"All the Arrows Were Pointing Down"

Date December 17, 2008

From Forbes:

Drive along Interstate 80, just outside the city of Sacramento, Calif., and scores of gated and planned communities await. Only they’re not what developers envisioned. Sidewalks are empty; homes are unoccupied. Blame the heady days of the real estate boom. Easy-to-acquire mortgages, plenty of open land and generous zoning provided new homes to scores of buyers. Between 2000 and 2005, Sacramento-area builders doubled production.

But as prices dropped and demand dried up, builders cut back. This year, there are expected to be 6,140 new constructions in the Sacramento metro area. That’s down from 20,370 in 2005, according to the National Association of Home Builders (NAHB). Median prices are now $212,000, down from $375,000 in 2005. For many residents, this is old news. Sacramento home builders and buyers engaged in the same behavior leading up to, and following, the Savings & Loan crisis. That’s when construction doubled and then quartered once prices fell. Indeed, it’s a market prone to booms and busts, which not a good sign for long-term investment.

From the Sacramento Business Journal:

CB [Richard Ellis], Greater Sacramento’s largest commercial real estate brokerage, wanted the market outlook this year to be more of a low-key panel discussion with fewer numbers bandied about. Office chief David Brennan joked that all the arrows were pointing down anyway.

CB’s land group…declared that prices for residential land hit bottom late this year — a bottom they weren’t ready to call in 2007 as land buyers and sellers executed very few deals.

The pressure to unload land has become too great as homebuilders sold at deep discounts, at about 25 to 30 cents on the dollar, CB senior vice president Randy Grimsman said. That trend will increase next year, said senior vice president Peter Nixon….About 70 percent of the land deals will be lender repossessions, he predicted.

From the Sacramento Bee:

San Francisco-based regional brokerage TRI Commercial is closing its Sacramento office as of Friday and consolidating local operations in Roseville…In response to our questions, TRI issued a press release calling the closure a “strategic move” based on prospects for diminished revenue next year. The release states that the 12 agents in the Sacramento office will be invited to meet with managers in Roseville, but it doesn’t say how many – if any – will be offered jobs.

From the Sacramento Business Journal:

Stunned by a dramatic decline in loan applications and a frozen secondary market for small-business lending, Comerica Bank trimmed its operations, including a processing and sales center in Sacramento. The banking giant eliminated 64 jobs nationwide, including 10 in the Sacramento region.

Comerica handled 15 loans for a total of $9.1 million for the first nine months of the year in the Sacramento district, a 56 percent decline from the 34 loans for a total of $19.4 million for the same period in 2007. Lenders in the Sacramento SBA district saw loans decline almost 38 percent. Nationally, SBA loan approvals were down 29 percent.

From Business Week:

[Thomas] Lawler [economist and founder, Lawler Economic & Housing Consulting in Vienna, Va.] says he’s seen prices begin to stabilize in some places—Sacramento, for one, and even some areas outside hard-hit Las Vegas. He believes that if Congress and President-elect Obama launch a big economic stimulus plan on Day One and homebuilders bring no new inventory onto the market for six months or so, the national housing market could find its bottom by the third quarter of 2009.

From the Average Buyer blog:

Back in late 2006/early 2007 I couldn’t find a RE agent (and we looked hard) that would tell me a home was overpriced, nor could I find a broker who would only give me a quote for a 30yr fixed loan (2 other quotes that lowered my monthly payment always seemed to come with it). So its interesting to see how history gets revised.

Originally posted here.

Stockton: $250,000 Off Peak

Date December 17, 2008

From the Stockton Record:

TrendGraphix said the median sales price fell from $190,000 in October to $175,000 last month in San Joaquin County. That compares with a $200,000 sales mark in January 2002, when TrendGraphix began tracking sales as the market was well into the start of a six-year boom.

That’s a whopping $250,000 price cut from its $425,000 peak in September 2005.

From CNNMoney:

The worst performing market in the nation [according to Zillow.com] was Stockton, Calif. The average home price there plunged 32.3% year-over-year to $210,179 in the first three quarters of 2008. Almost as bad were nearby Merced, down 31.2% to $167,282, and Modesto, was was off 30.4% to $197,368 in the same time period.

[Zillow’s Stan] Humphries expressed surprise that these areas are still performed so poorly. “I would have thought that they would have produced some more positive trends by now,” he said, “but we are seeing no slowdown.”

From the Christian Science Monitor:

The housing market in California’s Central Valley…is showing signs of new life…Buyers are out in force. Here in Lathrop, Calif., and in nearby Stockton – the nation’s foreclosure capital – home prices could be bottoming out…”At this point, I don’t think you’ll see more price declines in Stockton,” [says ForeclosureRadar’s Sean O’Toole].

