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 If you haven't been following the saga of Atlanta mortgage originator Kal Wayman, this item is not for you. For those playing catch-up, we criticized Kal's over-the-top, sex-drenched TV ad as inappropriate to the serious business of mortgages, and then dozens of Kal's friends and clients rushed to his defense in the "comments" section of this blog.
Which raised a number of questions -- Why did we publish so many promotional comments about Kal? Didn't all those supportive comments add up to free advertising? And how do we know Kal himself wasn't sitting there at a keyboard, sending one love letter after another to himself?
That's what one regular reader asked tonight: "Have you checked the IP addresses of all the Kal fanboys to be sure it isn't Kal himself spamming the blog?"
I'll deal with that issue first, and then the others. First of all, comments are moderated, in the sense that I try to keep profanity and personal attacks off the blog. So I had seen all the comments. Sheepishly, I went back and checked IP addresses of all 48 comments, and found only two that were suspicious -- different names, same IP address. So it appears Kal really does have that many friends.
Read more Inside The Blog: So Everybody Loves Kal; Why is That News? »
 This story from Friday's New York Times is pretty important: the headline reports "Big Investors Jumping Back Into Shaky Home Loans."
Highlights: "The subprime mortgage business is in tatters ... some of the biggest lenders have cut back or shut down."
"So what is the smart money — private equity, hedge funds and investment banks — doing? They are swooping in and taking over those battered businesses, seeing opportunity amid the wreckage ... betting that the market will snap back quickly.”
"It is a risky proposition. ... "'The reality is that the mortgage business for the foreseeable future is not a growth business,” said Jeffrey Kirsch, president of American Residential Equities.
Why we think this is important (Bloviation Alert): Because, in our opinion, The Housing Bubble is not really about housing at all. It's about credit. (Why is a Santa Monica condo worth $800,000? Because lenders will fight each other for the chance to loan someone $800,000 to buy it.) As long as Wall Street keeps buying these loans, prices will not collapse. And this article in Friday's New York Times says that investors are willing to keep the credit flowing. That's important, we think.
But enough about us. What do you think?
Photo Credit: AP
 What do you call a 559 Square Foot house on a 1,263 SF lot? Somebody witty over at Curbed.LA called it the Leprechaun House, and somebody else called it "crazy" when it was listed at $399,000. Now, as Curbed.LA reports here, the price has been reduced by 100K.
"In mid-March, we featured this charming 1bd, 1ba cottage near the shores of San Pedro. Most of you expressed shocked outrage at the asking price of $399,000 for the 559 SF home. And we quote:
"Commenter Anonymous: "559 SF on a 1,263 SF lot? that has to be record. Since it's St. Patty's day, can we assume that a family of leprechauns live there?"
"Apparently, the seller heard you and has dropped their asking price by an astounding $100,000," to 299K.
Comments? Thoughts?
Photo Credit: Curbed.LA
 Weird Indie movie star Vincent Gallo isn't exactly our cup of joe, but he's building a reputation as quite a house flipper, specializing in architecturally significant digs. Radar online has the very latest:
"In July 2006, Gallo purchased the John Lautner-designed Wolffe House in the Hollywood Hills—an insanely modern work of art in wood, stone, and glass—for just under $4 million. Now, with the staggering asking price of $5.9 million, he stands to clear a nearly $2 million dollar profit in less than one year.
More: "And it's hardly his first purchase and sale of architecturally significant property. He recently sold a one-bedroom apartment at the Sierra Towers in West Hollywood (formerly owned by David Geffen) to Cher for close to $4.5 million.
Who is John Lautner? (There are no stupid questions) From Wikipedia: "Influential American architect whose work in Southern California combined progressive engineering with humane design and dramatic space-age flair... created an entire genre of commercial architecture, "Googie," with the 1949 design for Googie's Coffee Shop at the corner of Sunset Strip and Crescent Heights."
Photo Credit: NNDB
 No, we're not talking about our new best friend Kal in Atlanta. We're quoting from a fascinating Bloomberg profile of a 27-year-old who played the mortgage game in Orange County until the music stopped.
Highlights of the story Taher Afghani:
--Decided to become a mortgage broker after partying with a bunch of young brokers in Cabo: "I had never seen so much money thrown around in one weekend ... It was crazy. All these kids,
literally 18 to 26, were loaded -- the best clothes, the cars, the
girls, everything.''
--Quit a $58,000-a-year job managing a Target distribution center to make $120,000 -- often more than $3,000 per loan -- as a broker for Costa Mesa-based Secured Funding Corp.
-- Selling mortgages over the phone to people who had signed up for credit cards, Afghani says he and fellow brokers dispensed with details about rates
and fees and instead talked up how borrowers could use home equity
loans to pay down other debts. "It was easier than financing a car,''
Afghani says.
--Brokers like Afghani are not required to be licensed or trained to sell loans in California. "In other words, the corporation can hire a loan originator right off
the street and have them originating loans that day without any
education, licensing or individual accountability,'' the California Association of Mortgage Brokers says.
