Friday, April 11, 2008
California Real Estate Defaults
"Sacramento may eliminate up to 600 jobs in the city's first staff reductions in half a century, and the police and and fire departments in the California capital may have their budgets cut by 20 percent. The culprit is the collapse of the U.S. housing market. ... California, the most populous U.S. state and accounting for almost one-seventh of gross domestic product, will lose $25 billion in personal income by the end of 2008 and property values will fall by $630.7 billion, according to forecasts from economist Jerry Nickelsburg at [UCLA], and the U.S. Conference of Mayors. ... The number of houses and condominiums sold in California plummeted 30 percent in January from a year earlier to 313,580, and the median price for an existing home dropped 22 percent to $430,370, according to the California Association of Realtors. ... Vallejo, a bedroom community of 120,000 near San Francisco, was forced to weigh whether to file for bankruptcy in February after declining housing-related tax revenue left it close to insolvency and unable to pay rising labor costs. ... With no end in sight to the slump, homeowners are racing to get their property revalued to reflect current prices and lower their tax bills. ... The real estate slump has taken its toll, with more than 31,000 jobs elminated last year in the subprime mortgage industry by California-based companies, including 12,000 positions at Countrywide Financial Corp. in Los Angeles, 3,200 at New Century Financial Corp. in Irvine, and 2,6000 at ACC Capital Holdings in Orange", http://www.bloomberg.com/, 20 March 2008.
California real estate will continue to fall. The current bust has very negative implications for muni bonds and muni bond insurers. Thanks for the lead, HDF.