Sacramento Foreclosures and Short Sales to Continue For at Least Four Years… Analysts say
January 24th, 2010 Categories: Default News, Sacramento Economy, Sacramento Foreclosures
Sacramento Foreclosures will continue until prices rebound, people get back to work and the economy improves. Analysts say that will be at least four years. But economists agree that the California economy is more tied to joblessness than to housing.
Even though there are signs California may be beginning to emerge from the recession; the numbers indicate there are many more homes to come through the “foreclosure pipeline”. Housing sales have been growing for several months, and state Controller John Chiang on Thursday released his December cash report that showed the month’s receipts rose above estimates by $481 million, or 5.7%.
According to an article the other day in the Bee, even the Appraisal Institutes economic forum analysts agree that joblessness and politics have more to do with the economy than foreclosures.
(Source: The Sacramento Bee) 
Jan. 16–Even as Sacramento entertains ambitious proposals for a new NBA arena, economists Friday warned it will take up to four years for the region to recover from its overbuilding and overspending spree.
Analysts Friday told 150 residential and commercial appraisers that area recovery could begin taking shape in mid- to late 2011. But it will be prolonged, slow and susceptible to setbacks, they said during a 2010 economic forum sponsored by the Sacramento Sierra chapter of the Appraisal Institute.
The pronouncements came as the capital region endures 12.4 percent unemployment and predictions the jobless rate may rise to 13.5 percent. Hanging, too, over Friday’s forum: a wild-card specter of new state cuts that many fear could disproportionately afflict the capital.
“I don’t expect 2010 to be anything more than a year of stabilization,” said Garrick Brown, Sacramento research director for commercial real estate brokerage Colliers International. Brown said rents are still falling and more stores, offices and industrial spaces are sitting empty.
“I think we’re about to enter a period of two to three years where there’s virtually no new construction,” he said. “It means there’s going to be a lot of developers out there without a lot to do.”
Brown said retailers are again filling large area stores that went dark after 2008 retailer implosions. But they won’t fill smaller shopping center spaces any time soon.
“You won’t see a new push by mom and pop retailers for four or five years. They’re dependent on home (refinancings) and it’s not happening,” he said. Unfilled space and tenants struggling to pay rent are forces pushing many owners toward foreclosure, he said. That suggests a sequel to the residential meltdown that began in 2007.
But an often-predicted tsunami of commercial foreclosures won’t happen, Brown said. Instead, they will dribble out “in waves of distressed assets the next five years.”
Folsom home-building industry consultant Greg Paquin told appraisers that commercial real estate “is where (the residential market was) two years ago.”
He said 2009 was the bottom for capital-area home builders, who reported a half-century low of 2,814 sales for the year. That’s an 84 percent drop from the housing boom’s 2004 peak. Sales will rise 10 percent this year, said Paquin, president of The Gregory Group.
Though residential foreclosures still cloud the housing market, Paquin said he doesn’t expect a double-dip recession or spiraling inflation, or, in response to a question about rising commuting costs, the death of suburbia.
“I’ve heard people say the suburbs are dead.
I strongly disagree,” he said. “I think we’ll see urban-style development in suburban areas.” Paquin, like Brown, expressed anxiety about the politics of state budget cuts. Both analysts noted that large-scale state employee layoffs could push area unemployment past 15 percent, delay recovery by a year or two and send the foreclosure rate “vertical.” Said Brown: “Until we get a handle on that, it’s hard to know what’s going to happen to our local economy.”
Los Angeles economist Chris Thornberg sounded the same theme, saying the economy rests more on political decisions than fundamentals.
Thornberg declared the U.S. recession over, saying, “The recession didn’t end because the problem of imbalance was fixed. It came to an end because of massive government intervention in the economy.”
Thornberg, head of Bacon Economics, said the shape of recovery depends on the “politics of the next 18 months.”
He told appraisers he’s bullish on California and praised a return of cheaper housing once again aligned with incomes.
“For all intents and purposes we’re back to where we need to be,” he said.
Thornberg counseled patience in working off excesses from 15 years of large trade deficits, overspending and debt.
“We have to work our way back to where the economy can grow normally,” he said.
