Wednesday, August 17, 2011

Update on the Economic Sustainability Plan for the Delta

A 15 page draft executive summary of the Economic Sustainability Plan is now available as part of the August 9 draft.  The previous drafts did not have an executive summary because the draft was too incomplete and preliminary.

The August 9 draft makes some adjustments to the recommendations in the second draft, all of which are included in the executive summary.  The individual chapters can be downloaded here, including chapter 4 on levees and flood risk that is getting the most current attention.  There are four public meetings around the Delta over the next two weeks if you want to hear more and make comments.

There are a few elements of the plan that are still under development for the September/final draft.  The most significant adjustment will be in the Legacy Community chapter which is getting reorganized with new content including better graphical illustration of concepts.  We are also fine tuning some parts of the data analysis in the agriculture chapter and developing a visual concept of what the recreation strategy could mean for a detailed area in the Delta.  None of these will change the broad recommendations in the plan, but will add detail and support. 

Thursday, August 11, 2011

Should the Government Sell REOs in bulk?

The Obama administration seems to be coming up with a plan to accelerate that trend by packaging foreclosed properties together and selling them off in bulk to investment groups who will rent them out. 

I don't completely understand the logic behind the plan, and in defense of the administration, it is an RFI (Request for Information) which suggests they are still figuring out the details themselves.  It is supposed to help make rents more affordable, and although it might help speed properties into the rental market a little faster, I don't think it will do anything to help rents in the long run.  I think it is mostly about trying to help the GSEs unload their REO property, and my cynical side fears that it is a plan pushed by big private equity investors to get them access to the nice returns that can be had picking up foreclosure properties around here as rentals.  Will this be good for taxpayers by cutting the losses for Fannie/Freddie/FHA on their foreclosures?  Maybe.  I can't see how bulk sales will bring higher prices for the homes for the GSEs, but it may cut their transaction and holding costs on the properties so they net more in the end.  That's a big if. 

My first impression is that this is a bad idea for hard hit areas like the Valley.  Lots of these homes are going to the rental market anyway, some by local investors and we also have out of towners with local agents buying investment property for them.  Others are selling to local families that are buying affordable foreclosure homes, and that is the silver lining in this whole mess.  Why would we want to reduce that opportunity for locals and pass it on to some hedge fund in New York just because there is a chance that Fannie/Freddie can cut their loss by a whisker.  In the long-run we end up with even more out of town landlords.

I might be a little more supportive of it if the investors who acquired property in this advantageous way were required to include a reasonable and fair, lease-to-own option for the tenants. 

And of course, we shouldn't give up on more effective loan modification plans.  For the few folks I know who have been successful with this, the modification effectively turn the homeowners into renters of their current homes but without the damage and displacement of the foreclosure process on families or neighborhoods.

These are just my initial thoughts and it will be interesting to see the feedback to the RFI and the eventual plan.  I doubt this will be the last post on this topic.

Thursday, August 4, 2011

July 2011 California and Metro Forecast

With the weekend, I forgot to post that we released our July 2011 California and Metro Forecast last Friday.  It was interpreted as gloomy, which it is, but it is actually moderately optimistic compared to some of the other forecasts for the Central Valley, particularly Sacramento, and the deepening pessimism about the national economy.  Click here to see the summary.

I remember last fall being amazed that the 10-year U.S. treasury bond was yielding a mere 2.5% during a supposed recovery, and what that said about the general lack of confidence in the recovery.  That didn't last long, and the yield has been a still low 3-3.5% for most of the year.  Today, it closed at 2.4%.  I'm not ready to predict another recession, but it is a safe bet that the October 2011 forecast will be lower.