I try to stay ahead of the curve.

Which is why, nearly two years ago, I wrote a piece on the impacts of the housing bust on the job market.

In short, I noted that all those millions of people who chased the real-estate boom—the newly minted real-estate agents, the mortgage brokers, the developers, and the construction workers—had added more jobs to the economy than had any other industry, at its height accounting for about 1 in every 10 jobs: a record, according to Moody's Economy.com. (In California alone, the number of real-estate brokers rose to more than half a million workers—more than the total number of homes sold in the state last year.)

"We're more dependent on housing than at any time in the last 30 years," Moody's chief economist Mark Zandi told me, "which could be a problem if the downturn becomes more pronounced."

Yet until just recently, it wasn't. While the folks I wrote about were forced to give up selling mortgages and houses, their lost jobs were offset by a continuing boom in commercial real-estate development. In San Diego, for example, while condo construction all but dried up, a dozen or more fancy new hotels and office buildings were rising into the skyline, offering jobs aplenty to many of those thrown out of work in residential construction.

Yet as several economists noted at the time, the commercial building cycle is far slower than the cycle for residential housing. Big buildings take years to get approval and years more to construct. "There's somewhat of a time lag here," Jay Butler, director of the Arizona Real Estate Center, said. "But everyone's eventually going to feel it."

Nearly two years later, we're doing exactly that as whatever backlog there was back then has been all but erased. And with demand for commercial space falling and credit as tight as it has been in more than a decade, new construction is slowing— with construction in January down by 1.7 percent, the largest decline in 14 years—as the massive commercial real-estate market slowly grinds to a halt.

The result isn't just more job losses in the real-estate sector—it's more write-downs for the banks that have financed the huge commercial projects. Indeed, today's Wall Street Journal suggests that the result will be yet another ugly round of write-downs for the banking industry as commercial property values decline by as much as 26 percent over the next two years.

All this isn't just to say I told you so (although I pretty much did, didn't I?).

January 19, 2008

Despite relatively strong job growth, the unemployment rate in California jumped above 6 percent last month, prompting Gov. Arnold Schwarzenegger to speed up construction projects that would result in the hiring of 5,000 new workers.

California employers added 15,000 new jobs last month, according to data released yesterday by the state Economic Development Department. The strongest growth came from educational and health care services, which added 5,900 jobs.

Nevertheless, the unemployment rate jumped dramatically, rising from 5.6 percent in November to 6.1 percent in December, because the number of people entering the work force were greater than the number of jobs being added.

“Never has California seen unemployment rise this drastically in a period that was not officially considered to be a recession,” said Christopher Thornberg, co-founder of Beacon Economics in Los Angeles. “This significantly diminishes the outlook for the state economy and state budget in 2008.”

In addition, the real estate and financial industries continue to deteriorate. Statewide, financial firms – including mortgage and real estate brokerages – cut 4,200 workers last month and construction firms shed 2,000 jobs.

To combat the job losses, Schwarzenegger ordered the accelerated release of $300 million in funding for roads, highways and other transportation projects, as well as $200 million for levee reconstruction.

Those funds are already in the budget, but were not slated to be spent this early in the year. Among the projects are a $25 million expansion of Interstate 5 in San Diego County.

“Speeding up construction of roads, schools and levee repairs will help our economy continue to grow and keep more people working,” Schwarzenegger said.

Schwarzenegger said he is also working with the Legislature to speed the release of $29 billion in unallocated funds from the 2006 infrastructure bonds.

“I have spoken with all four legislative leaders, and we are committed to acting quickly on removing regulatory and statutory hurdles that hinder investment in new construction in both the public and private sector,” he said.

Despite December's relatively healthy hiring pace, job growth in California was dismal in 2007. Payrolls grew only 0.5 percent, the slowest growth since 2003 and half the national rate of 1 percent. It was only the third time since 1995 that California's job growth lagged the nation's. In comparison, California employment grew by 1.7 percent in 2006.

“It's unusual for California to grow slower than the U.S.,” said Jed Kolko, research fellow at the Public Policy Institute of California, an economic think tank in Sacramento. “The main reason is that the housing slowdown is worse here than elsewhere.”

Kolko added that even though California's employment growth was slow last year, it was nowhere near as bad as it was during the recession of the 1990s and was even a bit faster than the sluggishness following the dot-com crash in 2000.

“We're doing a lot worse than the best of years, but a lot better than the worst years,” Kolko said.

But a report by the U.S. Bureau of Labor Statistics suggested that job growth in California may be slower than the state is reporting. A BLS study released Thursday shows that California added 120,000 jobs between June 2006 and June 2007, compared to 207,000 jobs reported by the state.

The state is slated to revise its 2007 data on Feb. 29, using updated information similar to that used by the BLS.

Stephen Levy, director of the Center of the Continuing Study of the California Economy in Palo Alto, said the BLS report provides an indication of what will happen after the state revises its estimates.

“For the state, job growth for 2007 is likely to be revised sharply downward, resulting in minimum job gains,” Levy said. “Job levels will be revised sharply downward for construction, finance and manufacturing.”

Levy expects the revised figures to show job losses in Orange County and large downward revisions for the Riverside-San Bernardino area. On the other hand, the new BLS figure for employment in San Diego last June is slightly higher than the number that the state reported at the time.

According to the data released yesterday, San Diego County continues to perform better than the state as a whole, although it has recently been lagging behind the national average.

Unemployment rose only slightly in the county, from 4.8 percent in November to 4.9 percent in December, not adjusted for seasonal hiring fluctuations. In comparison, the unadjusted rate was 5.9 percent for California and 4.8 percent for the nation.

Murtaza Baxamusa, director of policy research at San Diego's Center for Policy Initiatives, said that if the local rate were adjusted for seasonal changes it would be higher, since it would not include the temporary hiring of retail workers for the holiday season.

In the past year, the county added 14,600 salaried jobs, for an increase of 1.1 percent. Last month, the county added 1,800 jobs, on a seasonally adjusted basis, led by 800 new jobs in professional, scientific and technical services and 600 in health care.

But local real estate brokerages cut 400 workers last month. Administrative and support services were down 400, telecommunications resellers 200, construction firms 100, and information technology firms 100.

Tuesday, Nov. 27, 2007 | In one of the first local cases in a national crackdown on mortgage and real estate fraud, four people connected with a San Marcos realty office have pleaded guilty to charges that they went to great and illegal lengths to secure mortgages for financially unqualified consumers, thereby pocketing more than $1 million in fraudulent commissions.

In some transactions in the scam, the defendants used straw buyers -- consumers with higher credit scores and bank reserves -- to secure financing for other customers, fraudulently claiming those third parties would occupy the homes, according to prosecutors.

For others, the team altered financial information on loan documents to meet the lenders' requirements, or created false employment information and posed as those employers when lenders called to verify. They submitted loan applications with inflated bank account balances falsely substantiated with fictitious bank statements.

