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President Bush, today: "One of the most troubling developments has been the increase in adjustable rate mortgages that start out with a very low interest rate and then reset to a higher rate after a few years."
Alan Greenspan, as reported by Business Week in April 2004: "No less an expert than Federal Reserve Chairman Alan Greenspan has sung the praises of ARMs. In February (2004), he told credit union executives that such loans could have saved many homeowners tens of thousands of dollars over the past decade. He noted that ARMs are much more common in other countries, and he encouraged the mortgage industry to create more options. 'The traditional fixed-rate mortgage may be an expensive method of financing a home,' Greenspan said."
Our take: (This is a joke, folks): It could be that Greenspan was confused, or deceived about ARMs. Perhaps he had no idea that they sometimes lead to higher mortgage payments.
Your thoughts? Comments? Insights?
Good morning. Here's how far we've come in this housing cycle: The Mortgage Bankers Assn. is now talking about flippers who gambled on houses, got stuck, and then walked away. Jeez, that doesn't sound like a Washington lobbying group talking, it sounds like a comment on one of those cranky housing blogs.
Annette Haddad writes in today's L.A. Times: "Blame it on the speculators. That's what the Mortgage Bankers Assn. did Thursday in a report showing that as many as 1 in 5 mortgages in default in California belongs to borrowers who are not living in the homes with the troubled loans."
Doug Duncan, the trade group's chief economist: "Defaults are on the rise in most parts of the country, but it should be recognized that it is not always the case of a homeowner losing his or her home but is often the case of an investor gambling on a continued increase in home values and losing that gamble," Duncan said. Many of these investors "simply walked away from the mortgages," he said.
Our take: Many commenters have pointed out here that the gambling mentality is not unique to investors -- many people who bought homes to live in were also gambling that they'd be able to refinance, or sell the home at a profit.
Your thoughts? Comments? E-mail story tips to lalandblog@yahoo.com.
Update: You can read the President's comments here, and see the entire proposal here. Here's the soundbite I've seen on cable news a couple of times: "A federal bailout of lenders would only encourage a recurrence of the problem. It's not the government's job to bail out speculators, or those who made the decision to buy a home they knew they could never afford. Yet there are many American homeowners who could get through this difficult time with a little flexibility from their lenders, or a little help from their government."
Old post: Here's breaking news from the New York Times tonight: "President Bush, in his first response to families hit by the subprime mortgage crisis, plans to announce several steps Friday to help Americans who have credit problems meet the rising cost of their housing loans, administration officials said Thursday." The L.A. Times coverage is here.
Highlights of the N.Y. Times report: Bush will call for the Federal Housing Administration to expand mortgage insurance for homeowners with spotty credit, will "jawbone" lenders, urging them not to foreclose on some borrowers, will focus his efforts on low-income homeowners, and will support legislation to provide tax breaks to homeowners whose mortgage debt is forgiven by lenders.
The Wall Street Journal has more on the FHA expansion: "Among the most tangible moves will be an administrative change to allow the Federal Housing Administration, which insures mortgages for low- and middle-income borrowers, to guarantee loans for delinquent borrowers. The change is intended to help borrowers who are at least 90 days behind in payments but still living in their homes avoid foreclosure; the guarantees help homeowners by allowing them to refinance at more favorable rates."
The L.A. Times points out that even government-backed insurance won't save some borrowers who simply can't afford the homes they're living in: "Many people who took out adjustable-rate loans in recent years at low "teaser" rates and now face sharp jumps in their payments, may be unable to afford any new market-rate loan, even with government insurance, experts say."
Friday figures to be a newsy day -- Fed Chairman Ben S. Bernanke will also speak about housing issues, a speech closely anticipated on Wall Street, where traders will be looking -- and for the most part hoping -- for signs that the Fed intends to cut interest rates in September.
Comments? Thoughts? Insights?
From Inman News: "A new report released by an industry trade group found that only 24% of California households could afford to buy an entry-level home during the second quarter."
More on the affordability report from the California Assn. of Realtors: "The minimum household income needed to purchase an entry-level home at $504,080 in California in the second quarter of 2007 was $101,550, based on an adjustable interest rate of 6.29% and assuming a 10% down payment."
More numbers: The price of an entry-level home in Los Angeles is estimated at -- oddly -- the exact same amount as the statewide number, $504,080, requring the same income, $101,550.
Our take: First-time buyers put down a lot less than 10%, on average. In 2006, 41% of first-time buyers put nothing down, according to CAR.
Thoughts? Comments? Insights?
An apology in advance: We'll be out of pocket, and comments will be slow to post today. Keep 'em coming. They'll go up later this afternoon. Sorry for the delay.
While we're at it, a commenter yesterday complained about how looooooong it took for his comment to post. We moderate the comments -- otherwise it's a free-for-all full of profanity and worse. Sometimes we sit at the computer waiting for new comments to pop up, and we jump on them in, like, 10 seconds. Other times we have a life and it takes awhile for us to get to them.
Thanks for your patience, and thanks for all the comments.
Pete
 Kate is back, still blogging, still looking for the future home of Mr. Kate. This week she explains her current strategy and tells us about the houses she has her eye on. Enjoy:
One of the most common questions I get asked is: "Why haven't you bought a house yet?" The answer to that question changed dramatically since I began my search. At first, it was because the listings in my target neighborhoods and price range were few and far between and (luckily!) I ended up on the losing end of several bidding wars, as you know from one of my earlier posts.
Eventually, people urged me to expand my search area to include neighborhoods north of the 101 where bidding wars were not as common. So, in June, I went looking in an area called Fashion Square. Fashion Square is bound by Hazeltine and Woodman, Magnolia and Riverside, and is named after the adjacent Westfield Shopping Center.
