Thursday, July 31, 2008

Governer Cuts State Worker Pay; Nobody Cares

The Governator signed an executive order cutting the pay of 200,000 state workers to $6.55/hour.

IT IS FURTHER ORDERED that the Director of the Department of Finance and Director of the Department of Personnel Administration shall work with the State Controller to develop and implement the necessary mechanisms, including but not limited to pay letters and computer programs, to comply with the California Supreme Court's White v. Davis opinion to pay federal minimum wage to those nonexempt FLSA employees who did not work any overtime.
As you can see by the overwhelming media presence outside the Capitol, there is huge public interest in this story:

Wednesday, July 30, 2008

Financial Title Is No More

Agent Bubble writes in with this announcement from Folsom-based Financial Title:

I am sending this notice to you with much regret - Please see the attached announcement. Our owner, Mercury Company, has completely ceased doing any and all business with any title companies under its umbrella. This includes Financial Title state-wide, as well as other companies. I have enjoyed working with all of you and thank those who have stayed with me through the tough changes that have been placed on this industry in the past year. I hope to work with you all again very soon, and will definitely be trying to contact each and every one of you by phone in the next couple days.
More from here: Folsom-Based Financial Title Company Closes

I Can Haz Desperation

Five days after the bill was passed by Congress, Bush signed it. The last free market plank in the 2004 Republican platform (pdf) just turned to jelly:

Fiscal Discipline and Government Reform

To make sure the private sector has the capital it needs to invest, grow the economy, and expand prosperity, our leaders must make sure that the growth of the federal government remains in check. The challenges America has faced over the last four years have created an unwelcome but manageable budget deficit. These deficits are due to a number of factors: the stock market downturn that began in 2000 and the subsequent recession that President Bush inherited when he took office; the terrorist attacks on America and the necessary spending for homeland security and the War on Terror those attacks precipitated; and the crisis in confidence produced by corporate scandals that were years in the making.
Instead, the Feds will decide who deserves to receive a bailout keep their house:
7/30/08 7:25 AM EST Tony Fratto, deputy assistant to the president and deputy press secretary, said in a statement: "We look forward to put in place new authorities to improve confidence and stability in markets and to provide better oversight for Fannie Mae and Freddie Mac. The Federal Housing Administration will begin to implement new policies intended to keep more deserving American families in their homes."

Monday, July 28, 2008

Sacramento Regional Real Estate Trends for July 26, 2008

Inventory failed to sustain its July high of last week, falling by 0.8% from last week. All of the trends showed minor reversals over last week, which could be due to typical end of the month listing expiration effects. (Hit me with your best shot, Sippn!)

This year the market has definitely defied the trends of the past, so any forecasts you read should be taken with a grain of salt (including mine!) A lot of what happens will depend on the availability of credit and how effective any bailouts are. From direct personal experience, I can tell you there are no second liens being done at all, and 10% down is the minimum I've seen offered on 700+ credit.

**Update on sales from Minyanville (via Lander's blog)**

According to the Journal, metro areas like Sacramento, California, Denver, San Diego and Las Vegas actually reported a decline in housing inventory from a year earlier. Supply is still well above historical averages but, the report argues, if this trend continues it could usher in the end to the real estate slump.

Small boutique investment firms, big hedge funds and Investment banks like Lehman Brothers (LEH), Goldman Sachs (GS) and Merrill Lynch (MER) are driving these markets. Some are buying foreclosed homes en masse, while others are snapping up delinquent mortgage at a deep discount. As the new owner of the loan tries to sort things out with the borrower, homes previously for sale come off the market.

The majority of these properties, however, will just end up for sale again: Almost half the delinquent mortgages traded in this market ultimately end up in foreclosure. Investment banks and hedge funds aren’t in the business of owning portfolios of residential real estate, so in a few months they’ll start punting homes at further discounted prices.

Second, year-over-year comparisons for real estate and mortgage data are about to get a lot easier. Think back to the beginning of the credit crunch last summer - the mortgage market all but shut down. Real estate transactions ground to a halt, inventory spiked and price declines began to accelerate.

For as bad as the real estate market is today -- and while prices have certainly come down -- activity last year around this time was even worse.

In the next few months, new calls for a bottom will ring out. But given that so-called experts have been calling for a bottom since, well, the top, Minyans would be wise to continue to wait patiently for real signs this has occurred.

John Wayne Airport

Here's some pics taken by Darth Toll at the Southwest terminal at the John Wayne airport in Orange County last Friday. Not as bad as Burbank, but not great either.

Max, I just sent you a couple of pictures from the OC (John Wayne). It's got a decent flow of traffic, but I've seen this terminal so packed you could barely get a seat and it's nowhere near that level right now. Plenty of open seats, even ones with power for laptops.
If anybody else has photos of empty shopping centers, stores, airports etc. that are usually very busy, send them to me and I'll post them here.