A recent NAR survey found 20 percent of buyers are investors, but Stockton-area real estate agents put the investor share at one-third or more…The pricing floor provided by these investors, however, has broken through several times when the number of new listings exceeded the ability of investors to absorb them, he [real estate agent Jim Muthart] says.

Strong rent prices are key to a good return, and rents have softened recently, says Muthart…[D]on’t assume each foreclosure equals a new renter, argues Caroline Latham, CEO of RealFacts, a rental data-tracking firm. Many families who are foreclosed on will move in with another family or move to a cheaper region, not rent. “We are seeing a return to the notions that [investors] had in 2005,” warns Ms. Latham, referring to the buying frenzy in the run-up to the housing bubble peak. “They think they’ll be able to rent it and come out smelling good.”

Originally posted here.

60 Minutes: The Mortgage Meltdown & The Next Wave Of Defaults

Date December 16, 2008

12/14: Scott Pelley reports on the mortgage crisis that’s far from over, with a second wave of expected defaults on the way that could deepen the bottom of the U.S. recession.

Watch CBS Videos Online

 

 

Originally posted here.

Outlook For 2009 - A

Date December 15, 2008

Take what you like and leave the rest behind…

Dec 11th: CNBC Squawk Box - Part 1

CNBC Squawk Box - Part 2

 

 

Originally posted here.

ON THE ROAD TO NATIONALIZATION WITHOUT A WHIMPER

Date December 14, 2008

 

VIDEO - 12-10-2008
Ron Paul speaks the truth.
We are on a downward spiral of Nationalization of all our industries.

And this from Lee Iacocca in 2007

Where Have All The Leaders Gone?”

Excerpted from Where Have All the Leaders Gone?. Copyright © 2007 by Lee Iacocca. All rights reserved.

Had Enough?

Am I the only guy in this country who’s fed up with what’s happening? Where the hell is our outrage? We should be screaming bloody murder. We’ve got a gang of clueless bozos steering our ship of state right over a cliff, we’ve got corporate gangsters stealing us blind, and we can’t even clean up after a hurricane much less build a hybrid car. But instead of getting mad, everyone sits around and nods their heads when the politicians say, “Stay the course.”

Stay the course? You’ve got to be kidding. This is America, not the damned Titanic. I’ll give you a sound bite: Throw the bums out!

You might think I’m getting senile, that I’ve gone off my rocker, and maybe I have. But someone has to speak up. I hardly recognize this country anymore. The President of the United States is given a free pass to ignore the Constitution, tap our phones, and lead us to war on a pack of lies. Congress responds to record deficits by passing a huge tax cut for the wealthy (thanks, but I don’t need it). The most famous business leaders are not the innovators but the guys in handcuffs. While we’re fiddling in Iraq, the Middle East is burning and nobody seems to know what to do. And the press is waving pom-poms instead of asking hard questions. That’s not the promise of America my parents and yours traveled across the ocean for. I’ve had enough. How about you?

I’ll go a step further. You can’t call yourself a patriot if you’re not outraged. This is a fight I’m ready and willing to have.

My friends tell me to calm down. They say, “Lee, you’re eighty-two years old. Leave the rage to the young people.” I’d love to—as soon as I can pry them away from their iPods for five seconds and get them to pay attention. I’m going to speak up because it’s my patriotic duty. I think people will listen to me. They say I have a reputation as a straight shooter. So I’ll tell you how I see it, and it’s not pretty, but at least it’s real. I’m hoping to strike a nerve in those young folks who say they don’t vote because they don’t trust politicians to represent their interests. Hey, America, wake up. These guys work for us.

Who Are These Guys, Anyway?

Why are we in this mess? How did we end up with this crowd in Washington? Well, we voted for them—or at least some of us did. But I’ll tell you what we didn’t do. We didn’t agree to suspend the Constitution. We didn’t agree to stop asking questions or demanding answers. Some of us are sick and tired of people who call free speech treason. Where I come from that’s a dictatorship, not a democracy.

And don’t tell me it’s all the fault of right-wing Republicans or liberal Democrats. That’s an intellectually lazy argument, and it’s part of the reason we’re in this stew. We’re not just a nation of factions. We’re a people. We share common principles and ideals. And we rise and fall together.

Where are the voices of leaders who can inspire us to action and make us stand taller? What happened to the strong and resolute party of Lincoln? What happened to the courageous, populist party of FDR and Truman? There was a time in this country when the voices of great leaders lifted us up and made us want to do better. Where have all the leaders gone?

