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More than 50,000 Yolo County residents could find themselves shelling out upwards of $1,000 next year on flood insurance.  Potential first-time buyers include the entire population of West Sacramento, Knights Landing, Yolo, Clarksburg and a third of El Macero.

The Federal Emergency Management Agency is updating the county’s flood maps, which determine where there’s a one percent chance of flooding in any given year.  The so-called 100-year flood is the threshold many banks use when requiring homeowners to purchase government-backed flood insurance.  FEMA delivered draft maps in December to local planning departments. A three-month public comment period extends to late May or early June.  Based on public input, FEMA will issue final versions around August. Six months later the maps will take effect.

Yolo County lies in a natural floodplain. Flood zones already run along the Colusa Basin Drain near Dunnigan and Knights Landing, Cache Creek (including north Woodland), and the Sacramento River (including the Yolo Bypass)  The current flood zone stops at the western levee along the Yolo Bypass.
Under the new maps, that flood zone would stretch westward to include thousands of acres currently outside the floodplain.

Nothing has happened to the integrity of the levees, said Will Marshall, an assistant city engineer for the city of Davis. ‘This doesn’t mean the levees aren’t going to hold water back.’  After Hurricane Katrina and the 2005 levee failures in New Orleans, FEMA decided to enforce quality standards established in 1986, Marshall said.  Yolo County’s 215-mile levee system is controlled by a hodgepodge of owners ranging from the state Department of Water Resources to private landowners.  ‘FEMA told the owners, ‘If you don’t certify the levees to the 1986 standards, we’re going to pretend the levees aren’t there … If you can’t demonstrate that it’s a good assumption that they can withstand the one-percent event, we’re going to assume they can’t,’ ‘ Marshall said.  None of the owners certified their levees.

The quality of the levees hasn’t changed, but tens of thousands of people will have to buy flood insurance come spring 2010.  Marshall estimated about 100 homes in El Macero would fall in the new flood zone.  That could cost them as much as $2,721, said Duff Devine, a local agent who deals in flood insurance.
Devine crunched some numbers on a few El Macero homes that would fall in the new flood zone.  Right now they could buy flood insurance for $348 a year as part of a ‘preferred risk’ policy.  That number could skyrocket eight fold to $2,721 if the draft maps still include El Macero when they take effect.

‘It’s huge,’ Devine said. ‘That’s the biggest premium I’ve ever seen in my time doing this.  Devine questioned the numbers - which he stressed were only hypothetical - saying homeowners typically see premiums jump three or four times.  Residents could avoid higher costs by purchasing flood insurance before the maps take effect, said Eric Simmons, the FEMA engineer for Yolo County. The lower cost would be grandfathered in even after they fall in a high hazard zone.  ‘The idea is to reward loyal policy holders,’ Simmons continued.
Buying flood insurance is a good idea even without the flood maps, said Mark Cocke, Woodland’s senior civil engineer.  ‘People make the assumption that they’re protected because they see a levee,’ Cocke said. ‘But every levee is going to have an event that exceeds its design capacity, and when that happens, bad things are going to happen.  ‘Every levee has a failure point,’ he added, ‘and people need to know that.’

By Jeff Hudson | Enterprise staff writer | February 18, 2009 08:30

What’s the trend in residential real estate? That depends on where you look.

First, consider the Sacramento region as a whole. The median home price in most neighborhoods tumbled steeply during 2008 - in some locations by 30 percent, or more.

At the same time, the volume of home sales over the Sacramento region picked up dramatically, as first-time home buyers, investors and bargain hunters began scooping up foreclosure bargains in significant numbers. Industry experts say more than 70 percent of the homes being sold in the Sacramento region in the last few months are foreclosures, which are moving at rock-bottom prices.  Prices in some parts of Sacramento County have come down so far that you can buy a house for less than you might pay for a luxury car.

‘On Feb. 1, there were 122 single-family homes for sale in Sacramento County priced under $50,000,’ said Doug Arnold, owner of Coldwell Banker Doug Arnold Real Estate. ‘They’re in places like Rio Linda and North Highlands. … With the prices down, and interest rates low, the number of sales in Sacramento just about doubled’ in late 2008, as compared to the preceding year.   This same trend was evident over Yolo County as a whole.