They purchased and submitted to lenders letters from tax preparers that misrepresented consumers as business owners, deposited their own money into clients' bank accounts to falsify certificates of deposit, and fraudulently sent lenders copies of social security cards altered to hide work restriction language, according to court documents.

Alejandro and Emilio Lopez, two owners of Century 21 Eldorado in San Marcos, headed the "Lopez Team" of loan officers, loan processors and real estate agents. Ravinderjit Singh Sekhon was a loan officer there and Linda Velasquez was the office manager, acting as translator for Sekhon with Spanish-speaking clients. All four pleaded guilty earlier this month to charges related to the scheme.

Obtaining financing from subprime lenders using so-called stated income or "no-doc" loans, the group fudged employment, rental, bank and even citizenship status information for more than 200 unqualified clients, brokering first and second mortgages for an average of $400,000 each, according to court documents.

That federal prosecutors are illuminating the scam marks a public acknowledgement of a significant trend of surreptitious real estate-related fraud schemes that have gone unfettered for years, market watchers say.

"You hear about it, kind of under the radar, that this stuff is kind of going on, but nothing really surfaces," said Mark Oatman, president-elect of the North San Diego County Association of Realtors. "The lending institutions now hopefully will be rooting these people out."

The region's sizzling housing market hid layers of shady activity as housing prices doubled or tripled in mere years and lenders loosened their lending standards to expand the market. When home values were rising, consumers with unaffordable loan payments could refinance or sell their homes, paying off the lenders in full and sometimes even pocketing a profit. There was no indication in the court documents if the borrowers knew their information was being falsified as it was submitted to lenders.

But in a slow market, when loan payments skyrocket, many borrowers slide quickly into foreclosure. As banks sell those homes at a loss, their victimization by loan officers submitting false information becomes apparent. This prosecution doesn't touch what some experts consider the widest used form of mortgage fraud in the region in recent years -- cash back schemes that involve artificially inflated loan values and defraud lenders out of hundreds of thousands of dollars in some cases.

Still, the fact that the FBI has found this scam out and has brought charges is heartening for local real estate appraiser and mortgage fraud expert Todd Lackner, whose office is stacked with files he says show schemes countywide.

"I haven't seen much in San Diego; there's a huge lag," Lackner said. "This (scam) has probably been going on for a long time. They've probably been investigating this for two or three years. But if they [investigated] this, you would think they were doing other ones."

This scam stretched from December 2003 to June 2005, according to the government's documents. As part of their guilty plea filed Nov. 13, the defendants admitted they frequented swap meets to find potential clients. They advertised on Spanish-language radio stations and in Spanish-language publications. They billed themselves as problem-solvers for the region's Latinos. Experts say Latinos, especially immigrants, face unique challenges in obtaining financing because they often have thinner credit histories than do other segments of the population.

Aracely Panameño is the director of Latino affairs for the Center for Responsible Lending. Panameño's group predicts that the fallout from predatory lending practices to Latinos will result in a net loss of homeownership in the end, as thousands face foreclosure due to skyrocketing payments on their high-cost loans.

"The greatest concern right now is that formal charges have been lacking, whether at the local or the federal level," she said. "That has been very, very concerning. More of this (investigation) obviously helps a great deal."

The Lopezes and Velasquez are each charged with one count of conspiracy to commit wire fraud and face maximum penalties of five years in prison and $250,000 fines. Sekhon is charged with one count of wire fraud and faces a maximum penalty of 20 years in prison and a $250,000 fine. And the defendants have agreed to repay their illegal gains, a total of $1,070,000.

Defense attorneys for the Lopezes and for Velasquez did not return calls seeking comment Monday. Nor did prosecutors with the U.S. Attorney's Office nor FBI investigators. Scott Savary, defense attorney for Sekhon, declined to discuss the case.

The defendants are scheduled for sentencing on Feb. 4, 2008.

With more than 200 clients wrapped up in this scheme, at $400,000 a loan, the fraudulent loans could total more than $80 million.

Rachel Dollar is an attorney who represents lenders in mortgage fraud cases and runs a blog tracking mortgage fraud litigation nationwide. Dollar said lenders lose an average of 39 percent on a fraudulent loan.

She said some defendants in schemes like these hide behind the national push to increase homeownership for Latinos, a sort of solidarity against the faceless lenders.

"This is very ... typical of the whole 'we were helping people' mentality," she said. "A lot of loan officers utilized that rationale that they were just helping borrowers. But there definitely are reasons for the qualifying criteria -- so that people can actually make their payments."

But those agents and brokers are often mired in a significant conflict of interest: the more loans and sales they make, the more money they earn in commissions.

"At the same time, you end up ... very successful in the real estate business," Dollar said. "The question becomes were they helping the borrowers or were they helping themselves?"

SAN DIEGO—The U.S. Department of Housing and Urban Development will issue San Diego enough vouchers to help pay the rents of more than 1,350 households living in city-owned public housing.

The change gives the San Diego Housing Commission more control over municipal housing.

Tenants will be offered a choice between remaining in city-owned units or using vouchers to rent private apartments or houses. Private landlords, however, are not required to accept the vouchers, which carry regulations on how much the city will pay toward rent.

The Housing Commission received word last month from HUD that the public housing would no longer be under federal oversight. The agency this week guaranteed the city federal subsidy vouchers to help tenants move into private accommodations.

San Diego has struggled to operate its public housing program as federal funds for the program have sharply declined.

Housing Commission chief Elizabeth Morris said she expects most of the 4,000 people living in the city complexes to stay where they are while they weigh the pros and cons of moving. Residents who choose to stay would continue to pay 30 percent of their income toward rent.

Public housing residents who choose to move into privately owned housing must remain within the city of San Diego during the first year they have a voucher. After that, they can apply to move elsewhere in the county.

San Diego's housing agency becomes one of only a few in the country that have made the break from federal control.

September 14, 2007

Decades of federally subsidized public housing likely will end in San Diego after the U.S. housing department decided this week to let the city's Housing Commission divorce itself from the program.

The changeover would place the city's 151 rental complexes entirely under the control of the commission while giving it the financial freedom to expand the number of affordable housing units for low-income households.

The transition away from public housing, however, will not affect the more than 1,300 low-income households that would continue to have their rents subsidized either in commission-owned complexes scattered throughout the city or in rental units of their own choosing.

The city still must secure approval for 1,366 vouchers needed to subsidize the rents of people living in public housing. San Diego's 1,366 public housing units are occupied by a little more than 4,000 individuals.

If the vouchers are awarded, San Diego's would be one of only a few housing agencies in the country that have made the break from federal control. Only two other housing authorities – one in Georgia, the other in the Northwest – have left the program, according to officials of the U.S. Department of Housing and Urban Development.

The push to move away from conventional public housing comes at a time when federal funding has steadily diminished, hamstringing the housing agency's ability to properly maintain its rental complexes in neighborhoods from San Ysidro to Carmel Valley.

