COSTA MESA UNPLUGGED:

My carcass was among those tossed to the curb the last time the nation’s housing market did a face plant.

It was 1991. Nearly the entire aerospace industry had packed its bags, loaded tens of thousands of jobs into the station wagon and left Southern California for good. The move was a lead pipe to the housing market’s knees here, which was already staggering a bit from years of partying during the Reagan-era boom economy. It was a scary time. My wife and I had just learned we were expecting our third child. Days later, I was handed a pink slip. Two days later I started my communications business. And I haven’t looked back.

The current housing market malaise is different in two ways: One, it’s far worse than the 1991 train wreck. Two, it’s worse because its causes are much more deeply rooted in the financial gear work that drives the buying and selling of homes.

This time, housing markets are in a flat spin — and Costa Mesa’s is not immune — because they soared too high and too fast on really cheap jet fuel. Put another way, rock-bottom, post 9/11 interest rates and really dopey mortgage contraptions such as zero-down, negative amortizing, stated-income and option ARM loans made it just about possible for a chicken salad sandwich to buy a pad.

The buckets of near-free money revved demand to extraordinary levels, driving prices beyond the physics of affordability. In many O.C. ZIP codes, home prices doubled in just 24 months and became disconnected from median incomes in the region.

So now the piper is at the door, wanting his due. Resetting mortgage payments are draining bank accounts, setting off an unprecedented wave of foreclosures. Swelling home inventories coupled with a contraction in mortgage availability are sending prices whistling back to earth.

Probably it will be the end of 2009 before there’s light at the tunnel’s end. But, that will only be the beginning of the recovery.

The implications of this housing market hangover for Costa Mesa are already proving profound on a couple of fronts. Badly drooping home values in Newport-Mesa — particularly those on the Costa Mesa side — have put the skids to the Newport-Mesa School District’s plans to sell Measure F bonds during the 2008-2009 school year. That could stall several Measure F projects, including the construction of the planned Costa Mesa High School Aquatics Center.

Those Measure F bonds — structured as tax assessments against Newport-Mesa property values — were designed and packaged in anticipation of 6% annual appreciation in home values. But California’s tax assessor sees only 4% to 6% home value appreciation in Orange County in the coming few years. I’m thinking it won’t even be that much, sadly.

Costa Mesa City Manager Allan Roeder said the flagging real estate market — and the follow-on drop in retail sales given the closing of most folks’ home-equity ATM machine — will pinch the city’s coffers.

Noting that Costa Mesa’s annual property and sales tax revenues combined are less than Newport Beach’s property taxes alone, Roeder said “We’ve been running at about a 7% to 8% increase [in general fund revenues] per year over the last three to four years. That will likely drop to 3% to 4% for the coming year.” But much of that smaller increase “has already been eaten up by the negotiated compensation increases for police, fire and other personnel,” Roeder said, anticipating that the real general fund revenue increase this year will be more like .75% to 1%. When a city’s general fund revenue growth shrinks — in fairly short order — from 8% to just 1%, the ripples of the real estate market malaise are hard to ignore.

Fasten your seat belts.

BYRON DE ARAKAL is a former Costa Mesa Parks and Recreation Commissioner. Readers can reach him at [email protected].