I figured these homes had to be more affordable than homes south of the 101, as they were not in the hills and not walking distance to Ventura Boulevard's restaurants and boutiques. But they weren't. As of June 30, there were 11 homes in this neighborhood listed for sale between $800k and $900k (remember, these are mid-century tract houses we're talking about). I couldn't believe people were paying that much for these homes, so I decided to watch and see who would pony up.
After two months (that's two months of watching these listings, many of these homes have been listed in excess of four months), how many of those original 11 listings do you think sold? Well, one definitely sold. As detailed below, it was an REO that sold for nearly $400k less than its previous recorded sale. One went inactive, and no sale data is available so it seems to have merely expired. Four of the 11 are still priced between $800k and $900k, but two of them have seen at least 8% reductions. And the remaining five have been reduced below $800k. (In fairness, a couple of other homes in this neighborhood came on the market in July and then went inactive, but here again no sale data is available for them and they were not part of the original 11 listings).
Read on below: Kate gets specific about the houses she's monitoring, and the price reductions she's tracking.
Read more Kate watches, waits and fears a falling knife »
Good morning, again. The L.A.Times' E. Scott Reckard checks in on the jumbo market and reports that it is still messy and pricey: "creditworthy borrowers are getting hammered if they want mortgages with payment options or "jumbo" loans..."
How bad is it? Reckard tells of a Manhattan Beach landlord (near perfect credit) trying to refinance a home that's worth in the $1.6 million range (he thinks), and currently carries a $650,000 mortgage. He's looking for a 30-year fixed with an interest-only pay option for the first 10 years. Last year he got a similar mortgage on another property with a 5.5% rate.
So what did WAMU quote him?
(Wait for it... Wait for it...)
"A loan officer at Washington Mutual Inc. quoted him a rate of 9.75%, saying that the lender 'had to charge such high rates so that they could sell off the loans'" ... He passed.
Doug Duncan of the Mortgage Bankers Assn.: "No one's buying mortgage-backed securities that are backed by jumbo loans."
Thoughts? Comments? Any recent stories from the real world?
 Good morning. The chief executive of home builder Hovnanian Enterprises is joining Countrywide's Angelo Mozilo on the "it really looks bad out there" bandwagon. Like Mozilo, Ara Hovnanian went on CNBC and worried aloud about a recession. Pull quote: "The credit market disarray is real."
CNBC's Bob Pisani observed that what's really going on here is that Mozilo and Hovnanian are appealing to the Fed to cut rates.
Today's gross domestic product number (4% annualized growth in the second quarter) is, as Joe Pesci would say, "a mystery wrapped in a riddle inside an enigma." How do you go from 4% growth -- pretty darn good -- to needing a rate cut in five weeks? We know, we know: credit freeze, mortgage meltdown, etc. Still, the strong number weakens the case for a rate cut.
Thoughts? Comments?
Photo Credit: Reuters
 In a letter to Sen. Charles Schumer written Monday and released today, Fed Chairman Ben Bernanke suggests ways Congress can encourage new mortgage products to help homeowners at risk of foreclosure. We're going to ask for very specific feedback at the bottom of the post, but please, read on:
Here's the AP lead: "Federal Reserve Chairman Ben Bernanke is suggesting that policymakers look for ways to encourage a wider range of mortgages geared for low income and other borrowers who have been hard hit by the housing slump and credit crunch."
Here's more: ""'The Congress might wish to consider FHA reforms that allow the agency more flexibility to design new products and to collaborate with the private sector in facilitating the refinancing of creditworthy subprime borrowers facing large resets,' Bernanke said."
Here's how Reuters is covering it: "Regulators need not lift investment caps on Fannie Mae and Freddie Mac in order to rescue troubled subprime borrowers, but new loan products could help some avoid foreclosure, Federal Reserve Chairman Ben Bernanke said in a letter released on Wednesday."
Two-part question: Part One: What kind of new product is Bernanke encouraging here? Any guesses?
Part Two: OK, here's a scenario: Let's say the borrower has a 2/28 mortgage, 2006 vintage, for $400,000. How could you restructure that loan so that the borrower pays just a little bit more than the "teaser" rate, and still pays off the loan? Can it be done? What are the options for the borrower? Or, are we barking up the wrong tree? Is Bernanke suggesting ("collaborate with the private sector") that banks or lenders forgive part of the loan if the government helps refinance it?
You can also skip the complicated stuff and just tell us what you think of Bernanke's ideas. Hat tip: Investorguy
 We are shocked -- shocked -- that it took Sen. Chuck Schumer three full days to complain about the Countrywide Financial business practices laid out in Gretchen Morgenson's New York Times story over the weekend. Schumer is usually much quicker than that.
As Mark Lacter reports over at L.A. Biz Observed, "the New York senator told the Calabasas mortgage lender today to stop paying brokers higher commissions for steering borrowers to adjustable rate subprime loans - a practice that was outlined in a NYT story over the weekend." Lacter links to a Dow Jones piece that has no response from Countrywide.
Our take: We thought the bigger headline in the N.Y. Times story -- at least for Washington follow-up, and possible legal trouble for Countrywide -- was this nugget: "Independent brokers who have worked with Countrywide also say the company does not provide records of their compensation to the Internal Revenue Service on a Form 1099, as the law requires."
It's never good to mess with the IRS. Those guys have zero sense of humor.
Your thoughts? Comments? Insights?
