00.000-08:00

Friday Bank Faliure:

I. Introduction
On November 7, 2008, Franklin Bank, SSB, Houston, TX was closed by the Texas Department of Savings and Mortgage Lending and the Federal Deposit Insurance Corporation (FDIC) was named Receiver. No advance notice is given to the public when a financial institution is closed.
The FDIC has assembled useful information regarding your relationship with this institution. Besides a checking account, you may have Certificates of Deposit, a car loan, a business checking account, a commercial loan, a Social Security direct deposit, and other relationships with the institution. The FDIC has compiled the following information which should answer many of your questions.

II. Press Release
The FDIC has issued a press release (PR-113-2008) about the institution's closure. If you represent a media outlet and would like information about the closure, please contact David Barr at 703-622-4790 (Closing Weekend) or 202-898-6992 (Thereafter).

Mall losing a tenant

2008-11-06T05:48:00.000-08:00

Another horrible retail concept is coming to an end, which means our local mall is going to lose a tenant.

Liby Lu is closing:

Retailer Saks Inc. said Wednesday it’s closing all of its Club Libby Lu specialty stores that cater to girls in the 4-to-12 age range.
In a press release, the company cited lack of profitability for the closings ... Birmingham, Ala.-based Saks (NYSE: SKS) has 78 Club Libby Lu stores in malls across America and 20 stores located in former Saks Department Store Group stores, the company said.
Saks expects to close all of its Club Libby Lu retail units by the end of the first fiscal quarter in 2009.
During the fiscal year ending Feb. 2, Club Libby Lu generated revenue of $60 million. The retail units and brand employs 1,700 associates nationwide -- all of whom will be offered severance packages.

$144 million cash “dividend" and Supreme Bean

2008-11-05T20:12:00.000-08:00

Suncal update:

McAllister Ranch’s bankruptcy trustee has cast a critical eye on the relationship between Lehman Brothers Inc. and SunCal Co., court filings show —
especially the $144 million cash “dividend” the companies received from a development loan that later defaulted.

The trustee has requested an emergency order to force the Lehman affiliate in charge of $18 million left in a development fund to pay for basic upkeep of McAllister Ranch — southwest Bakersfield’s unfinished 6,000-home development — and two related properties in Riverside County.

The emergency motion filed Tuesday by the Chapter 11 trustee, Alfred H.
Siegel, also said Lehman’s status as first-priority lienholder “may be disputed,” mostly due to emerging details about the $144 million dividend.

A Lehman affiliate got $116 million of the dividend, the motion says.

The document also asserts the original $235 million development loan arranged by Lehman defaulted because the dividend payment made the development affiliate —owned by both Lehman and SunCal — unable to pay its bills.
“One fact is certain,” Siegel’s motion says. “If the $144 million had not been disbursed ... there would have been sufficient cash” to pay the developer’s debts.
Numerous construction companies, some based in Bakersfield, are owed about $46 million by SunCal for work done at McAllister Ranch and the Riverside sites.

Supreme Bean busted:

The new owner of now-defunct Supreme Bean, Bakersfield’s chain of eight drive-through coffee stands, has filed for liquidation bankruptcy.

San Joaquin Bank and early October numbers (not pretty)

2008-11-05T08:03:00.000-08:00

Recall my post from April 2008 where I questioned the loan loss reserves at San Joaquin Bank. Well, it looks like I was correct.

San Joaquin Bank record first ever loss:

Bakersfield-based San Joaquin Bancorp was forced to record its first quarterly loss in almost a quarter century Tuesday after creating a cushion for itself in case of construction loan defaults among local homebuilders.
The company’s stock price fell $2, or 10.53 percent, to close at $17, its lowest
price in almost five years.

San Joaquin Bank's stock is now down 64% from its all time high.

Median Home price for October is now $165,000:

Bakersfield’s median price for existing homes fell 35 percent in October compared to the previous year, according to the Preliminary Crabtree Report released Monday.

October’s median price was $165,000. A year earlier, the number stood at $254,500.
Last month’s number was also a $10,000 drop from September’s price.
Looking ahead, Crabtree expects prices to drop further.
The median listing price is currently $157,900, he wrote, less than October’s median sales price.

If you look at the previous Crabtree predictions, even from a few months ago, he was still saying we hit bottom...looks like he is finally capitulating.

Freedom fails!

2008-10-31T15:16:00.000-07:00

Freedom has failed in America:

On October 31, 2008, Freedom Bank, Bradenton, FL was closed by the Florida Office of Financial Regulation and the Federal Deposit Insurance Corporation (FDIC) was named Receiver. No advance notice is given to the public when a financial institution is closed.

The FDIC has assembled useful information regarding your relationship with this institution. Besides a checking account, you may have Certificates of Deposit, a car loan, a business checking account, a commercial loan, a Social Security direct deposit, and other relationships with the institution. The FDIC has compiled the following information which should answer many of your questions

Stop paying your mortgage?

2008-10-31T01:31:00.000-07:00

It looks like George and Hank are trying to spread the wealth around to the average Joe's. They, along with the FDIC, are trying to bailout troubled homeowners by strong arming the banks they bailed out with our tax dollars.

Why should any pay their mortgage now? Why not just ask your lender for a reduction in the balance due or threaten them to walk away? What if ten million home-debtors did it, then what are they going to do? Why should only the most reckless financially among us get a bailout? Why should a home-debtor who refinanced every six months and pissed away the money on junk get to wipe the slate clean?

Below are a few of the latest stories:

Treasury plan irks many:

As the Treasury Department prepares a $40 billion program to help delinquent homeowners avoid foreclosure, it confronts a difficult challenge: not making the plan too tempting to people like Todd Lawrence.

An airline pilot who lives outside Norwich, Conn., Mr. Lawrence has a traditional 30-year mortgage that he has no trouble paying every month. But, thanks to the plunging real estate market, he owes more on his house than it is worth, like millions of other people.

If the banks, which frequently lent irresponsibly, and many homeowners, who often borrowed irresponsibly, are getting government assistance, Mr. Lawrence says he believes sober souls like himself are also due a break.
“Why am I being punished for having bought a house I could afford?” he asked. “I am beginning to think I would have rocks in my head if I keep paying my mortgage.”

“If the lunch truly is free, the demand for free lunches will be large,” said Paul McCulley, a managing director with the investment firm Pimco
“This is not about trying to create fairness,” said Michael H. Krimminger, special adviser for policy at the Federal Deposit Insurance Corporation, which is working with Treasury on the latest plan. “The goal is to keep people in their houses.”
Still, he acknowledged, “a lot of people are angry because they feel some people are getting something they don’t deserve.”
Peter Schiff, the president of Euro Pacific Capital in Darien, Conn., who prophesied doom before it became fashionable, says he thinks just about everyone who is underwater and has few other assets should stop paying.
“If the government says, ‘Prove that you can’t afford your house and we’ll redo your mortgage,’ then people are going to try to qualify,” Mr. Schiff said.

FDIC trying to give free ponies to homedebtors:

The Federal Deposit Insurance Corp.'s program to lower loan payments for truggling borrowers with mortgages from IndyMac Bank has been lauded by consumer advocates and government leaders as a model of foreclosure prevention.

But when the FDIC, which is running IndyMac, mailed out 35,000 letters offering homeowners a chance to rework the terms of their mortgages, more than half the borrowers were apparently so discouraged, scared or stressed out that they didn't bother to respond.

The intent wasn't charity, the FDIC's Bair said; instead, she reasoned, it would be easier to find a buyer for the thrift if more borrowers were current on their loans.

Stop paying your mortgage?:

Seriously.
Assuming your home is worth equal or less on the market today than your outstanding mortgage balance, of course.
You deserve to live free for a year, and you deserve to have your home price come way down so you can buy it back in a few years for much less.
You've already been taxed to the tune of $700 billion for a bailout for the bankers, even though you told Congress "no".
Now the FDIC and Treasury are "working on a plan to curb foreclosures."
In return I recommend that every American with a mortgage immediately stop paying.
Today.
Whether you can afford it or not.
Consult with an attorney and CPA, in the same room before you act to make sure your specific mortgage (and the state in which you live) is a "non-recourse" loan and to understand exactly what impact this will have on you (it will come with a significant impact, most specifically to your credit rating!
Hear me out - you may find that this course of action makes perfectly good sense.)
See, in many states purchase-money first mortgages are "non-recourse", meaning that all they can do is ruin your credit and foreclose on your house.
That's it.
They cannot force you into bankruptcy, they cannot garnish your wages. And from the time you stop paying until the time you get evicted, you get to live there for free.
Finally, after you have been foreclosed upon, your house (and lots like it if your friends and neighbors do likewise) will drop dramatically in price. Presto! In a year or two you will be able to buy it back at half what you paid for it in 2004 or 2005.
Now that's a bargain.
So give the government and the banks back what they're trying to give to you - a royal screw job.

