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 American Home Mortgage is clinging to life, but its time will come. And when it does, it will join a very long list of failed mortgage lenders. The Implode-O-Meter blog, one of our favorites for news on the mortgage industry, now counts 105 lenders that have imploded.
While we're at it, we also want to express our support for The Implode-O-Meter, and Aaron Krowne, in their current legal battle. Loan Center of California sued The Implode-O-Meter in May, alleging that an e-mail posted on the blog in April caused such damage to the company that two of its major sources of funding -- Credite Suisse and Washington Mutual -- withdrew nearly $4 million in funding.
Aaron fears that the lawsuit could embolden powerful interests to attack blogs that dare to challenge them. If the lawsuit succeeds, he writes, "Major corporations could interpret this as 'open season' on bloggers and other conversants who criticize their companies (irrespective of merit).
This is from Blown Mortgage's coverage of the lawsuit and its importance: "The whistle blower has always had the tough road. Few people believe them at first; then come threats, lawsuits, illegal discrimination and pressure brought to bear on friends and family. It is no different with blogs. ML-Implode has chosen to shine a bright light on the mortgage industry and it makes those in the light uncomfortable. They react to this unwanted attention by attempting to shut down the light - to shut down the whistle blower through any and all means. The law and precedents set have ensured that whistle blowers are protected. It is vital to the progress of public discourse that bloggers are afforded the same protection."
Thoughts? Comments?
A few quick hits:
--American Home Morgage shares finally opened today on Wall Street. When we checked they were down 88%, to $1.20 (yes, down 88% in a single day; this is what happens when a business collapses). The stock has traded above $36 in the past year. As part of his "housing is doomed" rant, Jim Cramer predicted worthlessness (bankruptcy) for this stock.
From Bloomberg: "American Home Mortgage Investment Corp. shares plunged 89% after the lender said it doesn't have cash to fund new loans and may have to sell off assets. ... Investment banks cut off credit lines, leaving American Home without money yesterday for $300 million of mortgages it had already agreed to provide, the Melville, New York-based company said in a statement today. It anticipates $450 million to $500 million of loans probably won't get funded today."
--From Reuters: IndyMac, the Pasadena-based lender that cut 400 jobs last week, said profit declined as more borrowers fell behind on payments and it made less from selling loans to investors. The shares rose as much as 20 percent as the company said credit losses weren't as steep as its competitors. Second-quarter net income slid 57%, while revenue fell 21%.
--From Inman News: Lending Tree, a division of the internet company IAC, lost $1.3 million in the second quarter, after making a $9.8 million profit a year earlier. Revenue declined 9%, to $98.6 million.
Thoughts? Comments? Insights?
 L.A. home prices have fallen by an average of 3.3% over the past year, according to the Standard & Poor's Case-Shiller home price index -- which we consider to be the most reliable measure of home price trends.
The report, which covers price changes through May, shows:
--Nationally, the level of home price appreciation has now been declining for 18 months in a row, since December 2005.
--The 10-city composite shows year-over-year price declines of 3.4% in May.
--“At a national level, declines in annual home price returns are showing no signs of a slowdown or turnaround,” says economist Robert Shiller.
Why we like Case-Shiller: it is the only index we know of that even tries to track the price of a typical single-family house in a given city. It uses "matched pairs" of price data -- that is, if a specific house sold twice in a period of time, it uses those two data points to measure price change.
Your thoughts? Comments? E-mail story tips to lalandblog@yahoo.com
Photo Credit: Reuters
Good morning. I'm splitting the Jim Cramer post in two, because the trashing of the Inland Empire (he says it's such a housing disaster it needs to be plowed over) is overshadowing his advice to upside-down homeowners: just walk away from the house and the mortgage.
Cramer on walking away: "When your house drops 20% in value, then it doesn't matter whether you're prime or subprime. It's better to walk away, even if you're wealthy. Because you don't want to lose your credit card, and you don't want to lose your car. Your house is the one thing that's fungible. It's smart to walk away... It's actually a good thing. I know that sounds a little counter intuitive. But if your home declines 20% in value, it's really important to sell it, or walk away from it."
Strong stuff considering this guy is probably the most prominent investment advisor on television today.
Your thoughts? Comments? Play investment advisor for a second: what do you advise someone who paid $500,000 for a house, still owes all the principal, and the house is now worth $400,000?
 CNBC host Jim Cramer, never far from the fringes of any financial argument, has now claimed the "sky is falling" perch in the housing debate. In this video, Cramer rants that the Inland Empire is so awash with bad loans and unsold houses that it needs to be "plowed over"; he predicts a 100% foreclosure rate in 2/28 mortgage products; and encourages upside-down homeowners to be "smart" and walk away from their houses. Wild stuff, but hey, he's Cramer. Partial transcript:
"I'm looking for a 100% default of the 2 and 28's. 100 percent. The bears are looking for 50 percent. I'm saying that they're foolish and way too optimistic.... Now, where are these 2 and 28 loans concentrated? Largely in Florida, in Phoenix, in Las Vegas, in the Southland of California, the northern part, Sacramento, but most importantly, the Inland Empire. I think the Inland Empire needs an agricultural adjustment company. ... we need to, like, plow over the Inland Empire, because there's so many more homes. And the homebuilders have way too much inventory. And the people who have made these loans whoever, where the mortgages are, I think almost everything that was written from May of 2006 until the end of the year was worthless."