Most recently, the commission, like similar agencies nationwide, has been getting just 84 percent of the funds needed to operate its public housing complexes; it expects its allotment to fall even further.

“I'm pretty excited about the financial stability we'll get and that public housing won't bankrupt the Housing Authority,” said Elizabeth Morris, the commission's chief executive officer. “To do that and at the same time add affordable housing to our inventory and serve the same number of extremely low-income families, what could be better?”

Morris said she's hoping the city will learn in the next month or two whether its request for the vouchers will be granted. She said she knows of no other competition for the special funds allocated for rental vouchers when public housing is phased out.

Although no other agencies in the country have requests pending to leave the federal program, a number of authorities have inquired about the possibility, said Orlando Cabrera, HUD's assistant secretary for public housing and Indian affairs.

HUD gave its approval to San Diego, he said, because “it made its case that it's a tool they think will help their community. Their motivations would be less of an issue than the fact they have 151 properties that would not serve the folks in San Diego as well as vouchers would in the private marketplace.”

In making its case to HUD, the commission argued that its plan would create additional housing opportunities beyond those for the tenants in public housing now being served.

As tenants moved out and used their vouchers for housing in the private market, the commission said it could replace those renters with a wider range of low-income households earning up to 80 percent of the area's median income, or $56,150 for a family of four. Most public-housing tenants earn less than half that amount.

Where San Diego now receives on average of $450 a month per public housing unit, including the rent paid by tenants, the city could realize between $603 and $1,601 a month, depending on the location, size of the unit, and income level of the renters, according to the commission.

Current residents who choose to stay, however, would continue to pay 30 percent of their income toward rent. Housing officials point out that the city would also be able to borrow against its public housing complexes, valued at more than $124 million, to build or purchase at least 350 housing units affordable to both low-and middle-income families.

“My concern at first was that I want to make sure we're not losing affordable housing,” said San Diego City Councilwoman Toni Atkins. “I feel more comfortable now. But I don't want public housing residents to suffer, so the commission has to present a plan as to how these transitions will occur and whether we'll get the vouchers.”

Before presenting its plan to HUD, local housing officials met several times with residents of public housing to explain the proposal and reassure them that they would be able to stay.

Although San Diego is one of the first major U.S. cities to restructure its public housing program, it was one of the last to build such housing. Where many large cities began erecting massive, tenement-style projects in the 1930s and 1940s, San Diego's first public housing complex didn't open until the early 1980s. By then, policy-makers had shifted from building massive high-rise apartment complexes to low-rise developments, a concept adopted here.

“I think the history of public housing has made it eminently clear we're better off with mixed-income developments than highly dense, very low-income communities,” said San Diego affordable housing activist Richard Lawrence

August 14, 2007

San Diego County home prices and sales continued their downward slide last month as home buyers found it increasingly difficult to navigate the volatile mortgage market.

New-home sales were at their lowest level in five years, and the rate of homes in the county that sold for a loss over their previous sale was six times higher than a year earlier, DataQuick Information Systems Reported.

Some industry insiders who are concerned by tightening credit markets expressed pessimism about the short-term outlook, while others saw rays of hope for an upturn, noting that San Diego had led the California housing-price drop and now may be stabilizing.

In its report yesterday, DataQuick found that July's overall median home price for the county stood at $489,000, down from $495,500 in June and $500,000 in July 2006.

The drop was led by a pullback in resales – down 1.8 percent year-over-year for houses, with a median of $550,000, and condos, with a median of $377,250.

At the same time, buyers shifted away from lower-priced condo-conversion sales, which led to a year-over-year increase in prices in the new-home category to $425,500, compared with $400,000 in June and $425,000 in July 2006. Fewer conversions also drove the new-sales count down to 624, the lowest for any month since February 2002. Resales also were down from a month ago and a year ago.

DataQuick analyst John Karevoll interpreted the prices and sales as a sign that San Diego real estate may be nearing the bottom of the post-boom period.

“Most of the declines in San Diego have happened,” Karevoll said. “Now it appears to be re-establishing a balance that we have yet to see for the (Southern California) region.”

As home prices have fallen, credit has tightened, creating what some describe as a “double whammy” for real estate markets that saw huge run-ups in prices during the recent housing boom.

The credit crunch that began in the subprime market, which appeals to home buyers with blemished credit, now has spread to the prime market, leaving some buyers scrambling for financing.

San Diego County buyers have found that jumbo mortgages – loans that exceed the $417,000 limit that can be purchased by federally chartered Freddie Mac and Fannie Mae – are more costly to come by.

“Jumbo mortgage money is still out there but the price of it is more dear,” said Keith Gumbinger, vice president of HSH Associates, which monitors the national real estate market.

The recent meltdown in the subprime market has rattled the stock market as well, causing drops in trading values last week as investors worried about whether tighter credit would undermine the overall economy.

David Seiders, chief economist for the National Association of Home Builders, said many sales of new homes around the country are falling by the wayside as lenders tighten their financing programs.

“We are hearing that a lot of homes that had been sold, presold before completion, and financing had been arranged; now those loans cannot in fact be made,” Seiders said. “So the builders are now sitting with inventory they thought they had sold.”

The credit crunch has had less impact on people who can purchase homes with “conforming” loans of less than $417,000, said Zoltan Pozsar, senior economist for Moodys.com. The higher cost of nonconforming jumbo loans “affects areas where house prices are out of line with fundamentals, like San Diego, like pretty much all of California,” Pozsar said.

Although consumers in pricey California often complain that the low-conforming limit makes it more expensive to buy a house, lifting it has yet to gain traction in the federal government.

“People in the heartland don't have much sympathy for California home buyers,” said Keitaro Matsuda, senior economist of Union Bank of California.

In the first half of 2007, 35.6 percent of all primary mortgage loans in San Diego County were jumbo loans, said DataQuick's Karevoll. That compares with Los Angeles County at 46 percent, Orange County at 59.5 percent and the San Francisco Bay Area at 77 percent.

Longtime San Diego mortgage broker Martin Lopez said it's much harder to secure a home loan than it was several months ago. Before subprime loans began to fail, lenders were eager to sell loans that could be packaged as mortgage-backed securities and sold to Wall Street investors.

“There were very liberal guidelines” regarding debt-to-income ratios and credit quality, Lopez said. “People are having to prove their income now. They are having to prove their assets.”

Carlsbad-based home builder Barratt American now has a sales cancellation rate of about 25 percent, just slightly higher than normal, said President Michael D. Pattinson.

Sherman D. Harmer Jr., president of Urban Housing Partners, is involved with two condominium projects under way in downtown San Diego: Smart Corner and Sapphire Tower. He said tighter credit has slowed the sales process.

“We've gone back to our lenders, Countrywide, Wells Fargo and U.S. Bank, and tried to reconfirm with them if they have changed their underwriting standards, what kinds of loans are available, how processing has changed,” Harmer said. “There is a whole repositioning and restructuring of the loan process. It has been a moving target.”