‘During the second half of 2007, there were 566 Yolo County homes sold. During the second half of 2009, there were 1,097 homes sold - it almost doubled,’ Arnold said. ‘Of course, most of those homes were in West Sacramento and Woodland - which is where the prices have come down the most.’

Now narrow the focus on Davis, where the figures tell a somewhat different tale. Contrary to the regional trend, ‘the number of Davis homes sold is still slowing down,’ said Herb Cross, vice president of Lyon Real Estate, and manager of Lyon’s offices in Davis, Woodland and West Sacramento. ‘Year over year, since 2005, we’ve seen the number of Davis homes sold slowing down’ for several years in a row.

And while Davis prices have declined, they are generally holding steadier than in most parts of the region. Overall, Davis home prices dipped an average of about 6 percent when 2008 is compared with 2007 - even as much larger declines were seen in many other communities. The median home price in Davis continues to hover in the low $500s - while the median price in many other nearby ZIP codes is in the $200s, and in the case of a few ZIP codes, the $100s.

‘Davis doesn’t have the REO properties that the other communities have,’ Cross said, referring ‘real estate-owned’ properties that have been taken back after a foreclosure. Such homes have driven prices down in West Sacramento and Woodland. ‘Davis doesn’t have that’ to nearly the same degree, Cross said. ‘It’s a supply-and-demand thing.’

Arnold said that while the pace of sales in Davis continues to slow, some buyers ‘are picking Davis because they like the fact that there’s not a lot of homes for sale, not a lot of new homes, no big subdivisions.’

A low inventory of homes for sale in Davis also contributes to the comparative price stability. ‘There’s less than a three-month supply on the market, maybe 110 houses for sale’ at a given time - sometimes less, Arnold said. By contrast, Woodland and West Sacramento have a four- to five-month supply of homes for sale.

Arnold added that when you compare the cost of condos, there’s also a big contrast over the region.

‘The No. 1 unit of a McKeon condo (in northeast Davis) in Davis lists for around $280,000,’ Arnold said. ‘But in the Hillsdale/Madison area of Interstate 80 in Sacramento, I saw one of those units listed for $28,000.’

‘Location, location, location,’ Arnold mused.

Wait? Or move?

Naturally, the economy plays a big role in the decisions made by many buyers and sellers.

‘Mortgage interest rates are pretty good,’ Cross noted. But with home prices still moving downward, many potential buyers are waiting. And many potential sellers are ‘reluctant to put their properties on the market’ until prices start coming back, he added. ‘So we have reluctance on both sides,’ even though interest rates remain favorable, and prices are down.

Some first-time buyers also were waiting to see if there would be a $15,000 incentive in the federal stimulus bill. (As it turned out, that provision was taken out of the bill.)

It’s also difficult to put together financing for properties in the $1 million range. On Feb. 3, DataQuick, a firm that monitors real estate data nationally, reported ‘a bone-dry mortgage market for prestige home financing, as well as a decline in the value of many homes,’ contributing to 42.65 percent decline in the sale of California homes priced over $1 million, comparing 2008 (24,426 homes) against 2007 (42,506 homes).

‘It’s more difficult to get the larger loans. The lenders are much more cautious,’ Cross agreed.

But that doesn’t mean there aren’t any high end homes selling.

‘We recently sold the most expensive home ever in Davis, $2.7 million, in El Macero,’ Arnold said. ‘And we already have a $1 million home in Lake Alhambra Estates that’s pending. Some of them are moving.’

‘Both of those upper-end homes sold for all cash,’ he added.

Arnold said he’s seeing cash deals in other market segments as well. ‘Probably about 10 percent of sales are all cash, which always surprises people,’ he said, adding philosophically, ‘There’s always a group of buyers that have money.’

Cross likewise said he sees ‘a significant number of cash buyers,’ and they’re active in different price segments, high and low.

Kim Eichorn, an agent in Lyon’s Davis office, said she’s seeing interest from families with kids living in nearby communities, who are ’surprised that Davis prices are down to where they are.’ Eichorn said that for these families, the decision to move is ‘kid-driven. They want to get into the Davis schools.’

