Centene at the former home of Kings?

Sac Biz Journal

The pending deal to bring health insurance giant Centene Corp. to Sacramento, and up to 5,000 jobs with it, is likely to have ripple effects on regional real estate and development. Here are some areas that might feel the waves first.

Sleep Train Arena: While the area Centene (NYSE: CNC) is looking at for its regional headquarters campus in North Natomas includes the former home of the Sacramento Kings, it doesn’t appear to be a likely destination. But at nearly 200 acres, the arena and its surroundings are still a prime opportunity site, surrounded by housing and retail, and now likely near a dynamic office development as well.

The site also was on the Greater Sacramento Economic Council’s list of potential landing spots for Amazon.com Inc.’s second headquarters, and could host events while the Sacramento Convention Center undergoes renovations and expansions in the next few years. If it hasn’t happened already, expect the Kings and the city to make a major push to put the closed arena in front of anyone sniffing around the region.

Bannon Investors’ South Natomas site: For more than a year, most of the talk around new office development in Natomas centered on projects Bannon is considering on either side of Interstate 5 near West El Camino Avenue. Near the firm’s existing Gateway 2020 project on the east side, entitlements are under review for a 90,000-square-foot building.

On the west side, a development could either consist of one Gateway 2020-like tower or a three-building mid-rise campus. If Centene’s plan is realized, office brokers believe it’s bound to result in expansion over time and interest from office tenants with connections to Centene. As the class A development closest to Centene’s potential site is nearly ready to go, Bannon’s project could see the quickest, most direct positive impact.

Downtown Sacramento’s office market: So far, we haven’t heard why Centene decided Natomas was the place to go, though it seems likely City Councilwoman Angelique Ashby made a full-court press for the company to be in her district. That raises a question though: Why not downtown? Two proposed high-rises, by Vanir and CIM Group, could’ve absorbed a significant amount of the 1.2 million to 1.5 million square feet Centene may need.

And if the company was tilting toward a multibuilding campus, the Railyards would’ve seemed to be an option. It’s possible Centene wanted to have its own buildings and space, and it’s also possible the Railyards is likely to be more of a mixed-use development with several smaller employers rather than one big one. But either way, downtown’s office market, while very healthy, is still waiting for a transformational new tenant or two to turbocharge rents and spur a new round of construction.

Source: Sac Biz Journal

3000 new homes in Natomas

The Sac Bee

More than a decade in the making, a massive community of lakeside homes and apartments on farmland near Sacramento International Airport is up for key city approvals this week, with possible home construction next year.

The nearly 600-acre Greenbriar development is planned for a square of land on the city’s northwestern edge, wedged in the “Y” created by the split of Interstate 5 and Highway 99. Despite its location next to suburban North Natomas, the city’s guidelines for Greenbriar say it will be designed in the pedestrian-oriented style of old city neighborhoods like Land Park and Curtis Park, targeting a variety of resident types, including first-time buyers, young professionals, young families and older renters.

Eventually, a light-rail line planned to connect Sacramento to the airport would run through the community. That $1 billion transit project, however, is unfunded.

The developer, Integral Communities of Newport Beach, will ask the City Council Tuesday to approve a development agreement and other final documents. The project has been controversial in the past, with opponents arguing it represents suburban sprawl development on land that serves as habitat to at-risk species. The project developers still need state wildlife approvals for their habitat preservation efforts.

Integral Communities plans to build more than 2,400 for-sale houses and nearly 500 rental units, including 200 for lower-income seniors. The project also will include three commercial sites.

Integral Communities executives could not be reached for comment this weekend. City Councilwoman Angelique Ashby, who represents North Natomas, said she’s been told home models could be up by late 2018.

“The Greenbriar project provides some solutions to our ability to provide a variety of housing options for families in our city, near the urban core and on a future light rail line,” she wrote to The Bee. She said the project includes a school site for the Twin Rivers School District. A map of the project also shows a combination lake/flood drainage basin winding through the community.

Like the rest of western Natomas, Greenbriar sits beneath the flight paths used by Sacramento International Airport.