--Game over: Secured Funding's once-buzzing office is gutted, Afghani no longer sells loans. "Enough is enough,'' he says. "I'm so rock bottom I had to move out of my apartment in Irvine and live rent free with my girlfriend.''
Thoughts? Comments?
Photo Credit: Reuters
 Another good piece of enterprise reporting by Les Christie at CNNMoney.com: lots of people who were steered into expensive and risky subprime mortgages actually qualified for cheaper, prime-rate loans.
Under the headline "Wow, I Could Have Had a Prime Mortgage," Christie writes: "Imagine you're a homeowner, and you discover that instead of the expensive subprime mortgage loan you signed on for, you actually qualified for a prime-rate mortgage with much lower interest rates.
More: "I reviewed several hundred [subprime] loans recently for our wholesale division," said Allen Hardester, regional director of development for mortgage-broker, Guaranteed Rate, "and all of them, with one exception, qualified for a prime-rate loan."
More: "Fannie Mae estimated up to 50 percent of the borrowers, whose subprimes it bought that year, had credit profiles that could have qualified them for prime rates."
Comments? Thoughts?
Photo Credit: Reuters
 Truthfully, we didn't tell you so, our buddy Lou Barnes did last week, when he wrote that the Fed is more concerned about runaway global growth and inflation than the housing slump.
The AP confirms as much in its reading of Fed minutes released today: "Concerns about inflation trumped worries about the slumping housing market last month in the minds of Federal Reserve officials," Martin Crutsinger writes today.
Portfolio.com reads it the same way: "Fed watchers will translate this verbiage into "We're not about to lower rates." The Fed is oddly surprised by the housing downturn. We say "oddly," because we don't see any surprises -- we continue to witness a steady worsening of the housing sector, which has been going on for quite a while. We're not sure what the Fed expected -- a Spring Rebound?
More from AP: "Fed officials said the downturn in housing was turning out to be more severe than expected ... Bernanke and his colleagues did express the view in the minutes that the slump in home sales and construction that began last year would last longer than had been expected... 'The correction of the housing sector was likely to continue to weigh heavily on economic activity through most of this year, somewhat longer than previously expected,' the minutes said."
Read more We Told You So: Fed More Worried About Inflation Than Housing »
This TV ad -- you can see it here on YouTube -- is wrong on so many levels, we don't know where to begin. Like ours, your first response will probably be that it can't possibly be real. We thought the same thing, and so did Morgan Brown at Blown Mortgage, who blogged about it first.
Here's Blown Mortgage: "The following is an ad on YouTube for Kal Wayman, a mortgage originator from Atlanta Georgia. Don't let your kids watch - and it may not be suitable for all office environments. Trust me - this is a 100% legitimate ad for a real mortgage company and originator."
More: "At first I didn't believe it. I looked up Kal Wayman's web site at the end of the ad, sure enough www.gotkal.com is real. Then, I looked up Kal Wayman's company online and found them. They are F1rst Discount Mortgage. They are a real company and are licensed in several states including California. I looked up their license listed on First Discount Mortgage's licensing page with the California Department of Corporations. The license listed is expired, but they did renew after a year gap in licensing and as of April have an active California Finance Lender license with a new number."
I'm not sure what to say. Go, Kal, Go?
Comments? Thoughts?
Photo Credit: www.gotkal.com
 We reported twice today on falling prices in the LA area, so it's only fair we also report this: Westside Bubble reports prices in Santa Monica are busting through the $5 million mark -- and this house is not close to the beach.
From Westside Bubble: "This really got me a week ago, asking over $5 million north of Montana, east of 7th. I remember when $3M was high-end, then $4M, now they're trying to pass $5M. It's at 333 20th, 5 bed/6.5 bath, asking $5,095K, featuring all the usual stuff. For an ordinary-looking house on a 60' lot. Aren't you supposed to get a faux chateau for that? (Actually 127 17th crossed the $5M line first, asking $5,395K, sold in March, but I think that's a double lot with tennis court.)"
Twentieth Street is 20 blocks east of Ocean, which in turn is a good distance east of the beach.
Blogger's note: I find these neighborhood price milestones to be meaningful -- somewhat similar to when the Dow rises over one of those "psychologically important barriers," like 13,000. Once somebody has broken the barrier, even if it's just as an asking price, it makes it that much easier for other realtors, and other homeowners, to follow suit.
Comments? Insights?
Photo Credit: Westside Bubble
 Blogger's Note: Lou Barnes, a Colorado-based mortgage banker who writes a Fed-watching column for Inman.com, sent us email decrying the "intra-industry mudslinging" in which mortgage brokers are being blamed for the subprime meltdown. His thoughts follow.
"Everyone in the mortgage business today is effectively a broker. Mortgage "Lenders" died with the S&Ls and the birth of the modern mortgage-backed securities market, sometime around 1983.