‘I recommend they get their house in Sacramento (or wherever) sold, and get intermediate housing. I’ve worked with three families like that,’ she said.

Eichorn has also worked with some ‘move-up’ buyers, who are taking their equity from a smaller Davis home, which has declined somewhat in value, and moving that equity into a larger Davis home, which has seen a proportionally larger price drop.

The local market can be highly variable, and some homes can take a long time to sell. Eichorn recently sold a Central Davis home that had been on the market for nine months. The seller dropped the original asking price from $649,000 to less than $529,000.

‘Well-located homes in nice condition continue to sell close to the asking price,’ she said. ‘It’s homes that are challenged - with a bad location, or in poor condition or REO -that’s where you see the drastic price reduction.’

Trends for 2009?

One thing’s for sure - there are very few housing starts anywhere in the Sacramento region, because new homes can’t compete with low-priced foreclosures.

‘Right now, you can’t build new homes for what they’ll sell for. So new construction is almost nonexistent,’ Cross said.

The layoffs being announced at many companies, the talk of pay cuts for teachers and the mandatory furloughs of many state workers undoubtedly will play into some families’ financial calculations.

Many potential buyers continue to play a waiting game, hoping to time the ‘bottom of the market’ - the point at which prices level off, and then begin to rise.

Cross and Arnold said they expect to see some homes that were listed for sale last summer, and then taken off the market in the fall, coming back on the market as sellers test the waters in the new year.

‘There are a lot of people waiting on the sidelines,’ Arnold said. ‘People aren’t in any hurry. But there are people coming to the open houses on the weekend, window shopping. And some of them are pretty serious buyers. They’re just waiting to see what the fallout is from everything.’

Cross said that ‘for the overall trend in prices in Davis, I think we might see a slight decline looking into the year 2009.’

Arnold is more optimistic. ‘I actually think that things are going to get better. I think we’re very close to the bottom. Obama’s getting his act together. And I think the second half of 2009 is going to be good. Interest rates are going to be low, and things are going to start to move again.’

Marta Juliao and her husband Carlos Puente look at samples of new kitchen tile colors in their new home in Wildhorse. The couple sold their Mace Ranch home this summer and moved to a larger, four-bedroom house fairly nearby. (Wayne Tilcock/Enterprise photo)

Who buys a home in today’s market? People who have a good reason to do so.

Marta Juliao, who teaches Spanish at the Davis Waldorf School, and her husband Carlos Puente, a professor of hydrology at UC Davis, have two children, ages 8 and 11. Juliao and Puente felt they needed a little more elbow room.

The family had been living in a three- bedroom, two-bath home in Mace Ranch, ‘but it had been small for a long time,’ Juliao said. They considered homes in Woodland, but didn’t want to make their kids change schools. So they started looking in the northeastern part of Davis.

‘Our old house sold fast. There were three offers in a week,’ Juliao said. That house fetched a price in the lower $500,000 range.

The couple looked at somewhat larger homes in the $600,000s and $700,000s. They found themselves making offers on houses that were attracting other offers as well. They finally purchased a four-bedroom house in Wildhorse. In addition to picking up a bedroom, their new place has an office. Juliao likes having a room to do her grading and lesson plans.  ‘And there’s space for the kids to play. And the lot size is bigger in the back,’ she said.

‘In 2005, it would have cost too much for us,’ she said. But prices have come down.

Other Davis sellers, however, are finding it takes longer to find a buyer, if they can find one at all. Some houses linger on the market for months, particularly those on the higher end. Herb Cross, who manages the Lyon Real Estate offices in Davis, Woodland and West Sacramento, said that during the first six months of 2008, only four Davis homes sold in the $900,000 to $1 million range, and four more sold in the $1 million to $1.5 million range, plus one home that sold for more than $1.5 million.

‘It’s a tough market in the upper price brackets,’ Cross said.

The pace is busier in the middle range. Cross said during the first six months of the year, 42 Davis homes sold between $300,000 and $400,000. Another 52 Davis homes sold between $400,000 and $500,000, and 49 homes sold between $500,000 and $600,000.

A quick start

In fact, the summer started out pretty briskly for local Realtors.