More, he's just getting going: "When your house drops 20% in value, then it doesn't matter whether you're prime or subprime. It's better to walk away, even if you're wealthy. Because you don't want to lose your credit card, and you don't want to lose your car. Your house is the one thing that's fungible. It's smart to walk away... It's actually a good thing. I know that sounds a little counter intuitive. But if your home declines 20% in value, it's really important to sell it, or walk away from it."
More: "I'm calling for a dramatic decline in home values... I've sold all my real estate."
What's going on? Cramer is a smart guy, a good market-timer, but there's no gray in his world. It's black, or it's white. It's great, or it's awful. You should own it, or you should run from it. He's jawboning the Fed to cut rates to save housing. He's telling the Fed the sky is falling.
Does it matter? Yes, we think so. Cramer is influential. We're not saying he can influence the Fed; we're saying he's a smart, opinionated, outspoken guy who frames -- and then screams -- investment arguments for some traders and investors.
Your comments? Thoughts?
Hat tip, big time: Morgan at Blown Mortgage.
Photo Credit: Booksamillion.com
 We popped into five open houses yesterday in Santa Monica and sniffed a trend: ever-so-slight price reductions, even north of Wilshire. What we saw:
1720 Washington Ave. (pictured), a renovated four-bedroom, three-bath with a brick facade dating to 1889, on an impossibly tiny (2,600 SF) lot. Zero back yard. Originally listed at $1.485 million, reduced to $1.455 million, agent Karen Orlando told us she has an offer and is looking for a back-up.
2320 Idaho Ave., a 2,100 SF, four-bedroom, three-bath, was originally listed at $2.395 million, and has been sitting -- 129 days on market. It's been reduced to $2.195 million.
1701 California Ave. will show as a big price reduction -- it was originally listed at $1.79 million, but listing agent Sylvia Long told us she went out and had it appraised, and it came back at $1.5 million, and that's the new price. It's a quirky property: Two buildings, three units -- a two-bedroom, one-bath, plus a permitted one-bedroom apartment, plus another bedroom and 3/4 bath in the same building.
1144 17th #14 is a three-bedroom, three-bath townhouse, new on the market, listed at $949,000, holding right there.
822 19th St. #C, a two-bedroom, 2.5-bath townhouse with high ceilings further north of Wilshire has been on the market 75 days. Originally listed at $1.238 million, it has been reduced $46,000, to $1.192 million.
Photo Credit: L.A. Land
Thoughts? Comments? Insights? Did we cherry pick the open houses? No, we followed the signs.
 The median listing price of a home in greater LA fell by $5,000 in the past week, to $530,000, as inventory continued to pile up on the market, according to HousingTracker's analysis of MLS listings, which we track here every week.
The dip in asking prices confirms a clear trend: overall, listing prices are slipping slightly in Los Angeles -- they're down 1.7% over the past month, and 7.8% since this time last year. Inventory spiked by 451 listings in the past week, and now stands at 43,676 -- up 3.8% over the past month, and 14.0% over the past year.
Date Median Price 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 (up 24.6% y/y)
6/4 $540,000 40,458 (up 23.3% y/y)
6/11 $540,000 40,766 (up 20.4% y/y)
6/18 $539,000 41,324 (up 18.7% y/y)
6/25 $539,000 42,059 (up 19.3% y/y)
7/2 $539,000 42,530 (up 19.0% y/y)
7/9 $535,000 42,517 (up 17.2% y/y)
7/16 $535,000 42,685 (up 14.5% y/y)
7/23 $535,000 43,225 (Up 14.5% y/y)
7/30 $530,000 43,676 (Up 14.0% y/y)
Photo Credit: LA Times
Good morning again. Another lender is on the ropes, and this is not a sub-prime problem: "American Home Mortgage Investment shares sank on Monday after the home loan provider announced "major" writedowns, delayed a dividend, and said lenders were demanding it put up more cash."
More, from Reuters via CNBC.com: "American Home, based in Melville, New York, specializes in prime and near-prime loans. It has, however, made many loans that allow borrowers to produce little documentation. Such loans are often considered riskier. The company recently commanded a roughly 2.5 percent share of the U.S. mortgage market.... 'Bankruptcy is not out of the question,' said Matt Howlett, an analyst at Fox-Pitt Kelton Inc. in New York. 'It needs to find a partner with alternative funding and hope the market turns around. It's going to be tough.'
Thoughts? Comments? Insights of staggering insighfulness? Email story tips to lalandblog@yahoo.com.
 Good morning. Research firm RealtyTrac has been criticized for double-counting houses in its foreclosure statistics, so today it introduced new research with no double-counting, and guess what: the new numbers show slightly slower growth of forelcosures in California when you take out the double-counting.
In the first six months of the year, RealtyTrac counted 189,000
"foreclosure filings" in California, an increase of 232% over the previous year. But how much of that was double-counting?
The new stats answer that question: RealtyTrac says there were 104,000 "unique properties" in California in some stage of default or foreclosure in the first half of the year, an increase of 170% over the previous year's total. That means roughly 85,000 properties were double-counted.