Airport officials say they have arrangements with the developer to handle legal issues and to minimize bird-related safety concerns. Home sales will include disclosure statements that jets fly overhead. The airport also will establish an avigation easement, attached to property titles, protecting aviation rights, airport manager Glen Rickelton said.

Rickelton said the developer also has agreed to make the project’s planned lakes less attractive to birds, which sometimes collide with jets. That could include making the embankments steep so that it is hard for birds to walk in and out of the water as well as keeping the lake area free of garbage that birds might see a food source and telling residents not to feed birds.

Greenbriar managers also will be authorized to chase birds off the site using fireworks, scarecrows, water spray and dogs, so that those birds do not set up house around the lakes, according to project environmental documents.

Advocates for the Swainson’s hawk, listed as threatened by the state, are unhappy with the habitat mitigation land chosen for the hawks, which is an orchard west of the airport, adjacent to the Teal Bend golf course. Advocate Jude Lamare said the site is too close the airport, where 11 Swainson’s hawks have been counted as hit and killed by jets in the last four years.

The hawks forage in various places around the Natomas basin, but, as development continues, nesting areas will be reduced, forcing more birds into limited sites, including the one next to the airport. “If you are picking a ‘forever’ home for threatened avian species, it would not be next to a runway,” Lamare said. “You are squeezing the species down.”

The city gave its initial approval to Greenbriar in 2008, on the eve of a de facto building moratorium imposed by the federal government on the whole Natomas Basin due to flooding concerns. That moratorium has now been eased with improvements to the levees.

Around the same time as the moratorium began, the new home market in Sacramento collapsed. It has since largely recovered, though new home construction remains lower than it was in the boom years.

Integral Communities bought the property in 2010 from a partnership controlled by Sacramento developer Angelo K. Tsakopoulos, who had worked for years to get the land annexed into the city. According to market research firm Corelogic, the price tag was $28.1 million.

Records filed in the Sacramento County Recorder’s Office at the time showed that the partnership that included Tsakopoulos loaned $17.5 million to Integral Communities to help finance the purchase.

Back in 2006, when he was trying to persuade the City Council to move forward with annexing Greenbriar, Tsakopoulos pledged to donate as much as $20 million from the project to the Crocker Art Museum and the UC Davis Medical School. He acknowledged in 2011 that those promises had gone unfulfilled, blaming the recession’s punishing effect on land values. He said he hoped to revisit the issue when the market revived and did not intend to take any profit on the project.

Source: The Sacramento Bee

News homes for S. Natomas and Lincoln

SacBizJournal

Land sales for hundreds of new homes will lead to construction on two different projects later this year.

KB Home recently purchased lots in the Twelve Bridges master plan in Lincoln for $16.44 million, and Taylor Builders LLC bought lots for a planned project called Parkebridge in South Natomas for $12 million, according to property records.

Joe Killinger, Central California division president with KB Home, said the Lincoln lots will be the site of 240 single-family homes. Beginning lot improvements should get underway this summer, with sales beginning in spring 2019.

“Twelve Bridges is a good destination neighborhood for first-time and move-up buyers,” Killinger said. “For us, we see an opportunity to build something a little more affordable than what’s in the Rocklin or Roseville area.” For buyers in Lincoln, the difference could be as much as $20,000 to $30,000 less than a similar house in those cities, he said. The Lincoln community, purchased from JCPSac Properties LP, will have one- and two-story homes, ranging from about 1,700 to 3,100 square feet.

KB Home has five new communities starting in the next three to four months, Killinger said. While the pace of homebuilding overall is increasing, it’s still far from the peaks of 2006, he said, with entitlement review and labor shortages the major limiting factors.

Taylor Builders, a newly formed residential development company based in Roseville, bought the Parkebridge lots from BHT II Parkebridge 531 LLC.

President Clifton Taylor, who started the company last year after leaving residential developer Richland Communities, said the lots are enough for about 530 homes. Taylor Builders will start site improvements this spring for the land, which is south of Interstate 80 and between Truxel Road and Northgate Boulevard.

“The goal is to finish lot development and sell to builders,” Taylor said, adding the land is entitled for a combination of single-family homes and townhomes. “We’re working on finalizing an agreement with a general contractor.”