Photo Credit: Reuters
 Good morning. Barack Obama wants to fine unscrupulous lenders to pay for a housing bailout. The Financial Times: "Unscrupulous lenders who deceptively sold subprime mortgages to millions of Americans should be fined and the proceeds used to help bail out borrowers facing a wave of foreclosures, according to Barack Obama."
Our first take on this is that it is likely impossible and probably not a serious proposal, and is a piece of posturing. We'd like to be proved wrong on that, but how does Congress get money out of New Century Financial and scores of other subprime lenders that are out of business? Get in line in bankruptcy court? Who determines which subprime loans are "deceptive"? And, as commenter Tim K. points out, how do you separate the truly deceived borrowers from the speculators and flippers who were gambling on real estate with someone else's money?
From the FT: "Mr. Obama blamed lobbyists working on behalf of lenders for obstructing tougher regulation of the subprime industry, adding: 'Our government failed to provide the regulatory scrutiny that could have prevented this crisis.'"
More of our take: This is certainly true; it's also true that Sen. Obama and the Democratic Party were part of that government failure. Blaming lobbyists is a campaign theme of his -- a shrewd one, we think -- intended to paint Sen. Clinton in an unflattering light.
We'd like to give you a link to the entire Obama proposal -- an op-ed in today's Financial Times -- but it is behind an expensive pay wall, and L.A. Land is cheap. (What's up with that, writing about the American housing crisis in a British newspaper?) Here's the part that proposes a bailout:
"One way to protect innocent homeowners –- at least until this crisis passes –- is to establish a fund to help people refinance or sell to avoid foreclosure. We can partially pay for this fund by imposing penalties on lenders that acted irresponsibly or committed fraud."
Your thoughts? Comments? Insights?
Hat Tip: Tex
Funny headline, serious topic: foreclosed homes are often ill-maintained, and sometimes attract squatters and disease-bearing mosquitos, according to David Streitfeld's story in today's L.A. Times .
A big problem is swimming pools that are not properly drained and cleaned when the house is vacated. In the Antelope Valley, Streitfeld reports, mosquito control workers treated 65 pools last month, and hired a surveying company that identified as many as 1,000 that are "green," "half-empty," "murky" or "questionable."
Public officials say they can't just barge in and clean these places up: "'Unless the house is open and vacant, and starting to collect trash and debris, there's nothing we can do,' said Frank Bush, chief inspector for the L.A. Building and Safety Department's Code Enforcement Bureau.... As for the pool, 'you can't drain for the sake of draining,' said department spokesman Bob Steinbach. 'It's the owner's responsibility.'"
Our take: This is disappointing. Isn't there some legal way municipalities can put pressure on lenders and banks to clean these places up? Why should taxpayers foot the bill for cleanup when these homes are owned by banks?
Comments? Thoughts? E-mail story tips to lalandblog@yahoo.com.
 Frequent commenter Cal pointed this out to us: a link to our brief appearance last week on CNNI, discussing the California real estate market, captured for future generations on CNN.com. Thanks, Cal.
Comments? Critiques? Guidance: The observation "You have a face for radio, Pete," is not original.
Hat tip: Cal
 L.A. home prices fell 4.1% in the second quarter from year-earlier levels, according to the Case-Shiller index, which attempts to measure the change in value of a given house over time.
The national story from CNBC.com: "Home prices across the nation declined by 3.2% in the second quarter from a year earlier, suggesting the housing downturn has deepened, according to the S&P/Case-Shiller U.S. National Home Price Index."
Various markets for 2Q 07 vs. 2Q 06:
Los Angeles: -4.1%
San Francisco: -4.0%
San Diego: -7.3%
Las Vegas: 5.1% -5.1%
The Case-Shiller index uses "matched pairs" of houses to measure changes in prices, on the theory that a home that has sold multiple times can hold valuable information about price trends. We consider it the best single statistic measuring changes in home values, but of course we are always open to other thoughts and opinions.
Thoughts? Comments? E-mail story tips to lalandblog@yahoo.com.
Blogger's note: This post is updated with two additional links below, one to an LATimes story that ran on August 13 adressing this issue, and a new post on Manhattan Beach Confidential reporting that new escrows have slowed to a "trickle."
Every indication is that August was a very slow month for the real estate industry -- and we don't mean that in the "it's summer and things are slow" sense. We mean that in the "the mortgage industry is in crisis, loans aren't getting approved and deals are not closing" sense.
Remember, August was when two major lenders -- Countrywide and Thornburg -- had trouble getting their hands on money to lend; it was when rates on jumbo mortgages spiked, the market for mortgage-backed secruties froze, and the chairman of the Senate Banking Committee, Chris Dodd, said "You can't get a mortgage in America today."
So our question is, can anyone take a stab at quantifying how bad the August sales numbers will be? Two four pieces of guidance:
(New) The LA Times addressed this issue back on August 13th, reporting "August could wind up as one of the worst months on record for the region's home sales."
(New) Manhattan Beach Confidential reports that new escrows in August have slowed to a "trickle."
Commenter Cal writes, "Anecdotal evidence from realtors who post pending sales data and my own tracking of my local market pendings, I've seen approx a 16-18% drop in pendings in a short period of time from these sources."
But broker/columnist Lou Barnes cautions that we won't know for a while: "August home-sales are closing on contracts written June-July, and a
substantial decline in activity won’t appear until September sales are
reported in October."
Your thoughts? Guesses? Predictions? Email story tips to lalandblog@yahoo.com.
 For the fifth week in a row, median listing prices in the greater L.A. area dropped, this time by $3,000, according to Housing Tracker's analysis of MLS listings.
Stats: Median listing price dropped to $525,000, a decline of $14,000 since early July, and 7.9% over the past year. Inventory spiked again, rising by more than 600 listings to 45,168 listings.