‘We had our best June in four years’ in terms of the volume of homes sold, said Doug Arnold, owner of Coldwell Banker-Doug Arnold Real Estate. ‘But in July it went back exactly to where it was last year at this time,’ and things slowed down again.

Prices in Davis continue to run considerably higher than in surrounding communities. The median price in Davis has been hovering in the low $500,000s, and dipped to $489,000 for the second quarter of 2008.

Coincidentally, the median home price for the San Francisco Bay Area also dipped to $485,000 in June - the first time in more than five years that the Bay Area median moved below the $500,000 level, according to DataQuick Information Systems. DataQuick includes Solano, Napa and Sonoma counties in its Bay Area figures.

Davis home prices are unquestionably down compared to last year, about 7 percent.

In Woodland, by comparison, the median home price is running in the upper $200,000s. Pretty much the same goes for West Sacramento. And in both cities, prices have come down around 25 percent from last year.

Prices around the Sacramento region are taking a tumble. The National Association of Realtors released quarterly statistics Thursday for the metropolitan area, and concluded that ‘the steepest declines in single-family home prices in the second quarter were in the Sacramento-Arden-Arcade-Roseville area of California, where the median prices of $229,500 dropped 35.6 percent from a year ago.’

In 2005, the National Association of Realtors pegged the median home price for the Sacramento region at $375,900.

DataQuick’s city-by-city breakdown showed a median home price at $179,000 in June for the city of Sacramento, a figure that looks almost Midwestern to many California real estate analysts. The median of $179,000 (based on 1,200-plus homes sold for the month) represents a 40.3 percent price decline for Sacramento compared to June 2007.

By contrast, there are virtually no homes in the under-$200,000 price category in Davis. In fact, there are very few in the $200,000 to $300,000 range -just eight transactions during the first six months of 2008.

Foreclosures high

The current prices in the Sacramento region are being depressed by the huge number of foreclosures. An article by Bloomberg News on July 31 said foreclosed properties accounted for 63 percent of June home sales in Sacramento County. Banks are selling foreclosed homes at steep discounts - in some cases, for roughly half of the price that the same homes fetched at the market peak in 2005. The banks want to get those foreclosed homes off their books.

The foreclosure numbers get even scarier as you move south. Bloomberg reported that foreclosures accounted for 66 percent of June home sales in San Joaquin County (including Stockton), 72 percent of June home sales in Stanislaus County (including Modesto), and 75 percent of June home sales in Merced County.

On Thursday, Irvine-based RealtyTrac reported July figures showing Merced now has the nation’s second-highest rate of foreclosures, with one in 73 homes receiving a foreclosure filing. Stockton and Modesto were described as ‘in a virtual tie’ for third place, with one in 82 homes receiving a foreclosure filing. The Vallejo-Fairfield area in Solano County was No. 8 on the list.

Davis is getting off light by comparison, and the less-volatile prices in Davis are related to the smaller number of foreclosures here. A check of RealtyTrac’s statistics on Thursday listed 24 Davis homes in ‘pre-foreclosure’ (meaning two or more late mortgage payments), with four homes in the auction phase of foreclosure and another 25 homes that are ‘bank-owned’ (taken back by the lender).

Neighboring Dixon, with less than one-third the population of Davis, had 105 homes in pre-foreclosure, 73 in the auction phase and 148 bank-owned homes, according to Thursday’s RealtyTrac summary

In Woodland, there are 257 homes in pre-foreclosure, 93 in the auction phase and 376 that are bank-owned.

Arnold told The Enterprise his company is handling foreclosed homes in Davis and Dixon that were financed through Countrywide Mortgage a few years ago. ‘We have two agents doing that full-time right now,’ Arnold said.

Who’s buying foreclosures in Woodland, Dixon and West Sacramento?

‘Investors,’ Arnold replied. ‘They see what were $400,000 homes that are now $250,000 or $225,000. They’re going to hold them, fix them up, rent them for three or four years. And someday, prices will start going up.

‘We’re also seeing some first-time buyers’ going after foreclosures in the region, Arnold said. ‘I don’t that know I’ve seen many in Davis.’

There are plenty of foreclosures in West Sacramento. The listings on RealtyTrac on Thursday indicated 315 homes in pre-foreclosure, 99 in the auction phase and 396 bank-owned.

