"A stumbling Housing Market and soaring energy costs dented consumer confidence in 2007, sending sales of big-ticket items tumbling."
"Nearly every car dealership saw sales sink, particularly those selling trucks and SUVs that have fallen out of favor with consumers as gas prices soared past $4 a gallon."
"Home builders, many of whom expected 2007 would be a rebound year, endured another wrenching stretch of stagnant sales and delayed projects."
"The combination of stagnant wages and rising food and gas prices has taken a toll on the previously impervious consumer."
"Home builders are one sector of the economy clearly suffering. Revenues at the county's largest home builder, Christopherson Homes, were chopped in half as the company dramatically reduced the pace of construction around the state."
"The company, which generated $178 million in revenues in 2006, saw its sales fall to $89 million last year. The drop was accompanied by deep staff cuts."
'"You don't want to let them go, but the market just kept changing and not in the direction that we would hope for," said owner Brenda Christopherson."
"In the last Recession, which followed the Sept. 11, 2001, terrorist attacks and the tech bust, businesses pulled back on capital spending. But consumers charged ahead, pushing up housing prices while showing little fear of adding new debt."
"Despite predictions that the Housing Market is unlikely to turn around until next year, Christopherson is moving forward with a new phase of its Ragle Ranch subdivision near the Sonoma County Fairgrounds in Santa Rosa. The Chaparral project will include 138 homes selling in the low $700,000s."
"Sonoma County slowly began to slip into recession in April 2007, according to an index created by SSU."
"The recession was largely triggered by the crumbling real estate sector. The county's median home price has fallen 29 percent since peaking in late 2005."
'"It's difficult for anyone to know when the recession will trough," said Robert Eyler, chairman of the economics department at Sonoma State University. "There is still a lot of uncertainty."'
"The recession could end by spring 2009 if the real estate market hits bottom this fall. But that would mean foreclosures stop growing, the number of new homes on the market begins to slow, and more buyers step forward, Eyler said."
'"We're going to need six or seven months of seeing that trend before we can make the claim we're out of recession," Eyler said. "If that happens, the end of 2009 and 2010 would look really good."'
"Unfortunately, that scenario seems unlikely, Eyler said."
"The Worst Case Scenario is that the housing market continues its tumble, gas climbs to $7 a gallon, and inflation continues to raise the price of everything from a stapler to a pot roast."
'"If that happens, we will be talking about this like it were another great depression," Eyler said."
"That worst case scenario is also unlikely, he said."
"The SSU forecast punctuates a week of bad economic news. Last week, oil prices soared to an unprecedented $142.99 a barrel while blue chip stocks tumbled to their lowest level in almost two years. The Dow Jones industrial average is now down 20 percent from its record high in October, a trend traditionally viewed as the threshold of a bear market."
"The 1991 recession sliced 900 jobs from the county's total employment, although the economy continued to grow slightly."
"In 2001 it was much worse. The county shed 7,600 jobs and its economic output contracted by 12 percent."
"The academic jargon "supply-side boom" means growth will come from innovation by manufacturers, such as happened in the late 1990s with advances in the Internet, telecommunications and computers. It stands in sharp contrast to the boom experienced from 2004 to 2006."
"The recent expansion was driven by low interest rates and cheap money. Consumers went on a spending spree as inexpensive loans raised home prices and made people feel wealthier. Eyler called that a "demand-side boom," and the economy is now experiencing a hangover from those raucous, free-wheeling days."
"Wages are expected to continue to decline in real terms through 2010 as higher costs for groceries, gas and other goods result in paychecks falling shorter. In two years, people will be making an average 6.7 percent less than at the beginning of the decade, according to the SSU forecast."
"And then there is the housing market, now a source of pain. At some point, prices will fall to a level sustained by local wages and by outsiders who want a home in Wine Country."
'"We are going to need to get to that point before we can have a turnaround," Eyler said."
'"I don't think all businesses are in a recession. Some sectors are hurting more than others," said Ben Stone, executive director of the county's Economic Development Board."
"The wine industry remains strong and has been boosted by exports that have increased due to the weak dollar."
"We are in the first nationwide housing crash since the 1930s, and no one yet knows where it will end."
"How could Americans not be in a grumpy, even fearful, mood? Every day they are faced with news of plummeting house prices and a collapse in home construction (which created a third of all new jobs in the past few years)."
"Bank failures are becoming more common. Then there's the rapid decline of the U.S. auto industry—not unrelated to rising oil prices, which are also curtailing the dream of the suburban lifestyle. And millions of Americans are starting to fear losing their jobs—and the family healthcare that goes with them. The American imagination is haunted by the Great Depression of the '30s."
"The fate of the U.S. economy now hangs in the balance. On one side of the high wire is an inflation risk that can beget a wage-price spiral that would in turn induce a powerful contraction by the Fed. On the other side is an economy getting weaker, provoking bank and housing defaults that put further downward pressure on growth."
"House prices, the strategic fault line, have plummeted for most of the 68 percent of American families who own one. They are falling at an accelerating rate, while inventories of unsold and foreclosed homes are rising."
"Just a few weeks ago, a major mortgage lender in California failed—the third-largest bank collapse in American history. Banks are struggling to cope with borrowers who are defaulting in droves on mortgages, consumer debt, credit cards, student loans, home equity loans, car loans—you name it. The losses to the financial system are horrific."
"With 10 million mortgages exceeding the value of the homes, that could take a long time. If the futures market is correct in predicting an overall price drop of 30 percent, the value of housing assets will shrink by over $6 trillion, which could permanently lower household spending by about $300 billion a year.
"Only when this huge inventory is cleared from the market and prices start to rise will we know where the bottom was."
"A new Zillow.com survey shows that 62% of U.S. homeowners think their house has either maintained or increased in value in the last year despite overwhelming evidence to the contrary."
"In fact, the real estate Web site says that, by its count, 77% of homes nationwide have lost value in the past 12 months."
'“Whether it’s apathy, confusion or just plain denial, homeowners seem to believe the housing crisis affects every other home but ‘not my house,’ underscoring a wide gap between homeowners’ inflated perception of their home values and the gloomy market reality,” says Zillow."