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...And the pain is nowhere near over

Historical fact: Californian home prices fell for roughly six years running from 1990 through 1996.

C.A.R. sales report that showed the YOY Californian median used home sales price down by 36 percent

Year over Year June Sonoma County Median Price

June 2008: $401,500
June 2007: $600,000

Year end Median Home Price trends
1998: $218,950
1999: $244,000
2000: $305,000
2001: $348,000
2002: $375,000
2003: $420,000
2004: $499,000
2005: $591,000
2006: $580,000
2007: $550,000

Freddie Mac on Wednesday posted a second-quarter loss that was more than three-times larger than Wall Street expected as a huge number of borrowers with good credit fell behind on their exotic and risky mortgages.

Freddie's financial losses were concentrated in a handful of states -- notably California, Florida, Nevada and Arizona -- where speculation was rampant, prices skyrocketed, and buyers stretched to the financial limit to afford a home.

Today's challenging economic environment suggests that the housing market is far from stabilizing," Richard Syron, the chairman and CEO of Freddie Mac, told investors in a conference call held to discuss the company's earnings.

U.S. house prices will fall by as much as 20 percent nationally and the current mortgage finance crisis is about half-way through, the chief of major mortgage financier Freddie Mac said Wednesday.

Freddie is now reeling from loans -- made in 2006 and 2007 as the market turned sour -- to borrowers with solid credit but little proof of their incomes, or small or no down payments.

These so-called Alt-A loans make up about 10 percent of Freddie's portfolio, but accounted for more than half of the company's credit losses in the quarter.

"(Freddie) bought loans that . . . were on some level just as risky as what was subprime," said Ritch Workman, co-owner of Workman Mortgage Co. in Melbourne, Fla.
"And the pain is nowhere near over."

"As the slumping economy puts the squeeze on consumers, more shoppers in Sonoma County are turning to thrift stores to save a buck."

'"What we're finding is that shopping is up but the donations are in the tank," said Major George Hood, a spokesman for the Salvation Army."

"Thrift stores aren't just for the poor anymore, said Roger Playwin, national executive director of the St. Vincent De Paul Society, the Catholic charity that runs 408 retail stores around the nation."

"Middle-class people struggling with high mortgages and working two jobs to make ends meet are increasingly turning to thrift stores for the stuff they need, he said."

"I never go to the mall anymore," said Santa Rosa resident Malia Patterson, as she tried on a pair of flip-flops at the store Friday afternoon.

"Her friend, Gigi de'Marie, said the high cost of gas and food are only reinforcing her commitment to shopping at thrift stores and never to pay top dollar."

"She wore a colorful blouse she said was an expensive garment -- one that she had received as a gift from a friend who had herself purchased it at a thrift store."

'"It's so tough that we're even recycling thrift store clothes," de'Marie said."

"The median household income in Sonoma County was $60,821 in 2006, according to the U.S. Census."

"Putting food on the table is becoming a financial stretch for Americans of all income levels, according to a marketing research report."

"With budgets "strained to the breaking point" by rising costs for gasoline, energy, food and other necessities, more than half -- 56 percent -- of consumers earning less than $35,000 a year are having difficulty buying the groceries they need, the report said."

"Forty-four percent of consumers earning between $35,000 to $54,900 are in the same predicament, as are 24 percent of those making $55,000 to $99,900, and 16 percent of those making $100,000 or more."

'"These are very alarming statistics," said Sheila McCusker, a partner in Information Resources Inc., a private company which tracks consumer spending and released the report. "We're not talking about people saying, 'I can't buy that flat-screen TV' but 'I can't feed my family.'"

"Asked why higher-income consumers would have trouble buying food, McCusker said that people earning more than $100,000 typically own large homes and multiple large vehicles, which are expensive to maintain."

"Like smoke from lingering forest fires, a sense of unease hangs over many North Bay residents as they stretch their dollars to cope with rising costs, shrinking paychecks and a host of economic ills."

"...consumer confidence has hit a 16-year low and Americans are more economically pessimistic than ever."

'"There's always that little sense of foreboding in your mind," said Amy Stang, a Santa Rosa working mother of three. "I would hate to see the bottom fall out for our family."'

"In January, a power bill of nearly $400 sounded an alarm for Amy and Brian Stang, opening a year in which gasoline has soared to more than $4.50 a gallon, while food and airfare cost more and home values are falling."

"There is scarcely any good economic news these days, with inflation bumping up, take-home pay declining, thousands losing their jobs and mortgage-credit woes threatening to undermine the banking industry."

"It's made involuntary misers out of many who once felt pretty comfortable."

'"I put off paying bills, buying new tires, just about everything as long as possible," said Philip Tymon of Guerneville. "I look for bargains on everything I must buy."'

"He hasn't driven into Santa Rosa in weeks, and rarely spends money at night on movies or cafes. Vacation travel is out for at least the rest of the year, Tymon said."

'"Every penny counts at this point," said Katie Gonzalez, a working mother of three in Napa County's Pope Valley."

"Consumer confidence sagged in June to 50.4, the fifth lowest mark reported by The Conference Board, and it bodes ill for the nation's economy. When confidence nosedives, it typically means "people are going to hunker down and spend less," said James Wilcox, a UC Berkeley economist."

"Also in June, inflation reared up 1.1 percent, the second-highest monthly rise in 25 years. The only higher mark was in September 2005, after Hurricane Katrina shut oil refineries and energy prices spiked."

"Jim Kelly of Rohnert Park, who has lived on disability payments the past two years because of a back injury, said he's become virtually a full-time bargain hunter. Saving a dollar on a gallon of milk is "a big deal to me," he said."

"Cyndee Schenk of Santa Rosa said her job at the Penngrove post office pays well, but inflation consumed her latest raise. She quit going to Starbucks and shops for clothes at Wal-Mart and Kmart instead of Macy's and Mervyns."

"Financial Title Co. shut down all of its California offices Wednesday, including six in Sonoma County, becoming the latest escrow company to feel the bite of the housing slump."

"The shutdown came without warning, according to employees moving their belongings out of Financial Title's main office in Santa Rosa."

"A recorded message at several Financial Title offices in Sonoma County said the company is no longer in business and referred callers to its insurance underwriter, First American Title. A note with similar information was posted on the door to Financial Title's Santa Rosa office."

"Financial Title had 10 offices in Sonoma County as recently as last year, but it consolidated locations as business declined. The remaining offices were in Santa Rosa, Sonoma, Healdsburg, Petaluma and Sebastopol."

"Financial Title was the third-largest title company in Sonoma County, processing 12 percent of the escrows in the county, according to a report last November in the North Bay Business Journal."

Changing demographics

Census estimates show the number of Latino residents in Sonoma County increased 3.7 percent -- 1,869 people -- from 2006 to 2007.
The agency estimates there are currently 104,862 Latinos in Sonoma County, up more than 30 percent from the 80,619 living in the county in 2000.
The number of white residents dropped from 2006 to 2007 by 0.7 percent, or 2,250 people. From 2000 to 2007, the county's white population has declined 7.2 percent to 320,305 people.

This post first appeared on Sonoma Housing Bubble, please read the originial post: here

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...And the pain is nowhere near over


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