After all, they intend to give your neighbor who behaved imprudently a bailout, and if you were prudent, unless you suddenly become imprudent, you're going to get screwed in the form of being taxed to buy his home for him:
"The program, which might help several million homeowners refinance into affordable loans, would require lenders to restructure mortgages based on a borrower's ability to repay. Under one option, the industry would keep lower monthly payments for five years before raising interest rates, the people said. "

September numbers out - Prices down 46% from the peak

2008-10-24T16:28:00.001-07:00

DQ Numbers for September:

Bakersfield Median - $176,500

Down 28.8% YOY and Down 46% from the peak...knife catchers beware, as the economy continues to crater prices will continue to fall. Buyer beware!

The good news, a lot of other areas are crumbling faster than we are.

What were the predictions by the local real estate community for 2008:

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.

-----------------
“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.”

Real estate "mogul" defaults grow

2008-10-23T19:40:00.000-07:00

Real estate only goes up?:

Bakersfield developer Terry Moreland has had two more residential developments default, including one in northeast Bakersfield near City in the Hills, county records show. Four of his projects have now defaulted since August.

Two construction loans totaling more than $25 million taken out by Moreland’s Barcelona LLC defaulted last week. The loans, both from First Bank, were borrowed against property on Paladino Drive, east of Vineland Road, immediately north of the City in the Hills community. The tract’s two recorded phases show 96 lots are planned on 55 acres.

More than $18.7 million was in arrears on the loans as of Oct. 10, the default filings show. The loans were made in 2005 and 2007.

What will the bankers do with the money and Suncal Update

2008-10-23T16:35:00.001-07:00

Bailout Update:

What will the trillion dollar bailout do for America- so far nothing. What will it do for the large national bankers - allow them to pay billions of dollars in bonuses and dividend payments.

I have had several intersting conversations lately on this subject. One of them came from a mid-size California bank. This bank was offered a $50 millon from Hank Paulson and George Bush.

The offer is similar to the offer received by the nine large banks a few weeks ago. What will the bank do with the money? Will they stimulate the economy by lending the money to businesses (which is the intended purpose)? NO! They are planning on using the money to buy out other small California banks - this will only DECREASE the level of competition and allow them to raise their fees and rates! Nice plan Hank and George!

Suncal Update:

McAllister Ranch could become part of a liquidation bankruptcy case Thursday, court papers filed late Wednesday afternoon indicate.

Lawyers for SunCal Cos., the Irvine-based developer behind the troubled project, will ask a federal bankruptcy judge to convert an existing involuntary bankruptcy proceeding to a Chapter 7 case at a previously scheduled hearing Thursday afternoon in Santa Ana, the document shows.

Recent filings also show companies owed money by SunCal want to know what happened to a $144 million “dividend” payment to SunCal subsidiaries and/or its president in 2006. One lawyer says the money was probably used for cruises, charter flights and other extravagances during the real estate boom.

Local shopping center about to become a ghost town

2008-10-20T14:07:00.000-07:00

It looks like the shopping center that held the Mervyn's store on California is going to have another large vacancy. Shoe pavillion announced they are too tired to continue selling crappy shoes. Within one mile of this shopping center is an additional 300,000 square feet of empty commercial real estate space...what were those experts saying about CRE again?

By the way this shopping center is owned by the large Australian group that has had many CRE problems lately...more pain for them...good day mate.

Shoe Pavillion going bust:

Shoe Pavilion going out of business
Last update: 5:02 p.m. EDT Oct. 20, 2008
SAN FRANCISCO (MarketWatch) -- Shoe Pavilion Inc. said late Monday it will close all of its 64 stores after 29 years in business. Shoe Pavilion was once the largest independent discount footwear retailer on the West Coast.

Bailout money to be used to pay Wall Street Bonuses

2008-10-17T19:58:00.000-07:00

The massive government bailout given to Wall Street bankers will be used to pay billions of dollars in bonuses.

Looks like George and Hank got what they wanted - a failed bailout with Taxpayer dollars that will help the wealthy Wall Street bankers and do NOTHING for the other 99.9% of America. What a great country!

Wall Street banks in $70bn staff payout:

Financial workers at Wall Street's top banks are to receive pay deals worth more than $70bn (£40bn), a substantial proportion of which is expected to be paid in discretionary bonuses, for their work so far this year - despite plunging the global financial system into its worst crisis since the 1929 stock market crash, the Guardian has learned.

Staff at six banks including Goldman Sachs and Citigroup are in line to pick up the payouts despite being the beneficiaries of a $700bn bail-out from the US government that has already prompted criticism. The government's cash has been poured in on the condition that excessive executive pay would be curbed.

Pay plans for bankers have been disclosed in recent corporate statements. Pressure on the US firms to review preparations for annual bonuses increased yesterday when Germany's Deutsche Bank said many of its leading traders would join Josef Ackermann, its chief executive, in waiving millions of euros in annual payouts.

The sums that continue to be spent by Wall Street firms on payroll, payoffs and, most controversially, bonuses appear to bear no relation to the losses incurred by investors in the banks. Shares in Citigroup and Goldman Sachs have declined by more than 45% since the start of the year. Merrill Lynch and Morgan Stanley have
fallen by more than 60%. JP MorganChase fell 6.4% and Lehman Brothers has collapsed.

At one point last week the Morgan Stanley $10.7bn pay pot for the year to date was greater than the entire stock market value of the business. In effect, staff, on receiving their remuneration, could club together and buy the bank.

In the first nine months of the year Citigroup, which employs thousands of staff in the UK, accrued $25.9bn for salaries and bonuses, an increase on the previous year of 4%. Earlier this week the bank accepted a $25bn investment by the US government as part of its bail-out plan.

At Goldman Sachs the figure was $11.4bn, Morgan Stanley $10.73bn, JP Morgan $6.53bn and Merrill Lynch $11.7bn. At Merrill, which was on the point of going bust last month before being taken over by Bank of America, the total accrued in the last quarter grew 76% to $3.49bn. At Morgan Stanley, the amount put aside for staff compensation also grew in the last quarter to the end of August by 3% to $3.7bn.

Commercial Real Estate about to get much worse

2008-10-17T08:57:00.000-07:00

Mervyn's is DONE and they are Filing Chapter 7:

HAYWARD (CBS 5) ― Department store chain Mervyns LLC will announce Friday that it is filing for chapter 7 bankruptcy protection — which means the Hayward-based retailer must shut its doors and liquidate its inventory, sources told CBS 5.

Over the summer, Mervyns had filed for chapter 11 protection from its creditors in U.S. bankruptcy court for the District of Delaware. The company said at the time that it planned to continue business as usual while it reorganized.

The privately-held retailer, which has languished for several years, operates about 175 locations in seven states - but primarily in California

Office vacancies rise and rents fall:

In some parts of the region, office buildings that once housed mortgage lenders and other housing-related businesses stand 20% empty, according to brokerage Cushman & Wakefield. Even in desirable Santa Monica, vacancies have almost doubled as companies have shunned the coastal area's still-pricey digs in favor of cheaper rents elsewhere in the region.

Altogether, Los Angeles County had a vacancy rate of 11.6% including sublease space at the end of the third quarter, up slightly from 9.5% a year ago."We are certainly going to see vacancy rates go up as we go into this economy," said Joe Vargas, regional manager of Cushman & Wakefield. "Rental rates will be slow to adjust down, but we are going to see it happen."

The situation is worse in Orange County, where office vacancy rates rose to 16.2% in the third quarter from 11% a year ago, spurred in large part by the closing of several lenders that specialized in subprime mortgage loans. In the buildings around John Wayne Airport, however, vacancy has surpassed 20%.

End of office party is coming:

The next shoe? After years of plunging residential property valuations, commercial real estate is heading into the danger zone as office vacancies rise, stores close and hotel bookings fall.

This could mean another body blow to already struggling financial institutions. Alan Todd, head of research on commercial-mortgage-backed bonds at J.P. Morgan Securities, projects commercial-property losses of as much as $250 billion over the next 10 years, or about 7% of the $3.4 trillion outstanding debt. That would rival the roughly 9% cumulative loss rate during the real-estate carnage of the early 1990s.

Something positive

2008-10-14T16:51:00.000-07:00

From cnbc.com: (hat tip sm_landlord)

Bakersfield, California is known for three things: Buck Owens, Merle Haggard, and oil. All three were always pretty good at sad songs. But oil's boom over the last year has helped rejuvenate Bakersfield's fortunes.

