Archive for November, 2008
November 26th, 2008 categories: Our Market
By MIKE ALLEN
San Diego Business Journal Staff
A panel of economists at the University of San Diego agrees that the nation and region are in the throes of a recession, but they give some hope things may improve next year.
A key prerequisite to stabilizing before the anticipated rebound is continued foreign investment into the country, several panelists said Nov. 17.
“As long as the world continues to lend us money, we’ll continue to have our cake and eat it, too,” said Ryan Ratcliff, an economics professor.
And while we’re obviously suffering from economic upheaval, the fact is that most still regard this nation as much better off than other economies, panelists said.
“The U.S. economy looks like it’s going into the tank, but we’re considered a safe haven,” said Alan Gin, the economics professor who puts out a regional economic index.
Gin and his USD colleagues outlined the causes behind the turmoil, which has its genesis in an overheated housing market that began deflating in 2006 and blowing up in 2007. From there, the problem spread to the financial services industry, which caused stock markets to plunge.
In turn, banks began failing or hoarding their cash.
Then consumers began spending less. As a result, more companies’ sales declined, which led to increased layoffs. Add escalating gas prices earlier in 2008, and it’s a prescription for disaster.
The often optimistic Gin said earlier this year that San Diego would end 2008 with a net gain of jobs. He’s now saying 2008 will end with a net loss of jobs, only the fifth time that’s happened in the last 40 years.
The loss will be small — he couldn’t say exactly how much — but it will be “a full blown recession at a local level.”
The same will hold for the nation, Gin said.
The economy will contract in the fourth quarter for a second consecutive time, officially marking a recession. The downturn will extend into the first two quarters of 2009.
National unemployment could rise to 8 percent from the most recent rate of 6.5 percent. Locally, unemployment could surpass 7 percent from its 6.4 percent rate in October, Gin said.
History As Guide?
To the question whether this will turn into a Great Depression, Ratcliff said the 1930s were far worse. Contributing to the extended malaise was government retention of high tariffs (effectively killing exports); adherence to the gold standard that increased interest rates and shrinking money supply by 30 percent. Those all proved to be the worst responses, Ratcliff said.
In the ensuing years, Washington enacted a bevy of measures that have helped, such as setting up national insurance on bank deposits.
The recent bailout programs have appeared to thaw financial markets, but no matter what government does, it cannot stave off this recession, Ratcliff said.
The panel grappled with the issue of increased government intervention in the private sector and whether taxpayer dollars should be used to prop up failing companies.
Gin said Congress will extend some type of bailout for car makers, because of the number 17.
“That’s the number of electoral votes in Michigan.”
Mortgage Factor
Mark Reidy, executive director of the Burnham-Moores Center for Real Estate at USD, said the seeds of the crisis were sown years ago as billions of dollars of investment flowed into this country in search of better returns.
Wall Street responded by creating ever more complex and riskier securities — all backed by mortgages.
Congress cooperated by putting pressure on Fannie Mae and Freddie Mac, the biggest buyers of mortgages, to relax standards and accept subprime mortgages.
Then the credit rating agencies assigned ratings to the securities that turned out to be invalid.
Additionally, “the regulators absolutely did not do their jobs. They looked the other way,” Reidy said.
Despite what he called a shattering of our national reputation because of massive defaults on home loans, Reidy and the panelists agreed recent data prove the nation remains a better investment bet than most anyplace else.
“This is still the safest currency in the world. There’s been a flight to quality,” Reidy said.
Ratcliff pointed out that recently there was a positive sign in the local housing numbers. Last month, data showed that foreclosures had declined from the previous month and that home sales were picking up.
It provides a glimmer that a turnaround is nigh, he said.
Spoken by Jennifer Bonasia |
November 20th, 2008 categories: Our Market
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Calif. median home price – September 08: $316,480 (Source: C.A.R.)
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Calif. highest median home price by C.A.R. region September 08: Santa Barbara So. Coast $935,000 (Source: C.A.R.)
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Calif. lowest median home price by C.A.R. region September 08: High Desert
$159,720 (Source: C.A.R.)
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Calif. First-time Buyer Affordability Index – Second Quarter 08: 48 percent
(Source: C.A.R.)
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Mortgage rates – week ending 11/13/08
30-yr. fixed: 6.14% Fees/points: 0.7%
15-yr. fixed: 5.81% Fees/points: 0.7%
1-yr. adjustable: 5.33% Fees/points: 0.5%(Source: Freddie Mac)
Just the facts ma’am…
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Spoken by Jennifer Bonasia |
November 19th, 2008 categories: Our Market, The Greener Side
By MICHELLE MOWAD
San Diego Business Journal Staff
A Carlsbad construction firm has completed a $3.5 million retrofit at the Encinitas Civic Center to improve its energy efficiency.