We'll have more numbers and analysis on this report later in the day, but we're interested in your thoughts on it.
Photo Credit: Reuters
 We've been slacking off in the celebrity real estate department, in part because we're not crazy about the demi-celebrities (Nicky Hilton, etc.). But when an A-list, single-name celebrity does nearly $100 million in real estate deals on three coasts, we figure it's worth a link.
So here are Mel Gibson's recent moves, and there will be a short quiz to follow:
Sold his 7,000 SF beachfront Malibu home for "nearly $30 million," according to the LA Times.
Sold his 28-room, Tudor-style mansion in Greenwich, CT, for $39.5 million.
Bought a 400-acre ranch in Costa Rica for $25.8 million.
Our Quiz: Does this mean anything? We consider Gibson a shrewd businessman. Is he bailing on luxury U.S. real estate at the peak? Or, are we incorrect in viewing him as a smart businessman. Or, perhaps, his buyings and sellings have nothing to do with the real estate market. You tell us.
Photo Credit: AP
 What's more jarring: newly built Martha Stewart-branded houses in the Inland Empire, or in Lancaster? KB Homes is the builder in both places, and says the Stewart-branded homes are selling well.
The LA Times article linked above mentions two Martha homes that sold in Perris, one at $440,000, the other at $372,000.
But in an indication of just how soft the new home market is in Riverside County, KB Homes tells the LA Times it has cut the price even on some the Martha houses in "Olive Grove." "'The Riverside-San Bernardino market is quite soft right now,' said KB Home CEO Jeffrey Mezger said. In response, KB Home has cut prices on certain Olive Grove models since January. ... Still, Mezger added, the idea behind the homes 'generates traffic and buyers that benefit us in our other communities as well.'"
It sounds like KB Homes is happy with the way the Martha homes are selling, and in this market, anything that sells is a small success story. But we can't imagine KB homes went into business with Martha in hopes of "generating traffic" -- it did this deal to make money. The company lost $174 million in the second quarter.
Photo Credit: AP
 Good morning. Today's must-read is an excellent trend story in the LA Times Opinion section noting that the "working poor are tripling up to buy homes in the 'burbs."
The story, by USC urban planning expert William Fulton, explores an unusual trend: downtown, with its new condos and lofts, is drawing more and more affluent buyers; while the working poor with ownership ambitions are often tripling up to afford suburban homes.
Fulton: "If a $500,000 house requires that buyers have $100,000 in annual income to qualify for a mortgage, it only makes sense that multiple wage-earners making $20,000 to $30,000 each could join to buy it and settle in."
Fulton writes that multiple families in single-family homes are driving up population densities in mostly Latino suburbs such as Pico Rivera, Rosemead and Fountain Valley. Greater density means, well greater density -- three working families in a home means up to six cars, which don't fit in a driveway. "Already Oxnard has "bitten the bullet" and allowed residents to pave over part of their front yards for parking."
We'd like to hear your thoughts on this. Email story tips to LALandblog@yahoo.com
Photo Credit: Reuters
We were accused of sensationalism last week for jumping on that 799% increase in LA homes lost to foreclosure. If that kind of reporting is sensationalism, we'll plead guilty every time.
Here's another one, from today's LATimes: "Housing starts were practically nonexistent last month in Orange County, where the number of permits obtained by builders plunged 85% from a year earlier, data released Friday showed."
More: "In Los Angeles County, the number of permits issued decreased 36% last month from a year earlier, the researchers said."
One more: "Despite the drop in new-home building permits, Orange County lost just 100 construction-related jobs year over year in June, the state Employment Development Department said."
Our take: We suspect the state government's view of construction employment is based on an alternate version of reality: in the state's version of reality, construction workers are legal workers who have social security numbers, work papers, and pay withholding taxes. In other words, we believe there has been a sharp drop in construction employment, regardless of what the state says.
Photo Credit: Reuters
Good morning. After a week of turmoil in the housing industry, we bring you a moment of calm at LA Land: tree of the week. This week our tree-loving friend Pieter Severynen celebrates a true classic, Southern Magnolia.
Southern Magnolia – Magnolia grandiflora
"Big in every way, the classic Southern Magnolia from the humid Southern USA has adapted well to the Southland. It is an evergreen, summer blooming, pyramidal tree to 60’ tall by 40’ wide, with up to 10” long, stiff, leathery, glossy leaves that are typically fuzzy brown underneath, and equally large, showy, fragrant, white flowers. Some fruits develop in fall to 4” pods that open to reveal bright red seeds.
"An impressive tree, it takes little care, wet soil if drainage is good and lawn watering. Its drawbacks are slow growth, leaves that don’t easily decompose, no flowers when young, (up to age 15), dense shade, and roots that may lift nearby paving. Since growers recognized that not everybody has lots of space and patience they developed several smaller sized, earlier blooming varieties, some only 20- 25’ tall."
Thanks, Pieter
Email Pieter: plseve@earthlink.net
Photo Credit: AndalusiaFarm.org
We promised more on the Wells Fargo decision to exit the wholesale subprime lending business, and here it is: an e-mail, forwarded to L.A. Land, from one of the 200 or so employees axed:
Subject: Hasta La Vista,
Dear Friends:
At 11:00 AM Central Time, Wells Fargo exited the Wholesale Nonprime Market. No more subprime from Wells Fargo, effective immediately. Any loans in the pipeline will continue to fund until 8/31/07. For any questions about your loans, please contact our Ops center at 800-xxx-xxxx.
