This area makes Southern California’s Inland Empire look like it has recovered and we know that hasn’t happened.  The reality is that the inland regions east of San Francisco have plagued housing sectors like Riverside and San Bernardino counties. The inland area of San Francisco that includes San Joaquin, Alameda and Contra Costa counties has become bedroom communities for workers priced out of real estate markets closer to the coast.  And just like the Inland Empire, the area was among the hardest hit by the economic downturn as buyers lost homes to short sales and foreclosure as home values continue to prices plummet.

 Housing is perhaps the biggest millstone. During the real estate boom, families that couldn’t afford real estate in San Francisco headed inland, buying homes in towns such as Tracy, Manteca and Brentwood. Dwellings there could cost $500,000 less than comparable properties in the Bay Area, said Michael Locke, president and chief executive of the San Joaquin Partnership, a private economic development company. Builders rushed to put up homes in vast developments, and employment in financial services in the three counties grew by a third in just a few years.  Now, building has all but stopped. Home prices in San Joaquin County have fallen 63% since the peak median price of $451,500 in November 2005, according to MDA DataQuick. Prices in Contra Costa County are down 53% from their peak of $600,000 in April 2007.

One in every 135 houses in Contra Costa County received a foreclosure filing in June 2010. In San Joaquin County, that figure is 1 in 104, nearly double the California average.  Signs of California foreclosures and economic slowdown are everywhere. At Bethel Island, a Contra Costa County summer vacation area normally busy with tourists and fishermen, boats sit rotting in the Sacramento River. Nearby, a planned residential waterfront development has stalled. The builder completed boat docks before pulling out; an eerie remnant of the luxury once planned there. In Livermore, an Alameda County town, whole shopping developments are empty and home foreclosure notices dot homes.  In Stockton, which had one of the highest California foreclosure rates, the median home price of $100,500 fell from $397,000 at the height of the boom, a stunning 74% drop. 

But home buyers are scarce. Homes much closer to employment centers such as San Francisco and San Jose have fallen to the prices Stockton enjoyed a few years ago.  “It’s not a bargain if you don’t have a job,” said Stockton real estate broker Rudy Willey.  The unemployment rate in Stockton, the county seat of San Joaquin County, is 19.8%. It’s 29% in the nearby hamlet of Garden Acres, higher than any city of its size in Southern California’s Inland Empire. Closer to San Francisco, in the Contra Costa County city of Pittsburg, the unemployment rate is 18%. Some of the jobs have been lost because of closures in the manufacturing and financial services industries, traditionally strong in this area. And as the region’s population cuts back on spending, stores and restaurants are

With sales and property taxes plummeting, cash-strapped cities are hustling to attract businesses.  Like many areas, San Joaquin County has an enterprise zone. Businesses that locate there are eligible for tax breaks. Last year the county expanded its zone to 656 square miles.  Stockton attracted a power plant and a prison hospital, businesses other communities might not welcome. Gus Duran, the city’s interim economic development director, said he’s trying to woo other businesses by slashing permit and development fees 50%.  And Tracy’s City Council has voted to develop an incentive plan to attract retailers to the half-empty West Valley Mall, where a Mervyn’s closure prompted other retailers to flee. On a recent afternoon, in the darkened side of the mall that once held the Mervyn’s, two teenagers groped each other on a bench near the empty stores.

Economists say the employment picture won’t likely get much better until things improve in the East Bay, which supported many inland jobs. The Port of Oakland has shed jobs as cargo traffic fell; import volumes tumbled 14% between the first quarter of 2007 and the same period in 2010, according to the National Retail Federation. The region was also hit by the bankruptcy of Mervyn’s, headquartered in Hayward, and the buyout of Longs Drug, based in Walnut Creek.  “Stores don’t last here,” said Edna Jones, a teacher sitting outside a closed Mervyn’s in Newark. “You think something’s open, but it’s gone.” 

The Hardest Hit Fund was designed to be complementary to the Home Affordable Modification Program (HAMP) unveiled in 2009, a federal program unveiled in early 2009 to help homeowners modify their mortgages.   California loan modification plans are not easy to find as many homeowners have jumbo mortgages that lenders simply are not willing to restructure.  The HAMP fund was established by President Barack Obama in February to provide targeted aid to families in the states hit hardest by the downturn of the housing market. The first phase of the program provided $1.5 billion to five states with home price declines of more than 20%: Arizona, California, Florida, Michigan and Nevada   Read mor online > The Herald-Sun – Help coming against foreclosures.