The work by Xnergy could save the city up to 80 percent on energy bills each year, or $4.3 million over 25 years, according to company and city officials.
Mayor Jerome Stocks said the project would also help reduce the city’s carbon footprint.
The retrofit features the installation of a rooftop 96 kilowatt solar photovoltaic system, installation of a central plant that cools and heats more efficiently, and installation of skylights for natural lighting.
The city is seeking U.S. Green Building Council LEED certification as well as the Environmental Protection Agency’s Energy Star certification for the work.
Spoken by Jennifer Bonasia |
November 17th, 2008 categories: Our Market
“New” 2009 conforming loan limit unchanged from $417,000; high-cost areas now max out at $625,500
LOS ANGELES (Nov. 7) –The Federal Housing Finance Agency (FHFA) today announced that the “new” conforming loan limit for 2009 will remain at $417,000 for most areas in the U.S., unchanged since 2006. Loan limits for high-cost areas, including California, are capped at $625,500, down from the previous $729,750 limit. Loan limits for many areas of the state do not reach this lower threshold and are dramatically reduced from 2008.
“Although price declines mean that the total number of homes eligible for conforming financing has increased, we’re disappointed that the $729,750 limit stipulated in the Economic Stimulus Act of 2008 signed in February was not made permanent,” said C.A.R. President William E. Brown. “The reduction in the loan limit to $625,500 will negatively impact both the interest rates and the availability of funds for jumbo mortgages.
“We hope Congress will make the $729,750 limit permanent before the end of the year as one of the provisions in an economic stimulus package,” he said.
The conforming loan limit determines the maximum size of a mortgage that Government Sponsored Enterprises (GSEs) Fannie Mae and Freddie Mac can buy or guarantee. Non-conforming or jumbo loans typically carry a higher mortgage interest rate than a conforming loan, increasing the monthly payment and negatively impacting affordability for households in California.
In California, the new conforming loan limits for metropolitan areas range from $474,950 in the Sacramento-Arden-Arcade-Roseville metropolitan area, covering El Dorado, Placer, Sacramento and Yolo counties; to $625,500 in the Los Angeles-Long Beach-Santa Ana metropolitan area.
Leading the way…® in California real estate for more than 100 years, the CALIFORNIA ASSOCIATION OF REALTORS® (www.car.org) is one of the largest state trade organizations in the United States, with more than 175,000 members dedicated to the advancement of professionalism in real estate. C.A.R. is headquartered in Los Angeles.
Spoken by Jennifer Bonasia |
November 12th, 2008 categories: Our Market
Agency Intensifies Call for Water Conservation as State’s Supplies Dip
By MICHELLE MOWAD
San Diego Business Journal Staff
Drought-tolerant landscaping and water-saving technologies are becoming more critical for commercial buildings in the region’s semi-arid climate.
Although water usage was down 12 percent through September over the first three quarters of last year, the San Diego County Water Authority intensified its call for conservation on Oct. 30.
The announcement said agencies, including the Water Authority, will receive less water in 2009 than in 2008.
Last year, the Water Authority received 35 percent of its water from the state. Next year’s allocation would only be 15 percent.
“This initial allocation means water supplies statewide are approaching record low levels,” said Fern M. Steiner, Water Authority board chair, in the announcement. “It is likely that next year we will have less water available to meet the needs of San Diego County.
“It is imperative that residents, businesses and public agencies redouble their efforts to reduce water use whenever and wherever possible, especially outdoors.”
Businesses that incorporate water-saving technologies in and around commercial buildings reduce water-related expenses as well as energy consumption.
David McCullough, president of the American Society of Landscape Architects in San Diego, said consumers are seeing the cost savings more clearly.
“Nowadays, more than ever, there is a tie of cost savings to the earth movement, which makes it a bit more acceptable to more people,” he said.
McCullough, a principal with McCullough Landscape Architecture, estimated 75 percent of commercial landscape projects are built with energy efficiency and the environment in mind.
“Everyone is asking … to be LEED-certified or to be designed to LEED standards,” he said.
Los Angeles-based Kilroy Realty built Kilroy Sabre Springs, an office campus off Interstate 15 and state Route 56, to be environmentally friendly and water conscious.