The Test of a Leader

I’ve never been Commander in Chief, but I’ve been a CEO. I understand a few things about leadership at the top. I’ve figured out nine points—not ten (I don’t want people accusing me of thinking I’m Moses). I call them the “Nine Cs of Leadership.” They’re not fancy or complicated. Just clear, obvious qualities that every true leader should have. We should look at how the current administration stacks up. Like it or not, this crew is going to be around until January 2009. Maybe we can learn something before we go to the polls in 2008. Then let’s be sure we use the leadership test to screen the candidates who say they want to run the country. It’s up to us to choose wisely.

So, here’s my C list:

A leader has to show CURIOSITY. He has to listen to people outside of the “Yes, sir” crowd in his inner circle. He has to read voraciously, because the world is a big, complicated place. George W. Bush brags about never reading a newspaper. “I just scan the headlines,” he says. Am I hearing this right? He’s the President of the United States and he never reads a newspaper? Thomas Jefferson once said, “Were it left to me to decide whether we should have a government without newspapers, or newspapers without a government, I should not hesitate for a moment to prefer the latter.” Bush disagrees. As long as he gets his daily hour in the gym, with Fox News piped through the sound system, he’s ready to go.

If a leader never steps outside his comfort zone to hear different ideas, he grows stale. If he doesn’t put his beliefs to the test, how does he know he’s right? The inability to listen is a form of arrogance. It means either you think you already know it all, or you just don’t care. Before the 2006 election, George Bush made a big point of saying he didn’t listen to the polls. Yeah, that’s what they all say when the polls stink. But maybe he should have listened, because 70 percent of the people were saying he was on the wrong track. It took a “thumping” on election day to wake him up, but even then you got the feeling he wasn’t listening so much as he was calculating how to do a better job of convincing everyone he was right.

A leader has to be CREATIVE, go out on a limb, be willing to try something different. You know, think outside the box. George Bush prides himself on never changing, even as the world around him is spinning out of control. God forbid someone should accuse him of flip-flopping. There’s a disturbingly messianic fervor to his certainty. Senator Joe Biden recalled a conversation he had with Bush a few months after our troops marched into Baghdad. Joe was in the Oval Office outlining his concerns to the President—the explosive mix of Shiite and Sunni, the disbanded Iraqi army, the problems securing the oil fields. “The President was serene,” Joe recalled. “He told me he was sure that we were on the right course and that all would be well. ‘Mr. President,’ I finally said, ‘how can you be so sure when you don’t yet know all the facts?’” Bush then reached over and put a steadying hand on Joe’s shoulder. “My instincts,” he said. “My instincts.” Joe was flabbergasted. He told Bush, “Mr. President, your instincts aren’t good enough.” Joe Biden sure didn’t think the matter was settled. And, as we all know now, it wasn’t.

Leadership is all about managing change—whether you’re leading a company or leading a country. Things change, and you get creative. You adapt. Maybe Bush was absent the day they covered that at Harvard Business School.

A leader has to COMMUNICATE. I’m not talking about running off at the mouth or spouting sound bites. I’m talking about facing reality and telling the truth. Nobody in the current administration seems to know how to talk straight anymore. Instead, they spend most of their time trying to convince us that things are not really as bad as they seem. I don’t know if it’s denial or dishonesty, but it can start to drive you crazy after a while. Communication has to start with telling the truth, even when it’s painful. The war in Iraq has been, among other things, a grand failure of communication. Bush is like the boy who didn’t cry wolf when the wolf was at the door. After years of being told that all is well, even as the casualties and chaos mount, we’ve stopped listening to him.

A leader has to be a person of CHARACTER. That means knowing the difference between right and wrong and having the guts to do the right thing. Abraham Lincoln once said, “If you want to test a man’s character, give him power.” George Bush has a lot of power. What does it say about his character? Bush has shown a willingness to take bold action on the world stage because he has the power, but he shows little regard for the grievous consequences. He has sent our troops (not to mention hundreds of thousands of innocent Iraqi citizens) to their deaths—for what? To build our oil reserves? To avenge his daddy because Saddam Hussein once tried to have him killed? To show his daddy he’s tougher? The motivations behind the war in Iraq are questionable, and the execution of the war has been a disaster. A man of character does not ask a single soldier to die for a failed policy.

A leader must have COURAGE. I’m talking about balls. (That even goes for female leaders.) Swagger isn’t courage. Tough talk isn’t courage. George Bush comes from a blue-blooded Connecticut family, but he likes to talk like a cowboy. You know, My gun is bigger than your gun. Courage in the twenty-first century doesn’t mean posturing and bravado. Courage is a commitment to sit down at the negotiating table and talk.

If you’re a politician, courage means taking a position even when you know it will cost you votes. Bush can’t even make a public appearance unless the audience has been handpicked and sanitized. He did a series of so-called town hall meetings last year, in auditoriums packed with his most devoted fans. The questions were all softballs.

