Wells CFO: California economy close to bottom

Wells Fargo, the San Francisco banking giant, is sounding more bullish on the California housing market – at least compared with places like New York, where the downturn began later.

“It’s premature to say the economy has bottomed out,” Wells’ chief financial officer, Howard Atkins, said in an interview this morning as the bank reported record earnings.

 “But clearly there are signs that indicate to me we are closer to the bottom,”  Atkins said. “Some of that is in the housing sector. With interest rates so low, we are seeing volumes picking up, even in California – not just refinancings, but home purchases.”

Because California’s housing market collapsed earlier than many other states, “it will come out earlier. New York is definitely still  declining,” Atkins said.

Wells' first-quarter statistics showed $1.6 billion in revenue from mortgage loan originations and sales on $101 billion in new home loans. That put it ahead of Bank of America Corp. as the biggest originator.

There were $100 billion in additional mortgages in the pipeline at the end of the first quarter, up 41% from the previous quarter, Wells said.

Atkins said that Wells has added 5,000 mortgage employees to handle the surge caused by rates in the 5% range for 30-year fixed-rate loans. Given the backlog of pending home loans, they’ll be kept busy at least through the end of this quarter, he said.

Bank of America also recently said that it is adding 5,000 employees to handle the huge volume of loans.

Atkins’ comments came as Wells released first-quarter earnings. As the bank pre-announced April 9, its profit was about $3 billion before dividends to preferred shareholders. After dividend payments – including $372 million owed on $25 billion in taxpayer bailout funds – it earned $2.38 billion.

A year earlier, Wells had turned a profit of $2 billion. But in the fourth quarter it lost $2.7 billion.

-- E. Scott Reckard

California cities step up to keep sources of tax revenue

A "60 Minutes" segment Sunday focused on Wilmington, Ohio, a town where many livelihoods center on one major employer, DHL, a shipping company that is laying off big-time. Closer to home, Monday's Wall Street Journal looks at some Golden State communities trying to hang on to businesses in "California Towns Bail Out Auto Dealerships":

Detroit's troubles are forcing some communities to attempt an auto bailout of their own: propping up their local car dealerships.

Two California towns, hoping to preserve jobs and tax revenue, are bailing out local car dealers that are struggling to stay afloat amid tight credit markets and plunging demand for new vehicles.

Victorville, a desert town on the main highway between Las Vegas and Los Angeles, recently approved a $200,000 loan to Victorville Motors, a 40-year-old family-owned dealer in the town's auto park. Norco, east of Los Angeles in the so-called Inland Empire, has approved loans of $500,000 each to Norco Mazda and Frahm Dodge. A third city, Redlands, is mulling over a financial-assistance proposal for its new- and used-car dealers.

The Southern California cities, among the fastest growing in the U.S. until 2007, are reeling from home foreclosures and a collapse in the construction industry.

Car dealerships in these towns have been the economic engine of local government as well as pillars of the community, sponsoring everything from Little Leagues to rodeos. Victorville Mayor Rudy Cabriales said car dealers are the city's largest source of sales-tax revenue. Victorville, a city of about 106,000, projects sales and use tax revenue of $19.5 million in fiscal 2009, down 24.5% from last year....

"The last thing we want is for them to shut down, leaving an empty building, an eyesore in the auto park, and more people unemployed," Mr. Cabriales said.

Meanwhile, Victorville home values were battered last year. It's 92392 ZIP Code saw a median sales price decline of 44.8%, 92394 dropped 45.6%, and 92395 dropped 42.4%, according to MDA DataQuick. San Bernardino County as a whole saw a 40% drop. Norco, in Riverside County, saw median home sale prices drop by 31% last year. Not quite as bad as the county as a whole at -37%.

For all of Southern California, foreclosure resales were 55.7% of December activity, up a tick from 54.7% in November and more than twice the 24.3% in December 2007, reports MDA DataQuick.

It's somewhat curious that cities would cough up money to save dealerships, but in these California cases it doesn't seem to be so much about jobs as tax dollars.

In Norco, a city of about 24,000, car dealerships are expected to contribute about 40% of the $5.5 million the city expects in sales-tax revenue this year, according to City Manager Jeff Allred.

Still, there's no guarantee these businesses won't go belly up anyway. Who can afford to buy a car these days? Seems to me they could be throwing good money after bad.
 

-- Lauren Beale

Thoughts? Comments?

L.A. County unemployment at 9.9% last month

As employment relates to paying the mortgage or the rent, here's the latest on latimes.com:

California's unemployment rate jumped to 9.3% in December -- the highest in 15 years -- and with more layoffs expected, economists predicted even higher numbers for the rest of the year.

The state Employment Development Department today reported that the December jobless rate was up almost a full percentage point from 8.4% in November. It stood at 5.9% a year earlier.

The rate for Los Angeles County, which like the state number is seasonally adjusted, was 9.9% for December, up from a revised 8.9% for November.

"It's an ugly report," said Howard Roth, chief economist for the state Department of Finance. "We're in the grips of a formidable recession," with the highest unemployment since January 1994.

And yes, it seems to come back to housing.

"What's happening is the weakness that originally was in construction and financial services has spilled over to everywhere," said economist Esmael Adibi of Chapman University in Orange.

I'm with the economists on this one, I don't think we've seen anything yet. So does this mean one in 10 L.A. households can't cover their housing expenses?

-- Lauren Beale

Thoughts? Comments?

Photo: Eva Pilon assists a job seeker at Goodwill Industries' career resource center in Los Angeles. Credit: Luis Sinco / Los Angeles Times