Date Median Price Inventory
4/16 $545,000 35,489
5/14 $545,000 38,297
6/11 $540,000 40,766 (up 20.4% 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)
8/6 $529,900 43,989 (Up 14.1% y/y)
8/13 $529,000 44,483 (Up 13.6% y/y)
8/20 $528,000 44,451 (Up 13.0% y/y)
8/27 $525,000 45,168 (Up 13.2% y/y)
Thoughts? Comments? E-mail story tips to lalandblog@yahoo.com
Photo Credit: Reuters
 Lots of good, pungent commentary in the past few days about the Fed and the mortgage crisis. Quick hits:
Jim Grant will be popular here. He lays out the anti-bailout, anti-intervention, anti-interest-rate-cut case for the New York Times: "Ben S. Bernanke ... is said to be resisting the demand for broadly lower interest rates. Maybe he is seeing the light that capitalism without financial failure is not capitalism at all, but a kind of socialism for the rich."
The New Yorker's James Surowiecki writes that Bernanke's decision to cut the discount rate was a bad move that will only help Wall Street -- not the housing market: . "...there is something unseemly about watching the avatars of free-market capitalism rely on the government to pay for their bad bets. And there is something scary about contemplating the even bigger bets they’ll make in the future if they know that the Fed is there to bail them out."
On the other side of the argument, Jim Cramer isn't the only one begging Bernanke to wake up and do more. Mortgage broker and Inman News columnist Lou Barnes (we know, we know: some of you don't trust him) is hammering Bernanke for failing to revive the mortgage-backed securities market: "I don’t know if we need electrodes or explosives to get Mr. Bernanke into the real world, but once he’s here this job is a snap."
Barnes believes the Fed needs to restructure or re-rate all those mysterious, top-secret, and un-marketable mortgage-backed products that are stinking up the entire financial system with their un-quantifiable odors. He suggests this can easily be done by throwing its weight around on Wall Street and telling everybody to show their hand -- now: "In the old days, one of the most feared events on Wall Street was an 'information call' from the Fed," he writes.
Lastly, former Clinton Treasury Secretary Lawrence Summers weighs in, sort of, by asking a bunch of questions in this L.A. Times op-ed piece. In keeping with Democratic Party orthodoxy, he endorses an expanded role for Fannie Mae.
Comments? Thoughts? Insights?
Photo Credit: Reuters
Hat tips: Patrick.net, kmvc
News item: The Realtors' report on existing home sales for July is out, and here are the numbers: "sales slipped 0.2 percent to a seasonally adjusted annual rate of 5.75 million units in July from an upwardly revised pace of 5.76 million in June, and are 9.0 percent below the 6.32 million-unit level in July 2006."
Median prices, at $228,000 and change, were down 0.6% from year-ago levels.
Inventory: "Total housing inventory rose 5.1 percent at the end of June to 4.59 million existing homes available for sale, which represents a 9.6-month supply at the current sales pace, up from an upwardly revised 9.1-month supply in June."
Our take: Rising inventory is probably the headline here; 4.6 million homes for sale is a lot of homes. Interesting analysis, as always, from NAR economist Lawrence Yun: “Home sales probably would be rising in the absence of the mortgage liquidity issues of the past two months,” he said.
Well, yes, of course. If only lenders would resume giving 100% financing to everyone with a pulse, sales would be stronger. While we're at it, If only I could hit the ball long and straight, and could putt, I would be a scratch golfer.
Comments? Thoughts? Insights? E-mail story tips to lalandblog@yahoo.com.
Good morning. It's funny how perceptions shift over time. For quite a while, housing bubble blogs (not this blog, it's only 4 months old) have been predicting that the housing bubble would pop and cause a recession. Most economists said this was very unlikely -- the economy's fundamentals were simply too strong, and housing doesn't drive our economy. Then this summer, as predicted for so long on other blogs, housing weakened dramatically, mortgage defaults set in motion a credit squeeze, and now more and more economists are saying, gee, this could cause a recession.
Items:
--The risk of massive defaults on subprime mortgages and heavy debts now poses a bigger threat to U.S. economic prosperity than terrorism, a panel of U.S. business economists said on Monday.
--The default rate on sub-prime mortgages packaged into securities almost doubled to a record 13.43% in June from a year earlier, according to a report issued Friday.
--Former Treasury Secretary Lawrence Summers says in this article the risk of recession is greater now than at any time since 9/11.
--Time.com declares that "ground zero" in the real estate bust is ... Where do you think it is? The Inland Empire? The Central Valley? Miami? Phoenix? Las Vegas? San Diego? L.A.? Sacramento? Coastal Florida? Cleveland? Detroit? Wrong on all guesses. Time.com says it's ... Denver. What's our point? This crisis is a big local story in a lot of places.
Comments? Thoughts? Insights?
Hat tip: Patrick.net
 We popped into five Open Houses today in Culver City, where we heard two very bullish accounts of the local market. Rachelle Rosten of Colwell Banker told us, "Good houses, priced well, sell. And there are still a lot of buyers out there."
Bruce Forman, also of Coldwell Banker, told us, "The Culver City market is accelerating in terms of prices. What we're dealing with is a supply and demand issue. The people who ordinarily would be leaving Culver City for better neighborhoods aren't leaving because the neighborhood is getting better."
4235 Keystone Ave. 90232 (pictured): Very pretty but small (998 SF) 2 bedroom 1 bath, lots of sunlight, spacious yard with patio. On the market two days, $749,000. Sales history from Zillow.com: sold 11/97 for $251,500.
