Santa Cruz County Bank In The News
2011 NEWSMAKERS: Some job gains, but foreclosures weighed on the local economy like an anchor
January 3, 2012
By Jondi Gumz - Santa Cruz Sentinel
It's been two years of recession since the housing bubble burst, followed by two years of excruciatingly slow recovery. Local business owners, government officials and residents all continued to keep an eye on the plodding economy in 2011.
Bank profits have rebounded dramatically but the same can't be said for unemployment, which stood at 10.6 percent last month, down from 12.7 percent a year ago. It's still higher than anyone would like.
Local consumers responded enthusiastically to Bank Transfer Day on Nov. 7, moving their money out of banks with national and global operations to locally owned banks and credit unions.
Yet, the economic forecast remains cloudy.
There are 99,000 people working in this county compared to a year ago, when there were 97,000. But there are not as many as the 101,000 seen three years ago.
"If we don't pick up the pace of job creation, it's going to be another six years," said Jeffrey Michael, director of the University of the Pacific Business Forecasting Center, speaking to the Santa Cruz County Business Council last month. "I do think we will pick up the pace, but it might be another two years."
Michael is forecasting a 1 percent increase in jobs in Santa Cruz County in 2012 and an increase of .4 in 2013.
Government has been the largest source of jobs here, but even it has been forced to cut back. Budgets are pinched by the climbing costs of pensions and health insurance while revenues are static or shrink.
UC Santa Cruz is the largest employer in the city of Santa Cruz, with 7,364 employees as of June 30, followed by county government, with 2,319 employees, and city government, with 780 workers.
All three employ fewer people than two years ago. The downsizing has been most severe for the city of Santa Cruz, which has shrunk its workforce by 28 percent in two years. Of the city employees who remain, most are living with increased pension costs and some face more furloughs.
Cabrillo College, another major employer in the public sector, traditionally has offered stable work. But this month, the faculty union hosted a workshop on unemployment benefits for temporary part-time instructors known as adjuncts. About two-thirds of the Cabrillo instructors fall into this category.
Tourism and agriculture are key sources of private-sector jobs, but many pay less and offer seasonal rather than year-round work. Retail is unlikely to lead the way to recovery, with consumers spending cautiously as pay hasn't risen but healthcare premiums have.
The healthcare sector has enjoyed a solid job recovery but is feeling pressure to cut costs as federal reforms loom in 2014. Dominican Hospital contracted with a national group to provide physician coverage for its emergency department in 2012.
Jobs were lost when Bethany University, a privately run institution, in Scotts Valley closed in mid-summer for financial reasons, but Olivet University took over the campus, bringing in new faculty in September.
The housing sector remains mired in foreclosures, resulting from lenders being too loose with loans and consumers assuming home values would always go up. During the past five years, lenders have posted 8,600 notices of default in Santa Cruz County for borrowers behind on payments, and more than 3,800 homes have been lost to foreclosure, according to the weekly Santa Cruz Record.
Only a small percentage of borrowers who get a default notice find a solution through loan modification programs. So far this year, 728 homes in Santa Cruz county were lost to foreclosure, while Keep Your Home California helped 48 families in Santa Cruz County, and the federal Making Home Affordable program had 763 active loan modications as of October according to the latest Treasury data.
It takes a year for a lender to complete the foreclosure process and sell a home in Santa Cruz County, according to ForeclosureRadar.com, a tracking service. It's not unusual for a foreclosure sale to be postponed as borrowers seek the lender's permission to sell the property for less than the loan; in Santa Cruz County, more are filing for bankruptcy.
This year may be the turning point. The number of default notices is down 16 percent and scheduled foreclosure sales are down 5 percent from 2010, which could herald fewer foreclosures in the future.
The median price for a single-family home has fallen to $410,000 from a peak of $789,000 in 2005, according to figures kept by Gary Gangnes of Real Options Realty. Interest rates are at near historic lows, but sales volume is largely unchanged from year ago, and would-be buyers find a skimpy selection because homeowners are reluctant to sell.
Meanwhile, construction jobs have shrunk by half with no rebound in sight. The number of single-family residential building permits in the county is down 26 percent from a year ago, and off 80 percent from 2007.
In the commercial arena, there was activity in the hospitality and health sectors, but there was more remodeling than new construction.
The Fairfield Inn & Suites opened in Capitola, and the Beach Street Inn & Suites in Santa Cruz and Rio Sands motel in Aptos got makeovers. The Palo Alto Medical Foundation built a new doctors' office in Santa Cruz, Watsonville Community Hospital opened an urgent care clinic in a shopping center, and Planned Parenthood found a larger location for the Watsonville Health Center.
Other remodeling projects include Staff of Life's new larger market, Ace Hardware on Santa Cruz's Eastside and Verve Coffee Roasters downtown.
Two big projects are in progress. Bay Photo bought the empty Seagate Technology property in Scotts Valley and plans to move next year. Target started remodeling the former Gottschalks space at the Capitola Mall for a July opening.
Santa Cruz County Bank and Santa Cruz Community Credit Union have supported the recovery, granting $10 million in loans guaranteed by the federal Small Business Administration compared to $200,000 loaned by three national banks.
AT A GLANCE
HOW FORECLOSURES WORK
The foreclosure process starts with a notice of default when a borrower is at least three months behind in payments. The next step is when the lender sets a date for a foreclosure auction. Many sales are postponed as borrowers ask lenders to modify their loans or approve a sale for less than what they owe, but only a small percentage have obtained a loan modification through a state or federal program. Here are statistics for Santa Cruz County as of Dec. 20.
2006 - 2007 - 2008 - 2009 - 2010 - 2011*
Notice of default - 452 - 993 - 1,784 - 2,079 - 1,695 - 1,422
In foreclosure - 146 - 506 - 1,355 - 1,700 - 1,404 - 1,422
Sold by lender -- - 260 - 906 - 727 - 747 - 728
Source: Santa Cruz Record