The Federal Reserve Bank's July survey of senior loan officers, which was released yesterday, showed that more than half of responding banks had tightened their standards for subprime mortgages.

The survey found that nearly 41 percent of the banks had tightened standards for nontraditional mortgages, including interest-only mortgages, adjustable-rate mortgages and “Alt-A” loans, which require less stringent documentation of income. About 14 percent of banks said they had tightened their lending standards “somewhat” on prime loans over the past three months.

Meanwhile, consumers could cheer declining gas prices and mortgage interest rates – at least those that apply to loans that are less than the $417,000 limit. Freddie Mac pegged the average mortgage rate last week at 6.59 percent, down from 6.68 percent the week before.

In another sign viewed as positive, the San Diego Association of Realtors said there were 20,533 homes for sale as of yesterday, 10.7 percent fewer than at this time last year and the third straight month showing a year-over-year inventory decline.

“People who are in the market to sell are people who really want to sell, not investors testing the market,” said David Cabot, the association president.

But some investors have thrown in the towel and backed out of their real estate gambits, lifting the sold-at-a-loss percentage sixfold from a year ago, according to DataQuick.

Last month, 18.2 percent of homes sold locally went for less than their previous purchase price, DataQuick said. That compares with 3.3 percent of the homes sold in July 2006. The median loss suffered by sellers on these sales was $68,250.

Steve Shaffer, a real estate agent and mortgage broker in University City, handled one such case, a home on Governor Drive that was bought for $659,000 in May 2005 and sold last month for $575,500, a 12.7 percent loss.

“They bought it as investment,” Shaffer said of the sellers. “They realized that in this market, it wasn't a good investment.”

Other owners have fallen behind in their payments or let their homes go into foreclosure.

In South Bay, where all communities but Imperial Beach saw price drops in July, short sales are preferable to foreclosures, but banks have to be willing to take less than the outstanding loan balance to allow a short sale to proceed, said Scott Vinson of Coldwell Banker-Royal Realty.

“I think our eastern region of Chula Vista had a pretty hard blow,” Vinson said, referring to a spate of foreclosures there. “I'd think we'd be able to come back a little sooner than other parts of the county.”

Mary McFadden

Sunday, July 1, 2007

A huge, scary monster is growing in San Francisco's South of Market area. Like an atomically deranged creature from a 1950s horror movie, the first of the Rincon Towers is oozing upward, sucking light from sky and street. Its three-block shadow chills the hearts of all who pass under it, even for a moment.

Bred for expensive, high-density housing in a joint venture by the mad scientists at the Board of Supervisors, the Planning Commission and real estate speculators from San Diego, the black blob makes it obvious that urban planning in San Francisco is run by the Boys from Brazil and architects who used to design sippy cups for Satan.

They're selling exactly what they are destroying -- the community and the view.

Community is not fostered by stacking residents as if they were cans in a gourmet supermarket. Community is not created by designs that separate people, that put people into cars, into garages, into elevators, into their condos. Community is not encouraged by allowing real estate speculation to override sensible and sensitive design.

The view from the towers is not of the towers. They look down and out at lesser entities. When the Transbay Tower comes along, these three buildings will block the Bay Bridge and darken downtown.

Now that they have a foothold, these monstrosities have become the example rather than the exception. San Francisco's waterfront will be visible only from the East Bay. If we are not careful, San Francisco will steal Oakland's infamous tagline, "There is no there there."

"Manhattanization" made high-rises glamorous. San Francisco's urban plan ignores a glorious geography in favor of an "interesting" skyline but characterless streets. Sunlight never touches a large portion of downtown sidewalks. Inaccessible tops of buildings are considered public open space. The wind, present even on still days, is the digestive by-product of these now relatively small monsters.

Insensible rules, regulations and planning processes have flattened the city. Our famous hills have disappeared. The skyline, which once offered a rolling glissando of color and light, now looks like a series of bruises on a lame leg. Neighborhoods have lost so much open space and greenery that birds have moved away. This is good news for adaptable bugs, rodents, skunks and raccoons, but not good for people and pets.

Things have gone dreadfully wrong, and while there's nothing to be done about buildings in progress until nature shakes them down, we can demand an urban plan and building codes that add grace and life to our city. Great design accommodates need and embraces beauty. It does not trample upon the psyche.

The traditional -- our bright, fussy Victorians, the elegant Edwardians, the craftsman bungalows, the sleek moderns -- must be preserved, because these are the fragile, primary documents of history and icons of culture. Contemporary ideas can and must work with past ideals, as they do in Barcelona, London, Mexico City and Vienna.

Rincon Towers' baby brother is due shortly. The Transbay Terminal is scheduled to be twice the size of the scary monster already blotting out the sky. Be afraid. Very afraid.

June 12, 2007

The implosion of the subprime mortgage market is likely to prolong the national housing slump, Harvard University researchers said yesterday in their annual report on the state of the nation's housing.

“At a minimum it will slow any recovery,” said Nicolas P. Retsinas, director of Harvard's Joint Center for Housing Studies, which issued the report. “Add to that the overbuilding and the inventory correction and you can see why it appears, particularly for the new-home market, that this slump will last well into 2008.”

Housing-industry analysts say the riskiest subprime adjustable-rate loans were made in 2005 and 2006. As they reset at higher interest rates through 2008, they are likely to fuel the current surge in foreclosures.

As lenders move to tighten loose credit standards and prevent defaults, it will become harder and harder for subprime borrowers to refinance into more affordable loans, Retsinas said.

“One of the aftermaths of the subprime implosion was a tightening of credit,” he said.

Retsinas said problems in the housing industry go beyond lending and foreclosures. Even as prices ease somewhat, affordability remains an issue in many areas, including San Diego.

As home prices doubled in San Diego County between 2000 and 2005, they far outpaced middle-wage incomes. With job expansion here concentrated in the low-paying service sector, the Harvard report foresaw no quick improvement in the region's low housing affordability.

When housing is prohibitively expensive, the economy suffers, Retsinas said.

“The danger is . . . you're going to lose skilled workers who will move to a part of the country where they can get a job and afford a place to live.”

University of San Diego economist Alan Gin said he expected home prices to “ease downward some, possibly into 2008.” However, Gin agreed that local wages have not kept pace with home prices. Despite the slowing pace of home sales, housing costs have dropped only about 5 percent from the peak of the housing boom in fall 2005.

According to Harvard's “The State of the Nation's Housing 2007” report, everyone who attempted to profit during the nation's housing boom – buyers, sellers, builders and investors – played a role in the market's decline.

“ . . . This housing downturn has been driven largely by the market's own excesses,” the report said.

Troubles from risky subprime loans are evident in U.S. markets where home prices soared during the first half of the decade. A record 525 San Diego County dwellings were reclaimed by lenders or sold at auction in April, exceeding a previous record of 433 properties in March, according to DataQuick Information Systems. Even so, foreclosures make up a small fraction of the local real estate market.