For Sacramento, RealtyTrac reported 5,189 homes in pre-foreclosure, 3,182 in the auction phase, and 8,651 that are bank-owned. And for Elk Grove, the figures were 1,350 homes in pre-foreclosure, 709 in the auction phase and 1,799 bank-owned.

Solano County is getting hit as well. For Vacaville, the figures were 420 homes in pre-foreclosure, 259 in the auction phase and 562 bank-owned. And for Fairfield, the numbers were 796 homes in pre-foreclosure, 499 in the auction phase and 1,124 bank-owned.

The Los Angeles Times estimated this week that statewide, approximately 1,300 California homes are going into foreclosure on a daily bases.

Others feel the chill

Locally, the slowdown and downturn in the housing market also has meant hard times for real estate-related businesses. A few years ago, six title companies were doing business in Davis. Now there are only two, Placer and Fidelty.

‘Thirty years ago, First American Title was number one around here,’ Arnold reflected. But First American pulled out last fall.

The economic drag of declining home prices also has contributed to a drop in sales of large recreational vehicles - La Mesa RV in Davis will be closing in October. Sales at furniture stores and home improvement centers also have suffered.

The low median home price and large inventory of homes for sale in Sacramento is also making life difficult for home building companies. Asked about the $179,000 median home price for Sacramento during June, Arnold remarked, ‘The home building industry can’t build for that.’ Little wonder that the California Building Industry Association reported that in June, the Sacramento region had less than half the number of new home starts reported in June 2006.

The North State Building Industry Association, which serves the Sacramento area, is now touting the region as ‘the most affordable metropolitan area in California’ when median family income and median home prices are factored together.

Timing is everything

So is the market cycle approaching the much-discussed ‘bottom’? When is it a good time to buy?

That depends.

‘I think in the upper end, it’s certainly a good time to buy,’ Arnold said. ‘Some of the houses that were $1.2 (million) or $1.3 million are now $1 million, or under. And they’re going to go back up eventually, because Davis is Davis, and there are only so many homes in certain areas.’

Arnold also mentioned the traditional things that Realtors stress when showing Davis homes - good schools, attractive parks, low crime.

Cross said, ‘If you’re looking for a place to raise your family, now is a good time. There are advantages to owning property - pride of ownership, tax advantages, putting down roots, raising a family in a stable environment. You buy a piece of property, get a 30-year fixed mortgage, you know what your payment’s going to be. Your income will increase over time, your mortgage payment stays the same. That’s a huge advantage.

‘But if you’re looking to speculate, if you want to buy property and sell it for more in two years - you’re on your own,’ Cross said.

Cross advised that the difficulty with calling the bottom ‘is that there isn’t a light that goes on, and someone declares ‘We’ve reached the bottom.’ We won’t know we’ve reached the bottom until six months after we’ve reached it’ - and by that point, prices in the ever-cyclical realm of real estate have once more started to rise

Many homes in foreclosure today were purchased with subprime financing around 2005 - promoted, in some cases, by home builders who were eager to sell their product and relied on new methods of financing to do so.

This is part of the reason so many subprime-related foreclosures are found in areas like Elk Grove and Natomas that saw a lot of building around 2005, and so few subprime-related foreclosures are in Davis, where there were no major new subdivisions at the time.

Some observers think the two-year tide of subprime-related foreclosures has peaked, and most of the faltering subprime loans will have cycled through the financial system by the end of this year.

But real estate experts are concerned that a second category of mortgages, called ‘Alternative-A’ or ‘Alt-A’ mortgages, could send a new wave of homes into foreclosure in coming months. The New York Times, in a front-page story on Aug. 4, reported that the percentage of Alt-A mortgages in arrears ‘quadrupled to 12 percent in April,’ compared to a year earlier.

Herb Cross, who manages the Lyon Real Estate offices in Davis, Woodland and West Sacramento, described the difference between subprime and Alt-A.

‘A subprime mortgage is one that’s risky,’ he says. ‘Those kinds of mortgages were made to people that didn’t really qualify for a conventional loan.’

In some cases, buyers put no money down, or didn’t have to prove their income.