To be a leader you’ve got to have CONVICTION—a fire in your belly. You’ve got to have passion. You’ve got to really want to get something done. How do you measure fire in the belly? Bush has set the all-time record for number of vacation days taken by a U.S. President—four hundred and counting. He’d rather clear brush on his ranch than immerse himself in the business of governing. He even told an interviewer that the high point of his presidency so far was catching a seven-and-a-half-pound perch in his hand-stocked lake.

It’s no better on Capitol Hill. Congress was in session only ninety-seven days in 2006. That’s eleven days less than the record set in 1948, when President Harry Truman coined the term do-nothing Congress. Most people would expect to be fired if they worked so little and had nothing to show for it. But Congress managed to find the time to vote itself a raise. Now, that’s not leadership.

A leader should have CHARISMA. I’m not talking about being flashy. Charisma is the quality that makes people want to follow you. It’s the ability to inspire. People follow a leader because they trust him. That’s my definition of charisma. Maybe George Bush is a great guy to hang out with at a barbecue or a ball game. But put him at a global summit where the future of our planet is at stake, and he doesn’t look very presidential. Those frat-boy pranks and the kidding around he enjoys so much don’t go over that well with world leaders. Just ask German Chancellor Angela Merkel, who received an unwelcome shoulder massage from our President at a G-8 Summit. When he came up behind her and started squeezing, I thought she was going to go right through the roof.

A leader has to be COMPETENT. That seems obvious, doesn’t it? You’ve got to know what you’re doing. More important than that, you’ve got to surround yourself with people who know what they’re doing. Bush brags about being our first MBA President. Does that make him competent? Well, let’s see. Thanks to our first MBA President, we’ve got the largest deficit in history, Social Security is on life support, and we’ve run up a half-a-trillion-dollar price tag (so far) in Iraq. And that’s just for starters. A leader has to be a problem solver, and the biggest problems we face as a nation seem to be on the back burner.

You can’t be a leader if you don’t have COMMON SENSE. I call this Charlie Beacham’s rule. When I was a young guy just starting out in the car business, one of my first jobs was as Ford’s zone manager in Wilkes-Barre, Pennsylvania. My boss was a guy named Charlie Beacham, who was the East Coast regional manager. Charlie was a big Southerner, with a warm drawl, a huge smile, and a core of steel. Charlie used to tell me, “Remember, Lee, the only thing you’ve got going for you as a human being is your ability to reason and your common sense. If you don’t know a dip of horseshit from a dip of vanilla ice cream, you’ll never make it.” George Bush doesn’t have common sense. He just has a lot of sound bites. You know—Mr.they’ll-welcome-us-as-liberators-no-child-left-behind-heck-of-a-job-Brownie-mission-accomplished Bush.

Former President Bill Clinton once said, “I grew up in an alcoholic home. I spent half my childhood trying to get into the reality-based world—and I like it here.”

I think our current President should visit the real world once in a while.

The Biggest C is Crisis

Leaders are made, not born. Leadership is forged in times of crisis. It’s easy to sit there with your feet up on the desk and talk theory. Or send someone else’s kids off to war when you’ve never seen a battlefield yourself. It’s another thing to lead when your world comes tumbling down.

On September 11, 2001, we needed a strong leader more than any other time in our history. We needed a steady hand to guide us out of the ashes. Where was George Bush? He was reading a story about a pet goat to kids in Florida when he heard about the attacks. He kept sitting there for twenty minutes with a baffled look on his face. It’s all on tape. You can see it for yourself. Then, instead of taking the quickest route back to Washington and immediately going on the air to reassure the panicked people of this country, he decided it wasn’t safe to return to the White House. He basically went into hiding for the day—and he told Vice President Dick Cheney to stay put in his bunker. We were all frozen in front of our TVs, scared out of our wits, waiting for our leaders to tell us that we were going to be okay, and there was nobody home. It took Bush a couple of days to get his bearings and devise the right photo op at Ground Zero.

That was George Bush’s moment of truth, and he was paralyzed. And what did he do when he’d regained his composure? He led us down the road to Iraq—a road his own father had considered disastrous when he was President. But Bush didn’t listen to Daddy. He listened to a higher father. He prides himself on being faith based, not reality based. If that doesn’t scare the crap out of you, I don’t know what will.

A Hell of a Mess

So here’s where we stand. We’re immersed in a bloody war with no plan for winning and no plan for leaving. We’re running the biggest deficit in the history of the country. We’re losing the manufacturing edge to Asia, while our once-great companies are getting slaughtered by health care costs. Gas prices are skyrocketing, and nobody in power has a coherent energy policy. Our schools are in trouble. Our borders are like sieves. The middle class is being squeezed every which way. These are times that cry out for leadership.

But when you look around, you’ve got to ask: “Where have all the leaders gone?” Where are the curious, creative communicators? Where are the people of character, courage, conviction, competence, and common sense? I may be a sucker for alliteration, but I think you get the point.