Both sales closed within the last month.

Sac BizJournal

Student loan crisis could be worse than originally thought

Homebuyer demand exploded in 2017, and is expected to continue to surge in 2018 despite rising home prices, low inventory levels and increased competition.

However, as Millennials increasingly enter the housing market, one factor stands above all the rest, blocking the path to homeownership: student debt.

In fact, an overwhelming majority of Millennials with student debt do not own a home, and believe this debt is the cause for the delay, a recent study from the National Association of Realtors and nonprofit American Student Assistance showed. NAR estimates this student debt could be delaying homeownership for up to seven years.

But now, a new study shows the student debt crisis could be worse than anyone thought. Currently, at nearly $1.4 trillion in outstanding loans, student debt is the second largest source of household debt after housing, and the only form of consumer debt than continued to grow after the Great Recession, according to a new report from The Brookings Institution, a nonprofit public policy organization.

The report analyzes new data on student debt and repayment, released by the U.S. Department of Education in October 2017.

Here’s a look at some of of the shocking trends the study reveals.

The study suggest that for all students who entered college in 2004, nearly 40% of them could default on their student loans by 2023.

40%

Students who attend for-profit colleges are even worse off, as the data shows 52% of borrowers default at a for-profit school after 12 years, versus 26% of borrowers that default from public borrowers.

52%

But as high as the overall default rates may sound, they pale in comparison to default rates for black students. About 21% of black college graduates default within 12 years. This is compared to just 4% of white graduates. This is so high, in fact, that a black college graduate is more likely to default on their loan than a white dropout.

21%

Black defaults are so high, in fact, that the study shows within the next 20 years, up to 70% of black borrowers could ultimately default on their student loan.

70%

Perhaps surprisingly, the majority of borrowers who default did not hold large loan amounts. About 37% of those who borrow up to $6,125 for undergraduate study default within 12 years, compared with 24% of those who borrow more than $24,000.

37%

This report was prepared by HousingWire, and is based on data from Brookings’ Evidence Speaks series, which analyzes new data on student debt and repayment, released by the U.S. Department of Education in October 2017.

The Student Debt Crisis

50403020100For-profitborrowersPublicborrowers

Default rates

Black graduates

White graduates

70%

Black borrower defaults

Default Rate

Borrow up to $6,125

Borrow more than $24,000

 

The infographic above shows even as the student debt crisis deepens, minorities are hit the hardest.

But perhaps this should come as no surprise, as the median net worth among blacks at $11,030 falls far below the white median net worth of $134,230, according to data from the Economic Policy Institute.

Even when just looking at college graduates, that gap remains as black college graduates have a median net worth of $23,400 while white college graduates have a median net worth of $180,500. But of course, surely this changes when only considering those with a graduate or professional degree.

Unfortunately, no.

The chart below shows among blacks with a graduate or professional degree, the median net worth is $84,000, compared to $293,100 for whites.

And while it is unclear exactly how much of the student debt crisis is holding back the black homeownership rate, once again it falls significantly below the white homeownership rate of 63.9% with its mere 42% in the third quarter of 2017, according to the U.S. Census Bureau.

During 2015, the most frequently cited reasons black applicants were turned down for mortgages include 31% for credit history, 25% for debt-to-income ratio and 13% for collateral, according to data analyzed by the Pew Research Center. This is compared to the most frequently cited reasons white applicants were turned down for mortgages where debt-to-income was the No. 1 reason at 25%, followed by credit history at 21% and collateral at 18%.

Perhaps the high number of defaults on student loans among the black population could be partially to blame for worse credit history.

Whatever the reason for the lower homeownership rates, it is clear that as long as 70% of the black population is expected to default on its student loans, saving up for a home could prove to be an impossible feat.

Overall, the infographic above shows 40% of college entrants could struggle to repay their loans, and eventually fall into default. This represents a severe crisis for the student loan market, and could have devastating impacts on their ability to purchase a home.

 

 Source: housingwire.com

Group of bipartison senators seek more “predatory” lending protections for veterans

 

Over the last few months, Ginnie Mae and the Department of Veterans Affairs began looking into a segment of mortgage lenders that were aggressively targeting servicemembers and military veterans for quick and potentially risky refinances of their mortgages.

