By Jim Wasserman, The Sacramento Bee, Calif.
Oct. 10--Thanks to deep discounts on repossessed homes, the summer season's existing home sales have been somewhat upbeat. Falling prices have boosted sales throughout the region above last year's levels.
Not so for new homes. Sacramento-area homebuilders are still in a tailspin, having to compete with banks that are slashing prices on thousands of foreclosed properties.
During the just-finished third quarter, builders sold 1,204 homes, the lowest quarter since the Folsom-based Gregory Group began tracking numbers in 1999. The firm counts sales in El Dorado, Placer, Sacramento, Sutter, Yolo and Yuba counties.
The local homebuilding industry, dominated now by Wall Street giants, attracted almost 20 percent fewer buyers in July, August and September than it did in the previous three months.
Sales were off 24 percent from the same quarter in 2007.
"It's still challenging at best," said Gregory Group President Greg Paquin, releasing the newest quarterly statistics today. "The housing market is doing what it needs to do to correct (itself)."
It's true. For all the pain and downsizing in the building industry -- not to mention the huge economic losses -- there is a silver lining. Less activity in the new-home market is helping trim a glut of for-sale signs for both new and existing homes in the capital region.
At last count, Sacramento researcher TrendGraphix tallied 11,369 existing homes for sale in El Dorado, Placer, Sacramento and Yolo counties. That's a big fall from the year-ago peak of 16,081.
New-home builders are driving down their share of excess inventory, too. A year ago, they had 3,226 homes -- under construction, nearly finished or finished and vacant -- all awaiting buyers. In industry parlance, those homes are called "standing inventory" or "overhang."
Today, as area builders have pulled back sharply on construction starts, the standing inventory has fallen to 1,924 homes in the third quarter, Paquin said. It's the lowest in the capital region since the spring of 2005, he said.
"I think we are at, or very near the bottom, in terms of sales and pricing," he said.
Paquin said new home sales were strongest in July and August before tailing off in September. That's when Wall Street's turmoil grabbed headlines, which likely spooked a number of would-be buyers, he said.
"I talked to a couple of builders yesterday who said traffic is off 20 (percent) to 40 percent the past couple of weeks," he said. "A lot of people who were interested have backed away temporarily to let things settle a little more."
For the first nine months of 2008, new-home sales totaled 3,990, Paquin said. That's a hefty tumble from 6,087 sales the same time last year. And it's a huge fall from 13,535 sales for the same period in 2004.
Paquin estimates the year will end with maximum sales of 5,500 new homes in the capital region. That's in line with projections by the California homebuilding industry that 2008 will be the worst year for statewide sales since the state started counting in 1954.
All of that helps explain another example this month of a big homebuilder bailing out of Natomas.
Texas home builder D.R. Horton Inc. recently sold its 187-lot Provence subdivision in Natomas to San Diego-based land buyer Ranch Capital Partners, according to Hanley Wood Market Intelligence of Costa Mesa.
Hanley Wood analyst Kathryn Boyce in Sacramento said the deal is a partnership with Sacramento-based MDS Development. All of Horton's lots are ready for homes to be built.
The Wall Street Journal reported earlier this month that Horton is selling thousands of acres in California at a loss to reap the tax benefits. The Journal quoted a land specialist who predicted a "rash of builders shedding assets."
Here in Sacramento, Boyce said, "It's starting."
Last week, Home Front reported that Los Angeles-based Pardee Homes sold 100 acres and 637 finished lots in Natomas, at a loss, to a Roseville land buyer, Granite Bay Development.
Borrowers tell tales of regret The phone has rung incessantly since Tuesday's news about Bank of America agreeing to an $8.7 billion rewrite of Countrywide's riskiest home loans. Those are the subprime and so-called "payment option ARM" loans issued from 2004 through 2007.
The settlement stems from lawsuits filed against Countrywide by California Attorney General Jerry Brown and his colleagues in other states. All alleged a pattern of fraud and deception in placing borrowers in risky loans that were profitable for the lender. BofA, which bought Countrywide in July, settled the suit and will rewrite 400,000 U.S. loans, 125,000 of them in California.
Almost 20 Countrywide borrowers have called Home Front, hoping the settlement applies to them.
They've poured out tales of regret for paying too little attention before signing their loan papers. Some are still current on payments. Others are months behind.
All sound frightened, frustrated and embarrassed by an American dream that was supposed to turn out much different than it has.
During the housing boom, Countrywide was the region's biggest lender, making 68,400 home loans in El Dorado, Placer, Sacramento, Sutter, Yolo and Yuba counties from 2004 through 2007, according to MDA DataQuick.
Not all those loans were risky. Nor were all of those included in the BofA settlement.
But several thousand Countrywide loans in this area are likely to be changed. From the sounds of borrowers on the phone, that will be a welcome relief from the pain, shame and fear that is very real in this region.
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