Name me a leader who has a better idea for homeland security than making us take off our shoes in airports and throw away our shampoo? We’ve spent billions of dollars building a huge new bureaucracy, and all we know how to do is react to things that have already happened.

Name me one leader who emerged from the crisis of Hurricane Katrina. Congress has yet to spend a single day evaluating the response to the hurricane, or demanding accountability for the decisions that were made in the crucial hours after the storm. Everyone’s hunkering down, fingers crossed, hoping it doesn’t happen again. Now, that’s just crazy. Storms happen. Deal with it. Make a plan. Figure out what you’re going to do the next time.

Name me an industry leader who is thinking creatively about how we can restore our competitive edge in manufacturing. Who would have believed that there could ever be a time when “the Big Three” referred to Japanese car companies? How did this happen—and more important, what are we going to do about it?

Name me a government leader who can articulate a plan for paying down the debt, or solving the energy crisis, or managing the health care problem. The silence is deafening. But these are the crises that are eating away at our country and milking the middle class dry.

I have news for the gang in Congress. We didn’t elect you to sit on your asses and do nothing and remain silent while our democracy is being hijacked and our greatness is being replaced with mediocrity. What is everybody so afraid of? That some bobblehead on Fox News will call them a name? Give me a break. Why don’t you guys show some spine for a change?

Had Enough?

Hey, I’m not trying to be the voice of gloom and doom here. I’m trying to light a fire. I’m speaking out because I have hope. I believe in America. In my lifetime I’ve had the privilege of living through some of America’s greatest moments. I’ve also experienced some of our worst crises—the Great Depression, World War II, the Korean War, the Kennedy assassination, the Vietnam War, the 1970s oil crisis, and the struggles of recent years culminating with 9/11. If I’ve learned one thing, it’s this: You don’t get anywhere by standing on the sidelines waiting for somebody else to take action. Whether it’s building a better car or building a better future for our children, we all have a role to play. That’s the challenge I’m raising in this book. It’s a call to action for people who, like me, believe in America. It’s not too late, but it’s getting pretty close. So let’s shake off the horseshit and go to work. Let’s tell ‘em all we’ve had enough.

 

Originally posted here.

"Rogues in the Real Estate Industry"

Date December 13, 2008

From the Sacramento Bee:

You would think people with mortgage problems have enough trouble. But rogues in real estate always find new ways to inflict more. Last year it was foreclosure rescue schemes that robbed desperate people of their homes. Now, it’s loan-modification firms taking cash advances from struggling borrowers and disappearing.

Home Front has heard countless stories from struggling borrowers of phone calls offering to mediate with banks for $2,000 to $4,000 or more. Many are so desperate and confused they pay for what they can do themselves or get for free from nonprofit loan-counseling firms. Some say they have paid their advance fees, then can’t reach the firm.