It started with an investigation into “loan churning,” the practice of convincing an existing borrower to refinance their mortgage. Then, Ginnie Mae and the VA launched a task force to determine what steps to take to address the issue, and finally, Ginnie Mae increased its oversight over VA refinances.

But a bipartisan group of senators think both the VA and Ginnie Mae need more legal authority to stamp out the problem entirely.

Earlier this week, a group of 12 senators from both parties, led by Sens. Thom Tillis, R-North Carolina, and Elizabeth Warren, D-Mass., introduced the “Protecting Veterans from Predatory Lending Act of 2018.”

The bill would require lenders to demonstrate a “material benefit” to consumers when refinancing their mortgage.

According to the senators, a “small number” of lenders are “abusing” the VA program by “utilizing misleading advertising tactics” to convince VA borrowers to quickly refinance their mortgages.

Per details provided by Tillis’ office from April 2016 through August 2017, there were more than 1 million VA home loans originated, with nearly half of those being refinances.

According to Tillis’ office, the “vast majority” of those refinanced loans were originated by “good actors,” but more than 40,000 of those loans “may have been subjected to abusive lending practices.”

The bill would bring more protections for veterans to prevent “predatory” lenders targeting them for refinances.

The Protecting Veterans from Predatory Lending Act would establishing the following requirements:

• A lender may only submit a refinance loan for VA insurance if it certifies that all fees associated with the refinance would be recouped through lower monthly payments within three years
• A lender may only receive VA insurance for a refinance loan if the refinance loan has a fixed rate 50 basis points lower than the earlier fixed-rate loan (or 200 basis points lower if the new refinanced loan is an adjustable rate mortgage)
• A lender may only receive VA insurance or get a Ginnie Mae guarantee for a refinance loan if the refinance comes more than six months after the initial loan

The bill also stipulates that Ginnie Mae should provide Congress with a report in one year on liquidity of the Ginnie Mae security.

According to the senators, one side effect of these “predatory refinance practices is that they undermine the value of the Ginnie Mae security, thereby raising costs for every veteran receiving a VA mortgage.”

Ginnie Mae’s report would allow Congress to determine if the bill is having the desired effect on Ginnie Mae securities.

The bill also requires the VA to issue an annual report on refinance practices in the VA program, including the marketing of VA refinance products.

This annual report would allow Congress to more closely monitor developments in this area and determine whether additional improvements are needed, the senators said.

“The VA home loan program was designed to give veterans and servicemembers the opportunity to become homeowners as they raise their families and it has proven to be a great success,” Tillis said.

“Unfortunately, a few bad actors are taking advantage of the program as home lenders have begun targeting veterans and servicemembers to generate profit and fees at their expense, often leading to higher loan amounts and putting families in a worse financial position than they started off,” Tillis added.

“Our men and women in uniform deserve better, and I am proud to partner with Senator Warren on this bipartisan legislation that will end these predatory home lending practices,” Tillis concluded. “I hope Congress will consider this bill quickly so we can protect those who have sacrificed so much to protect us.”

The bill is also sponsored by Sens. Dean Heller, R-Nevada; Jon Tester, D-Montana; Shelley Moore Capito, R-West Virginia; Joe Manchin, D-West Virginia; Richard Burr, R-North Carolina; Brian Schatz, D-Hawaii; Dan Sullivan, R-Alaska; Chris Van Hollen, D-Maryland; Tim Scott, R-South Carolina; and Joe Donnelly, D-Indiana.

“The government shouldn’t be backing lenders who exploit veterans just to line their own pockets.  All three of my brothers served in the military and I understand the incredible sacrifices made by those who fight for our country – they deserve better,” Warren said. “I’m glad to work with Senator Tillis to crack down on lenders engaging in predatory practices that hurt veterans, their families, and American taxpayers.”

