California Leads U.S. in Defaults, Home-Price Decline

[marmar]

from Bloomberg:



California Leads U.S. in Defaults, Home-Price Decline (Update1)

By Daniel Taub and Dan Levy

March 20 (Bloomberg) -- Sacramento may eliminate up to 600 jobs in the city's first staff reductions in half a century, and the police and fire departments in the California capital may have their budgets cut by 20 percent. The culprit is the collapse of the U.S. housing market.

California, the birthplace of the subprime mortgage industry, is paying the highest price of any state as the housing meltdown persists. Its gross domestic product will drop 1.5 percent in the first half of 2008, the most in the U.S., analysts at Lexington, Massachusetts-based Global Insight Inc. estimate.

The state had the most foreclosure filings in the U.S. last year and the biggest fourth-quarter decline in prices, according to RealtyTrac Inc., an Irvine, California-based seller of data on defaults, and the Office of Federal Housing Enterprise Oversight in Washington.

``The depth and magnitude of what's happening in the real estate market is really, really grim,'' said Russell Fehr, Sacramento's finance director, in an interview.

California, the most populous U.S. state and accounting for almost one-seventh of gross domestic product, will lose $25 billion in personal income by the end of 2008 and property values will fall by $630.7 billion, according to forecasts from economist Jerry Nickelsburg at the University of California, Los Angeles, and the U.S. Conference of Mayors.

Economic `Drag'

``The housing slump is the real drag on the economy,'' Nickelsburg said.

Almost half of the 25 biggest U.S. subprime lenders were based in the state, according to industry newsletter Inside Mortgage Finance, and almost a quarter of the country's outstanding subprime loans were issued there, more than in any state, data from San Francisco-based research firm LoanPerformance show. Such loans are made to borrowers with limited or tainted credit histories. .......(more)

The complete piece is at: http://www.bloomberg.com/apps/news?pid=20601109&sid=a_IN0W3.lFV0&refer=home