The California Department of Real Estate cites an “explosion” of for-profit loan-modification firms as the foreclosure crisis deepens. Former lenders and real estate agents have retooled, and jumped to the newest way to generate income.
~~~
It’s just one more example of rogues in the real estate industry who are always adapting to the newest problems people are having. Honestly, this is an industry that is going to have years of an uphill fight to rebuild trust.

From the Modesto Bee:

Foreclosure filings fell nationwide in November, but they spiked dramatically in the Northern San Joaquin Valley, statistics released today by RealtyTrac show. Lenders repossessed 1,641 homes last month in Stanislaus, San Joaquin and Merced counties, and they warned 2,727 additional homeowners that foreclosure was imminent if they didn’t pay up.

From the SF Chronicle:

The recession that has already devastated the Central Valley has started to hurt the Bay Area, causing job losses that will continue through 2009 when the economy should begin a slow and weak recovery, according to a bleak forecast issued today. “There is no suggestion in the data that we are near that bottom,” was the somber message of the UCLA Anderson Forecast, a quarterly look at the state economy conducted by the university’s business school.

“The inland areas have been hardest hit by the housing downturn and are being hardest hit by the pullback of the retail and the wholesale sectors,” he [economist Jerry Nickelsburg] said. “Here you’re talking about areas of the East Bay and the Central Valley.”

From USA Today (hat tip Jeff):

[H]ome values have fallen so sharply since hitting a historic peak in the spring of 2006 that many Americans are wondering how much more prices can sink. As painful as the decline has been, history suggests home values still may have a long way to drop and may take decades to return to the heights of 2½ years ago. “We will never see these prices again in our lifetime, when you adjust for inflation,” says Peter Schiff, president of investment firm Euro Pacific Capital of Darien, Conn. “These were lifetime peaks.”

The boom in home prices — fueled by heavily leveraged loans built on low or even no down payments — made it easy to forget that housing values had been remarkably stable for a half-century after World War II, rising at roughly the same pace as income and inflation. Prices soared in most of the country — especially in Arizona, California, Florida and Nevada and metro areas of Washington, D.C., and New York — during a brief period of easy lending, especially from 2002 to 2006. That era’s over.

Originally posted here.

Wall Street Bonuses to Fall 50%

Date December 11, 2008

  • 8 really, really scary predictions by Fortune Magazine - snip:

    Dow 4,000. Food shortages. A bubble in Treasury notes. Fortune spoke to eight of the market’s sharpest thinkers and what they had to say about the future is frightening… We are in the middle of a very severe recession that’s going to continue through all of 2009 - the worst U.S. recession in the past 50 years. It’s the bursting of a huge leveraged-up credit bubble. There’s no going back, and there is no bottom to it. It was excessive in everything from subprime to prime, from credit cards to student loans, from corporate bonds to muni bonds. You name it. And it’s all reversing right now in a very, very massive way…

  • Wall Street Bonuses to Fall 50% by Bloomberg - snips:

    New York City will lose 170,000 jobs between July 2008 and December 2010, and Wall Street bonuses will decline at least 50 percent this year to the lowest levels since 2002, the state and city comptrollers said today… “The impact of this crisis will have a lasting effect on the city’s fiscal condition for years to come,” said Thompson, a 2009 candidate for mayor. “The toll taken by the financial industry makes this one of the grimmest economic periods for the city in many years”…

  • Freight Haulers Slam on the Brakes by WSJ - snips:

    In a normal year, Gordon Trucking Inc. might replace 20% of its fleet of 1,500 big rigs with new trucks. But given the bleak outlook for the freight business, the Pacific, Wash., hauler doesn’t intend to buy a single new truck next year. “We’re settling in for nuclear winter in the first half of 2009,” says Steve Gordon, operating chief for the company, which hauls everything from paper products to electronics. He’s not alone. Some industry executives and analysts predict that 2009 could be the worst year for freight-transportation volume in three decades or more. As a result, companies in industries ranging from trucking to railroads to ocean shipping are scaling back sharplyNext year “is going to be the worst year for transportation demand in 30 years,” FTR economist Noel Perry said in an industry conference call last month… Business is so bad that FedEx Corp. and United Parcel Service Inc. canceled their annual predictions of how many packages they would handle in the peak shipping days before ChristmasAcross the trucking industry, volume fell 6.3% from July through October, when volume usually begins to grow as retailers restock their inventories ahead of the holiday seasonSeveral truck manufacturers, such as Daimler Trucks North America and Kenworth Trucking Co., are closing facilities, severely cutting back production or laying off employees… “This is the tip of the iceberg,” Mr. Hursey says. “It’s going to be a disaster next year for the entire industry. I’m scared to death“… . railroad car-load volume dropped 10% last month from a year earlier, the biggest drop since the Association of American Railroads began tracking such data in 1997… For ocean shipping lines, the global downturn is particularly brutal… Maersk Line, the world’s largest ocean shipper by volume, plans to lay up eight vessels because of declining freight volume… Should economic conditions fail to improve next year, the possibility of mothballing even more ships “is obviously something we have to look into,” says Michel Deleuran, group senior vice president. “I have not experienced anything that is quite as severe as this”…

  • NY Real Deal - Manhattan office market suffering
  • Market Ticker - Den of Liars
  • Calculated Risk - Initial Unemployment Claims Increases Sharply to 573,ooo
  • NewsMax - Ron Paul: Bailouts Will ‘Destroy the Dollar’