Each of the other 10 senators also released statements about the bill. Here is each senator’s statement in full:

“The VA home loan program has assisted countless military veterans, including those in Nevada, in their pursuit to become homeowners. Recently we’ve learned some lenders are taking advantage of this important program and using veterans in order to earn a quick profit,” said Heller. “I’m proud to cosponsor this bipartisan bill to help protect veterans from predatory lenders. It is my hope that Congress will send a strong message to these bad actors by swiftly approving our bill, and I look forward to working with my colleagues on both sides of the aisle to do just that.”

“This bill cracks down on predatory practices and protects veterans,” said Tester, ranking member of the Senate Veterans’ Affairs Committee. “I’m pleased to join this bipartisan group of senators who are sending a clear message that we will not stand by while bad actors attempt to take advantage of veterans. This bill does right by those who have served and I look forward to a timely debate on this issue.”

“We owe a lot to our veterans and should be doing everything we can to ensure those who have selflessly served our country receive the support they need. That includes protection from those who are looking to take advantage of them,” said Capito. “This bipartisan legislation will help put an end to predatory home lending practices that threaten our veterans’ financial stability and provide important home loan protections they deserve.”

“Our nation’s veterans and their families have made unimaginable sacrifices to ensure we are able to enjoy the freedoms that we take so much pride in. It is disgraceful that a handful of predatory home lenders are exploiting our nation’s finest to make a profit. I’m proud to join a bipartisan group of senators to prevent this abuse and better ensure our veterans the opportunity to own a home,” said Manchin. 

“The VA home loan program has assisted over 18 million veterans become homeowners since its inception in 1944,” said Burr. “It’s an important benefit that our servicemembers have earned. While the program itself is largely successful, there remain unacceptable cases of predatory lending taking advantage of veterans across the nation. This bill will help prevent such abuses and ensure that those who have served our nation are further protected from misleading loan practices.”

“Lenders should not be allowed to pressure or exploit veterans into needlessly refinancing their homes just to make a profit,” said Schatz. “Our bill keeps mortgage lenders honest and protects both veterans and taxpayers.”

“Ensuring our nation’s men and women in uniform are supported – not taken advantage of – when they transition back to civilian life is absolutely key in our duty and responsibility to our veterans,” said Sullivan. “As a proud member of the Senate Veterans’ Affairs Committee, I am pleased to join this important and bipartisan cause that will push back against predatory home lenders targeting our nation’s veterans.”

“Our nation’s veterans sacrifice so much for our country – we must do everything we can to support them when they come home,” said Van Hollen. “That’s why we must ensure these men and women are not taken advantage of by unethical business practices used to turn a profit by any means necessary. The Protecting Veterans from Predatory Lending Act will safeguard veterans and their families from those who would seek to defraud them. I’m proud to support this legislation and urge my colleagues to move forward on this issue immediately.”

“Our service members do so much for us and it should be our responsibility to look out for their well-being whenever possible,” said Scott. “It is simply unconscionable that there are people out there who are willing to take advantage of our men and women who served in uniform for their own financial gains. Many see home ownership as a central component of the American dream, and incentives like the VA loan program afford our veterans the unique opportunity to reach that sought after goal. Any attempt to tarnish this initiative should be aggressively struck down, and I am glad to join this bipartisan group who have decided to stand up on behalf of our veterans – it is what they have both earned and deserve.”

“This common sense legislation would ensure that servicemembers and veterans can continue to obtain affordable mortgages, while putting a stop to a predatory lending practice targeting those who have served our country,” said Donnelly. “I am proud to support this bill led by Senators Tillis and Warren.”

Source: housingwire.com

Fed fines another 5 banks $35.1 million- mortgage servicing and foreclosure infractions

On Friday, the Federal Reserve Board announced another $35.1 million in civil penalties against five banks as part of its effort to terminate enforcement actions, issued in 2011 and 2012, against a total of 10 banks related to residential mortgage loan servicing and foreclosure processing.

The Fed announced Goldman Sachs was fined $14 million. Morgan Stanley received an $8 million penalty. CIT Group (which merged with OneWest) was fined $5.2 million. U.S.Bancorp received a $4.4 million fine and PNC was fined $3.5 million.

These financial institutions had yet to be penalized for mortgage servicing deficiencies, the Federal Reserve Board said in a statement. These additional penalties now bring the total amount of penalties issued in relation to mortgage servicing to $1.1 billion.