Thank you all for the business we have been able to do together.
It's been a GREAT run.
And yes, I am looking for a job! Any referrals or leads will be greatly appreciated.
xxxxxxx,
Formerly of
Wells Fargo
Alternative Lending."
 Lou Barnes, whose weekly column we enjoy at Inman News, writes this week that housing prices will not fall sharply: "Housing in the Bubble Zones is still sliding, inventory accumulating, foreclosures rising, all likely to continue for years. Those ignorant of housing propose resolution by sellers cutting prices, but it doesn't work that way: overextended prices stay flat until purchasing power accumulates to support them. The farther the boom pushed prices beyond purchasing power, the longer it takes. This time, years and years."
So Lou sees a very long period of flattish prices in LA, because this market was clearly pushed well beyond purchasing power.
That said, we'd like to hear your thoughts on what will happen with prices, and we'd like you to be specific. That is, if you believe prices will fall by 10%, do you mean median prices of existing homes sold? Or do you have in mind some other metric (adjusted for inflation, etc.)? And over what period of time?
You can include in your answer, if you care to, how much you believe prices have already fallen, if you believe that's the case.
We anticipate your thoughts on this one.
Email story tips to lalandblog@yahoo.com
Photo Credit: LATimes
There's a great piece of work over at ElliotWave.com looking back at the last housing bust in California, which stretched from 1988 to 1996. The blog read through archives of the Los Angeles Times and retells the bust as the paper told it -- and it's not pretty. It describes the initial euphoria and denial, followed by reports of frustrated, desperate home sellers angry at real estate agents for telling them to reduce prices, "insulting" lowball offers, rising foreclosures, vanishing equity and "ball and chain" houses that won't sell.
Susan Barretta's article is in three parts: 1988-1989, 1990-1993, and 1994-1996.
Will it happen again? Is it happening now? Your thoughts -- and memories of 1988-1996 -- are anticipated.
Hat tip: Patrick.net
 We're a day late again with the Thursday mortgage rate roundup -- sorry. Rates slipped again this week, continuing to bounce around within a pretty narrow range.
Inman News: In Freddie Mac's survey, the 30-year fixed-rate mortgage sank to an average 6.69% from last week's 6.73%... Bankrate.com's average 30-year-mortgage interest rate this week in
Los Angeles was 6.81%, down quite a bit from 6.90% a week ago.
Freddie Mac Timeline:
6/14 6.74%
6/21 6.69%
6/28 6.67%
7/5 6.63%
7/12 6.73%
7/19 6.73%
7/26 6.69%
Thoughts? Comments? E-mail story tips to lalandblog@yahoo.com
Photo Credit: Reuters
 Good morning. This one, from an e-mail tipster, gave us a laugh, and we thought we'd pass it along: A Venice home (1686 Electric Ave.) that's been sitting on the market for 159 days has had nine price reductions... of $1,000 each.
Here's the price history from Zip Realty:
Price Reduced: 05/15/07 -- $1,299,000 to $1,298,000
Price Reduced: 05/22/07 -- $1,298,000 to $1,297,000
Price Reduced: 05/29/07 -- $1,297,000 to $1,296,000
Price Reduced: 06/05/07 -- $1,296,000 to $1,295,000
Price Reduced: 06/12/07 -- $1,295,000 to $1,294,000
Price Reduced: 06/19/07 -- $1,294,000 to $1,293,000
Price Reduced: 06/26/07 -- $1,293,000 to $1,292,000
Price Reduced: 07/03/07 -- $1,292,000 to $1,291,000
Price Reduced: 07/10/07 -- $1,291,000 to $1,290,000
If the house looks smallish to you, you're right: it's 1,300 SF on a 3,900 SF lot.
We take it this kind of mischief is inspired by the knowledge that more and more home buyers are searching websites for price reductions.... We'd love to hear your thoughts on this.
Photo Credit: CLAW/MLS
E-mail story tips to lalandblog@yahoo.com
Well, sort of. We enjoy the Real Estalker blog about celebrity real estate immensely -- we find it chatty, reliable, funny, informative and very well-written. We have what we think is a healthy curiosity about who, exactly, writes it -- the posts are signed by "Your Mama."
So the New York Times tracked down said Mama for a story about people who stalk houses. Here's the skinny:
"Real Estalker reported on the screenwriter Naomi Foner Gyllenhaal and the director Stephen Gyllenhaal (the parents of the actors Jake and Maggie), who were renting out their Hollywood Hills home.
"The blogger, who uses the pseudonym Mark David and said he works as a graphic designer in Manhattan, said he was able to draw on the website of the Los Angeles County tax assessor’s office and other online sources for information about the location of the Gyllenhaal house (near Runyon Canyon Park), its size (2,563 square feet) and its purchase price ($850,000 in 1999), along with color photographs of its interior from the website of the Multiple Listing Service, the real estate database.