It is one of the few places in America where the economy is growing, according to Moody's Economy.com. And even as oil prices come back down, they remain at levels elevated enough to unleash billions of dollars in new drilling in Bakersfield's Kern County, the largest oil-producing county in the lower 48.

This is helping offset an awful foreclosure problem in the area. The video clip has some interviews I did with a couple of local oilmen, Chad Hathaway, who runs his own operation, and Steve Black, the VP of Operations for Bonanza Creek Energy. These guys are not spending money based on $100 oil. As Chad Hathaway told me, "I base it on $30 oil."

3 posh projects go bust as Valley dreams bite the dust

2008-10-12T07:15:00.000-07:00

Sacramento Bee has a story on the golf course community bust in the Valley

Sacbee.com:

In the Central Valley these days, the bankruptcies and foreclosures don't just affect individual homeowners.

They swallow entire developments – and the people who conceive them.

Winchester Country Club in rural Placer County, which went into foreclosure and sent legendary Sacramento highway contractor C.C. Myers into bankruptcy protection, isn't the only lavish golf-course housing development to fall on hard times. Three massive high-end projects in the San Joaquin Valley have fallen into bankruptcy proceedings in the past two years.

The three insolvencies symbolize the California housing bubble at its most extreme. Combined, they have cost lenders and investors tens of millions of dollars – and offer clues about the roots of the financial crisis that has gripped Wall Street and the world's economies.

President Bush in 2004

2008-10-08T15:57:00.000-07:00

From the Idiot in charge: (hat tip bigpicture.com)

"One other thing I've done, is I've called on private sector mortgage banks and banks to be more aggressive about lending money to first-time home buyers. And the response has been really good. There's a lot of people in this -- our communities around the country that deeply care about the issue of homeownership, and they've been responsive."
- George W. Bush, U.S. President, March 26, 2004.

Halloween 2008

2008-10-03T15:45:00.000-07:00

What was this "insider" saying during the bubble years?

2008-10-01T09:23:00.000-07:00

Before we look at today's article, I mean sales pitch from the long ago dis-credited REIC, lets discuss what this insider was saying during the bubble years.

I listened to Stan and Susan Ferguson's show during the bubble years and was absolutely disgusted with their mind numbing drivel. Every show started off with "its a great time to buy", "prices are not going any lower" and all of the other crap Realtors spew. Now we get another story from the local newspaper about how "now is the time to buy" (no really, this time).

Why doesn't the newspaper call these people out for what they said in the past? How about some real reporting instead of just parroting what they said? How many thousands of people have been foreclosed in our are because they listened to the horrible advice of a realtor?

Bakersfield.com:

Right time to buy a home? For some, definitely

Realtor Susan Ferguson of Coldwell Banker counsels clients to make sure they want to live in the home they would buy for five to 10 years. Gone are the days of buying a house and flipping it to make a quick profit.
The home you buy needs to be affordable, with payments you can comfortably manage.

“Prices right now are the best that they’ve been,” Ferguson said.

Instead of paying rent to somebody else, people with good credit and the resources for a down payment can “make that investment in yourself,” she said.

Latest bailout plan is to suspend fair-value accounting

2008-10-01T01:00:00.000-07:00

Bloomberg:

Representative Todd Tiahrt, a Kansas Republican, said the House probably would have approved a $700 billion bailout of financial companies yesterday had the legislation included a suspension of fair-value accounting. The House rejected the measure 228-205.

It would have passed ``easily'' if the rules had been suspended, Tiahrt, who opposed the legislation, said today in a Bloomberg Television interview.

It looks like the Wall Street crooks are trying to change the accounting rules and they are using this bailout as an excuse. Unfortunately, it appears Congress is buying their bs hook, line and sinker!

Where were these crooks when the value of their assets was going up year after year? They were booking these increases in fair value to their bottom lines and paying out big bonuses based on these fair-value increases. Now that the assets are declining they want to stop this rule; so they don't miss out on another big bonus!

What is fair-value accounting?

For many years, standard setters have grappled with the issues associated with accounting for financial instruments. Decisions with regard to what valuation method should be applied have been difficult and in some cases controversial.

In 1994, FAS 115 was introduced into US GAAP as a partial solution. It required fair value accounting for many investments. In 2000, FAS 133 was introduced to improve the accounting model for derivatives by requiring fair value measurement. FAS 157, issued in 2007, established a common definition of fair value. Then FAS 159 expanded the ability of companies to elect fair value as their measurement basis for certain financial assets and liabilities.

Recently the US markets began experiencing significant illiquidity and volatility, creating conditions that made fair value assessments more controversial. The value of today’s innovative and complex financial instruments, such as derivatives, mortgage-backed securities and other structured financial products is subject to market illiquidity and volatility. Although fair value accounting could apply to other assets and liabilities, the focus of this piece is on financial instruments (particularly financial assets).

Implications of fair value accounting

While many agree that fair value yields a more relevant measure than historical cost, it is not perfect. Two controversies surround fair value measurements today: (1) the application of fair value accounting in illiquid markets, and (2) how and when modeling should be used as the method to determine fair value.

Fair value measurements in illiquid markets

Recent credit market conditions have resulted in large write-downs through the application of fair value measurements. Most of the charges have occurred within the banking and broker-dealer industries. Companies providing credit protection through credit default swaps on the underlying asset, as opposed to insurance contracts, have been impacted by fair value measurements. Even though the default that would trigger protection may not have occurred, companies are required to recognize unrealized losses on the contract when the fair value of the underlying assets has significantly decreased. Also affected have been some corporations with investments in auction rate securities which suffered declines.

The requirements to use fair value measurements have been criticized for producing inaccurate results in the unusual market conditions recently experienced. Such results, it is argued, hurt the company in the long run. If a company must record losses in such an environment, critics claim, it signals bad news to investors that may ultimately be misleading. Therefore, they say, it is preferable to record only realized gains and losses.

In considering this controversy, it is important to recognize that accounting principles such as fair value are developed with the objective of providing information that will best serve the interests of investors, businesses and policy makers over the long term.

Summary

Balancing the factors, fair value still represents the most effective method to reflect the economic realities of market conditions. If fair value were suspended or replaced with some method based on historical cost, investors would be left to their own devices to determine the current value of these instruments—which would be less reliable and could delay any market recovery.

Although it has generated controversy, fair value continues to represent the best available methodology for determining and reporting the value of financial instruments. Markets naturally respond to financial information that fair value provides. The impacts of such measurements—whether positive or negative on a given company—are the results of market forces, not accounting methodologies. When market conditions result in volatility in values and earnings, investors benefit when companies transparently report on these circumstances and their impact on financial reporting.

A bailout solution we can live with

2008-09-30T18:56:00.000-07:00

There are thousands of people who come to this site (I have no idea why, but thank you), I figure I better offer a solution to this mess that we can all live with. A solution that does not reward the crooks on Wall Street and helps Main Street.

Solutions that I can live with:

1) Raise the FDIC limit to $5 million on bank deposits and $5 million insurance on money market accounts.

2)Once #1 is in place and the risk of capital flight is gone, start shutting down the insolvent banks and fire the management. Lets not let some Zombie banks stay alive for the next 3-5 years and get this credit crisis behind us.

3)The economy is in a recession and will be in one for some time, lets get on to some Keynesian Economics and start investing in jobs and projects that will move us forward. We need to re-build our crumbling infrastructure and construct projects that will allow us to become energy independent (nuclear, wind and solar investments). If we are going to spend trillions of dollars, why waste it on buying garbage from insolvent banks? Why not invest the funds in the USA and on projects that will create millions of jobs?

Some common sense thinking on this horrible bailout plan.

2008-09-30T08:35:00.000-07:00

From CNN.com:

Commentary: Bankruptcy, not bailout, is the right answer

The obvious alternative to a bailout is letting troubled financial institutions declare bankruptcy. Bankruptcy means that shareholders typically get wiped out and the creditors own the company.

Bankruptcy does not mean the company disappears; it is just owned by someone new (as has occurred with several airlines). Bankruptcy punishes those who took excessive risks while preserving those aspects of a businesses that remain profitable.

In contrast, a bailout transfers enormous wealth from taxpayers to those who knowingly engaged in risky subprime lending. Thus, the bailout encourages companies to take large, imprudent risks and count on getting bailed out by government. This "moral hazard" generates enormous distortions in an economy's allocation of its financial resources.

Thoughtful advocates of the bailout might concede this perspective, but they argue that a bailout is necessary to prevent economic collapse. According to this view, lenders are not making loans, even for worthy projects, because they cannot get capital. This view has a grain of truth; if the bailout does not occur, more bankruptcies are possible and credit conditions may worsen for a time.