While many of the refinance loans that went into default during fourth quarter 2009 were originated in early 2007, the median origination month for last quarter’s defaulted loans was July 2006, the same month as during the prior three quarters. The median loan origination month during the last quarter of 2008 was June 2006. This means the home foreclosure process has moved forward through one month of bad loans during the past 12 months.

Sales of foreclosed homes accounted for 42% of existing-property transactions in California in August, research company MDA DataQuick said Oct. 15. The Realtors said the number of existing houses sold climbed 2.1% last month from September 2008, boosted by lower prices and a federal tax credit for first-time homebuyers.  “The success of the federal tax credit is clear,” James Liptak, president of the California Association of Realtors, said in the statement. The group supports an extension of the credit through mid-2010 and the removal of its restriction to first-time purchasers.  

California, the most populous U.S. state, is on pace for 530,520 home sales this year, based on the rate of transactions last month, the association said.  “Efforts by the government to stimulate housing and the economy clearly are impacting the market,” Leslie Appleton- Young, the group’s chief economist, said in the statement. Sales have exceeded 500,000 homes on an annualized basis for 13 consecutive months, she said.

The median amount of time it took to sell a California house fell to 33.6 days in September from 46.2 days a year earlier, the association said. The group’s unsold inventory index for existing, single-family houses dropped to 4.2 months from 6.5 months a year earlier. The index shows the time needed to deplete the supply of homes on the market at the current sales rate.   The median price for a California condominium in September was $270,170, down 6.5% from a year earlier and up 3.8 % from August, the Realtors association said. Condominium sales rose 11% from a year earlier and 2.2% from August.

Listing agents have had to learn the ins and outs of such deals since prices began to slide in 2005, and some groups of agents have brought on agents with experience in short-sale negotiations. But the deals have become so cumbersome over the past year that many are ending up with specialists who do nothing but negotiate with lenders.  Homes are selling at a pace not seen in three years, thanks largely to lower home prices and tentative signs that the recession may be easing. At the same time, buyers and real estate agents say the buying process takes longer than at any point in memory, often six months or more in the case of short sales.

Such situations have grown more frequent in the past year, as many as two-thirds of all transactions for some real estate agents. Meanwhile, bank-owned properties’ share of completed sales in Southern California has fallen to about 43% from about 57% last summer, according to research firm MDA DataQuick.  Short sales have become more frequent in part because market prices are generally lower than at any point from 2003 to late 2008. Nearly 43 % of all mortgages in San Diego County exceeded the estimated values of those homes as of June 30, First American CoreLogic reported last month. In the two-county area of Riverside and San Bernardino, that figure was 57%.

Street Russell, director of enrollment at BGS3, a Louisville, Ky., company that negotiates with lenders on behalf of sellers, said California has come to account for about one-third of his company’s new clients. Sellers’ agents hire the company; it typically collects a fee of 1 % of the price when the sale closes. “You guys are going through such a difficult housing market compared to everyone else around the nation,” Russell said.

Such negotiators can be located in San Marcos, Calif., or San Marcos, Texas. It doesn’t matter because they focus on paperwork and phone calls to lenders, agents said. Negotiators’ selling point is that they free listing agents to focus on listing and showing properties. “I’m on the phone all day long,” said Karen Beer, a short-sale negotiator in Murrieta. Beer, who is also a real estate agent, relies on “co-listing” arrangements and splits commissions with the agent whom the buyer initially contacts. It’s one of several business models for short-sale negotiators and specialists.

Remerge Transaction Coordinators Inc. in Irvine uses the same model as Beer, said company owner Shelly Gorenstein. Remerge’s division of labor involves about seven people for a single short sale, Gorenstein said. One, for example, collects the sellers’ financial information and makes the case for a financial hardship.  Such hardships appear to have gotten markedly worse over the last year, while actual foreclosure numbers have risen more modestly, based on reports by CoreLogic. The portion of San Diego County mortgage borrowers whose homes are in foreclosure rose to 2.8 % in June 2009 from 1.8 %, while the Inland Empire’s rose to 5.9% from 3.8%.  But nearly 8% of San Diego County borrowers and about 16 % of borrowers in the Inland Empire are at least 90 days behind on mortgage payments without technically being in foreclosure, up from 5.1 % and 10.8 %, respectively. A short sale can be advantageous for such a borrower because it causes a somewhat smaller hit to the borrower’s credit score.