"The blogger, who declined to give his name for publication, saying he had real estate interests that might be compromised if people connected him with the blog, said by telephone that he can find out how much homeowners owe on their mortgage, but that he wouldn’t post that online. 'What I’m doing is invasive enough,' he said."
Our Two Cents: We still think Real Estalker is written mainly in Los Angeles.
 Kate in the Valley is an optimist -- she's still looking for a house, her blog looks better than ever, and she's still writing a house-hunting diary for us. Her latest entry:
"High home prices are not the only barrier to this house hunt. The other big barrier is Mr. Kate; he is a terrible house hunter. Yes. He. Is. If not for me, Mr. Kate would buy a house that was right on Sepulveda, sandwiched between two apartment buildings and backed by an alley. He really would so long as the house was more than 1,700 square feet, South of the 101, in move-in condition, and was 10% or 15% below our budget.
"I, on the other hand, will not even look at a house if there is an apartment building on the same block. Give me a pretty street and a good-sized lot, and it almost doesn't matter what the house looks like; I think I can fix it. In fact, I really want to fix it. I will fall in love with the bones of a house and go home to do a three-dimensional schematic with some CAD software I have. I will immerse myself in magazines and catalogs looking for the right range top and the right shower fixtures; I have an embarrassing volume of paint chip catalogs. Alas, Mr. Kate bristles at the thought of any remodeling, big or small. He simply dreads it.
"At one point, I took to flat out lying to Mr. Kate about the time required to remodel so that he would agree to bid on a house. "Add 10 feet to the back of the house? Oh, they can have that done in a few weeks. Did I say a few? I meant a couple. It'll be done before we move in! Don't worry!" Mr. Kate was not fooled. As a result of my, well, let's call them "optimistic estimates," he now automatically adds four weeks to any remodeling time frame I give him. Seriously, he suspects it will take two days -- and four weeks -- to paint a living room.
"You'd think that after watching hundreds of episodes of HGTV shows with me, he would warm up to fix-it projects a bit. Yeah, as it turns out, not so much. After all that HGTV watching, the only things that changed are: (1) he now hides the remote from me; and (2) he "accidentally" deletes an awful lot of my shows from our TiVo. But I suppose our very different house-hunting criteria will work out for the best. I would probably get myself in too deep with a big remodel project, and he would have us living in the only house ever constructed on a freeway median."
Thanks, Kate. Thoughts? Comments? As always, be respectful. This is a family blog. Read Kate's blog here.
 We picked a bad day to be out of pocket. We'll try to catch up quickly, starting with a quick roundup:
The Dow fell 311 points on fears the housing crisis will weaken the entire economy and that a widening credit crunch -- which started in housing -- will jeopardize all the private buyouts that have been supporting the stock market.
The earnings reported by home-building companies Pulte Homes, D.R. Horton and Beazer Homes were so bad Reuters wrote, "The slaughterhouse that has been the U.S. housing market for the past few months got bloodier on Thursday..." Sales of new homes fell 6.6% from May to June. "Overall, the market for new homes stinks ... liquidity is getting sucked out of the system," said analyst Alex Vallecillo. "Mortgages are going to be tougher to come by, more expensive. The buyers are basically drying up."
Wells Fargo is getting out of the subprime wholesale lending business. About 200 jobs will be cut, and the bank will continue to make subprime loans through its own retail channel. We'll have an additional item on this later, an e-mail from an axed worker.
Photo Credit: AP
Comments? Let 'em rip. E-mail story tips to lalandblog@yahoo.com
Good morning. A bunch of nuggets and news items:
Cars and Housing: AutoNation had a disappointing second quarter, and the chief executive blames the weak housing market: "I cringe a little bit every time I hear from specialists who say there's no spillover from housing onto the consumer," AutoNation CEO Mike Jackson told CNBC. "I flatly disagree with that." AutoNation's weakest markets included California and Florida: "Those are the big down housing markets, and there's a big direct parallel between the housing market and automotive retail sales."
Inventory glut in SoCal: From Annette Haddad's story on housing market weakness in today's L.A. Times:
"Southern California has a 12.6-month supply of unsold existing homes, about double the inventory from a year ago, according to a sampling of for-sale listings taken by the California Assn. of Realtors. The month before, the supply was 12.5 months." And what does high inventory mean? "We think inventory is the best indicator of future pricing trends — excess inventory equals lower prices ahead," said building analyst Daniel Oppenheim.
More price weakness coming: "Moody's predicts that from its peak in 2005, the national median home price will fall about 9% before stabilizing next summer," said Steve Liesman, CNBC's senior economic correspondent, during "Squawk Box" Thursday. "That means the price has further to drop than it already has."
Thoughts? Comments? E-mail story tips to Lalandblog@yahoo.com
Good morning. One house doesn't make a trend, but it makes a good item: Dr. Housing Bubble tells the story of a two-bedroom Lakewood home that was listed at $500,000 in April and has been reduced by 20% -- to $400,000.
Before you conclude the initial $500,000 price was a fantasy, consider this: the house sold in August for $500,000.
Dr. Housing Bubble: "I’m not sure what constitutes a crash but losing $100,000+ in 6 months is pretty significant. A 20 percent drop in 6 months is definitely a bubble bursting."