"Wells Fargo brokers its mortgage loans out the back just the same as a broker working from home does. Countrywide fancies itself a bank and a lender, but is just an immense mortgage bank, operationally indistinguishable from the 1960s pioneers.
"Brokers are blamed for vast misbehavior, but that's just intra-industry mudslinging. Wells was the largest sub-prime originator in 2006 by a mile, roughly $85 billion; as that position became embarrassing, it admitted this spring that it only kept $24 billion, and had "no credit risk" in that portfolio (it had sold the risk into the nouveau "credit derivative" market, born around 2000, which spawned all of this horrifying product). So, who did more harm with subprime 2/28 resets and suicidal underwrting, the brokers down the block, or the big guys?
"It doesn't matter! Today, mortgage "retailers" all do the same things, selling to wholesale, which in turn sells to Wall Street, which in turn derivatizes, selling both interest-rate risk and credit risk."
So speaks Lou Barnes. Thoughts? Comments? Fire away.
Photo Credit: LATimes
We try not to be too stat-happy here, but the Case-Shiller index is our favorite housing price statistic, because it is the only one that uses historical sales data to to measure changes in the price of a single home over time. Today it showed prices are falling both in LA and nationally.
From Inman.com: "A national home price index fell 1.4 percent in the first quarter compared to the same quarter last year, and a separate 20-city index dropped 1.4 percent for the month of March compared to March 2006.
"It was the second time in the history of the index that the annual national growth rate was negative -- the first time was in 1990-91."
The price index for Los Angeles -- which does not correlate to a dollar value -- dropped 1.4% from March 06 to March 07. Detroit and San Diego had the largest annual declines in March -- at 8.4 percent and 6 percent, respectively.
Comments? Thoughts? Insights?
Photo Credit: Reuters
 Among the excellent, albeit gloomy, offerings this morning over at Patrick.net: this rundown of the deep discounts evident in auctions of luxury homes out in Rancho Cucamonga.
Snippet: "These 7 beautiful Wilson Estates Luxury Homes in north Alta Loma, the crown jewel of the Inland Empire, were listed for over $1,200,000 in early 2007.
"By April the price had been reduced to the mid $900,000's with a banner which read MUST SELL BY MAY 5!
"The price reduction didn't bring a single buyer! On May 20th the banner was replaced with a sign which reads, 'AUCTION. 7 New Luxury Homes. MINIMUM BID $695,000.'"
Comments? Insights? Email story tips to lalandblog@yahoo.com
Good morning. Asking prices in greater LA have finally slipped in the past week -- according to Housing Tracker's analysis of MLS listings, which we monitor here every week. Housing Tracker shows median asking price down from $545,000 last week to $540,000 this week. Median asking prices had held steady at $545,000 since mid-April, when we launched this blog. Inventory jumped again, with another 841 homes listed, and now 39,941 on the market.
More on the numbers: The $540,000 median asking price represents a drop of 6.7% over the past year, and 0.9% over the past month. Inventory of 39,941 represents a gain of 7% in the past month and 24.6% over the past year.
Date MedianPrice Inventory
4/16 $545,000 35,489
4/23 $545,000 36,348
4/30 $545,000 37,338
5/07 $545,000 37,511
5/14 $545,000 38,297
5/21 $545,000 39,100
5/28 $540,000 39,941
Comments? Analysis? Let Loose.
Realtors and builders in Palm Springs must be very happy with this New York Times story over the weekend celebrating the area's rise as a year-round place to live. Highlights:
-- "An increasing number of home buyers are turning the desert city into their primary residence."
-- Who's Buying? "An influx of young buyers from neighboring Los Angeles and Orange Counties, with most of them finding work in the growing financial-services sector."
--Why? DataQuick reports the median home price for Palm Springs was $407,000, versus $540,000 in Los Angeles County and $630,000 in Orange County.
--But Isn't It Really Hot? Yes. "Temperatures can rise to 120 degrees, causing dashboards to pucker and the Desert Regional Medical Center’s emergency room to fill with cases of heat exhaustion — mostly from overzealous yard work."
Photo Credit: www.palmspringshomebuyer.com
 Did celebrities flip real estate back in the 1940s and 1950s? Who knows, but one of many themes of the recent housing boom has been the celebrity flipper (see Cox, Courtney).
Our personal favorites include Ellen Degeneres and Portia Di Rossi, for no real reason other than that we like them both. According to RealEstalker, which watches celebrity real estate dealings like a hawk, they are at it again:
"SELLER: Ellen Degeneres and Portia Di Rossi
LOCATION: Zorada Drive, Los Angeles, CA
PRICE: $2,300,000
SIZE: 2,755 square feet, 3 bedrooms, 2.75 bathrooms
DESCRIPTION: Classic 1956 post & beam. Exceptional mid-century modern home, constructed in a U-shape around a sun-drenched pool w mountain/city views."