‘The Alt-A mortgages are probably closer to a more reasonable guideline,’ Cross said. ‘These people have a better chance of making the payments on the initial terms of the loan.’ Other observers describe Alt-A as ‘one rung above subprime.’

The problem, Cross said, crops up when the terms of the Alt-A loan start to reset.

‘They may have had the ability to make payments when the payments covered interest only, and the payment was $2,000. But when the adjustment occurs, and the interest rate goes up, and you include principal (as well as interest), you may raise the payment to $3,000. And people may not have the ability or the will to make these payments.

‘We’re being told by the banks that we work with that there may be as many as 2,000 (more) foreclosures coming on the market in the next three months over the Sacramento region,’ Cross said. ‘And that’s going to have an impact on the market.

‘We think we’re going to start seeing some foreclosures occurring in higher price ranges, up to $400,000 or higher,’ he added. ‘It’s been mostly in the lower price ranges so far. We think it’s going to move up.

‘The unknown factor is how many people will have the ability to make the payments, but find themselves in a situation where the mortgage is greater than the value of the property,’ Cross said. ‘They may make a decision to walk away from the property, with the idea that they can escape the high payments, and rent a property for considerably less.

‘During the five-year period of time when their credit will be very limited, they can try to save the money they would have paid on the mortgage’ - and eventually re-enter the housing market.

A concentration of empty, foreclosed homes can have a negative effect on a community. According to reports by the BBC and other news agencies, many homeowners in the Stockton/Tracy area have ‘walked away’ from their mortgages, and moved to less-costly rented homes closer to their jobs in the Bay Area, saving on gas.

A signature Sacramento program that has helped almost 300,000 lower-income people nationally buy homes in the past decade – while stirring controversy for years – is likely to be shut down this week, Nehemiah Corp. of America officials acknowledged Monday.

The nonprofit giant believes Congress and President Bush will ban its decade-old down-payment assistance “gift” program within days as part of a larger housing bill, Nehemiah President and Chief Executive Officer Scott Syphax said Monday.

Syphax said he met Monday with the Nehemiah board and about 30 down-payment assistance employees in Sacramento to say it’s likely the “doors are closing” on the program.

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City staff members are still recommending that a residential project proposed for 233 B St., near Central Park and UC Davis, be rejected.

The project, which went before the Davis Planning Commission on June 25, is too modern in style and doesn’t fit into the character of the neighborhood, staff members said. Several members of the Planning Commission agreed, and asked local architect Maria Ogrydziak - who owns the property and submitted the proposal - to make some changes.

Specifically, the commission wanted Ogrydziak to incorporate traditional residential window patterns, front porches and more privacy for neighbors.

Tonight, the commission will look at changes to the plans, but staff members are maintaining that the changes are not enough to fit into the district’s design guidelines.

The design guidelines - the result of hours of research and work by community members, staff, several city commissions and the City Council - were written and approved about a year ago.

The City Council approved a zoning change along B Street that encourages development of townhouses, condominiums and businesses between downtown Davis and the UC Davis campus.

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By Jim Wasserman -jwasserman@sacbee.com

Published 12:00 am PDT Friday, July 18, 2008
Story appeared in BUSINESS section, Page D1

Anything might happen. But this is starting to look real.

For the third straight month, capital-area home sales climbed above figures for the same time last year, a welcome indicator in a region searching for the bottom of its long housing slump. But median prices continued to slide.

The 3,922 June escrow closings in Amador, El Dorado, Nevada, Placer, Sacramento, Sutter, Yolo and Yuba counties were the most since June 2006, DataQuick Information Systems reported Thursday.

See a larger version of this graphic

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What makes a city friendly? We looked for certain standards like safety, diversity, pedestrian and bike friendliness, as well as the presence of parks and public spaces. Then we looked for something unique, like a place that always has big, fun public events or someplace with a lot of farmers markets. Most importantly, we talked to brokers to get their personal stories of friendliness. (Did you know that people in Nashville will strike up a conversation with you while waiting at a red light?) And finally, we took a look at statistics that help make a place friendly, such as enough hotel rooms to welcome visitors, enough bars to have a robust happy hour, enough tourists willing to visit and, of course, budget-friendly home prices.

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