Doug Duncan, chief economist for the Mortgage Bankers Association, yesterday said subprime loans had done far more good than harm to the economy. Such loans have opened the door to homeownership to millions of Americans in pricey markets like San Diego County, Duncan said.

Of all outstanding U.S. home loans, about 14 percent are subprime, he said. Of those, about 19 percent are delinquent or in the process of being foreclosed on. Duncan expects less than one-third of those will actually be lost to foreclosure.

Among causes of the nation's housing slump, subprime lending “was a contributing factor, but it was not the driving issue,” Duncan said.

Consumer advocates and credit counselors hold that many borrowers don't understand the risks associated with subprime loans. Designed for people with low credit scores, they are more profitable for lenders and mortgage brokers than prime loans.

Subprime loans allow borrowers to qualify for credit on low, introductory “teaser” interest rates that adjust upward after several years. They carry higher fees because of the greater risk of default.

When teaser rates end in expensive markets like the San Diego region, monthly mortgage payments can increase by hundreds of dollars, said Paul Leonard, director of the California office of the Center for Responsible Lending.

To avoid defaults, consumers should be educated about the importance of shopping around for the best mortgages, said Melinda Opperman, vice president for community outreach for Springboard, a nonprofit consumer credit management organization.

“I do feel that the worst is yet to come,” as more subprime loans move into default, Opperman said.

Some analysts blame Wall Street for the subprime crisis. Because of rising defaults, investors have lost their appetite for securities backed by subprime mortgages, said economist Edward Leamer, director of the UCLA Anderson Forecast. That means the subprime market “isn't going to come back anytime soon,” Leamer said.

Wednesday, May 16, 2007 | The speculative housing bubble that launched San Diego home prices so high is now in the process of deflating. Prices have been on the decline for over a year, but they remain well above the levels that would be justified by the economic fundamentals now that the bubble-era forces of rampant buyer optimism and unsustainably lax lending are disappearing before our eyes.

Using the analytical framework described above, and considering the precedents set by past boom/bust cycles in the San Diego housing market, it sure seems that the most likely outcome is for San Diego home prices to continue declining for some time to come. But nothing is ever for certain in the financial markets, so today I'd like to discuss the following question: what could prevent a serious decline in home prices?

As I see it, there are two potential factors that could help out the housing market.

The first is economic growth. If home prices are too high in comparison to rents, incomes, and other fundamentals, then it's at least possible that those fundamental factors could rise to meet home prices rather than the other way around.

The problem is that this just isn't very likely. Home prices are so out of line with rents and incomes that, given the current pace of their growth, it would take many years for rents and incomes to catch up. Meanwhile, the oversupply of inventory (especially that of the must-sell variety) would be exerting downward pressure on prices the entire time.

The only way that economic growth could single-handedly bail out the housing market would be for regional economic activity, employment, and incomes to grow in great excess to their current levels. Such a gold-rush style boom is certainly within the realm of possibility, but it's not an outcome that I would consider likely.

The second factor that could aid housing market is government intervention.

We don't have to look back very far to spot a potential blueprint for the federal government's reaction to a housing-led slowdown. In the aftermath of the 2001 recession that followed the bursting of the stock market bubble, the Federal Reserve slashed short-term rates to levels not seen since the 1950s. Such ultra-low rates encouraged consumer borrowing that, in combination with rampant federal deficit spending, helped to keep overall demand aloft and to end the recession in fairly short order.

Of course, this technique had some unintended consequences (a housing bubble, record-shattering debt levels, and a structurally weak U.S. dollar come to mind). But I don't expect such nitpicking to stop the folks in Washington from using the same playbook again should the housing-related pain become too uncomfortable for their constituents to bear. Let's look at the actions of the Federal Reserve and Congress in turn.

The Federal Reserve will want to lower their short-term federal funds rate. In the case of a housing bust, lower short-term rate would be of key importance to the hordes of adjustable-rate mortgage holders who are facing higher payments once their loans reset. Jamming short-term rates back down to 2003 levels would certainly prevent a lot of foreclosures.

If things got bad enough and lowering the fed funds rates didn't do the trick, Federal Reserve chairman Ben Bernanke could even implement some of the more radical policy suggestions he made in his seminal 2002 "helicopter drop" speech, such as setting long-term as well as short-term rates and directly intervening in the mortgage market.

It all sounds easy enough, but the truth is that the Fed can't lower rates (let alone enact any of Bernanke's proposed pull-out-the-stops policies) with impunity. Lowering short rates tends to cause the dollar to fall and inflation to rise. Here in 2007, the dollar is a lot weaker and inflation notably higher than in 2003 when the short-term rates plumbed their lowest depths. It's doubtful that the Fed could do anything as drastic as they did after the stock market bust, but it's still likely that they will lower rates to the extent that they are able.

For its part, the people in Congress can continue to do what they do best: spend money that they don't have. There have been few repercussions to such an approach so far, and until there are, the government can be expected to keep on spending -- especially if times get tougher. In general, borrowing from the future to spend in the present tends to provide a short-term stimulus to the economy. Given that "short-term" is the typical politician's favorite timeframe, this approach is a crowd favorite.

A housing bust would provide even further temptation to spend money directly on attempts to address the market itself. Some of our more eagerly opportunistic leaders are already scrambling to throw taxpayer money at the subprime mortgage problem, but the list of potential opportunities for federal largesse is nearly endless. Our leaders could stoke housing demand by offering tax breaks or direct subsidies to potential home buyers. They could help out struggling homeowners by increasing the already generous tax breaks that owners are granted. They could force lenders to extend mortgage teaser-rate periods or allow lower monthly payments for troubled owners. They could put a moratorium on foreclosures (an early variation on this theme is already taking place in Massachusetts, where the state is demanding that lenders delay the foreclosure process by up to two months for any borrower that files a complaint with state bank regulators). They could direct government-sponsored mortgage purchasers Fannie Mae and Freddie Mac to loosen their standards to keep mortgage credit freely available. And if too many private lenders got into trouble, the government could affect an industry bailout as they did with the savings and loan industry in the late 1980s. The list goes on.

Keeping rates excessively low and increasing deficit spending could work for a more fundamental reason. Both activities tend to result in more money being created and spent into the economy. To the extent that there are more dollars chasing the same amount of goods, each dollar becomes worth less in comparison to those goods. This reduction in dollar purchasing power is more commonly known as "inflation."

If the government's tactics were to cause inflation to pick up the pace, incomes and rents might quickly rise in dollar terms. This could allow the fundamentals to catch up to home prices without the latter falling too steeply. It's not that great to own a home whose price is stagnating while the price of everything else is rising, but it's probably better than owning a home whose price is falling outright. (Of course, higher inflation would tend to increase interest rates, but as described above, various legislators and Fed chairman Bernanke have already pitched the idea of forcefully keeping mortgage rates low.)

