Wednesday, February 27, 2008
Friday, February 22, 2008
Just ran across this article on Sac Bee's website:
Dozens of Rancho Murieta homeowners have been left with cracked walls and listing foundations after local builder Reynen & Bardis said it can no longer afford to fix their defective houses.
Thirty-six residents have hired a law firm and begun filing lawsuits against the company, already reeling from the real estate downturn. Two lawsuits were filed in December and January, and more are planned.
The residents decided to take legal action after Reynen & Bardis suspended its effort to shore up foundations under homes in its Blue Oak Estates subdivision in Rancho Murieta South.
Over the past five years, Reynen and Bardis had worked to avoid such a lawsuit. The company bought back 52 houses in the subdivision. It pounded piers deep under the foundations of over two dozen more, said spokeswoman Michele McCormick. Another 24 homes await foundation work.
Then, in November, Reynen & Bardis crews simply disappeared, residents said.
"The balance of us are just kind of left out there," said retired banker Robert Lynn, who was waiting for his foundation to be fixed.
Lynn and other residents hired the law firm Anderson & Kriger in hopes of recovering money for repairs from Reynen & Bardis' insurance company.
"Reynen & Bardis says they can no longer be of any help, that their financial situation is such that they are pulling out," Lynn said. "The only recourse we have is to file a lawsuit."
When it rains, Lynn said, his house on Murieta South Parkway starts to move. Moisture expands the Ione clay soil on which the house is built. Then the concrete under the house starts to crack and shift.
"We heard a pop the other night, and this opened up," said his wife, Kay, pointing out a jagged crack extending from a corner of a dining room window.
Her husband has run around patching, spackling and painting to keep up with the cracks, but they keep coming. In the kitchen, the baseboard now sits about an inch above the floor. At one point, an entire wall broke free from its footings.
Francis Furtado, president of Reynen & Bardis' home building division, said the firm doesn't intend to abandon the Rancho Murieta residents. For the moment, it can't afford further repairs.
Furtado said the company already has spent $28 million to buy back houses in Rancho Murieta and more than $3 million on remediation.
"We are in a very tough market," he said. "There's no profit in home building. There's no profit in land development. Our income shut off. We had to hunker down. Our intention is to go back in, but right now the finances aren't there."
McCormick, a local public relations person, called Reynen & Bardis "a good company caught up in a whirlpool of events."
Reynen & Bardis, headed by longtime local developers John Reynen and Christo Bardis, was flying high just a few years ago. It invested heavily in land in the Central Valley and Reno. Today, it controls 23,500 potential home lots in the Sacramento area, or 9,215 acres, McCormick said.
Since the bottom fell out of the land market, the firm has faced mounting pressure from creditors. It has shut down home building and recently furloughed 89 of its 180 employees.
Earlier this month, Bank of the West obtained a tentative ruling in Sacramento Superior Court encumbering the personal residences of Reynen and Bardis as security for a $26 million debt.
In court documents, Bank of the West asserts that John Reynen and Christo Bardis personally guaranteed more than $750 million in loans from various financial institutions and "are not generally paying their debts as those debts become due."
Furtado said the company is negotiating with its lenders to reduce the debt and hopes to resume home sales soon. When the money starts flowing again, the Rancho Murieta repairs can get back on track.
Rancho Murieta residents said they haven't been told of the company's plans to return. "They've told everyone they're not fixing any homes, that they're not going to do anything more than what they've already done," said resident Matt McGuire.
Wednesday, February 20, 2008
This was the scene outside the Sacramento Memorial Auditorium this morning, where new citizens were being sworn in:
Normally I leave posts like this to Rob Dawg, but I was truly moved by what I saw. Some thoughts came to mind:
- Despite all the problems this country has, people are still beating a path to our door.
- People place a high value on things gained through adversity. These people overcame huge obstacles to reach this point.
- As our native population gentrifies, we'll rely on new immigrants more and more to fund social security and bail us out of our mistakes.
- Ignore or mistreat these people at your peril. We need them more than they need us.
Tuesday, February 12, 2008
With all the hubbub, I've been neglecting my stats. I'm going to let the graphs speak for themselves this week since we're halfway to next week already. And, if you haven't already, please check out my Natomas Area Commercial Real Estate Photolog. Chock-full of commercial real-estate goodness.
KAI RYSSDAL: On now to an important matter of our own. We aired a commentary last Thursday in which homeowner Kevin Mims talked about facing foreclosure because the collapse of the housing market had cut his family's income. "Foreclosure's all but unavoidable," he said, because he owes more on his house than he could get for it. We left out an important circumstance. Mr. Mims refinanced his house in 2006, and he took cash out. As a result, he owes $100,000 more than his original mortgage was for.'Nuf said.