Talk of Armageddon, however, is ridiculous scare-mongering. If financial institutions cannot make productive loans, a profit opportunity exists for someone else. This might not happen instantly, but it will happen.

Further, the current credit freeze is likely due to Wall Street's hope of a bailout; bankers will not sell their lousy assets for 20 cents on the dollar if the government might pay 30, 50, or 80 cents.

The costs of the bailout, moreover, are almost certainly being understated. The administration's claim is that many mortgage assets are merely illiquid, not truly worthless, implying taxpayers will recoup much of their $700 billion.

If these assets are worth something, however, private parties should want to buy them, and they would do so if the owners would accept fair market value. Far more likely is that current owners have brushed under the rug how little their assets are worth

LMFAO!! Paulson is an idiot!

2008-09-29T13:45:00.000-07:00

WSJ, May 7, 2008:

WASHINGTON -- Treasury Secretary Henry Paulson said U.S. financial markets are emerging from the credit crunch and that "the worst is likely to be behind us," marking possibly the most optimistic comments yet from the Bush administration on the financial crisis.

Mr. Paulson's comments, made in an interview Tuesday, reflect Treasury's view that the administration and the Fed have already taken steps necessary to quell the situation.

Bank Failure

2008-09-27T17:41:00.000-07:00

This one is across the pond.

BBC:

Treasury to nationalise B&B bank

Troubled bank Bradford & Bingley is to be nationalised, the BBC has learned.

Officials from the Treasury and the Financial Services Authority (FSA) have been in talks with executives from the bank in a bid to secure its future.

BBC News business editor Robert Peston says the Treasury will almost instantaneously sell to a bank, or a number of banks.

The bank will be nationalised using special legislation the Treasury put
through when it took Northern Rock into public ownership earlier this year.

The measure is expected be announced on Sunday night or Monday morning.

No soup for you!

2008-09-26T12:45:00.000-07:00

Does this mean these guys will need to learn the phrase "would you like to supersize that"?

Bakersfield.com:

State revokes real estate licenses of Crisp, Cole

David Crisp and Carl Cole’s real estate licenses have been revoked by state regulators.

The decision, released today by the California Department of Real Estate, ended license hearings held this summer regarding a mortgage fraud case against Crisp, Cole and several employees that was filed last September.

Bank Failure

2008-09-25T18:18:00.000-07:00

BushCo can't stop the tsunami

Washington Mutual is DONE! :

On September 25, 2008, the banking operations of Washington Mutual, Inc -
Washington Mutual Bank, Henderson, NV and Washington Mutual Bank, FSB, Park
City, UT (Washington Mutual Bank) were sold in a transaction facilitated by the Office of Thrift Supervision (OTS) and the Federal Deposit Insurance Corporation (FDIC).
The FDIC has assembled useful information regarding your relationship with this institution. Besides a checking account, you may have Certificates of Deposit, a car loan, a business checking account, a commercial loan, a Social Security direct deposit, and other relationships with the institution. The FDIC has compiled the following information which should answer many of your questions.

Another mogul not his paying bills on time and Supreme Bean closes

2008-09-22T19:57:00.000-07:00

Like many developers in the current downturn, Moreland has experienced some financial difficulties of late:

Last Friday, Moreland’s Val Verde LLC defaulted on a $5.4 million construction loan against a 126-lot residential project on the south side of Hosking Avenue, east of South H Street. More than $3.1 million was in arrears as of Sept. 17, the default filing showed. The May 2007 loan was made by PFF Bank and Trust.
Last month, Moreland’s Monte Carlo LLC defaulted on a $15.4 million loan against northeast Bakersfield property near Highway 178 and Miramonte Drive.
In addition, liens and lawsuits from contractors and subcontractors have piled up against various projects in recent months, county filings show.

Workers: Supreme Bean closes, leaving them without paychecks :

Supreme Bean, a Bakersfield chain of drive-thru coffee stations acquired by a Texas company earlier this year, appears to have gone out of business.
It was unclear Monday whether the closure of the chain’s at least eight locations was permanent.
Employees were notified Saturday that they were not to return to work. When they asked how to obtain their final checks, one worker’s manager suggested she file for unemployment benefits.

Maybe Moreland and the owners of Supreme Bean can call up Bush/Paulson and see if they can get in on this bailout...free ponies for everyone.

Bank Failure!

2008-09-19T08:03:00.001-07:00

Bushco can't stop the on coming train...

BANK FAILURE :

On September 19, 2008, Ameribank, Inc., Northfork, WV was closed by the Office of Thrift Supervision (OTS) and the Federal Deposit Insurance Corporation (FDIC) was named Receiver. No advance notice is given to the public when a financial institution is closed.

The FDIC has assembled useful information regarding your relationship with this institution. Besides a checking account, you may have Certificates of Deposit, a car loan, a business checking account, a commercial loan, a Social Security direct deposit, and other relationships with the institution. The FDIC has compiled the following information which should answer many of your questions

Privatize the profits and Socialize the losses

2008-09-19T08:03:00.000-07:00

Today is the day whatever form of crony capitalism we had was lost. King Geroge Bush has now decided to Privatize all profits and Socalize the losses.

Where was Chimpy Bush during this run up? He was signing the praises of an "ownership society". Meanwhile the fat cats on Wall Street were being paid BILLIONS in bonuses.

Now we the American taxpayer must foot the bill for this mess, while the richest of the rich get to walk away with all the profits. $1 trillion to $2 trillion will be the price tag for the bailouts of Bear Stearns, Fannie Mae, Freddie Mac, AIG, actions by the Treasury and Fed and the cost to run and step up RTC2.

Welcome to the USSRA!

Commerical real estate market crumbling.

2008-09-15T04:24:00.000-07:00

Where were these experts in this article when I was predicting a crumbling in the market? I know, they were cheer leading and talking their book. We are only in the early stages of this CRE bust. I have driven around town and there are many developments with zero or only a few tenants. As the Great Unwinding begins both the strong and weak hands will fold.

From the Bakersfield.com:

Victims of bad timing and economic conditions that have clobbered mom-and-pop store owners, Bakersfield’s independent retail market is struggling to an extent not seen since the 1990s.

The vacancy rate among Bakersfield’s standalone shopping centers has reached about 13 percent — double what it was a year to 18 months ago, according to Scott Underwood, a broker at Grubb & Ellis/ASU & Associates.

“It’s going to be a while before all this retail space is absorbed,” he said.

Just think...a few years ago everyone said we were nuts for thinking house prices were going to crash.

2008-09-14T20:02:00.000-07:00

Defaults and foreclosures continue to grow...no bottom in sight

2008-09-05T13:25:00.000-07:00

From Bakersfield.com:

One thousand properties foreclosed in Kern County during August, county figures show, the most ever for records going back to 1995

Default notices also hit a new all-time high. Lenders recorded 1,326 last month, numbers from the Kern County Recorder’s office show, reversing slight declines in June and July.

Tony Ansolabehere, the county’s assistant assessor, estimates there are currently about 5,600 foreclosed properties still owned by lenders in the county. Most are homes, he said.
“There’s a lot of inventory out there that needs to be absorbed,” Ansolabehere said.

Details at the County website

Friday Bank Failure

2008-08-29T14:16:00.000-07:00

From the FDIC.com:

Regions Bank Acquires All the Deposits of Integrity Bank, Alpharetta, Georgia

Integrity Bank, Alpharetta, Georgia, with $1.1 billion in total assets and $974.0 million in total deposits as of June 30, 2008, was closed today by the Georgia Department of Banking and Finance, and the Federal Deposit Insurance Corporation was named receiver.

The FDIC Board of Directors today approved the assumption of all the deposits of Integrity Bank by Regions Bank, Birmingham, Alabama. All depositors of Integrity Bank, including those with deposits in excess of the FDIC's insurance limits, will automatically become depositors of Regions Bank for the full amount of their deposits, and they will continue to have uninterrupted access to their deposits. Depositors will continue to be insured with Regions Bank so there is no need for customers to change their banking relationship to retain their deposit insurance.

The failed bank's five offices will reopen Tuesday, September 2nd, as branches of Regions Bank. However, for the time being, customers of both banks should use their existing branches until Regions Bank can fully integrate the deposit records of Integrity Bank.

Regions Bank has agreed to pay a total premium of 1.012 percent for the failed bank's deposits. In addition, Regions Bank will purchase approximately $34.4 million of Integrity Bank's assets, consisting of cash and cash equivalents. The FDIC will retain the remaining assets for later disposition.

The FDIC estimates that the cost to its Deposit Insurance Fund will be between $250 million and $350 million. Regions Bank's acquisition of all deposits was the "least costly" resolution for the FDIC's Deposit Insurance Fund compared to all alternatives because the expected losses to uninsured depositors were fully covered by the premium paid for the failed bank's franchise.