The potential interventions are many, varied, and complex. And unlike an explosion of local economic growth, at least some degree of monetary easing and housing-oriented deficit spending will be almost inevitable if things get bad enough in the real estate market.

What effect the interventions will have is another question. Meddling with the market rarely works out exactly the way it was intended, as witnessed by the housing bubble and the other economic distortions caused by the government's stimulative efforts from 2001-2003. And as we've seen with the subprime debacle, the government rarely reacts to something until after it's a crisis, so there could be some issues of closing of metaphorical barn doors vis-à-vis the whereabouts of certain metaphorical horses.

We have a long way to go before home prices once again meet up with their fundamentals, and there's no way of knowing exactly what path will be followed to that destination. The point is that while there will likely be tremendous downward pressure on home prices, it's important to acknowledge that there could be some forces putting pretty serious pressure in the other direction.

By: North County Times opinion staff

Our view: North County real estate strong and stabilizing

For the past several years, at dinner tables, water coolers, sidelines and cyberspace, North County's most popular conversation topic has been the real estate market. When the market was hot, there was a collective hyperventilation that blew up the housing bubble. When it started deflating, people despaired. As we look at the market today, things aren't as good as they once were, but they're not half bad.

Foreclosures

Perhaps no word unnerves middle-class Americans more than "foreclosure." And, indeed, the loss of a home is a financial and personal tragedy for the owner.

We've heard much in recent months about the record number of foreclosures in the county. But those numbers must be put in perspective. Earlier this month we reported that foreclosure filings on properties in San Diego County had climbed by 49 percent from February to March to 2,551. That figure represents one in every 408 households.

Scary as they seem at first glance, those numbers don't look so bad upon closer inspection. Of those 2,551 foreclosure filings, 1,998 were in default and 415 had been notified that their property would be sold for repayment. That leaves only 138 properties that were actually foreclosed on that month -- or a little less than 0.025 percent of San Diego County's 600,000 single-family homes, condos and duplexes.

Subprime loans

Some analysts have also speculated that the collapse of the subprime home lending market threatens the overall health of the real estate market. While there are many people nationwide who are suffering now for taking out those loans, the subprime market itself has contracted dramatically -- and that's a good thing.

Homeowners began turning to riskier subprime loans in earnest in 2005. Nearly three-quarters of all home loans made in the county that year were adjustable rate mortgages, which are often associated with the subprime lending market.

By December of that year, however, the Federal Reserve Board and other financial gatekeepers were warning lenders about questionable lending practices. At about the same time, news reports began to surface about skyrocketing mortgage defaults.

Since that 2005 watershed, at least 25 subprime lenders have gone belly up, put out a for sale sign or posted significant losses. That may shrink the pool of potential buyers in the short term, but it seems to be a much-needed correction that will lead to long-term stability.

Housing prices

Of course, for most homeowners, the only figure that counts is the resale price of their home. In North County, at least, there's good news here as well.

At $640,000, the median price of a single-family home in North County is up 2.4 percent from March 2006. That's only $10K off the all-time high set in June 2006.

Coastal communities are doing particularly well. Two standouts are Carlsbad, with year over year median price increases of 13 percent, and Encinitas, with increases of 34 percent in the same period. And high-end home prices, usually a benchmark of market health, are climbing in places like Rancho Santa Fe, where the median price for a home rose 12.5 percent.

So the housing market seems to be doing better. Interest rates remain low. As a result, at-risk homeowners won't have to worry as much when their adjustable mortgages go up. The fact that their houses are likely increasing in value will probably allow them to refinance their original loans, giving them a little breathing room. Despite the tightening of credit caused by the subprime collapse, housing prices in North County are holding up. That suggests that demand here remains relatively strong.

No one has a crystal ball, but the signs are auspicious. North County's housing market may not be as strong as it was, but it appears to be on the rebound.

It was opening day at Petco Park yesterday, which meant an adrenaline rush for the Padres, a this-is-our-year moment for the fans – and another marketing opportunity for anxious developers.

The signs were everywhere on the outskirts of the East Village ballpark.

“New condos for sale” announced a large banner hanging on Park Terrace, a brand-new high-rise hovering beyond the center-field fence.

At 7th Avenue and K Street, an advertisement for The Legend – a still-under-construction residential tower – gushed about “condo living at the ballpark.”

A block over, at 7th and J, was a poster for a planned 36-story luxury high-rise called Condominium Tower. The ad offered the chance to buy into a building “overlooking Padres Petco Park.”

It's no secret that the real estate market is flat in San Diego – especially in the downtown area, in part because so many buildings went up in such a hurry.

This is especially true in the East Village, where no fewer than a dozen commercial and residential projects are under construction within two blocks of the Padres' home field.

With all this competition, every developer near Petco Park is trying to separate itself from the crowd. The Legend, a 23-story tower where 60 of the 178 units remain unsold, is touting its seventh-floor lounge that overlooks the baseball field. The lounge will be open to residents and their guests.

The Icon, a 24-story building that sits on 10th Avenue across from the ballpark complex, brags of its rooftop “stadium,” where up to 60 residents and their guests can drink beverages and watch the game. A sales manager for the building – where condos range from $299,000 to $1 million – says about 20 percent of the 316 residential units haven't been sold yet.

The downtown developers need every edge they can get. San Diego real estate consultant Gary London cites “a blanket slowdown” in the downtown market – “probably the only over-built market in the entire San Diego region.”

“There's too much inventory under construction,” London said.

People who've already bought units tend to focus on the long term, hoping their condos will eventually become as iconic as the apartments and lofts surrounding Chicago's historic Wrigley Field.

Sal Rivera, a television journalist, and his wife, Rose, recently bought a condo with a balcony overlooking Petco's center field. “If we were going to turn around and sell tomorrow, then we'd be in trouble,” Rivera said. “But otherwise, we're fine.”

Many developers are hoping the 2007 baseball season will reintroduce the public to the East Village, where the spate of construction projects has reconfigured the skyline and altered the neighborhood in the six months since the Padres last played at home.

“When the season gets going, people get reconnected with downtown,” said Derek Danziger, spokesman for the Centre City Development Corporation.

Doug Wilson, developer of The Mark, a 244-unit residential building two blocks north of Petco, acknowledged that half of the units had yet to be sold, even though the building is scheduled to open early next month.

But he said he wouldn't panic, even if it takes another two years to sell the remaining condos.

“Long term, people will still move to California, to the coast, to downtown San Diego,” Wilson said. “Hey, this is not Armageddon. It's a needed correction.”

Rivera, the TV journalist, admits it was the view of Petco that sold him on his condo. He planned to watch last night's home opener from his balcony, even though he and his wife haven't officially moved in yet.

As a kid, he dreamed of playing professional baseball.

“He can't be on the field,” his wife said, “but now he has the best view.”

March 29, 2007

SAN DIEGO – Condo conversions in San Diego would be limited to no more than 1,000 units a year under a tentative settlement approved by the City Council on Tuesday.