Ellen & Portia backstory: "All the celebrity real estate nuts out there are well aware of the prolific buying and selling of this ... couple. Most recently they put their flaw-less weekend retreat in Montecito on the market for a blistering $24,000,000. Previous to that the couple had sold their ranch in the sticks of the Santa Ynez Valley, which is the same general vicinity of Michael Jackson's Neverland Ranch... And previous to that, Ellen sold off her compound of houses over on Woodrow Wilson Drive and Woodstock Road including a property called "The Treehouse" that was eventually purchased by actor Heath Ledger."
Photo Credit: www.realestalker.com
 Interesting piece of reporting by David Streitfeld in today's LATimes on the problem with foreclosure data. The problem is, the government doesn't track defaults and foreclosures in any meaningful way, and the private companies that do (RealtyTrac, Dataquick, etc.), have different ways of adding up the numbers.
Snippet: "The federal government compiles reams of data on home buyers and owners, but it doesn't track how or why people lose their homes. Neither do most state or local governments."
More: "RealtyTrac's numbers tend to top all other figures because the company counts every step in the foreclosure process — the notice of default, the auction, the house reverting to the lender — separately. One house might be tallied several times as a foreclosure."
This is not really a problem for the people who buy RealtyTrac's information -- they are real estate professionals looking to buy foreclosed properties, or get listings from banks looking to unload foreclosed houses. But it is a problem for politicians trying to figure out how bad the foreclosure problem is, and what, if anything, the government should do in response.
To be clear, the government has all the data it needs; it just makes no effort to manage, sort, or analyze the data. As Streitfeld reports, the LA County recorder's office in Norwalk receives 3 million documents a year. "They're filed in no particular order," he reports.
This strikes me as a problem that some really smart kids from Santa Monica College could fix with some Dell laptops and a server, but what do I know?
Comments? Thoughts? Insights of staggering brilliance?
Photo Credit: LA Times
 Intriguing bit of guesswork by economist John Husing, whose specialty is analyzing the Inland Empire: he says speculators account for up to half the defaults out there (and there are a lot).
Husing, quoted in Jon Lansner's real estate blog in the OC Register: "If you look at the first quarter 2007, 3.2 percent of all homes sold from 2004 to 2006 (831,188) received notices of potential default (26,748). This included both families and speculators ... I'm going to guess that about half the homes in default may have been speculators, but that is a pure guess. I know from talking to developers that many speculators made no payments on the homes they acquired once they saw that prices were falling."
Comments? Analysis? Email story tips to lalandblog@yahoo.com
Photo Credit: Reuters
 That's a good-looking picture to the right, isn't it? Of course it is: It was taken by a pro, Nick Springett (www.nickspringett.com), which is the point of this story in today's LATimes: if you want beautiful photos to help sell your home, it helps if your listing agent hires a professional photographer.
Rates start at $350 and climb from there. Yes, you can click over to Best Buy or Sammy's and get a great camera, but that doesn't make you a great photographer. "Buying a Nikon doesn't make you a photograher," says Everett Fenton Gidley (www.efg3.com/). "It makes you a Nikon owner."
If you insist on taking your own pictures, read the Times story first. Among other things, it will tell you to stage your house first -- that means de-clutter, hide your personal photographs, and add some color to that all-white room you are so proud of.
Thoughts? Comments?
Photo Credit: Nick Springett
 Good Morning. Readers here often criticize borrowers who don't understand their mortgages, but have a little sympathy: these loans are designed to confuse the borrower, and often succeed. That's the point of Kathy Kristof's takeout today on a couple who took out an Option ARM and had no idea what they were getting into.
The "teaser"rate was 1.75%, and payments wouldn't adjust for five years; they had no idea the actual rate on the loan shot up to 8% after a month, and there was a pre-payment penalty of $18,000 if they refinanced.
"I am embarassed by this," said Jamie Horton, the borrower. "We are educated and successful people. I can't believe we were taken in like this."
The lender, Chevy Chase Bank of Maryland, says terms of the loan were clearly spelled out. The Hortons are suing. Says their lawyer, "I challenge anyone to pick up a set of these loan documents and tell me what is going on."
Comments? Insights? Your thoughts are always welcome.
Photo Credit: Reuters
 Anything we write about the ethics of mortgage brokers seems to touch a nerve, so here's more. From The Wall Street Journal, "Four Questions to Ask Your Mortgage Broker:
1) What will be your total compensation, from me and the lender, for any loan you help me obtain?
2) Will that compensation depend on what type of loan I choose, the interest rate, or any prepayment penalties?
3) Are you willing to work for a flat fee specified in advance and rebate to me any compensation beyond that level that you get from the lender?
4) How many lenders do you work with on a regular basis? Do any of them account for a majority of your business?
Additional points from the Journal story: "(This) doesn't mean consumers should shun all brokers. Many provide good service and can help people sort through the complexities of choosing a loan. Consumers don't necessarily get a better deal by going directly to lenders, which also can charge excessive rates and fees."