Reclamation System
San Diego-based Reno Contracting served as the general contractor and developed a groundwater discharge system that reclaims water and reuses it. This system diverts 2,500 gallons of water per day, or 1 million gallons per year.
The U.S. Green Building Council awarded the project LEED certification for those efforts.
“More and more we see corporate campuses needing a face-lift or just wanting to be more environmentally conscious,” said Jason Jones, an associate with Wimmer, Yamada and Caughey landscape architects.
The firm recently completed a landscape redesign for Columbia Center, a 27-story high-rise on West A Street.
Sentre Partners, a real estate investment and services firm, hired Wimmer, Yamada and Caughey to replace its landscaping with drought-tolerant plants and increase the efficiency of its irrigation system.
“As economic pressures grow, energy costs rise, profit margins shrink, and environmental responsibility becomes more vital, we are offering businesses a solution to easily reduce the cost and waste of energy and other resources,” said Gus Ezcurra, CEO of Advanced Telemetry.
The Larkspur-based firm recently introduced a new climate control and resource management solution for commercial application. EcoView, the product, helps building owners control energy and water costs and reduce the environmental impacts of running a business.
Already, Opera Patisserie Fines in Sorrento Valley has installed EcoView to save on its utility bills.
Conservation Incentives
These efforts by commercial water consumers have saved water, but not enough.
Lori Swanson, water resource specialist for the county Water Authority, said the agency offers numerous water conservation incentives.
“We are seeing quite a bit more requests for staff to come out and talk to businesses to let them know what can be done to save water and money,” said Swanson.
The Metropolitan Water District of Southern California offers rebates to encourage conservation efforts among businesses in its 26 member agencies, including the San Diego County Water Authority.
Its “Save Water, Save A Buck” program includes cash rebates on a wide variety of water-saving technologies, including low-flush toilets and urinals, weather-based irrigation controllers for outdoor landscaping, synthetic turf and other industry-specific water conserving devices.
The San Diego Water Department released a tip sheet Oct. 30 for area residents and businesses. It said to adjust the schedule on irrigation controllers, replace old batteries in irrigation systems, retain moisture in soil by using mulch, incorporate native and drought-tolerant plants, make use of the rain that does fall and don’t water on rainy days.
Spoken by Jennifer Bonasia |
November 8th, 2008 categories: Community Happenings, Our Market
Stephanie Armour, USA TODAY
Nearly 400,000 homeowners will be able to get more affordable loans after Bank of America (BAC) agreed Monday to modify mortgages that originated with its Countrywide Financial unit. The move could be worth more than $8.6 billion and mark the largest predatory lending settlement in history.
Monday’s deal settles claims brought by attorneys general in 11 states that accused Countrywide — acquired in July by BofA — of misrepresenting loan terms, loan payment increases and borrowers’ ability to afford loans.
Bank of America says it will restructure loans for Countrywide customers holding subprime mortgages and option adjustable-rate loans that permit borrowers to pay only a small portion of interest and principal owed each month. Some might wind up in new fixed-rate loans; others might not.
But the Bank of America deal represents only a fraction of the future defaults and foreclosures facing homeowners. There were more than 2.2 million foreclosure filings in the USA in 2007.
EVEN MORE DETAILS: Read Bank of American’s press release
“There could be a couple million more (foreclosures to come), so it begins to put a price tag on the problem and how expensive it is,” says economist Joel Naroff at Naroff Economic Advisors.
Pat Lashinsky, CEO of ZipRealty, says as many as 6 million homes will have gone through a short-sale or foreclosure before this housing slump is finished.
Expect more states to file claims against predatory lenders, predicts Roger Cominsky of Buffalo, a lawyer at Hiscock & Barclay who specializes in financial institutions and lending issues.
Under the terms of the agreement with Bank of America, eligible homeowners must occupy the home as their primary residence. Their mortgages must be seriously delinquent — or likely to become so. Loans must have been serviced by Countrywide and originated prior to Dec. 31, 2007. Modifications will include lower interest rates and principal reductions.
How borrowers will be helped:
•First-year payments of principal, interest, taxes and insurance will be restructured to equal 34% of borrower’s income.
•Effective immediately, no foreclosure sales can be initiated or proceed against borrowers who are likely to qualify for loan modification until a final decision is made on eligibility.
•No restructuring fees will be charged. Prepayment penalties will be waived.
“We will be proactive,” says Bank of America’s Daniel Frahm. “Effective Dec. 1, we’ll start reaching out to homeowners.”