Integrity Bank is the tenth FDIC-insured bank to fail this year, and the first in Georgia since NetBank in Alpharetta on September 28, 2007.

Bankers are dumb!

2008-08-27T08:32:00.000-07:00

I wanted to highlight a post by Ichabod that was very interesting. It really shows how slow the banks are to react to this downturn:

Actually, the bank needs to wise up and TAKE the short sales! With our market going downward (it used to be the kiddie slope, now its triple diamond slope!) the banks will make MORE money on homes through short sales. I had a home listed with a buyer wiling to pay $204,000 in April of '07- the bank wouldn't halt the trustee sale. They are now trying to sell it REO (after putting a town of money into the house for new carpet, paint, plus the monthly utility bills, hello?) for $100,000 LESS!

I had another house listed where the owner owed $254,000. I was trying to short sale the house, I had a buyer willing to pay $180,000 CASH, the bank said they refused to look at offers less than $200K. The house foreclosed (oh, and a transient broke in, flooded the bathroom, trashed the place) and the house sold REO for LESS THAN $120K!!! The funny thing is, the bank never even listed it for $200K!

One more boring example: I had a house listed For under $200K and had a buyer willing to pay $150K- the bank demanded $175K. The buyer was even willing to pay $175K if the bank would simply compensate him for the missing appliances- the bank refused, and foreclosed on the house. The bank then listed it for $134K! They never even tried to get $175 or even $150! It is still on the market for less than $100K!In conclusion- short sales are the best bet to a bank- but they have so much red tape, they are losing so much more than they really have to.

Will Crisp be homeless?

2008-08-26T19:51:00.000-07:00

Oh how the phony rich have fallen:

The Southern Oaks house where David Crisp has been staying in recent months — after the once high-flying Realtor lost all of his own properties to foreclosure — fell into default Tuesday, county records show.

The property at 9808 Fitzgerald Drive is owned by real estate broker David “Ty” Stewart.

“I’d like to keep it if I could,” Stewart said, “so I don’t have to evict a tenant who can’t pay rent.” Monthly payments are $4,500, Stewart said, and the interest rate is 12.5 percent.

The house is also worth $200,000 less than Stewart bought it for, he said,
because of the declining market.

“I’m just a victim” of the down economy “who’s struggling like everyone
else,” he said.

Victim? Whatever!

Maybe a victim of greed and hubris?

Weight Loss, Defaults and Nurseries

2008-08-23T10:03:00.000-07:00

Weight Loss centers trim the fat?:

Both of Bakersfield’s L.A. Weight Loss Centers appear to be closing amid nationwide reports that the Pennsylvania-based company is finished.

The east Bakersfield store at 2625 Mount Vernon Ave. is full of packed boxes. A handwritten sign says it is open three days a week. A manager was not available to comment.
Another handwritten sign on the door of the southwest store at 5113 Ming Ave. says it closed in July. No customer information was posted.

Options wilt as some nurseries close

Two perennial Bakersfield nurseries — businesses once hearty enough to pass from one generation to the next — may be going the way of last year’s petunias

Robby’s Nursery & Landscape Service, founded in 1962, and Cooper’s Gardens, another independent around since 1941, appear to have succumbed to economic and competitive maladies spreading among mom-and-pops industrywide.

Both nurseries’ owners pointed to the housing slump, tighter consumer spending and pressure from big-box retailers. They also blamed specific local factors: brutal weather, commercial property values that encourage selling out and shifting shopper habits.

Las Palmas Nursery on Coffee Road also closed recently. The owner could not be reached for comment

Another real estate "mogul" can't pay his bills on time:

Two residential tracts in Rosedale defaulted on more than $29.5 million worth of loans Friday, county records show. The abandoned construction sites are both on the north side of Meacham Road, near Heath Road.

One is the southern half of the Tallus Ranch development at the northeast intersection of Heath and Meacham Road. There, Modesto developer John Carter Williams defaulted on a $19.5 million loan from Colonial Bank N.A. made in June 2005. As of Thursday, the developer was behind on more than $10.5 million worth of payments, the default filing showed.

The second site is slightly west, at the northeast corner of Meacham and Wegis Avenue. The 116-acre property is bounded by Hageman Road on the north. There, Williams defaulted on a $10.3 million construction loan from Colonial Bank made in March 2006. More than $3.7 million was in arrears as of Thursday.
Both loans were made to Williams through his company, J.C. Williams Co.

More trouble for the City in the Hills and Ca home prices crash even more

2008-08-18T13:44:00.000-07:00

Bakersfield.com:

Construction at two tracts in northeast Bakersfield’s City in the Hills development has been halted by one of the builders there, K. Hovnanian Homes, a company official said.

The Rosemary Arbor and Lantana’s Edge neighborhoods are on hold, said Joseph Manisco, vice president and chief legal officer at the company’s Southern California regional office in Ontario. Manisco said the tracts weren’t profitable.

DQNews.com:

"What we're looking at is a fire sale of properties in newer affordable neighborhoods that were bought or refinanced near the price peak with lousy mortgages.

The median price paid for a Southland home was $348,000 last month, down 2.0 percent from $355,000 in June and down 31.1 percent from $505,000 for July 2007. That peak of $505,000 was reached in March, April, May and July of last year.
Orange County down 28% YOY
Riverside County down 34.8% YOY
San Bernardino County down 35.2% YOY

City in the Hills defaults and others.

2008-08-15T20:04:00.000-07:00

This is getting ugly...I might need to move out of town...maybe we will have a grapes of wrath II, except this time we go back to Oklahoma...

From the Bakersfield Californian:

A trio of large developments in northeast Bakersfield have defaulted — two of them from the master developer of the City in the Hills project, county records show, continuing to a string of such troubles in Kern. More than $26 million was past due on the three loans.

Here are details:
Three loans made by Indymac Bank to subsidiaries of City in the Hills’ master developer defaulted Thursday.
• A $19.8 million construction loan to S & J Alfalfa Inc. for about a square mile at the southeast corner of Highway 178 and Morning Drive. More than $9.7 million was owed as of July 29, the default notice said. The loan was made in December 2006.
• A $9.8 million loan to SKY 21 LLC for about 3/4 of a square mile on the east side of Masterson Street, at the southeast corner of its intersection with 178. More than $7.4 million was in arrears as of July 29 on the loan made in October 2006.
• A $17.9 million construction loan to Sycamore Villas Development LLC. More than $1.9 million was owed as of July 29. The loan was made in January 2007. All loans were signed by then-president Dennis A. Harris, records show. Indymac, based in Pasadena, was seized by federal regulators in July. Last month, another related company, MVB Ventures LLC, defaulted on a tract in City in the Hills known as Juliana’s Garden. Los Angeles-based Mountain View Bravo LLC is the master developer of nearby City in the Hills, on the north side of 178.
• Another northeast parcel defaulted Wednesday. Monte Carlo LLC defaulted on a $15.4 million construction loan from County Bank in Merced. Developer Terry L. Moreland owed more than $9.1 million as of Aug. 12 for the December 2006 loan against 105 acres near the northeast intersection of 178 and Alfred Harrell Highway
Federal regulators last month entered into a written agreement with County Bank requiring better lending oversight and disclosure of problem loans.
• In southwest Bakersfield, the Destefani family defaulted last week on a $3.6 million loan from Bakersfield-based A-C Electric Co. on about 143 acres at the northeast corner of Taft Highway and Old River Road. The area has plans for residential and commercial development, though the lot is currently agricultural land. More than $2 million was owed as of July 31, the default notice showed.

I assume the Nascar race track is dead now that the Destefani family is defaulting on their debts and begging for investors?

California's unemployment rate at a 12 year high

2008-08-15T13:59:00.000-07:00

As expected...California's unemployment rate just hit a 12 year high.

From the La Times.com:

California's unemployment rate in July rose to 7.3%, its highest level in 12 years as many areas of the economy shed jobs.

The state's nonfarm payroll shrunk by 14,900 jobs last month, the California Employment Development Department reported today. The unemployment rate increased by three-tenths of a percentage point from a revised 7% for June and now stands almost two full percentages points higher than the 5.4% it was at a year ago.

The unemployment rate was worse in the Inland Empire, rising to 8.9% in July from a revised 8.1% in June. Orange County fared better, with the unemployment rate reaching 5.7% in July from a revised 5.3% the previous month.

Since July 2007, California has lost a total of payroll 75,900 jobs -- down to 15.1 million.