The settlement, considered in closed session, is intended to end litigation against the city over how it reviews proposals to transform rental units into for-sale condos.

A coalition of environmental and affordable-housing advocates represented by attorney Cory Briggs argued that the city had failed to formally review each conversion project to assess what potential effects projects might have on the environment.

Before the lawsuit can be dismissed, the City Council must put into law a yearly limit on condo conversions. In addition, an ordinance must be adopted that would not allow approval of conversions until after landlords have surveyed their tenants to learn what effects the conversions might have on renters. The city would then issue an annual report on the survey results.

Under the agreement, the city will reimburse those bringing the suit $75,000 in legal fees and related costs.

“Full implementation of the settlement will end the need for litigation over future condo-conversion waves by preventing future waves from ever rising in the first place,” said Briggs, who represents the Affordable Housing Coalition of San Diego County and Citizens for Responsible Equitable Environmental Development.

Unaffected by the settlement are three other lawsuits filed by Briggs against condo converters dealing with the same issue of environmental analysis.

The lawsuit naming the city was one of two suits tossed out by a Superior Court judge last year, although Briggs appealed the ruling.

While San Diego and other cities in the county have been a magnet in recent years for developers seeking to convert rentals into for-sale housing, the overall real estate market slowdown has dampened interest in condo conversions.

“In the heyday, we were getting 20 or 30 applications a month, and since July or August, it's in single digits,” said Mike Westlake of the city's Development Services Department. “So there's definitely been a slowdown. Instead of four or five or six a week, we maybe get one a week, and that number will probably go down even more.”

Last year, applications for condo conversions accounted for about 1,800 units. So far this year, there have been six projects proposed, although two of those call for the conversion of more than 1,200 units in Mission Valley, according to city records.

Jim Waring, who oversees land-use issues for Mayor Jerry Sanders, said he expects that the ordinances required under the settlement will come back to the council within 60 days.

“This has been a great distraction and not a very productive use of our time,” Waring said. “We're settling the case so we can eliminate the distraction and focus on other things we think are more important.”

March 16, 2007

San Diego's leading economic indicators fell for the 10th month in a row in January, dragged down by a weakening employment outlook and the continuing decline in the housing market, according to a report yesterday by the University of San Diego's Burnham-Moores Center for Real Estate.

Economist Alan Gin, who compiles the monthly index of indicators, attributed the decline to the downturn in local home sales, which is beginning to have a ripple effect through the rest of the economy.

“The interesting thing is the impact of housing on the economy,” Gin said. “In employment, not only construction and real estate are down, but you're also seeing an effect in the retail sector. And help wanted advertising is down significantly in a lot of categories.”

Three of the six categories in the index worsened in January: residential building permits, help-wanted advertising and unemployment filings. In contrast, there were improvements in consumer confidence, local stock prices and the outlook for the national economy.

But the three latter categories have all declined in recent weeks.

The stock market has turned choppy, especially for small or mid-sized technology companies – precisely the type of companies that are based in San Diego. The national economic growth rate for the fourth quarter of 2006 was recently revised downward to 2.2 percent, implying slow growth for the current quarter as well.

The increasing pessimism on Wall Street and rising gasoline prices have already dampened consumer confidence. The San Diego Union-Tribune's monthly consumer confidence survey – a component of Gin's index – rose 5.8 percent in January but fell 2.1 percent in February.

“January had relatively good stock prices and low gas prices, which helped consumer confidence,” Gin said. “It will be interesting to see what happens to consumer confidence with gas prices rising. There's usually about a 70 percent correlation between gas prices and consumer confidence. If the past is any sign, the prices will put a dent in confidence.”

The 10-month decline in the economic indicators has paralleled a 10-month decline in residential building permits, a sign of the weakening housing market.

“We're weak today, but I think we'll be through these problems in nine months,” said Marney Cox, economist at the San Diego Association of Governments. “Most of the declines are in construction and real estate, and I think we're beginning to see some stabilization there. By the end of this year, I'm expecting that we'll be through this.”

But Peter Schiff, who runs Euro Pacific Capital in Newport Beach, said the real estate decline will be an impact on the economy for quite some time.

“Think about all the mortgage debt that was assumed by San Diegans in the last few years,” he said. “All they're going to be doing is paying interest on that money. Instead of buying a new car or going shopping, they'll be paying down their interest on interest-only loans. And there are so many people who bought homes for zero down payment, they will just be going to be walking out of their homes, if they haven't already, since they have no financial incentive to stay. This is a real disaster.”

Initial claims for unemployment insurance have also risen 10 months in a row, pushing the jobless rate from 4.1 percent in December to 4.3 percent in January. Job growth slowed to a gain of slightly more than 13,000 jobs, compared with an average of nearly 18,000 for 2006 as a whole.

February 15, 2007

San Diego County housing prices slid a bit further last month, returning to mid-2004 levels, as buyers pressed for more concessions from builders and discounts from sellers.

The overall median price stood at $472,000, down 5.6 percent from a year ago and $23,000, or 4.6 percent, less than in December, DataQuick Information Systems reported yesterday. The last time the median was that low was in July 2004, when it was $470,000. The market reached its all-time peak of $517,500 in November 2005.

Single-family resale homes, the biggest part of the market, shed $20,000 from the January 2006 level of $560,000, but the latest median of $540,000 was unchanged from December.

Similarly, the resale condominium median was unchanged at $380,000 from December to January. It was 3.6 percent below the year-ago level of $394,000.

It was in the new-housing sector that the biggest price fluctuations occurred. The median for newly built houses, condos and condo conversions was $395,000, down 8.8 percent from the $433,000 median one year ago and a dip of 14 percent from the December median of $460,000.

Tim Sullivan, a San Diego-based real estate analyst, said what's at work in the new-housing category is a buildup of completed, unsold inventory – finished homes sitting empty in subdivisions and condo projects.

“Inventory (of unsold homes) is the bugaboo everyone is focused on,” Sullivan said.

Sharon Hanley, who publishes a weekly bulletin on local new-home sales, reported that the inventory of unsold homes stood at 5,095 at the end of January – a 36-week supply – with 871 detached and 4,224 attached homes available. At the same time five years ago, the inventory was 2,378 homes.

To reduce the backlog last year, many builders began offering incentives, such as upgrades, discounts and special financing.

Tom Archbold, vice president for sales and marketing at San Diego-based Hallmark Communities, said the company's just-opened, 22-unit Vineyard project in San Marcos offers $30,000 in incentives on single-family homes built on small lots. Prices range from $459,000 to $554,000. Three of the first seven homes released were sold over the weekend.

Archbold said the incentives, usually taken in the form of interest-rate buy-downs, may not last much longer.

“It's not going to get any better than this,” he said.

Hallmark President Mike Hall said last year's sluggish new-home market prompted him to delay his next project, Dixie Village in Oceanside, by several months. Grading is now scheduled to start in April, with sales beginning in June.