4212 Vinton Ave. 90232: Built in 1939, 2 bedroom 1 3/4 bath, 1229 SF home, hardwood floors, "lots of potential" per MLS description, which means it has not been renovated. Designed by Helen Young, female builder known for custom touches and solid construction. Listed in late May at $855,000, sellers are sticking with their number.
4390 Elenda St., 90230: 3 bedroom, 1 bath, 1133 SF, livable but needs work. Small back yard is all dirt. Elderly owners died, home being sold in trust sale. $719,000, sealed bids due by Aug. 27 at 5 pm.
10812 Braddock Dr., 90230: 4 bedroom, 2 bath, 1783 SF on 5100 SF lot; big house for the neighborhood, but back yard is small. On market 51 days, originally listed at $949,000, reduced to $899,000. Recent sale info from Zillow.com: Sold 5/02 for $447,000.
4128 Lincoln Ave., 90232: Newly built 3 bedroom, 3 1/2 bath townhouse, 2200 SF, huge gourmet kitchen, sweeping staircase, 3-car garage. $1.079 million.
 Reuters has a good piece tonight on how "flips and scams" helped inflate the real estate bubble in California. The story tells of a couple, the Gordons, who paid $741,000 for a 4,000-SF home in Corona; they're still paying the mortgage, but two homes on the street are in foreclosure, and one is listed -- by the bank that now owns it -- for $550,000.
"We have no recourse," Joe Gordon told Reuters. "We'll have to live here eight to ten years before we get our equity back."
Thoughts? Comments? When do you think the Gordons' house will be worth $741,000 again?
Photo Credit: Reuters
 Saturday night/Sunday morning reading: The New York Times' Gretchen Morgenson writes a hard-hitting profile of Countrywide Financial, and it's not pretty. "Countrywide’s entire operation, from its computer system to its incentive pay structure and financing arrangements, is intended to wring maximum profits out of the mortgage lending boom no matter what it costs borrowers." Morgenson writes that Countrywide pushes borrowers into higher interest rate loans, nickels-and-dimes them with unusually high fees ($100 to e-mail documents), and is "Exhibit A" for lax lending. Tough stuff; it won't win Countrywide any friends in Washington.
The N.Y. Times also reports, "The median price of American homes is expected to fall this year for the first time since federal housing agencies began keeping statistics in 1950."
The Great Loan Blog has a short, sobering post worth reading:
"The loose financing is gone. Stated loans are on life support. ... The market for ALT A and subprime mortgages is DEAD. ... It's time to save and be prudent. Back to reality. The punch bowl of easy money is gone. Parties over it's time to sober up."
Our take: We agree -- two major changes have occurred in the market in the past six weeks or so. Easy money dried up; and the drumbeat of negative housing news reached the point where even the most clueless buyer can no longer buy a house in L.A. with the expectation that its value will rise quickly and significantly. These are body blows to a market that was already weakening.
Comments? Thoughts? Insights?
Photo Credit: Reuters
The REO Speedwagon is back for a second day. We continue to invite your guidance on how to make this feature better. Today we visit 90068 in the Hollywood Hills, at request of commenter Liz.
Neighborhood/ZIP: Hollywood Hills/90068
REOs listed by Catalist Homes: 6
REOs listed by RealtyTrac: 236
Sample REO from Catalist: 3261 Knoll Drive, 3512 Greenwood Ave., 3 bedroom, 2 bath, 1815 SF, $975,000.
Days on Market: 24
Recent sale information: Zillow.com and PropertyShark.com both say house was sold on 5/18/07 for $873,000.
We'd like your feedback on this: What's the best way to paint a ZIP code portrait of foreclosed properties for sale as REOs? Which sites should we use? What information would you like to see? And what neighborhood (and ZIP code) would you like to see tomorrow?
 Good morning, again. Excellent post over at the eagle-eyed Manhattan Beach Confidential blog, on a trend that speaks to the weakness of the market in August: numerous, brand-new $2-million and $3-million homes that have been sitting on the market are now listed for sale or lease in Manhattan Beach.
Example: 2709 Oak (new, 373 days on the market) – list price: $2.29m, rental price: $8,500.
On the surface, this is a no-brainer: the market is soft, you can't sell these showpiece houses right now, so you rent them out. But MB Confidential goes beyond the no-brainer and observes, shrewdly: "And yet, offering your new stuff for lease has got a bullish edge. Doesn't it convey that the builders expect demand and prices to recover in the near term, so they can later take the profits they penciled out at the start? An intriguing gamble."
Your thoughts? Comments?
Photo Credit: Reuters
Read more Newly built, not sold ... now for rent »
 Good morning. After a week of anxiety, argument, and a disturbing amount of anger in the comment section (what's up with that?), we bring your our cheerfully off-topic Saturday morning special, Tree of the Week. We feel a little bit like Florence Henderson serving Rice Krispy treats in the prison yard at San Quentin.
This week our tree-loving friend Pieter Severynen warns us of us the evils of Tree-of-Heaven:
Tree-of-Heaven – Ailanthus altissima
Beware what you wish for; it might come true. In 1751 French missionary Pierre d’Incarville, who was working in China, sent seeds of a beautiful tree to France. The royal physician to Louis XVI received some of the seeds and planted them in his Paris garden. There, American William Hamilton saw the rare tree from China, obtained its seeds and planted them in his Philadelphia estate garden in 1784. From there it spread first all over the East Coast, then across the country; it invaded California’s Gold Rush country in the 1800s.