The steadily worsening unemployment is evidence that California's economic weakness is spreading from the hard-hit construction, real estate and financial sectors to other once-healthy fields, said Howard Roth, chief economist for the state Department of Finance."

The state's economy continues to sputter, and it looks like the job losses are getting distributed to manufacturing and retail," Roth said. "It's not just housing but it's also high energy and food prices that are squeezing consumers."

The combination of a rising unemployment rate plus soaring inflation - the so-called Misery Index - is making life painful for even working Californians, said Stephen Levy, chief economist and executive director of the Center for Continuing Study of the California Economy in Palo Alto.

The index topped 12% in July, its highest point in 15 years, Levy said

Abolish the Fed!

2008-08-14T17:03:00.000-07:00

Alan Greenspan came out today and called his 4th or 5th bottom. Why should we belive him or anyone else at the Fed? This is what Greeny said in 2006:

Former Federal Reserve Chairman Alan Greenspan said the "worst may well be
over" for the U.S. housing industry that's suffering its worst downturn in
more than a decade. I suspect that we are coming to the end of this
downtrend, as applications for new mortgages, the most important series, have
flattened out." - October 2006

Lets flashback to what the head housing cheerleader at the Fed(who worked for the NAR and MBA) said in 2006 in Time Magazine:

"My view is that the run-up of home prices has been driven by the fundamentals,"
says Dick Peach, an economist with the Federal Reserve Bank of New York. He
figures we'll have a soft landing"

Don't believe the liars and crooks at the Fed!

Commercial vacancy rate to soar

2008-08-13T08:11:00.000-07:00

From Dow Jones Newswire:

After 113-years in business, Whitehall Jewelers said today its 373 stores in 39 states will be liquidated following the company's inability to find a buyer or drum up fresh equity after filing for Chapter 11 in late June.

"We're experiencing the most active period of liquidation sales in 10 years, due to a combination of consumer cutbacks on peripheral pending and tightening by retail lenders," said James Schaye, CEO of retail liquidator Hudson Capital Partners.

As part of a joint venture Hudson Capital Partners, Great American Group, Silverman Jeweler Consultants and Gordon Brothers Group will manage a court-ordered bankruptcy liquidation sale of Whitehall.

The sale, which will begin Aug.13, was ordered by the bankruptcy court as a result of Whitehall's Chapter 11 filing in June.

Inventory will be liquidated at below market prices, in a sale that is expected to last approximately four and a half months. Merchandise to be sold will include a selection of diamonds, gold, precious and semi-precious jewelry and watches.

Today a judge also approved Whitehall Jewelers Holdings Inc.'s request to employ a financial consulting firm over objections by a federal monitor who claimed that the move would represent a conflict of interest.

Company Locator:

Bakersfield Lundstrom201 Valley Plaza CenterBakersfield, CA
Bakersfield Whitehall2701 Ming AvenueBakersfield, CA

Look for more commerical space to open up as the economy begins to slow. If you have driven around town you already know there are entire strip centers that are 80-100% vacant. As more businesses go bust, I expect more malls & strip centers to receive foreclosure notices.

Recall this post from the local perma-bulls who made some comments they might regret.

When will we hit bottom? Open thread.

2008-08-11T08:05:00.000-07:00

I have received numerous emails on when I think we will hit the bottom of this housing bust. Right now prices have gone from a peak of $315,000 (median) to $190,000 (median) that is a drop of 40%. Add in inflation and selling expenses and the numbers look even worse. Remember all those realtors telling us in 2004-2007 that "now is the time to buy". Thanks for the good advice!

Questions for the readers -

How much lower will prices go?

When will we hit bottom?

(I am going to turn off the comment moderation for this)

Update:

Central Valley Business:

Pre-foreclosure filings set record in July

Pre-foreclosures hit record highs in July 2008 both nationally and in 14 states and the District of Columbia according to new figures from Foreclosures.com Inc., a Fair Oaks-based foreclosure information company.
“So far this year, more than 1.25 million Americans faced the risk of loosing their homes to foreclosure, up 7.3 percent from June 2008, and up 88.62 percent from July 2007,” says Alexis McGee, president of Foreclosures.com

Lehman Brothers and Bakersfield

2008-07-02T18:21:00.000-07:00

If you follow Wall Street you know the biggest company in trouble is Lehman Brothers. The stock has plummeted this year due to some bad mortgage bets.

From Fortune Magazine:

NEW YORK (Fortune) -- To understand what went wrong at Lehman Brothers, leave the canyons of Wall Street and head to the flatlands of Bakersfield, 120 miles northeast of Los Angeles.

That's where you'll find McAllister Ranch, envisioned as a 6,000-home, multibillion-dollar recreational community built around a Greg Norman-designed golf course, boating and fishing waters and a beach club. Now McAllister is three-square miles of fenced-off, almost lunar landscape punctuated by a half-finished clubhouse and a golf course gone to weeds.
So far Lehman's bets on McAllister and other real estate plays in Southern California's Inland Empire have cost Lehman at least $350 million.

None of Lehman's investment bank peers have this kind of exposure to the burst real estate bubble. Then there's the exposure all of them have: problems with collateralized loan obligations, leveraged buyouts, and mortgage-related securities. But Lehman insisted it was only minimally exposed to this kind of stuff.

Turns out, it wasn't. As a result, the bank and its shareholders have endured big losses; messy public demotions of the chief operating officer and chief financial officer; battles with short-sellers, who are betting that Lehman's share price, down about 70% on the year, will decline further; rumblings that the firm will be sold; and rumors (which we consider unfounded) that it will pull a financial El Foldo the way the late Bear Stearns did.

Foreclosures and defaults continue to rise.

2008-05-06T17:12:00.000-07:00

NOD's rise 148% YOY

Foreclosures rise 338% YOY

Bakersfield Californian:

April racked up another record month for local defaults and foreclosures, with 1,303 default notices sent out and 723 delinquent loans foreclosed on, the latest report from the Kern County Recorder’s office shows.

Since April 2007, however, they’ve jumped dramatically — more than doubling that month’s 526 default notices and more than quadrupling its 165 foreclosures.

McAllister Ranch developer defaults on $235 million loan

2008-04-24T15:56:00.000-07:00

From the Bakersfield Californian:

The developer behind southwest Bakersfield’s planned McAllister Ranch golf course community has defaulted on a $235 million loan against the property, the latest in a series of signs suggesting the project may be in financial distress.

The planned 6,000-home neighborhood near Panama Lane and South Allen Road is also beset by lawsuits and legal filings alleging unpaid construction bills.

A default notice recorded Tuesday shows Irvine-based developer SunCal Cos. owes more than $4 million in late payments to lender Lehman Commercial Paper Inc., a New Jersey-based commercial money market dealer.

The filing is the first legal step in the foreclosure process, which could result in the property being repossessed if SunCal fails to right the debt. The notice lists the borrower as LBREP/L SunCal McAllister Ranch LLC, the affiliate company formed by SunCal for the McAllister Ranch project.

The 2,070-acre site already features a Greg Norman-designed golf course and partially built clubhouse. An artificial lake and parks are also in the master plan, company ads state.

Crisp and Cole update

2008-04-23T19:25:00.000-07:00

Bakersfield Californian:

Hearing date set for David Crisp, Carl Cole

David Crisp, Carl Cole and three former Crisp, Cole & Associates employees accused of fraud in a state regulatory complaint are scheduled to appear in front of an administrative judge in Bakersfield this summer

A trial to examine the charges in a 25-page complaint filed by the Department of Real Estate last fall has been set to start on July 28 and run for three weeks, according to the Office of Administrative Hearings, the state department that runs such trials. Those named in the complaint, which alleges the group misled lenders in obtaining more than $12 million worth of loans, could be stripped of their real estate licenses.

Officials are looking for an appropriate venue to hold the trial, Pool said. A Bakersfield Masonic Temple is being considered as the trial site, but nothing has been finalized, he said.

As of April 16, more than $70 million worth of loans linked to Crisp, Cole, family members and associates have been foreclosed on or defaulted on, according to an ongoing Californian tally.

Developer goes bust

2008-04-23T19:22:00.000-07:00

Bakersfield Californian:

Developer with local projects files for bankruptcy

A Sacramento homebuilder with several troubled Kern projects filed for bankruptcy protection Wednesday.

John D. Reynen of Reynen & Bardis Communities Inc., along with his wife Judy M. Reynen, filed for Chapter 11 protection as individuals saddled primarily with business debts, court documents filed in a federal bankruptcy court in Sacramento show.

Some other creditors:
• Wells Fargo Bank, $29 million
• IndyMac Bank, $26.8 million
• Comerica, $21.5 million
• Chase Bank, $17.5 million

Coming to a city near you

2008-04-22T17:12:00.000-07:00

We sounded the alarm on CRE some time back, however, the local "experts" think otherwise.