The other five banks that already paid penalties are Ally, Bank of America, HSBC, JPMorgan Chase and SunTrust Banks.

From the statement:

“When it issued the mortgage servicing enforcement actions, the Board announced that it believed monetary penalties were appropriate for all firms subject to the actions for their mortgage servicing deficiencies The Board previously assessed penalties against the other firms under mortgage servicing enforcement actions. With the penalties announced today, the Board has now assessed penalties totaling approximately $1.1 billion against all Federal Reserve supervised firms under mortgage servicing enforcement actions.

The Fed’s actions required all of the firms to improve oversight of residential mortgage loan servicing and required the firms with mortgage servicing subsidiaries supervised by the Federal Reserve to correct deficiencies in residential mortgage loan servicing and foreclosure processing, the top bank said in its statement.

A spokesman for Goldman Sachs told HousingWire “We’re pleased to have resolved this matter.”

Additionally, the Board announced the termination of a supplemental agreement with Ally, issued in 2012 after Ally’s mortgage servicing subsidiaries sought out bankruptcy protection, which addressed the parent company’s contingent obligations under the 2011 enforcement action against Ally. According to the Fed, this agreement is no longer necessary after the termination of the 2011 action.

The Fed also announced the termination of enforcement actions issued against two servicers, Lender Processing Services, succeeded by ServiceLink, and against MERSCORP. Both companies faced enforcement actions tied to foreclosure-related services.

Source: housingwire.com

Wells Fargo pays $3.25 billion in 4th quarter for mortgage regulatory investigations and sales practices

2017 has been quite a year for Wells Fargo, as it continued to face fallout from its massive fake accounts scandal.

Several states, including California, Ohio and New Mexico, rose up against the bank, banning it from doing business with their governments.

But the fake accounts scandal wasn’t the only malpractice discovered at the bank. In October 2017, The Financial Industry Regulatory Authority ordered Wells Fargo Clearing Services and Wells Fargo Advisors Financial Network to pay more than $3.4 million in restitution to affected customers over faulty sales practices.

The bank has also taken steps to improve its business over the year, including getting rid of its sales incentives, which were blamed for causing the original scandal, changing up its leadership for its compliance team with a new chief compliance officer, who will start in January 2018, and even announcing a new CEO.

Now, the bank’s fourth quarter earnings show Wells Fargo paid a total of $3.25 billion in pre-tax expenses for litigation accruals on a variety of matters including mortgage-related regulatory investigations, sales practices and other consumer-related matters. A majority of this expense was not tax deductible.

The bank’s noninterest income surpassed that of the third quarter at $9.7 billion, up from $9.4 billion, however this income was partially offset by a decrease in mortgage banking.

Mortgage banking noninterest income was $928 million in the fourth quarter, down from $1 billion in the third quarter. Residential mortgage loan originations were $53 billion in the fourth quarter, down from $59 billion in the third quarter.

Mortgage servicing also continues to decrease. Mortgage servicing income was $262 million in the fourth quarter, down from $309 million in the third quarter.

Overall, the bank made $88.4 billion in revenue in 2017, up from $88.3 billion in 2016. Net income increased 4%, or $1.8 billion to $49.6 billion for the year.

During the fourth quarter, revenue increased slightly to $22.1 billion, up from $21.8 billion in the third quarter and $21.6 billion in the fourth quarter of 2016.

The net income increased to $6.15 billion, up from $4.54 billion in the third quarter and $5.27 billion in the fourth quarter 2016.

This is diluted earnings per common share of $1.16, up from $0.83 per share in the third quarter and $0.96 per share in the fourth quarter the previous year.

Source: Housingwire.com/Shutterstock.com

2018 Sacramento Residential Real Estate Predictions

Last year saw rising prices in Sacramento-area real estate as buyers competed for a tight supply of homes for sale.

What will 2018 hold? The Sacramento Bee asked three experts in different fields of real estate to help predict market conditions in the coming year.

Ryan Lundquist is an appraiser who tracks housing trends on his Sacramento Appraisal Blog. Pat Shea is president of Lyon Real Estate, the region’s largest brokerage. And Dean Wehrli is senior vice president for John Burns Real Estate Consulting in Sacramento, advising builders and investors on industry trends.