Invariably people admired the tree for its desirable qualities, they planted it by the thousands as an ideal street and garden tree; it was only later that they learned of its numerous faults. On the one hand the tree of heaven is a beautiful, lush, fast growing deciduous tree with handsome flowers and winged seedpods; it thrives where few other trees would, taking poor soil, drought, heat, cold, dust and polluted air. On the other hand, once established it aggressively overwhelms any nearby area through suckers and seeds, it supplants the native vegetation, and it is very difficult to eradicate. We now see patches of young trees along many of our freeways. It is the only tree to make the “Terrible Ten’ list of invasive plants in Southern California (see www.weedwatch.org). A fast-growing deciduous tree to 50’ x 50’ with a smooth gray bark, it has two-to-three-feet-long leaves that are divided into 25 or more 3-inch to 5-inch-long leaflets. Reddish male flowers plumes are smelly, the greenish female flowers are followed by brown seedpods in fall. Admire the tree’s beauty, but don’t plant it if you want to be kind to our environment.
Thanks, Pieter
Email Pieter: plseve@earthlink.net
Photo credit: www.americanpie.org
News item from today's L.A. Times: Hermosa Beach-based brokerage Catalist Homes has launched a free, Web-based service that allows people to search for lender-owned foreclosures in specific Southland communities, using parameters such as price range and home size.
We thought we'd test drive it and launch a new daily feature as well, which we will call "On the REO Speedwagon." (REOs are houses owned by banks after a foreclosure; If you are old enough to have bought 45s, you'll get the "speedwagon" reference).
Neighborhood/ZIP: Mar Vista/90066
Total number of REOs listed by Catalist Homes: 2
Sample REO: 3512 Greenwood Ave., 3 bedroom, 2 bath, $879,000.
Days on Market: 27
Recent sale information: Zillow.com says house was sold on 6/27/06 for $830,000. (No sale information found on Catalist)
User experience: slow, very slow. Confusing, but we are easily confused; if we register, do we find more properties? We registered, but our second search, as an "All Access Pass" member, failed, and we were told to try again later.
We'd like your feedback on this: What's the best way to paint a ZIP code portrait of foreclosed properties for sale as REOs? Which sites should we use? What information would you like to see? And what neighborhood (and ZIP code) would you like to see tomorrow?
 Good morning. The editorial page of the L.A. Times -- no relation to us -- weighs in strongly this morning against the idea of a bailout for L.A. homeowners at risk of foreclosure.
Back story: L.A. City Councilman Richard Alarcon is making noises about establishing a $5-million fund to make loans of $10,000 or less to homeowners facing foreclosure.
The Times' opinion? Bad idea. Bad: "Nothing gets blood boiling like the mention of government 'bailouts' for sub-prime borrowers, and with good reason. Using public funds to rescue buyers who assume more debt than they can afford (and at terrible terms) rewards borrowers' and lenders' irresponsible behavior and props up an overpriced housing market that probably deserves to fall a bit."
The Times also points out that, in a region where homes cost half a million dollars, and many borrowers put little or nothing down, loans of $10,000 won't make much difference. The Times does support the idea of more funding for foreclosure counseling services, but makes an important point: honest counseling often means telling borrowers they can't afford their house. It reports The Los Angeles Neighborhood Housing Services tells about 80% of strapped borrowers to sell their house.
Thoughts? Comments?
 Kate in the Valley, who guest-blogs for us about her house-hunting experiences once a week, knows what she likes in a house. She also knows what she doesn't like:
"After seeing scores of homes, I've noticed that certain common features (all within a seller's control) make a big difference in how attractive their home is to me. Below is a list of some features that I find most enticing and most discouraging in a property. It's not an exhaustive list, but it's a fair start.
THE GOOD:
(1) A nice big covered front porch. The vision of Mr. Kate and I spending summer nights sitting on our porch, waving to passing neighbors, is virtually irresistible. If you've put inviting patio furniture and pretty potted plants out, I'm sure to give your house a little extra consideration.
(2) A high quality shaded deck out back for entertaining. On a small tract house, usable outdoor rooms help me forget about the limited square footage but, for an outdoor deck to be usable in the Valley, it really needs to be shaded.
(3) New(er) plumbing, electric, roof, and a/c. It's so nice if you've already done this. I'll pay extra to not have to deal with contractors tromping through my house in the first few weeks that I live there.
(4) Credits. For example, if you have a big ole dead tree in your yard and you do not want to remove it yourself then put a tree-removal credit right in the MLS description. I'll think you are honest for admitting the flaw and reasonable for offering to cover the cost even if you won't take care of the problem yourself. But more importantly, I won't be distracted by the big ole dead tree in the yard when I'm thinking about making an offer on your house."
Read below to find out the no-no's -- what turns Kate off.
Read more The good, the bad, the Valley »
 Inman News took the pulse of a number of housing markets around the country, and the reading in Hemet -- 90 miles east of L.A. -- shows a market in distress. Lowlights:
--Realtor John Occhi says the market collapsed in March and estimates the number of sales has dropped 80% from last year''s levels. "Since then we have been a seeing a decline, decline, decline."
--Occhi says the loss of Alt-A funding has hit the region harder than the disappearance of sub-prime loans.
--"I wish I could tell you about the buyers," he told Inman News. "I haven't met one yet."
--Occhi says prices have backed up to 2002 levels. "It's a vicious, vicious place we're in now."
Thoughts? Comments? E-mail story tips to lalandblog@yahoo.com
 Say what you will about Countrywide CEO Angelo Mozilo -- and so many of you already have -- we like having him at the center of this story. He is a straight shooter from the old school, a reporter's dream and a publicist's nightmare -- and a species all but extinct from American public life.
Most CEOs and politicians today have perfected the art of "staying on message" -- that is, carefully repeating a sliver of the truth, always wrapping it in layer upon layer of spin, posturing and meaningless argument.