“There was a lot of inventory on the market, and that caused prices to soften,” Hall said. “We have enough lots to build on right now, so we're holding them back.”

Tony Pauker, who heads Olson Co.'s San Diego division, said his sales staff detects a slight change in mood among visitors to the company's projects.

“Traffic isn't up terribly in terms of gross traffic, but of those, the true buyers are actively looking in the market,” Pauker said.

To adjust to the slower pace of sales, Olson plans no new openings this year, Pauker said.

DataQuick reported that San Diego's home sales in January totaled 2,772, 4.3 percent below year-ago levels.

The January sales pace marked the 31st straight month of year-over-year declines, but it was the smallest drop since August 2005 and sharply contrasted with the 18.1 percent year-over-year decline registered in December.

The figures were derived from a revised methodology adopted by DataQuick that includes about 10 percent more transactions than previously considered. The way regional median prices are calculated also was altered slightly.

On a month-over-month basis, January had 27.5 percent fewer sales than December, but it was the smallest January pullback from December sales levels in five years. January almost always sees fewer sales than December because so many builders and consumers want to close escrow for tax reasons before the end of the year.

By other measurements, the housing market is not necessarily recovering rapidly from the 2006 downturn. The number of active listings this week on the Sandicor multiple listing service stood at about 16,700, higher than 16,300 last month and 14,200 a year ago, but lower than the cycle's peak of nearly 23,000 in August. The average time it took to sell a resale house last month was 81 days, compared with 69 days a year ago.

Even if slower than a year ago, San Diego's sales pace was much healthier than in other Southern California counties, DataQuick reported. There were 18,128 sales in Southern California last month, down 17.2 percent from January 2006. Riverside County was off 34.2 percent, followed by San Bernardino County, down 28.5 percent, and Orange County, down 16.3 percent. Los Angeles was off 6.9 percent.

As for the resale market, David Cabot, president of the San Diego Association of Realtors and a top executive with Prudential California Realty, said agents in his company and around the county were more optimistic about the coming year.

“I believe the bottom has been hit and should level out and should be going up a little bit,” Cabot said. “I don't know if that is accurate; we'll have to wait until June to see.”

It wasn't just real estate agents who were seeing an end to the downturn. Federal Reserve Chairman Ben Bernanke spoke before Congress yesterday about the “drag from housing” diminishing, while his predecessor, Alan Greenspan, told a Canadian audience that the “worst is behind us.”

January 14, 2007

San Diego's real estate division is cleaning house, hoping to make millions on land that has languished for decades.

It has started pulling a list of property from its massive portfolio that could be considered surplus and giving public entities first dibs. The city, squeezed for cash by a crumbling infrastructure and billion-dollar pension deficit, hopes to put land on the market by June.

For families who live next door to city lots that have become neighborhood dumps and fire hazards, the sales could be a godsend. But hundreds of families who rent land on the list wonder what will happen to them if the properties change hands.

In the 5-year map to fiscal health that he outlined last fall, Mayor Jerry Sanders proposed selling land and signing new leases to make $102.5 million by 2012. The plan estimates land sales and new leases will bring in $15.3 million in fiscal 2008 and $21.8 million in the following four years.

The real estate department has been examining the city's properties lot-by-lot for several months, as part of a review that began after The San Diego Union-Tribune reported that the city did not have an accurate inventory of the 4,000-some parcels it owns.

So far, the city has identified about 60 parcels for government review on its Web site. They include vacant lots in neighborhoods, land around a reservoir, houses and a mobile home park. The city has owned a dozen of the lots since the 1950s and 1960s, and two back to 1915, county records show.

The prospects of a sale are bittersweet for Jasper Lee Adkins, 81, and his wife, Blanche, 78. In the fall of 1958, they moved into a city-owned, two-bedroom home that abuts Highway 94 in the Stockton neighborhood, east of downtown San Diego. Rent was $70 a month.

The city acquired the lot for public projects in 1963 but didn't end up needing it. During the next three decades, the couple said they sought to buy the land, but the city wouldn't sell. After they both suffered strokes, they gave up trying. Rent is now $616 a month.

When a reporter told them that the city now is considering selling the lot, Blanche said they'd still be interested after all these years.

“It would have been paid for by now,” she said, referring to their efforts to buy the land more than 40 years ago. “But I can do nothing about it; you just have to take it as it comes.”

The city owns five houses and a duplex that may wind up for sale. Also on the list are 180 acres of land in the Cleveland National Forest, lots in Dulzura, open space in Sorrento Valley and a border patrol building in San Ysidro.

One property is a vacant lot in Grant Hill that a woman gave to the city more than a decade ago so proceeds from its sale would benefit public parks and libraries. Since then, the lot has been used as an illegal dump.

The most people potentially affected by a sale are those who live in Linda Vista Village, a 220-unit mobile home park overlooking Tecolote Canyon. Many of the residents have low incomes. Some are retired; others are families with children. Some have lived in the 75-acre park since 1980.

On Friday, about two dozen residents gathered in the park's clubhouse to try to figure out what comes next. They had more questions than answers. Do we have first right of refusal? Could we buy the land as a group? Could a developer build condos and force us out?

“How many times can I start over?” asked William Perry, 58, who bought a double-wide home and moved to the park to retire in 1999.

Margaret Neville, a single mother of two teenagers, is on disability. She said she simply can't afford to move. “Where do we go?” she asked.

The city leases the park to Tecolote Investors for about $160,000 a year. The lease, which expires in 2034, requires the company to make one-third of the homes available to low-and moderate-income families. Tecolote Investors collects about $1.6 million a year from residents, who pay between $590 and $638 a month in rent, according to city records. The files also show it cost Tecolote about $480,000 to operate the park in 2003.

Jim Barwick, who started as director of the real estate department in May 2006, said it's too early to address the residents' concerns. He stressed that the city had not yet decided to sell any land, and there would be public meetings before it does. He said he was not aware of a law that would require the city to offer land to people who live in the houses or mobile-home park before putting it on the market.

According to state law, government agencies are first in line to lease or buy certain surplus city properties if they plan to use them for purposes such as affordable housing, schools, parks and open space.

If, after 60 days, no government entity is interested, the city would take a closer look at the land to be certain it was expendable and appraise it to see what it's worth. If it's a good financial move to sell or sign a long-term lease, the real estate department would bring a detailed proposal for each lot to the City Council for approval.

A policy adopted in 1983 calls for the city to sell most properties at a public auction. There are exceptions for landlocked slivers that only an adjoining land owner would want to buy and for land a government entity might want, such the border patrol building in San Ysidro.

Barwick said he planned to recommend the council change the auction policy to allow some land to be sold on the market, which could bring in more money.

The city charter requires that proceeds of land sales go into a capital outlay fund that pays for new public improvements, such as buildings and sewer pipes. It states that money from the fund can't be used for repairs, such as fixing the city's decrepit water lines, but it can go to replace them.

Barwick did not specify what capital projects might benefit from the sales.