Short sales have always been more complicated and taken longer than other sales because lenders usually verify financial hardship and determine what an acceptable amount to lose on the property is.  In many cases, a second lender has loaned $50,000 to $100,000 on a property and is being asked to settle for $10,000 or less. Some lenders also demand that the borrower repay a portion of the remaining balance over several years after the deal closes. 

Falling home prices are giving rise to a foreclosure alternative that can help people get out of homes they can’t afford.

When home prices were rising, people who lost a job or otherwise couldn’t pay their mortgage, could have sold and moved on. Declining home values mean some can’t sell for enough to pay off the loan. In those cases, short sales are an option.

In a short sale, the lender agrees to accept less than the mortgage balance as payment in full because it’s a less costly route than foreclosure. Both processes result in losses for lenders, but with foreclosures, they have the added costs of maintaining and selling properties. Short sales also spare homeowners the embarrassment of foreclosure and eviction.

A short sale will damage a person’s credit score, but Fair Issacs, keepers of the widely used FICO credit score, says the impact depends in part “on the composition of the individual’s credit profile.”

“We really think it is a much better experience for everyone concerned,” said David Knight, who handles short sales nationwide as a vice president with Wells Fargo & Co.’s mortgage servicing unit in Fort Mill.

The San Francisco bank, which recently bought Charlotte’s Wachovia, is one of the nation’s largest mortgage lenders and servicers. Knight declined to provide specific figures but said Wells’ short sales have “probably tripled” in the past 18 months as unemployment has risen and home prices fallen. They’re more common in former bubble markets, where prices shot up and fell harder than in areas such as Charlotte.

Short sales aren’t always advertised as such, so there’s no way to get a complete count. Unlike foreclosures, there also are no consistent indicators of short sales in public records. But local Realtors say they’ve seen an increase. Job loss, unexpected bills and job transfers, coupled with lower home prices, are all factors driving the use of short sales.

“They’re really coming on in this last year,” said Joe Clorite, a Realtor for 20 years, who is with Keller Williams Realty’s University office. “People are in over their heads.”

Nationwide, short sales are up about 20 percent in the past six months, said Mark Pearce, N.C. deputy commissioner of banks. That’s based on figures collected from mortgage servicers by a multistate foreclosure prevention group Pearce is part of. The group has not yet publicly released the data.

“Short sales are going up fairly significantly,” Pearce said. “They’re better than foreclosures.”

Homes losing value

Struggling to make their monthly mortgage payment, Meleta and Gerald Wideman called their lender for help.

“Once we got behind, they said we could do a short sale to get out of the loan,” she said.

The couple, with two children, moved to Charlotte in 2006 from Chicago after visiting family and deciding they liked the area. They bought a new house in Oakbrooke, a subdivision north of uptown. They paid about $140,000.

Their troubles began the first year. They were school bus drivers and couldn’t find summer work. She found a year-round job working with blood donors, but her overtime has been cut. They are Seventh Day Adventists, and say their faith prohibits work on Saturday. All the year-round jobs he’s been able to find require Saturday work.

Seeing no way around it, they listed the house for sale. The asking price, $99,900, is well less than what’s owed. Nearby homes have shed value, too. A foreclosed home across the street sold two years ago for $143,000. On Friday, its listing price was $92,700. Another foreclosure is listed for $117,900, down from the $140,000 paid less than two years ago.

Meleta Wideman says they’re looking for a place to rent in the Charlotte area.

“I’m scared to leave because the economy is so bad,” she said. “I’m working full time. We know we can eat.”

Closing can take longer

A big drawback of short sales is added red tape that means closing a deal can take months, a potential turn-off for sellers, buyers and Realtors.

Clorite has had a house listed in Oakbrooke since May. He went through the months-long process of finding a buyer, getting a short sale approved. At the last minute, the buyer’s financing fell through, so the house is back on the market.

“There is more cooperation, but they are still far behind,” Clorite said of lenders handling short sales.

The Oakbrooke owner he represents is a California investor who thought he got a good deal in 2006 when he paid about $155,000 for the new house.