Not Angelo. Today, when 99 and 44/100ths% of CEOs would have stayed on message and talked about the Bank of America investment, he told us the housing market still stinks, and it's probably going to cause a recession.
From CNBC.com, on the outlook for the mortgage business: "This environment is certainly not getting better." On his continued belief the housing slump will cause a recession: "I still think so, I've been proven wrong so far," he said. "But I can't believe when you're having the level of delinquencies, foreclosures … that this doesn't have a material effect on the psyche of American people and eventually on their wallet."
Your thoughts? Insights? Comments?
A quick one, we're running out the door: Pimco's influential bond guru, Bill Gross, gives a full-throated endorsement to a homeowner bailout this morning. We believe this will embolden many Democrats -- and some Republicans -- to call for government aid to homeowners.
Gross: "Why is is possible to rescue corrupt S&L buccaneers in the early 1990s and provide guidance to levered Wall Street investment bankers during the 1998 LTCM crisis, yet throw 2,000,000 homeowners to the wolves in 2007? If we can bail out Chrysler, why can't we support the American homeowner?"
More Gross: "Get with it Mr. President and Mr. Treasury Secretary ... .create an RMC -- Reconstruction Mortgage Corporation. ... Write some checks, bail 'em out, prevent a destructive housing deflation that Ben Bernanke is unable to do."
To those who disagree and will ask, "who gives a damn what a bond billionaire says," we would say, Gross is the kind of commentator who has influence in policy circles. Perhaps not with the White House, but with other politicians at the state and federal level. You may disagree with him, but he is important.
Thoughts? Comments? Insights?
Hat tip: Seek Up xxx (you know your number)
Good morning. Why are some lenders failing and others hanging in? Simple, according to a new study by SMR Research: Most of the lenders that made the riskiest loans are failing. Inman News: "Nearly all of the mortgage lenders who engaged in the riskiest underwriting practices during the housing boom have gone bankrupt, been sold, or curtailed their operations."
SMR -- sorry, the report is not available for free -- ranked 163 U.S. lenders according to credit risk. A score of 1,000 was average. Here are some of the riskiest lenders, their scores, and SMR's notes on what happened to them:
South Star Funding 2,704 (closed)
Impac Funding 2,567 (closed wholesale)
Ownit Mortgage 2,434 (filed bankruptcy)
New Century 1,904 (filed bankruptcy)
Here are a few of the surviving lenders whose credit risk score ranked higher than the 1,000 average:
Barclays Group U.S. 2,220
H & R Block Mortgage 1,770
Quick Loan Funding 1,662
Indymac Bank, 1,609
Metrocities Mortgage 1,466
Countrywide 1,016
Marketwatch: "At least 22 of the country's largest mortgage lenders that haven't gone bankrupt are still engaged in risky underwriting practices, according to a new study by SMR Research Corp. 'These companies are in danger of credit losses on mortgages they've produced,' said Stu Feldstein, president of SMR Research."
Your thoughs? Comments? Insights?
Hat tip: Cal
News item from the L.A. Times: "Calabasas-based Countrywide announced in late afternoon that Bank of America made a $2-billion investment in the company in the form of preferred stock. Countrywide will pay B of A an annualized yield of 7.25% on the investment."
The preferred stock can be converted into Countrywide common stock at $18 a share -- a discount of roughly 18% below Countrywide's closing price Wednesday. L.A. Times: "It looks like BofA got a very nice deal," said money manager John Buckingham.
The Wall Street Journal writes that the deal "is likely to persuade investors that (Countrywide) has a powerful ally ready to help in any crisis. And it removes a major source of uncertainty hanging over the nation's credit markets at a time when investor confidence has been shaky."
The New York Times, meanwhile, explores an interesting angle of the Countrywide crisis that's worth watching: When it sold mortgages to investors, Countrywide Home Loans agreed to buy the loans back if they were ever modified in the future to help borrowers make payments. Politicians are clamoring right now for exactly those kinds of modifications, to help struggling homeowners avoid foreclosure. N.Y. Times: "But Countrywide’s servicing unit may have less incentive to help troubled borrowers who are interested in working out their loans, analysts said, because doing so could put the parent company on the hook to buy back a loan."
The N.Y. Times reports those agreements cover $122 billion worth of loans. If, say, 3 percent are troubled, buying those loans would cost Countrywide $3.7 billion -- a tall order for a company short on cash.
Your thoughts? Comments? Insights? Email story tips to lalandblog@yahoo.com.
A solid piece of quick enterprise reporting from the AP this afternoon: "Since the start of the year, more than 38,000 workers have lost their jobs at mortgage lending institutions, according to recent company layoff announcements and data complied by global outplacement firm Challenger, Gray & Christmas Inc."
The AP also includes 20,000 job cuts in the construction business, plus the expectation that thousands of real estate agents will lose their jobs, and concludes, "It's an employment collapse that threatens to rival the massive layoffs in the airline industry that followed the Sept. 11, 2001, terrorist attacks, when some 100,000 employees lost their jobs."
Tough stuff. Your thoughts? Insights?
Hat tip: Investorguy
Commenter AnnS was quick on the draw on this one: "Lehman Brothers, a leader in packaging subprime mortgages into securities, is shutting down one of its home lending units and laying off 1,200 employees."
More from NYTimes.com: "Lehman’s decision to shutter the lending unit, BNC Mortgage, makes it the latest casualty in the subprime mortgage meltdown."
Another one to watch: Will buyout firm Cerberus Capital Management go through with its deal to buy Option One, the mortgage subsidiary of H&R Block?