Sunday, July 27, 2008

It's All Under Control

The (potentially) biggest financial bailout in American history will be signed tomorrow, and the financial crisis will finally be over.

Stats tomorrow.

Wednesday, July 23, 2008

The System Defends Itself

As of Friday, there will be no difference between the US Government and the GSEs. How long before our foreign creditors stop trading their dollars for T-Bills and start buying U.S. assets instead? Oh, wait...

Tuesday, July 22, 2008

Burbank Airport Deserted

Sacramento airport was not the only one. Check out this photo I snapped at the Burbank terminal last Friday:

There was nobody in line at the Southwest counter, or at the TSA checkpoint either. I literally walked all the way through to the x-ray machine, and took my time unloading my laptop and emptying my pockets while I made conversation with the TSA guards. Trying to sound friendly and upbeat, I said "Wow, where is everybody?" One of them replied, "It's been like this all week, and I've never seen it this way. It's a little scary."

Anybody have a similar experience recently, or was this a fluke?

Sunday, July 20, 2008

Sacramento Regional Real Estate Trends for July 19, 2008

Inventory increased for the second week in a row, while Sacramento County asking price trends seem to have broken decisively to the downside for the first time in 2008. Market stress indicators continued to show deterioration at a somewhat increasing pace. The average SIT asking price loss in Sacramento County is now 34%!

I'm willing at this point to declare the spring dead cat bounce completely over, and I see no reason why the market won't deteriorate further in the next six months. The weekly median asking price drop of $5,750 on June 28th, 2008 was second only to the $6,000 drop on October 20th, 2007 for the largest price drop in several years. This weeks drop of $4,990 was in the top 10. Since I started keeping detailed records in April 2006, the median asking price in Sacramento County has fallen from $379,000 to $225,000. That's a decline of 40.6%. At the current rate of decline, the median asking price will fall below $200,000 by the end of September.

Friday, July 18, 2008

Five Local Starbucks Closing

Starbucks is closing five coffee shops in the Sacramento metro area as part of their national 600-store reduction strategy. That still leaves Sacramento with approximately 1,000,000 Starbucks coffee locations.

The Sacramento locations are:

  • 3630 N Freeway Blvd, Sacramento
  • 5040 Auburn Blvd, Sacramento
  • 7800 Stockton Blvd, Sacramento
  • 8785 Center Pkwy, Elk Grove
  • 1520 Dek Webb Blvd, Lincoln

View Larger Map

Thursday, July 17, 2008

Retail Reductions

Is it just me, or are there a lot more vacant storefronts around town this year? There seems to be a quiet contraction taking place, with small franchise stores and Mom & Pops closing down. Admittedly, I haven't been tracking this scientifically in any way, so this is purely anecdotal. A quick perusing of the SacBee business archives yielded a few of the more recent high profile regional failures like Elk Grove Ford, Room Source, and Gamel RV, but I think it's worse than that. Are you guys noticing the same thing, or am I crazy?

Tuesday, July 15, 2008

More Indymac Photos

I happened across another Indymac location today, this one near Long Beach. There have been cases of police intervention at some branches across the city, but these folks don't look they'll put up much of a fight.

Check out the now ironic ads in the window:

-You can count on us
-Get the most out of your relationship
-#1 Savings and Loan in LA


Monday, July 14, 2008

Indymac Line

I was able to make a short detour to Pasadena and check out the scene over at Indymac. There were a ton of local and national media on-site doing interviews; Pasadena PD were on hand for crowd and traffic control. A local AM radio news channel dedicated a whole hour to the story, including numerous interviews with people who lost tens of thousands of dollars.

Personally, I think this could be the start of something a lot bigger. One interesting aspect of this story (discussed by Calculated Risk last night) is the very large average deposit size of these Indymac accounts. CR pegs the average at around $90,000 per. And as I discussed earlier, the average loss is around $50,000 for accounts over the FDIC limit.

I will go out on a limb and argue that this so-called "run on the bank" was caused by people simply acting rationally to reduce their deposits below the $100,000 FDIC limit, and that Indymac was relying on these uninsured deposits to stay alive.

Going by the media presence outside Indymac, this will be top national news for quite a while. How many people with deposits over $100,000 will be making rational withdrawals over the next few days? How many children and grandchildren will be calling mom and grandma tonight making sure the savings account is safe?

How many other banks out there are relying on uninsured deposits to stay alive? I think we're about to find out.

Sacramento Regional Real Estate Trends for July 12, 2008

Nice inventory spike this week, but not trend defining. The market stress indicators showed continued mild decline, with SITs in Sacramento County now outnumbering other inventory for the first time. Yolo County is now over 40% SITs as well.

On a side note, I'll be traveling in the Los Angeles area this week, so I may post some observations from there if I get the chance. Things are definitely slow at the Sac Airport: this is the first time I literally had no wait either checking my bag or getting through security. And on a Monday morning no less. The airport is dead.