I had a new client come through this last week.

She owed about $400 between Fed & state. I told her she gets the gold medal for breakeven taxes. We should have a contest. LOL. It seems like most of my clients have WAY overpaid/underpaid this last year. Yeesh.

It's frustrating to see the ones with situations who are struggling but are unwilling to change their withholdings. (The family who went down to one income due to illness or the many people who came through with 2 houses, trying to sell one). Likewise, more frustrating are the clients who make big financial decisions and don't think to run it across their tax profesional. Then they are surprised when they owe $5k. I had a client lose her ROTH contribution because she sold a large chunk of stock and pushed her AGI too high. Someone else took $30k in retirement distributions, and they were surprised they owed. (Had not withheld anything). Etc., etc.

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In other news, CNN had an article on Top 10 foreclosure cities and sacramento was ranked #1. I've seen it at #2 or #3, but not #1 before. Yikes.

OF course #2 was Vegas. Gee, the hot climates are suffering.

That's the thing about Sacramento though. Our home had run up a good 125% at the peak (from when we bought in early 2002 - to the peak in late 2005).

Most of the people I met in the area either moved here from more expensive lands and then moved on to ORegon/Nevada with all that home equity. OR they felt priced out of home ownership and moved to Oregon/Nevada to buy a home. But the first group really were key in running up prices. PArticularly since they either already had equity from more expensive areas, or like us, just found the prices to be dirt cheap in comparison. (Whereas from the locals' perspective it was getting quite expensive in 2001/2002).

Since we enjoy the area so much, I really thought high prices were around to stay, for the most part. & still I think a decent amount of home appreciation is around to stay permanently. (I know too many people longing for $100k houses again, like you could get a decade ago, but I think that's a pipe dream).

But I guess we are unique. It seems like not very many people are tied to the area. Seems like most of the transplants have moved on.

Sacramento has historically been the cheapest area of Cali to live in, and it still is by a mile. I will just never get it. All I can figure is the combo of the weather (very hot in the summer whereas most of the state is rather mild year-round) and also the jobs. The jobs just aren't here. I admit most of the people who came through here the last few years didn't have jobs here. So it was a no brainer to take their insane equity and go to where the jobs were in more affordable states. A majority of the people I have met here had jobs in the Bay Area.

That's really all I Could figure. I saw Stockton (very nearby) has been hitting #1 in foreclosures for a while. But I think, who would want to live there??? & how come no one wants to live in Sac??

IT is a really weird dynamic because there is so much money and jobs in the Bay Area that there are many less nice areas between here and the Bay that have insane house prices and are thriving. Likewise, if you are in Sac and you want to move out to the country, or further out from the hub, it just gets more expensive. Very counter-intuitive. But the reason why is very clear. The further you get from here, the closer you are to a bigger metro hub.

Likewise, Sacramento seems to have location down pat, but it is the least desirable area of the state. I mean 1-2 hours drive to the snow and beautiful lake tahoe. Just over an hour to San Fancisco and the beach. A days' drive from the bauty of Northern Cali, Washington & ORegon. OR likewise, just a few hours to Disneyland/So Cal. Houses are cheap and I have an awesome job. The area itself is very beautiful (as it has been historically much less metro - it is called the city of trees). Likewise, this is our haven. I REALLY miss the 70 degree year-round weather back home. I grew up quite spoiled. But it's not worth the insane cost of housing for that one benefit. IT's really all I miss. So it still boggles my mind somewhat that this is undesirable land. But it really all comes down to the jobs I guess.

Anyway, it's not terribly shocking that home values plunged 20% last year (on average - some areas even more). It was quite obvious the high prices couldn't be sustained for the long haul. I mean, still leaves us with a good $100k equity over our purchase price. Though we've lost $250k in the course of a year. So yeah. The fact that so few really bought at the peak and so many are in trouble is just really mind boggling. Clearly the true problem in the home equity ATM mindset. Indeed.

Likewise, it's funny, but we are working with a mortgage broker highly recommended by a friend. I like him okay, and I think he will be able to help us refi, but he is REALLY into rental real estate. I told him a couple of times we weren't interested in the least. But he is really gung ho and just sent a general newlsetter about how he is going to buy and wants to help his clients get in the market. But since then I keep talking to other people who want to snatch some up with these "low" prices. IT's not just him.

Likewise, all my friends who have been priced out the last few years are excited at the chance to buy a home.

So, they are circling. Likewise, a foreclosure went in our neighborhood for $350k but afterwards one went from $400k.

I read somewhere it will yo yo for a while. Indeed.

It seems like not a lot of lessons have been learned from what I See of the people wanting to buy right now. I mean I met this broker guy once and told him we weren't comfortable with a 15-year mortgage right now, though we may be in a year or 2. We went over all of our finances for loan qualification.

Anyway, so he is trying to get me to buy rental real estate. He seemed really reasonable until he got on this kick.

No thanks, I do NOT need a seond mortgage right now. Frankly, it's the last thing I need. & even if I Was interested, I'd wait it out a bit longer. Indeed. But yeah, I liked him until that. He seemed very reasonable until I clearly saw that he sees no downside to buying a house, for rental, that one could not afford without the rental payment. Not my idea of a good financial move.

But it's just an indicator that cycle may just begin anew. Everyone who didn't get screwed over the first time didn't learn a thing. They are chomping at the bit to jump into the mess. Yikes!! Like they think they have the secret weapon. If nothing else I was bothered that this rental plan depended heavily on renters. Shaky financial ground indeed. I don't even have a dime to put down on a house anyway. Not one worth owning anyway...

So yeah, I watch very interested as all this plays out. I am at a loss to what's next... I can guess another year of losses though as subprime ARMs reset like crazy this next year. & is primarily what makes up the high prices in this area - lots of suprime ARMs that drove up housing prices.

I guess we are officially at ground zero though, according to CNN.