Monday, February 11, 2008
I think this speaks for itself:
Hey, I appreciate all the interest in my Marketplace commentary, and I apologize if anything I wrote was misleading. It wasn’t my intention to argue in favor of a government bailout for troubled homeowners or to portray mortgage lenders as predatory. I took pains to point out that my mortgage is a good one, with a competitive rate and fixed for five years. The point I was trying to make was that if your income is dependent on the real-estate industry (as mine and my wife’s are), then the current real-estate downturn can hurt you even if you have a good loan. It is absolutely true that Julie and I took out a home-equity line of credit after purchasing the house. The house was in need of a lot of serious repairs when we bought it. The heating-and-air system was over thirty years old and failed in our second summer in the home. We also spent money on improvements that were entirely cosmetic (landscaping, etc) and which in retrospect we probably shouldn’t have undertaken. And I can’t deny we blew money on stuff that had nothing to do with home-improvement.
My Marketplace commentary came about in a curious fashion. I had submitted commentary to the program before but had never had a piece accepted. Somehow, though, I must have gotten included in the program’s database of potential freelance contributors. On January 8th I received an email from Marketplace (apparently sent out to lots of other people as well) that asked “What’s Your Real Estate Plan for ’08?” I was invited by Marketplace to fill out a questionnaire which asked for responses to such things as “Describe your real estate situation,” “Describe the best and worst aspects of your current situation,” “What if any difficulty do you anticipate with your real-estate plan this year?” And so forth. I filled out the questionnaire and sent it back. The only thing about my situation that I could think of that might be unique was the fact that I had lost a home to foreclosure in a previous down market and now, 27 years later, was facing the same thing all over again. So I mentioned this in my questionnaire answers. A Marketplace reporter contacted me and asked if she could interview me for the program. I told her that, as a freelance writer, I would rather tell my story myself via a commentary. She arranged for this to happen. Alas, I was permitted only 300 words or so, which made it impossible for me to describe every aspect of my situation. Thus, I described only what I thought might interest people: the fact that for the second time in our lives my wife and I were facing foreclosure as a result of a real-estate downturn. Had I more time, I would gladly have spelled out that this situation is primarily due to our own failure to plan properly for hard times. Anyone who has read my New York Times Modern Love piece knows that I am not shy about fessing up to the fact that I am a poor breadwinner and an all-around financial loser. I never meant to imply that I have been victimized by corrupt lenders or that I endorse a real-estate bailout by the federal government. Again, I apologize if my piece gave anyone the wrong impression about my situation. Marketplace should not be held responsible for this failing on my part. I’ll try to do better next time.
Sunday, February 10, 2008
Last December I brought you An Elk Grove Commercial Real Estate Photolog and The Downtown Sacramento Commercial Real Estate Photolog. Mish's Global Economic Analysis and Calculated Risk have continued to follow the impending CRE crash very closely, and I'm still getting a lot of hits on my older posts. Now that the weather and my schedule has finally cleared, I am ready to do my small part and present the Natomas Area Commercial Real Estate Photolog.
Natomas is a suburb of north of Sacramento. It was the last major part of the city's area to be developed, and in the last five years thousands of houses have been built on what were once rice fields. The area is also home to Sacramento International Airport, and Arco Arena, where the Sacramento Kings play.
In addition to the residential and accompanying retail development, the area has been home to a large contingent of light industrial facilities, business/medical centers, and distribution warehouses. The number of these facilities has exploded in recent years, and now millions of square feet of space are available.
The following photolog is a very small sampling of what is happening in Natomas. There are still quite a few CRE projects under construction or planned in the area, and it looks like the glut will last quite a while. (The only beneficiaries of the glut appear to be the street racers. Every single empty street and vacant parking lot had circles burned in.)
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Walgreens and nothing else
Several vacant buildings along I5
Millions of empty sqft. *Edit: This is a collage of 21 photos I took while driving through the Natomas Business Park. There are over 1,000,000 sqft available according to these signs alone.
Bel-Air Shopping Center
Big new office building
Mostly empty office parks
Empty, unswept parking lot
Unneeded Planned development
Empty corner restaraunt
Planned development near Arco Arena
Empty completed development near Arco Arena
130,000 SQFT empty
Office park under construction
Sign spinners/empty retail
2.3 million SQFT of planned retail