  • Telegraph UK - Fear triggers Gold shortage, drives US Treasury yields below ZERO
  • Telegraph UK - Gold to $2,000 next year as world unravels
  • Financial Times - And now for a world government

     

     

    Originally posted here.

  • "New Year Bodes Ill for the Central Valley" Economy

    Date December 11, 2008

    From the Sacramento Real Estate blog:

    Prices have fallen yet again…Sacramento county is now at $122.69 a square foot, a drop of 34.3% over last November…Median price has also fallen for the same period - here we see a fall of 40.3% year over year. Median price last November was $293,000 and is currently $175,000.

    From Sacramento-based Foreclosures.com:

    The nation’s foreclosure hemorrhage has finally slowed and 2009 should see a significant decline in foreclosures as buyers return, pushing home prices up and fueling a real estate recovery, according to the 2009 Outlook from ForeclosureS.com….

    “Recovery is underway. Affordable is back in the housing market,” says Alexis McGee, real estate expert, educator, and president of ForeclosureS.com. “In 2009, housing will not only recover, but we’ll see buyers leap into this market in droves, depleting our housing oversupply, and actually put higher price pressures on the market. With 4.5% fixed mortgage rates, housing prices lower than they were ‘pre-housing bubble’, commodity prices lower, tax credits available for homebuyers, and the government eager to stimulate our economy, for the first time in years I can see prices rising again in 2009,” adds McGee.

    From the CVBT:

    The New Year bodes ill for the Central Valley as the global recession deepens, says a new economic analysis by the University of the Pacific. “While home prices are beginning to find a bottom and real estate sales have surged with low prices, the outlook for the agriculture industry, trade, transportation and other key service sectors have weakened substantially in the past three months,” says the report written by Jeff Michael, director of the Business Forecasting Center at the Eberhardt School of Business at Pacific in Stockton.

    From the Sacramento Bee:

    Get ready for two years of 9 percent unemployment. California and Sacramento’s jobless rate will top 9 percent sometime early next year and won’t fall below it until early 2011, according to an economic forecast released Tuesday by the University of the Pacific. The higher unemployment is the obvious result of a deepening recession as the economy moves well beyond the initial job losses in construction and mortgage lending. “We’re out of the housing thing and into a pretty severe … traditional structure of a recession,” said Jeff Michael, director of UOP’s Business Forecasting Center.

    Michael said the Sacramento area figures to lose 2 percent of its jobs next year, a significant downturn.

    From the Modesto Bee:

    In preparation for slower times, Pacific Southwest Container of Modesto has laid off an undisclosed number of employees. The container manufacturer…joins a growing list of San Joaquin Valley companies that have scaled back their staffs to reflect slowing business…[A]s consumer confidence wanes and people buy less, there is less need to make and ship the goods that once flew off store shelves.

    Initially, the decline in the valley housing market triggered job losses in real estate, finance, construction and other, related industries. As the economy continued to slow, the ripple effect has forced other businesses, including The Bee, to trim workers. Jeff Michael said he isn’t surprised to hear of Pacific Southwest Container’s layoffs. The director of the University of the Pacific’s Business Forecasting Center said it is part of a coming wave in the manufacturing sector. Goods that people can put off buying will take a hit, Michael said.

    From the Tracy Post:

    As a soft housing market and rising food and fuel costs eat away many folks’ disposable income, the ancient art of bartering has become an increasingly common way to get what one wants.

    Out-of-work Tracy carpenter Donald LaMmond, 42, can’t afford Christmas presents this year for his two daughters, ages 7 and 11, so he’s trading his handyman skills for board games and dolls to put under the Christmas tree. The contractor and his real estate agent wife, Kimberly LaMmond, 39, represent a pairing of two of the hardest-hit professions in today’s economy — definitely a source of stress for the couple, who sold their home 2½ years ago for much less than the loan that paid for it. “We’re both learning how to update our resumes, to get back out there,” he said. “And we’ve applied to McDonald’s and Wal-Mart, but it’s hard to get out there — other people want those jobs now, too.”

    Originally posted here.

    Sacramento Unemployment Rate 1990-2008

    Date December 10, 2008


    Source: BLS

    In the 1990s, Sacramento home prices did not bottom out until well after the unemployment rate had peaked (3-4 years). Will we see a similar pattern this time around, or is this a completely different animal?

    Originally posted here.

    Paquin Predicts Sales Bottom for 2009

    Date December 9, 2008

    From the Stockton Record:

    Question: It’s been the slowest year yet for home builders. When do you anticipate that the market will hit bottom?

    Answer [Gregory Paquin, president, Gregory Group]: It is our expectation that the Central Valley will hit bottom during 2009 and begin to see the signs of recovery in 2010 and 2011, although some areas - Sacramento and some northern Central Valley communities - may experience the recovery sooner than others (some mid- and southern Central Valley communities). Several things will need to happen before the housing recovery can begin: a slowing of foreclosure activity, less fear about job losses, the stabilizing of the overall economy and the easing of credit markets - a swing of the pendulum back to the center.

    Related posts:
    Paquin Predicts Sales Bottom for 2008
    “I’m optimistic we will [reach bottom] in 2007″

    Speaking of predictions, Sacramento Bee housing reporter Jim Wasserman invites readers to submit questions to an upcoming Sacramento real estate roundtable, which apparently includes blogger Average Buyer. Kudos to the Bee for making room for an informed consumer’s perspective. Knock ‘em dead AB! (no pressure or anything)