Lundquist: Prices have been trending upward since 2012. Last year they went up again by 8 to 9 percent. That’s pretty consistent with the past few years, the way the market’s behaved. We have a market trying to figure out, “What does normal look like?”

Shea: I’m predicting 5 percent price appreciation in 2018. With the restrictions on inventory and tax changes, I think there’s some uncertainty. That’s why I’m taking a more moderate position.

Wehrli: Home prices will go up. We have at least a couple of years of appreciation ahead.

Q: Where are we in the current housing cycle? How much longer will the upswing last? Is it a good or bad time to buy or sell?

Lundquist: The first and most important thing I’d say is, “My crystal ball is broken.” When I ask people who bought in 2012, “Did you buy at the bottom of the market on purpose,” they almost all say, “Nope, I just got lucky.” Buying a home has so much to do with lifestyle. It’s not just an investment. Are you comfortable with the mortgage payment, and does this house make sense with your lifestyle? There’s no guarantee of what will happen in the future. I would advise someone (thinking of buying or selling) to be cautious. It feels like we’re closer to the top of the cycle than we are to the bottom, but it’s a guess about whether or how long home values will increase.

Shea: I think we have more runway in the housing market. There are more buyers willing to buy because the employment numbers are so solid. New construction is getting more traction. Interest rates will stay low this year. Absent something significant happening on the national or international level, the (upswing) should continue through 2018 and 2019.

Wehrli: Typically our housing cycles are six or seven years (which we’re nearing). But I think we’re in for a comparatively longer housing cycle. We have legs left in this cycle.

Q: Are we in another housing bubble?

Lundquist: As prices increase, it’s only natural to have those conversations. I’ve heard more and more talk this year (about a potential housing bubble). With Bitcoin being in a very clear bubble, it provides a natural platform to parlay that into real estate. If you compare the numbers now and in 2005, you see the price metrics are getting pretty close. If we have a normal year of appreciation, by the end of the year we’d be pricewise right about where we were at the top (of the market in 2005). It’s only natural for people to see that. But we’ve had a lot of inflation for the past 10 years. It’s such a different market today than in 2005. We don’t have the ticking time bomb of variable-rate mortgages. Back then lenders were giving money to anyone with a pulse.

Shea: In my opinion, the answer is “no” because the previous housing bubble was fueled by bad loans. This time around, there’s much more conservative financing, the interest rates are so low and the appreciation (has been steadily trending upward). There’s no way people are going to lose these houses, especially with rents going up. You could rent for more than the mortgage payment. The housing market is built on a tremendously strong foundation.

Wehrli: I don’t think we’re in a housing bubble or anything approaching that. The 2012-13 appreciation was really rapid. The market caught up. The appreciation (since then) hasn’t been extravagant. It’s sustainable, and it’s not completely out of whack with incomes, as it was in 2004-05. The supply is constrained. There’s not easy credit or ginned-up demand. I don’t see any of those things in the current market at all.

Q: Is there any relief in sight for the Sacramento region’s tight housing market? Will the supply of resale homes and new housing increase significantly in 2018?

Lundquist: A shortage of housing plays a huge role in the market being competitive. I hope inventory improves slightly this year. It’s just going to take time. Unless something happens that we don’t expect, it’s just going to be a longer ride to see that play out. More new construction of single-family homes and apartments would help. It’s not just all on the builders. Cities and counties need to cooperate and have a building-friendly environment. That’s really the big solution to the housing crisis. We need more units, and those units have to be built.

Shea: I don’t see any significant relief. Just enough keeps coming on the market to sustain us. That’s a composite of individual decisions to move up, move down or move out of the market. Plus marriages, divorces, life changes always happen to people.

Wehrli: I don’t see that alleviating. We still are in an undersupplied market. Where undersupply is greatest is in the entry level. The new home market has a hard time servicing that sector (because of rising construction costs). I don’t see what the factor would be to release more supply onto the market. Single-family rental investors came here in a big way and bought up the supply (of low-priced homes in 2011 and 2012) that would have percolated into the resale market by now. That supply is not coming back into the for-sale sector soon, if ever.