Some $150 million has been set aside for borrowers in certain states who suffered foreclosure or are at serious risk of foreclosure, and another $70 million is earmarked for relocation assistance to borrowers unable to keep their homes.
The attorneys general in West Virginia, California, Connecticut and Illinois had sued Countrywide over its business practices.
“Countrywide’s lending practices turned the American dream into a nightmare for tens of thousands of families by putting them into loans they couldn’t understand and ultimately couldn’t afford,” California Attorney General Edmund Brown said Monday in a statement.
Spoken by Jennifer Bonasia |
November 5th, 2008 categories: Community Happenings, Featured Events, Glimpse of the Day, Lifestyle, Our Market
Change Happens when you need it the most. All across America last night, citizens watched history unfold as Barack Obama became the President Elect, on his path to becoming the 44th President of the United States of America. For some, today is a day of rejoicing, for others, an opportunity to look ahead with optimism even though their candidate wasn’t victorious.
I think the victory belongs to every American regardless of ideology simply due to the overwhelming involvement of the American people in directing the path of our government. I fear we had become a society that took it’s liberty for granted and just assumed others who were in positions of power and authority would do right by us and our country. It’s a shame we had to hit such a low to wake us all up to the fact that it’s our responsibility, my responsibility, to lead government and if we blindly follow those who are in a position to make or break our success as a nation, we deserve what we get. Unfortunately, the typical outcome is less than we expect and that has never been more obvious than today and this mess we find ourselves mired in.
So whether or not your candidate won the election, YOU won by taking charge of your destiny and being a part of the American process.
Please enjoy these photos of Celebration around our nation and our world.
Spoken by Jennifer Bonasia |
November 3rd, 2008 categories: Our Market
A reader is tempted to enter a model lease-back deal, but wonders about the builders’ financial volatility.
Q: I keep seeing model lease-back offers from builders. Most of them pay enough rent to more than cover the monthly cost, but my biggest concern is about the builder’s financial viability, since so many of them have gone bankrupt. Are there any particular things one should watch out for?
A: Builder lease-backs, in which the buyer rents a home to the builder who uses it as a model home, are generally great deals for all concerned. Builders get an early sale. Buyers get an upgraded home at a discount price, and a tenant who won’t be calling in the middle of the night to complain about a clogged toilet.
But in these uncertain times, I can understand your caution. Since last year, an .estimated 20% of builders went out of business, according to Gopal Ahluwalia, director of research for the National Association of Home Builders. Most were small or mid-sized builders who didn’t have enough cash in reserve to cushion them through a downturn.
![[builder]](http://s.wsj.net/public/resources/images/OB-CP419_re_bui_D_20081103092052.jpg)
Associated Press
You can analyze the earnings, debt and cash flow of a public company to determine its long-term financial health, but you can’t do that with a small, privately-held one. You can talk to suppliers and subcontractors to see if they’re being paid promptly, to recent buyers to see if they are satisfied and to local regulatory and consumer agencies to see if any complaints have been filed against the company. If you’re still concerned, you can try to negotiate a lump-sum rather than a month-to-month lease payment, payable at closing.
Keep in mind that when the lease is up, you won’t be getting a brand-new home. Although builders usually make an effort to keep models looking fresh, as they cut back on expenses they may cut down on the number of times carpets are shampooed and paint scuffs are touched up. In downturns, builders also sometimes make one model home complex serve several different communities, which means more wear and tear on each unit. I recently visited a model home in Prince William County, Virginia that was being used this way. It was only one year old, but felt much older. Visitors had slammed a kitchen drawer so often that the front was coming loose and had broken a closet light switch. The gray, opaque stain on the deck had worn through in spots.
A builder will often promise to repair and repaint a model at the end of the lease, to convert the sales office to a garage and to re-route sidewalks and fences running through the model-home complex. If you’re worried that the builder will go belly-up before all this happens, get an estimate from an independent contractor of what it could cost to perform these necessary fixes. Have the builder deposit the funds to cover them in an escrow account. It’s smart to hire an experienced real estate attorney to represent you during all these discussions.
Finally, don’t just consider the builder’s financial staying power — think about your own. If home prices fall while the project is being built out, are you prepared to hold on until the market recovers? What if there’s a delay in building planned community amenities like pools and clubhouses, a situation that’s sure to hurt your ability to attract buyers or renters? As scary as it may be to think about these possibilities, planning for worst-case scenarios is the best way to avoid being overcome by them.
Write to June Fletcher at fletcher.june@gmail.com
Spoken by Jennifer Bonasia |
