Wednesday, Sept. 19, 2007 | When 25-year-old Richard Kabel toted his business degree to San Diego from Michigan a couple of years ago, he landed a job working behind the scenes for a real estate developer, researching potential lots to purchase and analyzing business moves.
But soon, he heard stories of the money to be made in the frenzied housing market, even as it descended from the peak times in 2004 and 2005. He got his real estate sales license in 2006 and sold some condo conversions for the developer. He’s now looking for other work.
“I was gonna give it a shot,” he said. “It was a pretty lucrative career in the San Diego area for the past couple of years. But I came in at probably the worst time to get into real estate. I missed the party, so to speak.”
Still, Kabel wasn’t alone. The success of the housing market earlier this decade inspired Californians, business-inclined and otherwise, to enter the industries tied to its booming ascent, even after it started to show signs of slowing. Mortgage, title, escrow, construction and real estate companies of all sizes added staff and increased operations. But a plummeting number of home sales, dropping prices and increasing foreclosures have left the real estate-related industries reeling of late.
The numbers tell the story. Kabel was one of 140,921 people in California to take the Department of Real Estate’s salesperson exam in 2006, a decline from the 164,000-some who took the exam in 2005. That’s up dramatically from about 35,000 test-takers in 2000.
Some months earlier this decade, close to 20,000 people took the entry test. Only 8,503 took the test in July 2007. It’s a far cry from the days when the DRE conducted mass real estate exam days, issuing thousands of tests in a single day at convention centers throughout the state.
And from July 2006 to July 2007, the construction sector lost 3,500 jobs in San Diego County. The financial services sector — including real estate and mortgage industries — lost 1,500 jobs in the same period.
Last month, locally based subprime mortgage lender Accredited Home Lenders announced it was cutting its staff by 62 percent — 1,600 jobs nationwide — and closing 60 of its branches. Other local lenders and branches of national lenders have closed their local operations, leaving loan processors, underwriters, office assistants and others out of a job here.
Many with experience are joining firms with better success weathering the slowdown. But the adjustment comes at a time when just making a loan to a client is more difficult. Now, even standard mortgages come with a load of new qualifications and requirements imposed as a reaction to the crisis in the subprime market, the section of mortgage borrowers whose credit was poor and whose incomes were often not verified.
“It’s like musical chairs out there,” said local mortgage consultant Mark Goldman, a broker with Windsor Capital Mortgage Corp.
The job losses corroborate the pessimistic prophecies issued by some housing market analysts in the last two years. They expected the housing market would fall, and the damage would not be contained within the market. Now, the jobs bleeding from various sectors in the region underscore the spillover of the housing-market trouble in the greater economy.
The impact of the job losses evokes mixed reactions. Local economist Alan Gin delivered a speech to a group of Realtors recently, telling them about the industry job losses in the county, and was shocked when the crowd began cheering.
“It’s not good because we’ve got fewer jobs out there, but some people in the real estate industry might argue that it’s a good thing,” Gin said. “Some people during the real estate boom just thought it was a way to make quick money.”
Lynn LaBreche Hamilton, a Realtor, believes it was too easy to get a job in real estate this decade. Hamilton’s company, OneSource Realty, was sold to Coldwell Banker a few months ago.
“[The job loss] is almost a healthy thing,” she said. “It kind of weeds out people that maybe weren’t the strongest agents. Back then, everybody had a sister who sold real estate.”
Hamilton had been with OneSource for eight years when it was sold in June. She’s working now for Coldwell Banker, but said some of her few hundred colleagues from OneSource left the company, or real estate entirely, during the switch.
One self-employed loan processor in North County who’s been in the industry for a dozen years said the slowdown in work means she’s headed for foreclosure on her own home. She asked to remain unnamed so that the few clients she still has don’t disappear entirely. Her story is indicative of the trouble faced by scores of San Diegans in these market conditions.
In 2005, she made $120,000 processing loans for several mortgage companies. Last year, her income was about one-third of that. And now, she said, her income has dwindled to almost nothing.
Last month, for example, she processed just two loans for a monthly income of $800. They were home equity lines of credit, refinance loans for which she receives just $400 per loan instead of her usual $600 fee.
She made enough to buy a condo for $309,000 in 2005, and to rent office space for her business. Her monthly mortgage payment is $2,300, she said, nearly six times what she earned last month. She’s assessing her options to get out of the condo and thinks she will probably end up foreclosing on it and moving in with her boyfriend.
She moved to San Diego from Massachusetts with a degree in communications more than a dozen years ago. When she arrived, she did what she called the “move to San Diego and don’t know anyone” jobs — assistant to a school photographer, door-to-door restaurant coupon sales. Those aren’t an option now, she said.
“Absolutely not,” she said. “I’m 40 years old — I’m not going back to selling coupons door to door.”
Mortgage processing was her ticket out of those jobs, so she believed. But her financial livelihood was doubly tied to the housing market — in her job and in her La Costa condo, which she doesn’t expect to get more than $260,000 for if she were to sell.
“I didn’t make enough money where I thought that I could purchase a home until I entered the mortgage industry,” she said.
Still, she believes the market will come back.
“It’s probably never going to go back to the heyday that it was,” she said. “People are going to leave. The fly-by-nighters who hopped on board will go back to selling cars or whatever they did before.”
Kabel, the former Realtor, sold his own condo and now rents in Little Italy. He is looking for work at a commercial real estate firm, hoping to remove himself from the near-meltdown in the local residential scene. Industry analysts say the commercial sector is faring better.
Kabel said one of the biggest impacts for the young people who entered the industry when times were good is a lifestyle change.
“People have a tough time adjusting their lifestyles; they had the metro scene going downtown and everyone had this image of themselves that isn’t holding true anymore,” Kabel said. “It’s a tough pill to swallow. When the Realtors go, the mortgage brokers are next.”
Pida Kongphouthone, the 31-year-old president and broker at California Capital and Investment Group, said business is good for him. But for his friends who specialized in making loans that are now much harder to get — those subprime loans for poor-credit consumers, or jumbo mortgages (more than $417,000), aren’t faring so well.
“A lot of my colleagues that are in title companies are being laid off,” he said. “Direct banks, lenders and other mortgage companies are closing down, because they don’t have the products anymore.”
And the people who were once flying high are stuck now, he said.
“Here’s what it comes down to: there were a lot of people who were making a lot of money and not doing much work,” he said. “And now they’re realizing that they’re not going to make $10 or $15K a month at a regular job, even if they have a Ph.D., so it’s a reality check for them.”
Sharyn Crown, a longtime Realtor based in Coronado, said that reality check is welcome.
“A lot of people think it’s easy money, but when a lot of people get into it, they realize it’s actually a job,” Crown said. “A lot of people have never been in anything but a hyper market. But if you can survive in this market, you can survive in any market.”