From the Financial Times:

Regulator fears wave of bank failures

US bank failures could rise above “historical norms” as a weakening economy puts pressure on badly underwritten loans, particularly in commercial real estate, according to a bank regulator.

In an interview with the Financial Times, John Dugan, who oversees about 1,700 national banks as comptroller of the currency, said the growing problems for lenders follow a period of almost four years in which no institution regulated by his agency had failed.

“We’re going to have some more bank failures that will come back more to historical norms and may go above that with time,” he said. “That is a natural consequence of the economy going from historically exceptionally benign credit conditions to something that is more normal to something you would get in a downturn.”

Mr Dugan’s Office of the Comptroller of the Currency is particularly worried about lending by smaller banks to commercial real estate developers for condominiums and other projects. More than a third of smaller community banks have made commercial property loans that exceed 300 per cent of their capital, the OCC says. By comparison, in 1987, when hundreds of banks failed amid a commercial property collapse, such banks had commercial property loans equal to 175 per cent of their capital.

Bakersfield prices down 29% from the peak

2008-04-22T17:02:00.000-07:00

March 2008 DQ News.com numbers are out:

Bakersfield Median is down 20.56% YOY (down to $225,000)
Bakersfield Median peaked at $315,000 - we are now down 28.58% from the high.

Kern County $46 million to $66 million in the hole.

2008-04-21T13:43:00.000-07:00

From the Central Valley Business Times:

Kern County may impose a hiring freeze as one way to curtail costs in the face of an estimated deficit of between $46 million and $66 million for the coming fiscal year that starts July 1.

The county’s board of supervisors will consider a virtual freeze on county hiring as well as curtailing non-personnel spending at their meeting Tuesday.

Bakersfield.com:

County Administrative Officer Ron Errea will deliver a proposal asking the board to give him the power to clamp down on county hiring and spending.

All new hires — and hiring of county “extra help” part-timers — would have to be approved by Errea’s office.

Notices of defaults continue to grow

2008-04-18T13:34:00.000-07:00

The most recent details of NOD's are available from Fidelity Title. For the week we had 432 defaults. If we continue at that pace we will have 22,464 defaults in Kern County this year. What a disaster. All of the bottom callers need to check their analysis before they continue with their mind numbing drivel about how "now is the time to buy".

With defaults increasing, unemployment increasing and credit continuing to be very tight there is no way we are at the bottom.

NOD list from Fidelity.com.

California unemployment hits 6.2%; worse than Ohio, Pennsylvania

2008-04-18T12:25:00.000-07:00

From the LA Times.com:

California's unemployment rate rose by a whopping half a percentage point in March, reaching 6.2% as a weakening economy shed jobs in the ailing construction and financial activities sectors. In all, 1.13 million were unemployed

"This is a huge increase," said Howard Roth, chief economist for the state Department of Finance. He blamed the steady rise in joblessness -- up from 5.0% in March 2007 -- on deterioration of the crucial housing market. "The bubble has a slow leak, so it's hard to tell how long it will take" to fully deflate, he said.

All Central Valley financial institutions feeling real estate impact, except one?

2008-04-17T17:47:00.000-07:00

Numerous Central Valley financial institutions are hurting. However, there is one that appears to be bucking the trend. Are they really bucking the trend or is something else going on?

Here is a sampling of some recent financial results from Central Valley financial institutions.

Kern Schools FCU (Bakersfield):

Based on the 2007 annual report, which I received today, they are showing a decline in net income (from 2006 to 2007) of 71%. According to their report "This drop was caused by loan losses in 2007 totaling $13.055 million, compared to none in 2006".
That is a serious adjustment in loan losses and loan loss provision. However, I would expect loan losses to continue to go up as we find more homedebtors underwater. Look for 2008 losses to be much higher due to declining real estate values, an increase in unemployment and more foreclosures.

American River Bank (Sacramento):

American River Bankshares (NASDAQ: AMRB) of Sacramento, parent company of American River Bank, says its net income in the first quarter dropped 12.1 percent from year-ago levels to $1,833,000 from $2,086,000 during the first quarter of 2007.

“Clearly, first quarter earnings were negatively impacted by the $4 million increase from year end in our non-performing loans to nearly $12 million,” says David Taber, president and CEO. “We have a seasoned credit administration team in place that is managing our non-performing loans by establishing appropriate reserves and being proactive towards resolution of these credits."

Pacific State Bank (Stockton):

A squeeze on its interest margins helped lower profits at Pacific State Bancorp (NASDAQ: PSBC) of Stockton in the first quarter, according to Steven Rosso, president and C.E.O.
An increase of $45,000 ($210,000 total addition) or 27.3 percent in the provision for loan losses in the first quarter of 2008 over 2007 levels reflects the weakening economic environment within the bank's service areas, which management is actively monitoring and which may indicate the need to record additional provision in the future, it says.

Capital Corp of the West (Merced):

Capital Corp of the West (NASDAQ: CCOW) of Merced, parent company of County Bank, one of the Central Valley’s largest community banks, says it expects to report a net loss for 2007 of about $4 million, once everything is added up.

The bank says it’s “primarily as a result of the rapid decline in real estate values in California's Central Valley in the fourth quarter of 2007.”

It’s telling the Securities and Exchange Commission that it still cannot file the financials for last year because of the number of its loans it has to review “and the inability to obtain timely appraisals and other supporting market information.”

The company says certain of loans require an adverse classification and a substantially greater provision for possible loan losses.
“The company has also concluded that it had material weaknesses in its credit/lending and accounting functions,” it says. “The material weaknesses relate to the proper credit risk classification of loans, establishing the level of its allowance for loan losses, accounting for housing tax partnerships and certain other matters.”

San Joaquin Bank

First let me say I have no stock position in this bank. Also, this is not investment advice, I just find it interesting that one bank can report record profits in this declining market while every other bank is getting hammered with losses related to the housing and credit crises. How did they do it? Great risk management or was it an unjustified adjustment in their loan loss provision?

San Joaquin Bank (Bakersfield):

San Joaquin Bancorp (OTCBB: SJQU) of Bakersfield says its net income after tax was $9.4 million last year, an increase of 11 percent compared to $8.5 million in net income reported for 2006.

Dilute earnings per share in 2007 were $2.54, compared to $2.29 per diluted share reported for 2006, also an increase of 11 percent.

"We are pleased with the company’s performance in 2007 which represents our 24th consecutive year of record profits,” says Bart Hill, company president

From their 10k filing (Yahoo.com):

We reported record annual net income of $9,418,000 for the year ended December 31, 2007. The majority of the increase in 2007 came from increased net interest income and a reduction in the provision for loan losses.

How can a financial institution justify reducing their loan loss provision in an environment like this? All of the Central Valley institutions listed above are doing the opposite. If you look at the reports from the major financial institutions on Wall Street, they are dramatically increasing their loan loss provisions to the tune of hundreds of billions of dollars.

The Bakersfield Californian did a recent story on the CEO where they asked some tough questions of him.

Q. What is your favorite thing about doing business in Bakersfield and Kern County?
A. The people in Kern County are family oriented, friendly and hard working. That’s a winning combination for business.
Q. What’s a fun fact about you?
A. It’s sort of odd I’m a sailor in Bakersfield. I grew up sailing in the San Francisco Bay. I sail regularly on the coast. When the America’s Cup is on, I’m probably the only one in town watching it.

Based on that interview I guess we will never find out why they lowered their loan loss provision in what has been called the most difficult time for financial institutions since the Great Depression.

REIC members are really hurting right now

2008-04-17T17:30:00.000-07:00

Hat tip to Fred

Recall when we were told that one of the companies listed below was doing great and we were all idiots. I guess we were right!

Bakersfield Californian:

The turmoil in the real estate industry has claimed another casualty, this time engulfing a high-profile Bakersfield home loan officer.

Robert Russo, who advertised as “Bakersfield’s Refi Guy” and twice ran for city political seats, filed for Chapter 13 personal bankruptcy on March 26.

“I cornered myself in that market of refi and it’s gone,” Russo, 49, said Thursday.
“That’s why it’s so scary now in this business,” Cheatwood said.
Last spring, Cheatwood was left with $22,000 worth of unpaid expenses when Mortgage Tree, the Modesto company she had worked for since 2001, closed its doors. Money was due to appraisers, utility companies and employees, she said. Cheatwood dipped into her retirement to recover, and now does loans for a locally owned mortgage banking company, Golden Empire Mortgage Inc.

Bakersfield Californian:

A Bakersfield real estate broker with a long history of messy property ownership has filed for personal bankruptcy

Khamphou Siripane, the head of Global Realty & Investment and All Community Home Loans Inc., filed for Chapter 13 bankruptcy on March 25.