    From the Sacramento Bee:

    California’s financial troubles have prompted Gov. Arnold Schwarzenegger to start talking about state layoffs…At a Los Angeles event last week, Schwarzenegger said the state has to look at all areas of government to close the $11.2 billion funding gap this fiscal year. “I think the longer we wait the more we will have to lay off people from government,” he said in response to a question about the state’s financial health. “And I think because of the delay now, we are almost, I think, forced – as a matter of fact, we are going to have a meeting … about that, how many people we need now to lay off in order to make ends meet.”

    About 112,000 state workers are employed in the Sacramento region, roughly 10 percent of the work force.

    From the Sacramento Bee:

    Sacramento, already weakened by one of the nation’s highest foreclosure rates, is especially vulnerable. The stumbling state economy has prodded Schwarzenegger to propose that state employees take off one day per month without pay. “What I’m seeing now are state workers who are panicked … who are living paycheck to paycheck and are saying, ‘Once I’m forced to take one day off a month I can’t make my mortgage payment,’ ” said Jonathan Stein, an Elk Grove bankruptcy attorney.

    From News10:

    Sacramento Salvation Army homeless shelter supervisor David Benning…believes they’ve never had a higher percentage of first-time homeless in the shelter than they do now. The bad economy is likely to blame, as more people face the same crippling hardships. “Foreclosure, generally,” says Benning, talking about the reasons people give when looking for shelter. “They lost their job, unemployment benefits have run out.”

    From the Sacramento Bee:

    [B]orrowers rolled up the center’s escalators for a massive foreclosure prevention workshop organized by Hope Now…The larger-than-expected crowd at the convention center spoke to the magnitude of problems in the region…”At 7 p.m. we had 1,200 borrowers registered,” said Hope Now spokeswoman Katherine McGann. “They’re still coming.”

    From CNBC:

    The top U.S. banking regulators said Monday that some of their foreclosure prevention efforts are floundering and that they have no agreed plan for the future, two years into a housing crisis that has dragged the economy into a deep recession. More than half of troubled borrowers face losing their homes even six months after lenders have eased their monthly payments, one regulator said, a discouraging sign for reversing a tide of foreclosures.
    ~~~
    [I]nstead of spending so much time focusing on trying to modify these loans, perhaps we need to look at the problem from a different perspective. How do we transition these borrowers out of homes they can’t afford, with as little pain as possible, and in turn give qualified borrowers the incentive to buy up the inventory? Unless the lenders or investors or government officials are willing to simply throw the loan out and give away an awful lot of house to an awful lot of borrowers, modifications, and certainly “mass modifications” which a lot of government types are pushing, are just exacerbating the problem.

    From the CVBT:

    U.S. Rep. Dennis Cardoza, D-Merced…says the Treasury Department should immediately look into expanding the [4.5 percent fixed rate] program to all American homeowners…Homeowners who have been responsible and paid their mortgages every month should receive the benefit of a lowered mortgage, as well as those who need assistance meeting the demands of their mortgages, he says. “By lowering the monthly payments, we will essentially be giving each homeowner a stimulus check by putting more money in their pocket and without placing a burden on the Treasury or the taxpayer,” says Mr. Cardoza.

    From the Stockton Record:

    [N]ew numbers from Irvine-based RealtyTrac, which tracks the foreclosure market, indicate that the number of single-family homes actually repossessed by banks and mortgage companies is growing at a faster pace in San Joaquin County. In the first six months of this year, a total of 5,643 houses were repossessed countywide, RealtyTrac said. Compare that with 10,478 from January through October. That means the monthly average of repossessed homes is up from about 940 per month in the first six months of the year to more than 1,200 per month so far in the second half of the year - a nearly 28 percent jump.

    From the Sacramento Business Journal:

    Kobra Properties won’t bother to save 16 of its most troubled assets as it starts bankruptcy proceedings, the founder and president said in documents filed in the case. The plan to abandon 238 acres — mostly unfinished office, retail and restaurant projects — of its 900-acre real estate portfolio is part of Kobra’s strategy to emerge from bankruptcy as a more viable property developer…The abandoned assets will likely be repossessed by lenders and eventually offered for sale, and could be purchased at a steep discount by investors hoping to profit from one of the worst real estate reversals in decades.

    “I have determined that certain real property assets of the debtors’ bankruptcy estates are unnecessary for the debtors’ reorganization and have no value to their respective estates,” company founder and president Abe Alizadeh said in court papers. “These assets are burdensome, of inconsequential value and have no equity or value.”

    From the Manteca Bulletin:

    More than 80 percent of the record 1,044 existing homes in Manteca that have closed escrow so far this year are foreclosures. That means owner-occupants and investors alike lost their homes because they couldn’t make the payments. And for the most part it wasn’t due to job loss or a catastrophic event such as a major illness. They simply borrowed more than they could afford and did it so with low introduction periods where interest - as well as sometimes part of the principal - was deferred for two to three years. They were betting prices would continue to increase and being able to refinance. The foreclosures are bad news for those who got caught in what is looking more and more like a Ponzi scheme where the last ones in on the housing bubble that expanded beyond reality by liar loans.

    Originally posted here.

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