Most important point last: The Journal reports, "California is an exception. A 1979 ruling by the state Supreme Court established that mortgage brokers there do have fiduciary duties. Pete Ogilvie, president-elect of the California Association of Mortgage Brokers says that hasn't caused him any problems and clarifies his role."
That last part, as I read it, means that a California-based mortgage broker has a legal duty to put the borrower's interests first -- which is interesting, because no one has mentioned that legal duty in comments or emails.
Comments? Feedback? Your thoughts are always welcome.
 "Tree of the Week" was chosen this week, and written, by our friend Pieter Severynen, a landscape architect, arborist and, we think, a poet of trees.
"Did you know that the City of Los Angeles Department of Water and Power
gives away trees? Visit www.GreenLA.com/tree/index.htm or call
1-800-GreenLA. At the various tree giveaways in the city, the Purple Leaf Plum is
usually the first one to go. Most people fall in love with its deep
dark purple foliage."
"The tree is 'Prunus cerasifera ‘Krauter Vesuvius’ – ‘K.V.’ Purple-leaf plum. Carl Krauter of Bakersfield introduced this darkest of the purple
leafed plums in 1957, hence the name. This well-behaved, vase shape to
rounded, small tree, 15-20’high, 10-15’ wide, loves full sun to part
shade. Single pink flowers adorn the bare branches around February, at
the end of its winter leafless period. It produces little to no fruit,
takes dry conditions, and has few problems. Branches have a tendency to
all emanate from one spot on the trunk, so prune the tree at an early
age to make later maintenance easier. If you find its in-your-face leaf
color too gaudy, try one of its more subtle cousins such as P.x
blireiana (the ‘x’ means it is a hybrid) or P.c.‘Thundercloud’."
Comments? Questions? Use the comment function to submit nominations for next week's Tree of the Week? (Flowers and shrubs are always elligible).
Thanks, Pieter. Email Pieter: plseve@earthlink.net
Photo Credit: Monrovia.com
 Interest rates are headed higher. Says Who? Says Lou Barnes, who makes a convincing case here, and is officially now one of LA Land's favorite Fed-Watchers.
Highlights of his weekly column at Inman.com:
--"Rates are rising because the global economy is taking off."
--"Housing is neither at bottom nor causing a recession."
--This week's spike in new home sales? "A sign of panicked builders trying to stay in business, building and dumping homes at or below cost, undercutting resales."
--"Why isn't housing knocking over the economy? The traditional reasons are lost on Wall St.: if you don't have to sell, don't sell. Live in it. If your value doubled since 2001, and you've lost 5 percent, you still have a 95 percent gain."
--"How can mortgage rates rise when demand is falling? Get a grip: annual American mortgage demand is a minor element in global markets for IOUs. They are just electrons, after all, traded 24/7 in competition with every other borrower on the planet."
--After laying out a convincing case for global growth, he warns, "As glorious as all this growth is, at this pace it is accident-prone. I have no clue if this phase will end by central-bank catch-up, tripping stock markets as they go by, and shoving property markets from behind; or by central-bank failure, markets running to cliffs. Whichever: rates are going up."
Have a favorite Fed-Watcher you think LA Land should link to? Let me know. Faithful readers know I also like to showcase Pimco's Bill Gross here.
Photo Credit: Reuters
 Old journalism rule of thumb: if a headline asks a yes-or-no question, the answer is always "No" (Think about it: if the answer was "yes," why would you pose it as a question?).
So to our earlier question, "Has Housing Hit Bottom?" the answer is, "No." Or, alternatively, "No,you dope."
The proof is in today's news of continued declines in existing home sales in California. Highlights:
--Statewide, sales of existing home in April fell 27.8% from year-ago levels.
--On a month-to-month basis, April sales fell 13.3% from March.
--The "unsold inventory index" -- how many months it would take to sell off the current inventory of for-sale homes -- rose to 10 months, from 5.7 months a year ago.
--As the lower-priced market stalled, median prices rose -- 6.2% from year-ago levels statewide, to $597,640.
Comments? Insights of staggering brilliance? Use the comment button. Or email story tips to lalandblog@yahoo.com.
Photo Credit: Reuters
 Nothing like a Friday afternoon guilty plea to spice up the blog. A Beverly Hills mortgage banker has agreed to plead guilty to federal felony charges in what the Feds are calling a "massive mortgage fraud scheme that caused more than $18.5 million in losses to banks."
Highlights:
--Richard Maize, 53, of Beverly Hills, co-founder of Americorp Funding, will plead guilty to bank fraud, conspiracy to commit bank fraud and loan fraud, and false statements on a tax return, says the U.S. Attorney's office in LA.
--The scheme allegedly involved flipping properties, first buying them
at market value, then using "straw buyers" who would agree to pay
vastly inflated prices.
--Five people have been previously charged in the scam, which dates to loans made from 2000 to 2002. (Do these names ring a bell: Charles Elliott Fitzgerald? Mark Alan Abrams? They allegedly bought the homes involved in the scam, and used Maize to get mortgages for "straw buyers.")