Q: How will the Bay Area’s economy influence Sacramento home values, whether it continues booming, or, as some suggest, hits a downturn?

Lundquist: I think what happens in the Bay Area can impact our market to a certain extent, but I don’t think Bay Area home values are the main driver for Sacramento. If we have tech money coming in, and there’s a tech bubble, that would remove buyers from our market, particularly those with cash or looking for an investment. But I don’t think that’s the number one driving factor in our market.

Shea: Sacramento’s connectivity to the Bay Area is getting deeper and deeper. More Baby Boomers are going to come this way (to retire) and more young people, as they decide to start families, will find Sacramento an attractive place.

Wehrli: If Silicon Valley (were to slow down), it would have a marginal impact in Sacramento. There are some submarkets with newer housing – Elk Grove, North Natomas, West Sacramento – and upscale markets like El Dorado Hills that could be affected. But it’s not going to have a huge impact on Sacramento. We’d feel it but not in a major way. The Sacramento market is driven internally.

The Sacramento Bee

Catching up with the Times.

They may be a little late to the game, but John McManus, publisher of BuilderOnLine.com, is betting home builders are about to get a dose of digital reality.  McManus, reporting from the Consumer Electronics Show (CES) currently underway in Las Vegas says the digital age has already transformed the purchase of goods and services; the National Retail Federation says 174 million Americans shopped both on-line and in stores between Thanksgiving Day and Cyber Monday, and 51 million shopped only in stores. But 58 million confined their shopping to their mobile phone, PC, or laptop.  Last Friday’s jobs report would have met the most cautious of analysts’ estimates for 161,000 new jobs were it not for a loss of 20,000 in the retail sector.

Those figures are, in essence, a payoff for the billions of dollars stores, even those that also have a brick and mortar presence, have invested in making on-line shopping a comfortable and rewarding experience for consumers. But so far, McManus says, residential development and home building have been shielded from the intensity and pace of change that has taken place in other consumer market places.  Now those changes are coming, and at unnerving speed.

He describes three areas where technology will be quickly changing residential building operations.  The first, and the most dramatic use of technology, is a new model marketing newly constructed homes.  Big builders are trying to drive down costs to bring more affordable homes to market.  One area of focus is the buying experience itself, and the resources builders currently spend on it. This includes building model home parks and sales and design centers to be the retail, consumer-facing dimension of their operations.

McManus suggests channeling a big chunk of those resources, he says 75 percent, into “technology and data-enabled virtual experiences” for consumers.   He quotes a discussion with a CEO of one of the major home builders he met at the CES who said building only one model home at each residential development, rather than four, changes the game economically. “What we’re investing in building, maintaining, warehousing, merchandising those models in all of our communities, we could instead develop rich experience with augmented and virtual reality tools.  It’s time for us to catch up to the rest of the way consumer businesses go to market, instead of doing this the antiquated, far more expensive way that we’ve been doing.”

So, McManus says, look for a sea-change in production home building, with model and design center investments diverting into technology-enabled buying experiences. He gives no specifics, but we envision standing in a builder’s lone model home, a center entrance colonial perhaps, and using a virtual reality device, tour each of his other three home designs.  Or, with a methodology already in use by one quartz counter manufacturer, scanning a room in the model then test driving various trims and finishes.

There are few digital or real-world markets that don’t depend on some form of customer ratings or reviews, and McManus expects technology will soon deliver this for homebuilders as well.  One new entry is the provision of a star rating for energy and water usage performance and, perhaps within months, we will see introduction of a standardized rating and review system for builders.

Another change underway is less dependent on technology than a result of it; specifically, the shift to on-line consumerism mentioned above.  This “Amazon-ing of America,” as he calls it, is having a profound impact on traditional shopping malls.  Builders are looking at failing and abandoned ones as so much real estate, ripe for repurposing.  The generally good locations they inhabit give them a new future as “higher-density, mixed use, attainably-priced complexes perfectly situated for many metro area’s housing-starved workforce populations.”

JANN SWANSON, Mortgage News Daily

Jan 10 2018, 12:16PM