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There’s an old adage that says: “When your neighbor loses his job, it’s a recession. When you lose your job, it’s a depression.” The same wisdom likely holds true for the victims of foreclosure as well, and for 4,550 residents of Placer County, 2007 is turning out to be a truly depressing year. That’s how many homes have entered the process of foreclosure in Placer County through September, according to RealtyTrac, a web-based company with listings of more than 550,000 foreclosed homes. To date for 2007, that number represents a 10-fold increase over all of 2005, when just 474 foreclosures were recorded in the county. If the current, chilling pace holds, there will be more than 6,000 foreclosures in Placer by the end of the year.
Nationwide it is an equally dismal story: More than two million
foreclosures are forecast for 2007, the same level as 2005 and 2006
combined. And California is unfortunately on top of the heap, with
337,707 defaults posted through September of this year, representing
21.5% of the national pie. In August alone, 57,875 defaults were
recorded in the Golden State, an all-time national record. The
situation has deteriorated to a level where in many communities, the
number of foreclosures exceeds the number of new house sales. Closer to home, the highest numbers of defaults are in Lincoln, Rocklin
and Roseville—all centers of new home construction. And though Auburn
may have proportionately fewer foreclosures, we’re all in the same
flimsy boat. I’m still getting seven hours of sleep every night, but I believe there
is ample reason for widespread concern about our local economy, even in
the short term. The reason is simple—Auburn is a transaction-based
community that revolves in large measure around the buying and selling
of property. We don’t make anything here, except perhaps wine, and even
that segment is facing huge survival challenges (the subject of a
future column). Think about how many of your neighbors and perhaps how even you are
employed. This town is loaded with real estate agents, mortgage
brokers, appraisers and title companies. On top of that are the banks,
land-use attorneys, developers and construction companies (who do make
tangible products, though these days, a house isn’t a home any more,
it’s more of a financial instrument). At this moment we are in the midst of a perfect storm where real estate
prices continue their relentless slide in the same instant that the
stock of available properties is at an all-time high. The days of easy
money—sub-prime loans written for buyers with over-stated balance
sheets—are finished, and the net result is we’re facing trouble ... big
trouble, right here in River City. Already, a ton of people have been flushed out of the real estate
world, creating a series of residual impacts that rather than trickle
down, cascade on the rest of our fragile marketplace. When the
commissions stop flowing, so does much of the discretionary spending in
our service-based chunk of paradise. Newspapers have been hard hit already, with real estate lineage drying
up faster than the reservoirs that serve Atlanta. First to go when
belt-tightening starts are butts in the seats at local restaurants, and
I’m sure most local eateries would report a softening of business (that
may also be attributable to the sheer number of establishments now
operating in Auburn). When pressed, people will pay PG&E before
popping for a night on the town. If/when regular folks start ignoring record days on Wall Street and
focus their attention on the reality of what is happening on High
Street, retail will be the next to take it in the gut. The test will be
how wide consumers everywhere open their pocketbooks for the Christmas
season. We’ll see, but there is one huge issue that undoubtedly will
hurt places such as Auburn ... the very real threat of $100+ for a
barrel of oil. Though American drivers have reluctantly adjusted to gasoline at $3 per
gallon, an $80 price point for a full tank at $4 per gallon might be
another story. We’ll quickly feel it in higher prices for all goods,
and we’ll see it in reduced tourism in Old Town, Downtown and the
American River Canyon, not to mention diminished Tahoe traffic. Normally an optimist, I’d love to point to the commercial construction
sector as a bright spot within our local community, what with a new,
72,000-square-foot shopping center going in at Luther and Hwy. 49, as
well as more than 120,000 square feet of new office space planned in
two new complexes near the airport. Problem is, we already have a ton
of vacant commercial space. Auburn’s two newest shopping centers—both beautiful projects—are
struggling mightily. The Skyridge Courtyard has never reached 50%
occupancy, and the new, 47,000-square-foot Nevada Street Commercial
Complex (next to the movie theater) is deserted. A mix of retail and
office space, it has a lone client: Wachovia Securities. Looking for office space? You can get up to 44,000 square feet at
Creekside (behind the multi-modal station) and up to 24,000 square feet
in Auburn Towers on High Street (completely dark). For insight into the
broader picture, Coldwell Banker Commercial publishes a quarterly
report of local activity. The most recent “partial” survey lists more
than 150,000 square feet of vacant office space; another nearly 60,000
square feet of available retail space ... in Auburn alone. Go up or down the hill and there is plenty more to be had. The new
shopping center at the Penryn I-80 exit is sucking wind, and all of the
exchange construction at the Sierra College exit is designed to
accommodate a boatload of new box stores. In my view, the message to Auburn leadership in both City Hall and the
Chamber of Commerce should be crystal clear: focus as much energy and
resources as possible on solid economic development programs. This
isn’t a time to rely on the hope that “If we build it, they will come.”
We need to develop and communicate a creative marketing strategy to
help navigate the troubled waters ahead. Gary Moffat is a journalist and co-owner of Carpe Vino in Old Town
Auburn. Read his other work at www.onlyinauburn.com and
www.carpevinoauburn.com.
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