--One example: A Bel Air home bought for $735,000, then flipped to a "straw buyer" for $2.37 million.
--Maize allegedly arranged the mortgages through other banks, and received kickbacks on the deals.
--Lehman Brothers Bank appears to have been notably asleep at the switch: It was duped into funding 40 loans involving the Maize scam, totalling $28 million, in just two years.
Comments? Thoughts? Insights?
Photo Credit: Desi on LATimes.com's Your Scene
 Unlike yesterday's mixed reading on sales of new homes, there's nothing mixed about today's report on existing home sales. From AP: "Sales of existing homes fell by a larger-than-expected amount in April while the median price o f a home sold during the month fell for a ninth straight month as the troubles in the subprime mortgage market acted as a further drag on housing."
More: "The National Association of Realtors reported Friday that sales of existing homes fell by 2.6 percent last month to a seasonally adjusted annual rate of 5.99 million units. That was the slowest sales pace since June 2003."
"The median price of a home fell to $220,900, an 0.8 percent fall from the midpoint selling price a year ago. It marked the ninth straight decline in the median price. ... Sales were weak in all parts of the country. The Northeast experienced the biggest decline, a fall of 8.8 percent in April from the March sales pace. Sales were down 1.7 percent in the West, 1.2 percent in the South and 0.7 percent in the Midwest."
Photo Credit: Reuters
 Yesterday's Sybil-like report on new home sales has sparked a mini-debate: does the month-to-month rebound in sales indicate the housing market is bottoming out? Or does the steep drop in prices mean housing is still in a free-fall? Here a mini-debate:
From the BBC via Patrick.net: "The housing market seems to be bottoming out," said Mark Vitner, senior economist with Wachovia
Securities in Charlotte, North Carolina. "The worst is clearly behind
us in terms of the decline in home sales and construction activity."
From LATimes.com: The government report "does not jibe with the reality" in Southern
California, said Peter Dennehy of Sullivan Group Real Estate Advisors,
a San Diego-based consultant to builders. "Sales are what they are and
that is they are lower than what they were last year.
From CNN Money: Paul Kasriel, chief economist with Northern Trust in Chicago, equated the strong sales to the strategy of the Detroit automakers, who cut prices and offer other sales incentives to counteract weak demand for their cars and trucks, sometimes taking a loss on the sales.
"The builders are clearing out the merchandise," he said. "They're doing a Detroit here. When you have excess supply, the quickest way to move supply back into balance with demand is to cut the price, and finally they're doing that. I would not say this is the bottom of the housing recession."
Comments? Thoughts? Insights? Email story tips to lalandblog@yahoo.com.
"
Reuters today has more from Countrywide Financial CEO Angelo Mozilo on what went wrong and who's to blame for the mortgage mess:
"Perched on an arm chair on a ballroom stage, Mozilo, who made $387 million in pay and stock options over the past five years, disavowed blame for the collapse, pleasing his audience of fellow mortgage-banking industry leaders and foot soldiers.
"'You've got to be careful here about blaming ourselves too much," the deeply tanned and sharply dressed chairman of Countrywide told the Mortgage Bankers Association this week. The real culprits, he argued, are the Federal Reserve with its series of interest rate hikes, crooked real estate speculators, falling housing prices and regulators' attacks on interest-only and other risky subprime loans.
More from AM: "Regulation ... is better for the crooks because only the good people have to comply," Mozilo said to a reporter before taking the stage. "So I'm against it. In fact, it's regulators, in my opinion, that have caused part of the problem when they attacked the pay option and interest-only loans."
Your thoughts? Comments?
Photo Credit: Reuters
Intriguing post over at Manhattan Beach Confidential: the blog is tracking nine listings, all of which were purchased a little over two years ago and have now hit the market again. Why the two-year-itch? "Thanks to our tax code, you can reap up to $500k in capital gains (for a couple) on a home sale tax-free. You just have to have made it your primary residence for 2 years."
Why track these listings? When and if they're sold, they should yield a pretty good picture of same-house price appreciation, which is a very hard statistic to get at.
What's interesting is the listing prices, and the implied appreciation over those two years -- three of the listings are marked up by 11% or 12% from two-year-ago prices; but three are marked up 41% to 47%. Who's right?
Comments, Questions, Insights, Opinions? Always welcome.
Photo Credit: Manhattan Beach by Johan
via Your Scene at LATimes.com
A reminder: nothing personal against mortgage brokers, but they are not in the business of shopping for the best loan for you; they are in the business of shopping for the best loan for them. They're under no obligation to get you the best deal -- some brokers may have that goal, may even do business that way, but the industry doesn't embrace that concept.
From The Wall Street Journal: “Borrowers often see mortgage brokers as their allies. But many brokers are making it clear they don’t see things that way. They are fighting efforts by federal and state politicians to impose a fiduciary duty on them to put their customers’ interests first.”
“‘The mortgage broker does not represent the borrower,’ says Chris Holbert, president of the Colorado Mortgage Lenders Association. ‘We sell access to money.’”