The listing history:
Price Reduced: 04/24/07 -- $499,900 to $485,000
Price Reduced: 05/27/07 -- $485,000 to $470,000
Price Reduced: 07/11/07 -- $470,000 to $450,000
Price Reduced: 07/18/07 -- $450,000 to $400,000
Photo Credit: Dr. Housing Bubble
Your thoughts?
Hat tip: Patrick.net
 These are not rhetorical questions -- we ask them because we don't know the answers, and we're interested in your thoughts.
How badly does foreclosure damage neighboring properties? We ask this because today on KNX-AM, we heard Ed Smith of the California Assn. of Mortgage Brokers cite this assertion, made by HUD Secretary Alphonso Jackson: "Properties within 150 feet of a foreclosed vacant house lose 10% of their value." Ten percent sounds awfully high to us. Your thoughts?
Is it possible for a homeowner to have equity in a home and still lose it to foreclosure? Explain that one to me. If they have equity, can't they just sell the house? Or, if they can't sell it, give it to the bank, in a deed-in-lieu-of-foreclosure transaction?
Photo Credit: L.A. Times
We did not take a red-eye to Washington last night so that we could be at the National Assn. of Realtors headquarters this morning when the monthly sales numbers were released. But CNBC's Diana Olick was there, and she filed this interesting item indicating the NAR is on the defensive about its housing market stats:
"The PR team passed out two interesting papers: “Fact Sheet,” they each blared across the top in bold print.... I asked: Why the papers? Well it seems they’ve been getting a lot of calls, not from the folks sitting there in the room, but from others. Who? They wouldn’t say. I asked why they seemed to be on the defensive. 'Criticism of the national data, not local. The trend of inquiries has been rising,' Walt Molony of the NAR told me."
We're not sure the exact nature of the criticism. Any thoughts, ideas? The NAR's national numbers did show a slight year-over-year increase in the median sales price of existing homes.
 Sluggish market update: Sellers of a $2.8-million Manhattan Beach house are now offering a 2007 Mercedes-Benz S550 with the house, provided you pay full price.
The house has bounced around in price from $2.8 million down to $2.5 million, as Manhattan Beach Confidential reports, and it was once advertised as coming with $300,000 in furnishings designed by "participants" from "Queer Eye for the Straight Guy."
We've always thought these tactics were pretty hokey and confusing. Certainly it makes the car more affordable -- you're effectively financing it over 30 years. But is there someone out there who can afford a $2.8-million home but can't afford a new Mercedes?
Thoughts? Comments?
Photo Credit: Manhattan Beach Confidential
 Good morning. Home sales across the country dipped again in June, according to the monthly National Assn. of Realtors report that's summarized at Inman News.
In brief: "Sales of existing homes fell 11.4% in June compared to a year ago, to a seasonally adjusted annual rate of 5.75 million homes, the National Assn. of Realtors reported today."
The annual rate is down sharply from May's rate of 5.98 million home sales per year. Home sales peaked at 7.03 million in 2005.
In the West: sales were down 19.1% year-over-year, and the median price slipped 0.4%, to $340,000.
Your thoughts?
Photo Credit: Reuters
 Important piece of writing today by Bill Gross, the Pimco bond king, explaining why the subprime meltdown is causing a credit squeeze. It's not the collapse of the Bear Stearns funds. It's not Countrywide's warning that prime loans are turning sour. It's not the rising foreclosures. So what is it? Gross say it's the troubling truth that the bond-rating houses did not see this coming and did nothing to warn investors:
"To be blunt, (investors) seem to be thinking that if Moody’s and Standard & Poor’s have done such a lousy job of rating subprime structures, how can the market have confidence that they’re not repeating the same structural, formulaic mistake with CLOs and CDOs? That growing lack of confidence –- more so than the defaults of two Bear Stearns hedge funds and the threat of more to come –- has frozen future lending and backed up the market for high-yield new issues such that it resembles a constipated owl: absolutely nothing is moving."
So there you have it -- the credit markets are backed up like a constipated owl. Or, if you prefer a golf analogy, like Rancho Park Golf Club on a Saturday afternoon.
Photo Credit: Reuters
...Was not about Countrywide's earnings or an 800% spike in foreclosures. It was this Business Week article about Fannie Mae and Freddie Mac and their growing exposure to the subprime meltdown.
We'll start with a couple of anecdotes about houses they own because of foreclosure: "Fannie has a 'charming colonial' on the market for $7,000 in Detroit, despite the $59,000 outstanding on the loan. The property, repossessed in May, has been looted, with the kitchen sink and drainpipes stolen. Meanwhile, agent Debbie Leslie of Le Valley Real Estate has cut the price on a home Freddie owns in Flint, Mich., five times this year, from $10,900 to $5,250. The mortgage is $26,250. 'We're waiting to see where the floor is,' says Leslie.
"Driven by market competition and regulatory mandates, the two have become big buyers of adjustable-rate mortgages, or ARMs.... The two have also moved more prominently into low-documentation loans, which require little or no proof of the borrower's income.... 'We don't know how much trash is on their balance sheet,' says Josh Rosner of researcher Graham Fisher & Co. 'It seems they've shot themselves in the foot.'"
