Friday Bank Failure

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!

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?

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

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

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.

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

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!

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

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.

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

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.

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

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

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

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

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

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.

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

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

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?

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

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!

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

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.

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?

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

Unemployment rate up 13% YOY

If we are losing jobs who will buy all of these homes? If there are less people employed who will rent all of these homes that are available for rent? What will be the impact on prices?


Bakersfield Californian:

Kern County’s unemployment rate rose to 9.9 percent in January, up from 9.4 percent in December and 8.8 percent a year before, according to data released Friday by the state Employment Development Department.

Most of the 11,500 jobs lost countywide between December and January — 8,600 of them — were farm-related, data show. The second-largest category of jobs lost that month was that of trade, transportation and utilities, where 1,000 positions were eliminated. In no main category were jobs created in Kern that month.

Fremont also said it faces a "significant liquidity risk"

Fremont stock is tanking after hours based on big news.

From Yahoo News:

Fremont General Corp., the holding company for Fremont Investment & Loan, said Thursday because it might have to record more write-downs than it originally recorded and is considering putting itself up for sale.

Fremont also said it faces a "significant liquidity risk" and has opted to defer some payments on its junior debt, sending its shares down in late trading.

The company said in connection with ongoing reviews and as it prepared its year-end financial statements, it found it might have to record additional asset write-downs and reserves, which could require the bank to adjust its regulatory capital downward.

High end starting to go down. $300,000 plus price reductions.

This home, at 19480 PADRON CT, Bakersfield, CA 93314, has been reduced $305,000 since it was listed in July 2007.

From Zip Realty:

Price Reduced: 08/29/07 -- $1,300,000 to $1,000,900
Price Increased: 09/14/07 -- $1,000,900 to $1,900,000
Price Reduced: 09/16/07 -- $1,900,000 to $1,095,000
Price Reduced: 02/14/08 -- $1,095,000 to $995,000

This home at, 3006 SPRINGBANK CT, Bakersfield, CA 93311, has been reduced $301,000 since it was listed February 19, 2007.

From Zip Realty:

Price Reduced: 06/20/07 -- $1,250,000 to $1,225,000
Price Reduced: 08/08/07 -- $1,225,000 to $1,199,000
Price Reduced: 02/04/08 -- $1,199,000 to $949,000

Where will all the children go?

Michael Jackson facing foreclosure:

Yahoo.com:

LOS ANGELES (Reuters) - Michael Jackson's famed Neverland Valley Ranch in California will be foreclosed and sold on March 19 unless the pop star pays a balance of nearly $25 million, property records showed on Tuesday.

FoxNews.com celebrity columnist Roger Friedman reported on the Web site http://www.foxnews.com/) that Jackson has been formally apprised of the foreclosure and that legal documents have also been filed with the Santa Barbara County Recorder's office.

"You are in default of a deed of trust ...," Jackson was told in the five-page filing, according to a copy of the document published by FoxNews.com. "Unless you take action to protect your property it may be sold at a public sale."

According to the documents, if Jackson fails to pay the outstanding balance, estimated at $24.5 million, Neverland would be sold to the highest bidder at a public auction on the courthouse steps.

The county recorder's Web site shows that a Notice of Trustees Sale was filed against Neverland Valley Ranch on Monday but no further details were available and a spokeswoman for the office declined to comment.

Jackson's publicist, Raymone Bain, did not return calls seeking comment on the foreclosure notice.

The onetime "King of Pop" has owned the 2,800-acre (1,133-ha) ranch in the rolling foothills above the California coast since 1988, naming it after the whimsical island where children never grow up in J.M. Barrie's Peter Pan stories.