We made this point a while back, but today The Journal wrote about it, Ben Jones linked it on his blog, and reader Michael Hoskinson pointed it out to us in a comment, so we thought we'd make it again.
Comments? Thoughts? Insights? Anybody want to speak in defense of mortgage brokers?
Photo Credit: Reuters
The monthly report on new home sales is known for its volatility, and doesn't tell us much about Los Angeles -- this market is not driven by new home construction -- but today's report was so weird, it's worth delving into it a little bit.
Headlines: new-home sales jumped 16% in April from March levels, but median sales price declined 11% -- both are big swings. Strong sales in the South skewed the numbers; new home sales in the West grew 8.5%.
So does this mean housing is hitting a bottom? Beginning to recover? I certainly don't know the answer, but stock investors viewed this as a sign of a housing bottom, which they think is bad news for stocks, because they were hoping housing would continue to be weak enough to justify a Fed rate cut, which is what they want. Thus, perceived good news on housing was bad news for stocks today.
Comments? Other interpretations?
Photo Credit: Reuters
 Good morning. One of the challenges of writing about real estate in Los Angeles is that national stories about the bursting of the bubble ring somewhat false here -- it feels to us that the bubble, if there is one, hasn't burst here. That said, the national bubble story has clearly moved into the finger-pointing stage. A top Treasury Department official is now blaming the mortgage industry for relying too heavily on stated-income loans -- "liar loans". This from Comptroller of the Currency John C. Dugan: "Sound underwriting and, for that matter, simple common sense suggests that a mortgage lender would almost always want to verify the income of a riskier subprime borrower to make sure that he or she had the means to make the required monthly payments. But the norm appears to be just the opposite." Roughly half of all subprime loans last year were "liar loans," he said, although he called them "stated income" loans. The mortgage industry, though, generally gets what it wants out of Washington, and here is one reason: the industry has spent $210 million in the past seven years on lobbying and campaign contributions. The Common Cause report says in part: "In 2001, the Mortgage Banker's Association organized a meeting with eight major subprime lenders and several other trade associations in an effort to develop a 'unified battle plan'.... They hired a powerful public relations firm to spin a campaign and a positive national message. They also hired a 'SWAT team' of lobbyists to speak with mayors, city councils, and other entities who were contemplating further lending regulation." Comments? Thoughts? Send email to lalandblog@yahoo.com.
GLENDALE -- The Glendale "heatmap" from Trulia.com demonstrates something I learned today: Glendale is a big, diverse city. With a population of 207,000, it is the third-largest city in LA County, trailing only Los Angeles and Long Beach. Average listing prices range from $450,000 and under in the southeast portion of the city, to $1.05 million and higher, in Northwest Glendale -- a wide range. The neighborhoods, and prices, divide along The 134: north of The 134 is the more affluent part of the city, with much higher real estate prices.
The site of L. Ron Hubbard's first Church of Scientology, Glendale is home to the U.S. headquarters of Nestle and IHOP. It is also home to the largest Armenian population in the United States, estimated at 40% of the city's population, or 85,000 people. It was also the boyhood home of John Wayne, and the place where he was first called "The Duke."
Comments? Questions? Thoughts on the value of the Trulia heatmap? Use the comment function, or email story ideas to lalandblog@yahoo.com.
What's new on the market in Glendale -- north of the 134:
1934 Verdugo Knolls (pictured): Picket-fence, cottage-style Traditional, 3-bedrooms, 1 3/4 bath, 1,522 SF, secluded and nestled into the hills north of Glendale College. Listed at $839,000, with two offers already, one at the listing price.
1864 Verdugo Vista: Secluded 3-bedroom, 1 3/4 bath, 1,303 SF, very large deck under mature Oak trees. Originally listed at $739,000, redued to $719,000. Gerri Cragnotti's opinion: "This is a deal. Very charming little house. This will sell." (Note: she is not the listing agent).
1405 Bruce Avenue: "Romantic Courtyard" Spanish built in 1931, 3-bedroom, 2-bath, 1,619 SF on handsome, tree-lined street. $789,000. Gerri's Opinion: "This will sell right away." (She is not the listing agent).
1664 Ben Lomond Drive: 3-bedroom, 3-bath, 2,846 SF (including basement rec room) with pool in Northwest Glendale. House hasn't sold in 50 years. $949,000.
1338 Carmen Drive: 4-bedroom, 2 bath, 2,569 SF, two-story Spanish Revival in Rossmoyne. $1.169 million. Brochure says "Old world charm throughout," Gerri says: "It's a cosmetic fixer." She adds, "To redo an 80's redo is expensive. It's got potential. It's a great location."
In Glendale's prettiest neighborhoods -- on the shade-dappled streets north of the 134, where Spanish Revivals are populated by what Realtor Gerri Cragnotti calls "studio people" -- there are signs of a slowing market, but nothing approaching weakness.
