The tide has turned red in California.
Gov. Arnold Schwarzenegger said Friday he will declare a "fiscal emergency" in January to give him and the Legislature more power to deal with the state’s growing deficit.
The nation’s largest state economy is struggling with shrinking state tax revenue from the meltdown of the subprime housing market and the credit crunch on Wall Street.
The shortfall is now projected to be more than $14 billion. That’s a 40 percent jump that would put it among some of the state’s worst fiscal emergencies.
California, of course, is practically ground zero when it comes to the housing bubble. But it certainly won’t be alone when it comes to budget shortfalls– just the first. Many more will follow.
Here’s a taste of what going on in housing markets all over the state.
From the San Jose Mercury News by Peter Carey entitled: Housing slump hits home in East S.J.
"The wave of foreclosures sweeping Santa Clara County has hit its Latino residents the hardest, stripping many first-time buyers of their homes and sending financial shock waves through the South Bay’s largest minority community.
Nearly 60 percent of the 1,429 properties in the county taken back by lenders from Jan. 1 to Nov. 15 were owned by people with Hispanic surnames, according to a Mercury News analysis of data provided by ForeclosureRadar. In San Jose, that figure was 69 percent.
"It was great giving people their American dream," said Dolores Marquez, a retired community worker and long-time East Side resident. "But God, how they hooked them in and snatched it away."
"There are tons of houses on my block that haven’t sold," said Veronica Frausto, a county social worker and single mother who bought her house for $612,000 in 2005. ‘They have signs up, and it’s affecting the value of my home as well. It’s ‘price reduced,’ ‘price reduced.’"
"That has trapped people like Frausto, who is unable to refinance her no-down-payment loan because of the drop in home prices. She is renting rooms and working with her lender to try to avoid foreclosure."
Girlie Bass, a registered nurse whose husband drives for the Valley Transportation Authority, is trying to get her lender to take back the "fixer-upper" on Aetna Way in San Jose she bought for a borrowed $615,000 in 2004. "I just want them to release me from the mortgage. Take the house. I don’t care if I get a dime out of it," said Bass, who is 61. She said her loan payment is now $6,497 a month, far outstripping her and her husband’s ability to pay.
Neighborhood Housing Services Silicon Valley says it is getting an average of seven requests for help a day from homeowners worried about making their mortgage payments or losing their homes. These are largely Spanish-only speakers with an average loan balance of $475,000 to $575,000 typically earning an average of $3,300 or less a month per household, according to Marlene Santiago, the agency’s bilingual foreclosure counselor.
"‘Most of what I’ve seen is the client cannot afford the home due to the fact they probably should never have been put into that loan to begin with," said according to Marlene Santiago, Neighborhood Housing Services Silicon Valley’s bilingual foreclosure counselor."
The bottom in housing is nowhere in sight.