We have questions: Are Fannie and Freddie in trouble? And if they are, how does that play out? We happen to think this is a good question for presidential candidates: Is there an implicit guarantee of a federal bailout of Fannie and Freddie? And if they run into trouble, would you support a bailout?
A particularly interesting question for Hillary Clinton, given that "Friend of Bill" Franklin Raines ran Fannie into a $6.3-billion accounting scandal.
Hat tip: Patrick.net
 We told you the news was crummy today. DataQuick Information Services today is reporting a huge spike in the number of L.A. homes lost to foreclosure -- up 799% from the second quarter of 2006 to this year's second quarter.
A bunch of numbers from DataQuick: Notices of default more than doubled in L.A., rising 127%, but the default problem is much worse elsewhere in the state:
Statewide: Up 158%
Riverside: Up 191%
San Bernardino: Up 180%
Orange County: Up 138%
In a second category, "Recorded Trustees Deeds" (actual loss of a home to foreclosure), L.A. mirrors the state average, with a 799% year-over-year increase:
Statewide: Up 799%
San Bernardino: Up 987%
Riverside: Up 793%
Orange County: Up 646%
One more cheerful thought: During the three-month period measured, banks and lenders took back 2,581 houses in L.A. -- that's about 28 houses foreclosed every day.
Hat tip: Cal
Photo Credit: L.A. Times
 There is a lot of news today on the housing market, all of it indicating the market continues to deteriorate.
Countrywide is still making money ($5 million in profits per day), but profits are falling, investors are disappointed, and what the company sees in the housing market is not good. The L.A. Times: "The nation's biggest mortgage lender signaled that rising defaults and delinquencies are spreading beyond the troubled subprime market to higher-quality "prime" loans. ... The Calabasas-based company reported a 33% drop in its second-quarter profit and slashed its outlook for the rest of the year, citing an "increasingly challenging" housing market.
The Reuters headline from the conference call featuring Countrywide Chief Executive Angelo Mozilo, pictured, is: "Countrywide CEO: No housing recovery before 2009."
A couple of notes: Nobody is in a better position to understand the housing market -- Countrywide is the nation's largest mortgage lender. The news here is the spread of trouble (defaults and delinquencies) beyond the subprime market. "Increasingly challenging" means the problem is getting worse.
Your thoughts?
Photo Credit: Reuters
The biggest housing story of the past couple of weeks, in our opinion, is the ongoing tightening of credit, at the retail level and higher on the financial food chain. These may not be big headlines, but every day major lenders are eliminating some of the risky loans (2/28s, 3/27s, stated income, etc.) that created demand and pumped up housing prices.
Item: Wells Fargo, a major player in sub-prime loans, on Monday said it will no longer offer 2/28s (two years at a low teaser rate, 28 years at higher adjustable rates).
The squeeze is hitting corporate borrowers as well: "The cost of raising money in the junk bond market continued to surge Monday, spurring online travel firm Expedia Inc. to sharply scale back plans to borrow money to buy back stock. ... Since mid-June at least six companies have pulled junk bond sales. This month U.S. companies have sold just $708 million of junk bonds, the slowest pace for any July since 1994, according to Dealogic."
Your thoughts? Insights?
 Good morning. News item: A waterfront home in Long Beach has sold for $8.1 million, a record for that city. We don't know if it's worth $8.1 million -- our expertise tops out in the six figures -- but that is a good-looking home.
In addition to the price, and the picture, two things caught our eye on this one: The video tour on vimeo.com -- how long before everybody selling a house does this?
And the price reduction of $2.8 million, as reported here by Curbed L.A. and here by the Press-Telegram, which points out the house was sold in 2003 for $7.6 million.
Photo Credit: Dreamhomesmagazine.com
 No, it's not just your imagination, L.A. housing is really expensive: Curbed L.A. informs us tonight that Los Angeles housing is officially the least affordable in America.
Here's the nugget: "With L.A.'s median household income at $58,319, only 3% of recent home sales are considered affordable."
The research comes from Forbes.com, which ranks America's least affordable housing markets as follows: Los Angeles, San Francisco, San Diego, Miami, New York.
Here's more on the methodology, from Forbes.com: "For example, in the first quarter of 2001, 42.3% of homes sold in Los Angeles were available to the median earning household. But in the first quarter of 2007, only 3% of homes sold there were affordable to those households earning the median income. This is based on data from the National Assn. of Home Builders (NAHB) and Wells Fargo ... that assumes a 10% down payment, a 6.1% mortgage, and tax and insurance costs calculated by the Federal Housing Finance Board."
Thoughts? Insights?
Photo Credit: L.A. Times
 Asking prices in Greater L.A. held steady for the second week in a row, as inventory continued to mount, according to Housing Tracker's analysis of MLS listings, which we monitor here every week. Housing Tracker shows the median asking price steady at $535,000 this week. Inventory climbed by 540 houses, with 43,225 now on the market.
More on the numbers: The $535,000 median asking price represents a drop of 7.0% over the last year and 0.7% over the last month. Inventory increased 2.8% in the last month and 14.5% over the last year.
