Thursday, June 18, 2009

Trouble in Paradise: Marin County - foreclosures double - commercial real estate vacancies top 41%

Marin County commercial real estate vacancies top 41%

While not faring as badly as some California Counties, Marin County, according to the 2000 census, has the highest per capita income in the country, is awash in supply in commercial and residential real estate. Vacancy rates in class A commercial real estate is cited as being over a stunning 41% in San Rafael by the Marin Independent Journal. The Examiner recently reviewed one of the most extensive reviews of current foreclosures throughout Marin County provided by Foreclosure Radar. Foreclosures almost doubled to over 800 residential properties from the 440 cited by the Marin Independent Journal for 2008 ( just five months ago. The 800 plus Marin households cited are currently in pre foreclosure, foreclosure or being auctioned off by banks. The entire housing supply in Marin County according to wikipedia totals 61,000 (,_California) .

Mortgage experts have often cited some localities in California as being relatively immune from harsh downturns in real estate due to a limited supply of new homes or office buildings due to stringent building codes, zoning and a anti growth stance among the local community. Estimated values for the distressed homes in Marin County ranged from $100k in Novato to a $3.6 mm home in Tiburon an $4mm home in Kentfield. Mark Hanson, Managing Director of the Fieldcheck Group thinks its going to get much worse before it gets better for the mid to high end of the residential market. " I don't think we have begun to see the beginning of this negative equity crisis yet. Its all about who can buy these homes at the higher end and with the home financing market tightening the way it is, the number of buyers that can put down $300k - $400 k cash in order to buy a $1mm plus home is getting smaller and smaller. Historically, 'move up buyers" would take up supply in the high end, but these potential buyers can't sell their homes at their desired prices and therefore can't move. I think we are heading for a castastrophic fall in home values in the upper end of the housing market. " According to the website: , as of May 2009, 19 homes were listed for sale in Ross, with 0 being under contract.

The economic impact of the distressed markets and high upturn in vacancy rates is not good for the County and City government budgets within Marin County as the tax rolls suffer from lower taxes bases when homes are finally sold to receiving little to no income from vacant commercial properties. The inventory of unsold homes continues to grow, actual sales (which triggers precious sales tax revenues for the cities and County) have stalled. Meanwhile the continuing increase in the velocity of foreclosure listings further deteriorates local markets as banks auction off homes for rock bottom prices creating a downward spiral on property values.

Like many Counties around the state, the County of Marin has a large and growing unfunded pension liability with 14 recent retirees receiving over $100k for life from taxpayers. Estimates for unfunded public employee pensions and medical benefits range from $700mm to over $1 billion which means cuts in services and a "crowding out" effect for government services to taxpayers as all monies are used first to payoff cadillac pension and healthcare benefits. Recent statewide initiatives, backed by Governor Schwarznegger, leading Democrats and public employee unions, asked California voters to approve more taxes. Four out of five of these intiatives were soundedly rejected by voters, thus leaving policy makers and government leaders little room to manuever. The mandate and choices are few but one is clear: "cut" And local government leaders can no longer look to any budget relief from real estate sales as the economy continues its stall and with unemployment statewide at almost 10% and current and unfunded budget deficits soar.

According to the San Francisco Chronicle, home prices are seeing significant declines or "reductions" original asking prices from Marin County home sellers . In Tiburon, 28% of homes had to lower their prices close to 20%, In Mill Valley, 34% of homes put up for sale reduced their asking prices, on average by 8%. With multi million dollar homes, these write downs can be costly, particularly given most homeowners put up 20% equity or less to buy their homes. Should prices deteriorate more than 20% or more , many Marin homeowners find themselves in a "negative" equity situation...further fueling homeowners' concerns and heightening the risk of even more and more foreclosures perpetuating deeper declines in property values across the commercial and residential markets. This toxic swirl has already hit the lower end of the Marin residential markets hard in places like Novato, where homes have settled back 40% from their highs two or three years ago.


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11:04 AM  
Blogger Matthew said...

Marin residents are just more creative (and determined) in hiding their balance sheets and income statements... We'll see a 20-25 percent (additional)correction coming to housing prices in a Marin County town near you... bank on it...

9:01 PM  
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3:31 PM  

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