The investor, who asked not to be named, said he has been unable to get a reliable tenant. He’s lost money, paying for extensive repairs as well as the mortgage, taxes and insurance. Now rents are going down. The house is listed for $120,000, likely to sell for less.

“It’s better to just cut the losses and dump the property,” the investor said.

Clorite believes he has another buyer, but again, he’s waiting on lender approval.

Short sales take time because everyone being short changed must approve the deals. That includes the mortgage holder, others with liens such as home equity loans and investors backing the mortgages. They may negotiate among themselves on how much of the loss each will accept.

Lenders have become more efficient, Pearce said, but the sluggish process can still turn away buyers.

“They’re not going to wait when there are so many homes being sold for lower prices these days,” he said.

See the original article written by Stella M. Hopkins.

Daniel Taub’s article indicated the number of existing single-family detached homes sold soared to 544,580 on an annualized basis from 294,520 a year earlier, the group said.   The median number of days it took to sell a property dropped to 46.1 days in December from 66.7 days a year earlier. The Realtors’ Unsold Inventory Index, which indicates the number of months needed to deplete the supply of homes on the market at the current sales rate, dropped to 5.6 months from 13.4 months a year ago.

Mortgage Loan Defaults

California mortgage defaults dropped 7.7 % in the fourth quarter after the state enacted a law to delay foreclosures, MDA DataQuick said in a separate report today. Homeowners in the state received 75,230 default notices in the fourth quarter, down from 81,550 a year earlier. Fourth- quarter defaults were down 20 % from the previous three months, according to the San Diego-based research company.  Kelly Media Group President, Jason Cardiff commented, “When borrowers are in line to renegotiate their mortgage, most lenders don’t report loan defaults even if the borrower is behind 6 months.” Cardiff continued, this means “We need to be extremely cautious when considering foreclosure data and housing reports.”

A law that requires mortgage lenders to discuss ways to avoid foreclosure with California borrowers before filing a default notice went into effect in September. Defaults plunged to 14,995 that month, and were back up to 39,993 in December. `No one expected defaults to stay at the much lower levels we saw immediately after the new law took effect,” MDA DataQuick President John Walsh said in a statement.

The area’s median price, which reflects the midpoint of sale prices, hit $505,000 in mid-2007, DataQuick said.  A total of 19,926 new and resale homes and condominiums were sold and purchased last month in the 6-county region that is the most heavily populated area in the state of California.  The area, including such cities as Los Angeles, San Diego and Riverside, recorded 13,240 sales during December 2007.  The median price paid for homes sold in Southern California hit $278,000 in December, down from $425,000 in December 2007.  DataQuick said the drop in the median price “overstates the decline in home values” since more affordable homes in the foreclosure-hit inland markets accounted for a large portion of sales. The Southern California foreclosure sales accounted for 55.7 % of December’s re-sales, up from 24.3 % in December 2007.

California’s residential real estate market was one of the most expensive in the US during the years-long housing bubble. The state is now struggling with one of the country’s highest foreclosure rates after many buyers got in over their heads with debt Formerly sidelined buyers are rushing to snap up foreclosed homes, but many would-be buyers in expensive markets remain on the sidelines because financial institutions are reluctant to make so-called “jumbo mortgage loans required to pay for homes in California’s many high-price neighborhoods.  John Walsh, president of DataQuick said, “Mortgage interest rates last month were near record lows … It does look like the spigot is being opened a little bit, at least for reduced home purchases.”  Read the complete article. 

According to former Ditech executive Josh Emmons, “The increased consumer awareness of foreclosure prevention alternatives like loan modifications has reduced some of the short sale market-share.”  Still many real estate evaluators expect a bumpy road for 2009 with property values forecasted to decline in double digits across the state. California short sales continue to dominate the Southern California housing market. However many believe we will see a turn of the tide for the mortgage business. 

KMG President, Jason Cardiff remains optimistic of a possible rebound for the housing sector in 2009 because of the significant efforts from the mortgage powerhouses to lower interest rates and make credit more available for refinancing and new home financing.  In a recent Real Estate Related News article Jason Cardiff said, “2009 may see the housing sectors and home financing markets rebound after all.”  He continued, “The Federal Reserve showed their commitment with record low rate cuts to fight deflation and many financial insiders believe the President Elect, Barrack Obama will be aggressive in an effort to stem the foreclosure mess.”  Read the complete story > Jason Cardiff Remains Optimistic of 2009 Mortgage Rebound