Date Median Price 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 (up 24.6% y/y)
6/4 $540,000 40,458 (up 23.3% y/y)
6/11 $540,000 40,766 (up 20.4% y/y)
6/18 $539,000 41,324 (up 18.7% y/y)
6/25 $539,000 42,059 (up 19.3% y/y)
7/2 $539,000 42,530 (up 19.0% y/y)
7/9 $535,000 42,517 (up 17.2% y/y)
7/16 $535,000 42,685 (up 14.5% y/y)
7/23 $535,000 43,225 (Up 14.5% y/y)
Comments? Analysis? Let loose. E-mail story tips to lalandblog@yahoo.com.
Photo Credit: Reuters
 We post this at the risk of revealing our own startling ignorance, but, hey, faithful readers know that about us already. Seriously, we spotted some new -- to us -- housing market jargon, and wanted to pass it along: A "scraper" is a house bought by a builder who intends to level the house and start over. We've heard "teardown," but not "scraper." Here's how Manhattan Beach Confidential uses it:
"Some months ago, we featured a home pitched as "The perfect Tree section starter! ... 3521 Elm is a 1200 sq. ft. bungalow in a part of the Tree Section that's pretty forgettable. In June, after this one went pending, the listing agent's ads started to show the home as one of several sales to builders. At that point, it was clear this would be no one's "starter home." It was a scraper."
Now help us out: Is there a difference between a teardown and a scraper?
Photo Credit: Santa Monica construction by L.A. Land
 Good morning. In a softening market, you see some weird listings, like this one that Westside Bubble spotted:
"This 3 bed/2 bath house at 4250 Beethoven St., asking $839K, tells quite a story in its description: "Soon to be in Foreclosure! This price is based on short sale approval. The house was built new from the foundation up in 2005. Travertine flooring throughout living room and kitchen. Mahogany hardwood floors in the bedrooms. Excellent opportunity. Hostile tenant, DO NOT DISTURB. SHOWINGS WITH ACCEPTED OFFER ONLY."
There's a lot going on here. A flip that flopped? Anybody want to help fill in the blanks?
Photo Credit: Westside Bubble
We were asked recently in a radio interview if the L.A. housing market is reverting to traditional financing, with buyers making 20% down payments. Um, we said articulately, we don't think so -- L.A. is just not a 20% down payment market. There aren't enough buyers with $100,000 in the bank.
This personal finance profile in today's L.A.Times sheds more light on that issue. It profiles a couple with $13,000 in savings, and contains the following advice from a financial planner: don't buy a house until you've saved enough for a 5% or 10% down payment.
So -- is 5% down becoming the new "no-money-down"? And if it is, doesn't that make the market even worse, because so many prospective buyers don't have a 5% downpayment in the bank?
Your thoughts, as always, are anticipated and appreciated.
 Good morning. We lead off our Sunday morning roundup of
commentary with this from Tom Petruno of the L.A. Times: "The fire sale in mortgage securities has yet to begin. But it's coming. The implications for the rest of financial markets aren't clear, but when confidence is shaken in one market there usually is collateral damage."
Lou Barnes at Inman News (his column is behind the pay wall) has similarly ominous thoughts: "Each day this mortgage/housing mess more resembles the S&L disaster of the '80s (when it's done, I bet this one is bigger and more painful), and the regulatory boobism of that episode."
Barnes also this week praised Fed Chairman Ben Bernanke: "Bernanke made his best speech by far in testimony to Congress.... He acknowledged that the subprime matter is serious, not confined to that market, and housing will get worse before better -- both revisions of near-term previous thinking.... It takes guts to make a public estimate of losses in the mortgage fiasco ("$50 billion to $100 billion"), knowing for sure that it's too early to be correct...."
Photo Credit: Reuters
 We've read a lot of articles about foreclosure, but we haven't seen anything as detailed as Dr. Housing Bubble's by-the-numbers account of a couple's slide into foreclosure. Check it out, it's worth reading the entire thing.
In brief: Couple makes $130K a year, drive his and her Mercedes-Benzes, and they buy a big house in Costa Mesa in 2004 for $675,000 with no money down. Oh, and they take out a 2/28 mortgage, with the first two years fixed at a teaser rate of just 2.75%.
What happens? Well, the $130K a year income suddenly goes down, the interest rate and the house payment go up, and the housing market hits a slump, and suddenly Mr. and Mrs. Mercedes are missing mortgage payments. Lots of them. Dr. Housing Bubble has the household budget every step of the way, from living large to moving out.
This one is an eye-opener: a foreclosure tale without pity, and with plenty of numbers.
Thoughts? Comments?
Photo Credit: L.A. Times
 We read through the entire, 10-part "Dust Up" on LATimes.com devoted to the foreclosure crisis, hoping to find a nugget we could pass on. And here it is: a consumer advocate argues lenders should be forced to avoid foreclosures by modifying loans so that borrowers can afford to keep their houses indefinitely.
Paul Leonard, the director of the California office of the Center for Responsible Lending, writes, "When loans are modified, borrowers should be able to afford their loans over the long term at the so-called fully indexed rate, not just the current payment level. Public agencies should be monitoring and holding lenders accountable for affordability ou | |
American Home Mortgage is clinging to life, but its time will come. And when it does, it will join a very long list of failed mortgage lenders. The Implode-O-Meter blog, one of our favorites for news on the mortgage industry, now counts 105 lenders that have imploded.