"If it's under a million in Glendale, and it's a nice house -- in move-in condition -- you will sell and you might get multiple offers," Cragnotti told LA Land this morning. "Over a million is a different story. There are 70 homes sitting on the market in the $1 million to $2 milliion range."
Why the split market? At the $1 million price tag and above, "We have a lot of people who have to sell first before they buy. So houses are sitting on the market," she says. "In the $800,000 range -- and I know this sounds ridiculous -- but you have first-time buyers who don't have to sell anything."
Example: 1934 Verdugo Knolls, a picket fenced, 3-bedroom Traditional listed two days ago at $839,000, already has a full-price offer, Cragnotti says.
In the $700,000 to $900,000 range, Cragnotti says Glendale is stealing buyers from more expensive nearby neighborhoods, notably Los Feliz, Studio City, and Pasadena. "People move here for authenticity, for the character of the neighborhoods," she says.
Read below for more from Gerri Cragnotti, including her (intense) dislike of McMansions, and why fraud is a major cause of foreclosure in Glendale.
Read more Micro-Market Snapshot: In Glendale, If It's North of The 134 and Under $1 Million, It Sells »
Good morning. I hear a lot of stories about real estate fraud in Los Angeles -- like the cash-back-at-closing scheme, in which the borrower gets the cash back, never opens the door of the house, never makes a single mortgage payment, and walks away with the cash. But I don't hear a lot about real estate fraud investigations or prosecutions. Maybe I'm not listening carefully enough.
I'm waiting for a California official to do what the Attorney General in New York is doing -- that is, start making some noise about fraud. Andrew Cuomo has been sending out subpoeanas -- some to California companies -- as part of an investigation into whether mortgage brokers pressure appraisers to inflate property values.
(Pressure on appraisers? Next you are going to tell me Barry Bonds didn't get those muscles by doing push-ups).
News item: the mortgage bankers are blaming the mortgage brokers for the subprime mess. "Who made this mess? The short-term folks," said John Robbins, chairman of the Mortgage Bankers Assn. "People who get a commission when the deal happens. For them, it's the number of loans that counts. Good loan? Bad loan? Who cares? For them it's all about their commission."
Comments? Insights? Use the comment button, or email story tips to lalandblog@yahoo.com.
Things we learned from this listing on Westside Bubble:
--It's possible: You can get a 2-bedroom house in Santa Monica for under $1 million.
--When a lot is 25' by 80', it's called a "sliver lot."
--If you bought this house, a decent Olympic long-jumper could jump right over your lot. Seriously.
Here's the whole item: "Then there's this 2 bed/1.5 bath house at 724 Navy St., second block west of Lincoln, asking $949K. "Great location in Ocean Park Neighborhood just blocks to Main Street and the beach!" Notice how they never say how many blocks? "Completely renovated with new kitchen, granite counters, stainless appliances, and bamboo floors. The architecturally designed master is bright and has over-sized French doors that open into the yard." Almost a million dollars for a little old house on a tiny 25' x 80' lot?! Words fail me."
Countrywide CEO Angelo Mozilo is officially LA Land's Favorite Real Estate personality. Why? Because while the official party line of the industry is that "it's now a normal market," and "home prices are holding up," Angelo sees and says something very different: there are no buyers, and price depreciation is causing problems.
More of Angelo's greatest hits, as reported here by Reuters:
"The cause of the problem that we have today is decreasing values. That's the cause of the problem, because we didn't have delinquencies and foreclosures when values were going up," he said at a Mortgage Bankers Association conference in Manhattan.
"First-time home buyers were begging us to make them loans because they thought home values were going up significantly, and so they put a lot of pressure on us to make them loans," he said.
The second quote pretty much summarizes the modern lending business. A major lender is talking about pressure from borrowers. Huh? Isn't that kind of backwards? Of course borrowers want money, but how exactly do they exert pressure? By storming into a mortgage broker's office and demanding 100% financing and a low teaser rate?
Help me out with this one. Comments?
Listing prices for LA-area houses are flat for the sixth week in a row, as inventory continues to climb. That's according to Housing Tracker, which tallies up MLS listings in the area every week. Median asking prices held at $545,000 -- a 6% decline from year-ago levels -- while another 611 listings were added to what is a sizeable pile, now nearly 40,000 homes listed.
Here are the LA numbers from Housing Tracker, going back to mid-April, when this blog launched:
Date MedianPrice Inventory
4/16 $545,000 35,489
4/23 $545,000 36,348
4/30 $545,000 37,338
5/07 $545,000 37,511
5/14 $545,000 38,297
5/21 $545,000 39,100
Comments? Insights of Staggering Brilliance? Use the comment function, or email story tips to lalandblog@yahoo.com
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If you haven't been following the saga of Atlanta mortgage originator Kal Wayman, this item is not for you. For those playing catch-up, we criticized Kal's over-the-top, sex-drenched TV ad as inappropriate to the serious business of mortgages, and then dozens of Kal's friends and clients rushed to his defense in the "comments" section of this blog.