He may owe as much as $500,000 to as many as 49 creditors, according to the bankruptcy filing.

Kern County records indicate Siripane’s personal real estate deals have been clouded for years by tax liens, foreclosure filings and property lawsuit notices.

4 years of equity is GONE!

2008-04-15T11:07:00.000-07:00

From DQnews.com:

The median price paid for a Southland home was $385,000 last month, the lowest since $380,000 in April 2004.
The weak start to the home buying season also saw another record dive in the median sales price, the result of depreciation, slow sales for higher-priced abodes and growing sales for discounted homes fresh out of foreclosure.

Foreclosures everywhere! County reviewing 40,000 homes

2008-03-05T20:20:00.000-08:00

Developer foreclosures - Bakersfield Californian:

$74 million loan to Irvine-based developer SunCal Cos. for a major housing project in Shafter was foreclosed on Wednesday morning at a public auction on City Hall steps.

SunCal’s outstanding debt to national homebuilder Lennar Corp. had reached almost $86 million with interest and fees by auction time. Opening bids for the 515-acre site started at $10 million. No one made an offer, so the property went back to Lennar.

A pair of Wasco properties borrowed against by Eagle Meadows of Wasco companies operated by Stockton-based developer Kent Hoggan went back to lender Investment Grade Loans Inc. after no one answered the opening bid call at $100,000 apiece.

About 77 acres at Gromer and Magnolia avenues and 75 acres near Palm and Filburn avenues carried about $4.2 million in debt. Both are currently agricultural sites.

Sacramento developers finding out Bakersfield's streets are not paved with gold, from the Bakersfield Californian:

They live in one of eight homes completed before Sacramento developer Reynen & Bardis Communities Inc. halted construction here late last year, leaving idle partially constructed houses on many of the cul-de-sac’s dirt lots.
Hidden Grove’s future and that of at least seven other local Reynen & Bardis projects in Bakersfield, Wasco and Shafter are up in the air as the homebuilder’s finances teeter.

Still, Reynen & Bardis is among a dozen or so developers who have defaulted on Kern projects carrying loans of $2 million or more, according to an ongoing Californian survey.

It’s the first time metropolitan Bakersfield has seen such a spike in developer defaults and foreclosures, real estate professionals say, and it’s unclear what the final impact will be.

Foreclosures reach a new record, again, Bakersfield Californian:

Foreclosures reached another new high in Kern last month, according to the latest report from the Kern County Recorder’s office.

The monthly tally shows 586 properties foreclosed in February, up from 512
the previous month and 107 in February 2007.

Default notices, meanwhile, arrived at a steady pace despite the short month, with 1,177 recorded. That’s just two more than January’s count, but more than double the 502 sent out a year ago.

The following was posted on the Counties website. Kern Assesors Website:

Kern Residence Values Decline

The Assessor is in the process of reviewing more than 40,000 residential properties in Kern County as a reduction may be necessary for these properties due to the downturn in the housing market. These reviews are for purchases that occurred between July, 2004 and December, 2007. The Assessor will be determining the market value of these properties for January 1st, 2008. If the market value for January 1st, 2008 is less than your current assessed value, an adjustment will be made. This adjusted value will be reflected on the 2008-2009 tax bills. All properties that have a lower value will receive notification via US mail by July 15th, 2008. It is not necessary at this time to contact the Assessor’s Office, the review will be automatic. If, by the 1st of August, you have not received a determination of value from the Assessor’s Office, and you feel your value is too high, please contact the Assessor’s Office at (661) 868-3485.

"Los Angeles" from turning into a vast, broken metropolis stretching from Tijuana to Bakersfield.

2008-02-29T21:47:00.000-08:00

From the LA Times:
But it was a reminder, too, that the truly rural outposts of Los Angeles County -- the nation's top agricultural county not so long ago -- are withering away. And this one happens to abut the proposed site of the largest planned community in county history.Neenach -- and a smattering of other forlorn towns hidden between Lancaster and the Grapevine -- will be the subject of a fierce dispute in the coming year over when enough is enough in Southern California.

On one side, advocates will wave studies showing that there are 6 million more people headed this way in the next 20 years, people who will need roofs over their heads. On the other side, activists will point out that once construction starts here -- above the historical northern boundary of the region's development -- there will be nothing to keep "Los Angeles" from turning into a vast, broken metropolis stretching from Tijuana to Bakersfield.

It would all be very apocalyptic-sounding, if only it was the kind of thing that got Neenach bent out of shape.

When the abutting development is built -- if it is built -- it will be called Centennial. It would be the end, for all intents and purposes, of Neenach.

Billed as a "new town," Centennial would be constructed on a chunk of the 165-year-old Tejon Ranch. There would be 23,000 homes, eight elementary schools, three fire stations.

Developers perpare for housing market surge?

2008-02-29T15:53:00.000-08:00

The Bakersfield Californian is running a story this week titled " Developers prepare for housing market surge". Please read the story, but before you do, please read what they said in January 2007. Please keep in mind what actually happened in 2007.

Local real estate insiders scoff at predicted 'nose dive'

Jan 8, 2007
By Ryan Schuster, Californian staff writer

Bakersfield's housing market is still healthy and is simply going through a market correction that was inevitable after its meteoric rise, according to several local real estate professionals."I don't think it's all doom and gloom," said Jon Busby, a real estate agent with Bakersfield Premier Realty. "We had the investors that came and the builders that came and drove the prices up. It's just correcting itself now."

In December there were 3,181 homes listed on the market, down 13 percent from the month before, according to a preliminary report on December sales compiled by local appraiser Gary Crabtree. The full report is due out next week.

The preliminary report also shows the median list price of existing homes declined from $289,000 in November to $288,000 in December.

"Listings are going down," Crabtree said. "Sellers have come to the realization that the party is over and they can no longer get the prices they were expecting before. We've reached a plateau and that plateau is holding. It is not taking this gigantic nose dive everyone was predicting."

After being one of the nation's hottest real estate markets in recent years, some have described local market conditions as a bubble and predicted Bakersfield's real estate market will be one of the nation's worst in 2007.

But local real estate experts disagree.

"They are crazy. We don't have one of the worst housing markets in the country," said Ray Karpe, the president of Karpe Real Estate Center and the incoming president of the Bakersfield Association of Realtors. "The market is not bad at all. The market has just slowed. It has gone from a ridiculously good market to a good market. We couldn't maintain that forever."

The real estate slowdown has led homebuilders to scale back their building pace locally.

In November, 120 building permits were pulled for single family residences in the city of Bakersfield, down from 225 a year earlier and 650 in August 2005.

Crabtree projects that home prices will decline by about 5 percent in 2007, but he says more dire national projections are off base.

"They don't see the whole picture," Crabtree said. "They're not here. They don't have their feet on the ground. They don't know what's going on."

Leslie Appleton-Young, the chief economist with the California Association of Realtors, anticipates a 7 percent drop in the statewide median sales price in 2007. She said areas like Bakersfield that had a wave of new construction during the housing boom, adding more supply, will experience greater price decreases.

But she said while the housing market is softening, she doesn't believe it is a bubble.
She said she doesn't foresee a real estate crash like the one in the mid-1990s unless the economy slips into recession, causing mass job losses.

"It's all relative. The housing market in general has been accused of being a bubble," Appleton-Young said. "There has been talk of a bubble for four years. In the last year and a half we have seen a significant decline in sales. But the actual decline in prices has been slower. What is protecting the market is we have an improving economy."

But increased foreclosures and a rise in interest rates could spell trouble for the housing market, Appleton-Young said.

Crabtree said last year he routinely saw between 20 and 30 notices of default filed a month. The numbers jumped to 41 in November 2005 and 179 in November 2006.

Local appraiser Jeremy Jans anticipates the local market will actually pick up a little this spring, despite a possible increase in home listings some are predicting.

"Although we will not get back to where it was, it will be a strong market this year," Jans said.

"We are a unique market. We always react a lot slower than everyone else. We are a lot more affordable than other places."

Bakersfield's relatively affordable housing market compared to the rest of the state has prevented a more dramatic market correction, according to Delores Conway, the director of the
Casden Forecast at USC's Lusk Center for Real Estate.

"It's slowing like all places are slowing because the speculators are pretty much gone," Conway said. "Bakersfield has been fairly strong, partly because of lower prices and the shift in population into central California.

"In Southern California we are pretty much land constrained. Bakersfield can still build. As long as the builders don't get crazy, there still is demand. It's just that the housing market is returning to more of a normal level."

THIS WAS MY REPSONSE - MY RESPONSE