By the numbers: The Morgage Lender Implode-O-Meter blog now counts 132 major U.S. mortgage lenders that have imploded in less than a year.
Comments? Insights?
News item: "Accredited Home Lenders Holding Co. will slash its workforce by more than half and stop accepting new mortgage applications in the U.S. as it struggles to survive in the troubled home lending industry, the company said Wednesday. ...San Diego-based Accredited ... said it will cut about 1,600 of its 2,600 positions and close 65 branches."
Our take: Some days it feels like we're watching "The Terminator" on fast forward.
Your take? Email story tips to lalandblog@yahoo.com.
News item from today's LATimes: " ... the chief executive of the nation's largest savings and loan, saying lending standards became irrationally lax in recent years, is supporting stricter professional requirements for mortgage brokers. 'They should have something like stockbrokers -- licensing, testing, higher standards,' Washington Mutual Inc. Chief Executive Kerry Killinger said in a recent interview."
First take: Makes perfect sense. It's a no-brainer. It's also easy for WAMU to suggest stricter requirements for a separate corner of the financial industry.
Second take: It's a disappointing way for WAMU to enter the conversation. How about volunteering a few ways that it will reform its own business? In our naive, hopeful, "Charlie Brown-is-finally-going-to-kick-the-football-this-time" kind of way, we are hungry for some real leadership on the entire issue of mortgage lending. Disclosure, for example, is a joke -- it's confusing at best, misleading at worst. WAMU is in a unique position to provide leadership: it will likely have a much bigger role in the mortgage business two years from now than it did two years ago. That said, we do not consider this leadership.
Third take: We'd be ecstatic if someone would prove us wrong and show us some real leadership on the issue. Wouldn't that be a day-brightener?
Thoughts? Comments? Email story tips to lalandblog@yahoo.com.
 Good morning. News item from Bloomberg: "Toll Brothers Inc., the largest U.S. luxury homebuilder, said third-quarter profit fell 85% as the deepening housing slump cut sales, increased cancellations and forced the company to write down property."
Here's what caught our eye in the company's press release: "... nearly two years into the current housing slowdown"... "... tightening credit standards will likely shrink the pool of potential home buyers: Mortgage market liquidity issues and higher borrowing rates may impede some customers from closing, while others may find it more difficult to sell their existing homes."
Our take: Toll Brothers says the slump is now nearly two years old, and demand for new houses is likely to drop. This is not the same as the general real estate industry analysis, which holds that there are a lot of buyers on the sidelines, waiting for prices to fall. This is worse for sellers: Toll Brothers is saying that the rules have changed -- "tightening credit" -- and some potential buyers can't come off the sidelines even if they want to. Big difference.
Your thoughts? Comments? Insights?
 Stop us if you've heard this one already: Los Angeles is still the least affordable place in America to buy a house.
"Maintaining its spot at the bottom of the affordability scale for an 11th consecutive quarter was Los Angeles-Long Beach-Glendale, Calif., with 3 percent of homes sold that were affordable to median-income families."
That's Inman News coverage of the latest National Assn. of Home Builders/Wells Fargo Housing Opportunity Index, which ranks American cities according to the affordability of their housing markets.
Thoughts? Comments? Insights?
Photo Credit: LATimes
News item: Phoenix-based mortgage lender First Magnus files for bankruptcy protection, less than a week after suspending operations. First Magnus fired 99% of its 6,000 employees last Thursday.
''The company went out of business overnight,'' spokesman Gary Baraff said. ''Three weeks ago we were at the apex of the company's history. Everything was falling into place for us, and we had remarkable momentum across the country. It was shocking to everyone that essentially the secondary market collapsed.''
That's a big company to disappear that quickly.
Your thoughts? Comments? Insights?
Clearly, a number of you disagreed with the way we reported today's batch of foreclosure numbers from RealtyTrac. To refresh, we led with the fact that California foreclosure filings were flat from June to July, and not with the fact that they are running 289% ahead of year-ago levels.
To which commenter Tim K. observed, "Talk about spinning the stats. It's the *rate*, not the direction.
I'm heading towards this brick wall at 60 mph. But hey, in the last 5 seconds my speed is STILL 60 mph! Whew, I thought for a minute I was accelerating! All is well! :)
A fair point, well made.
By way of explanation: We are pessimistic about this trend; we expect the number to rise month-to-month as more of the toxic loans made in 2005 and 2006 hit that magic 25th month and reset to higher rates. So we felt it newsworthy that the spike -- which we may be wrong about -- has not yet begun. Here are the numbers from RealyTrac of foreclosure filings by month:
Month California filings LA filings
July 06 10,025 2,079
Aug 06 12,486 2,106
Sep 06 14,806 3,675
Oct 06 16,098 2,557
Nov 06 19,248 4,493
Dec 06 12,623 3,281
Jan 07 25,961 5,032
Feb 07 23,200 3,958
Mar 07 31,434 5,155
Apr 07 30,505 5,690
May 07 39,659 9,329
June 07 38,801 9.035
July 07 39,013 9,407
Comments? Thoughts? Insights? Email story tips to lalandblog@yahoo.com.
 Good morning. Nationally, foreclosure filings spiked by 9% from June to July, but in California the numbers held fairly steady, rising less than 1% from month to month, according to RealtyTrac.
Within California, Los Angeles is not a major foreclosure trouble spot. "Six California metropolitan areas reported foreclosure rates among the (nation's) top 10 in July: Stockton at No. 2; Merced at No. 3; Modesto at No. 4; Vallejo-Fairfield at No. 5; Riverside-San Bernardino at No. 8; and Sacramento at No. 9."
Year over year, California foreclosure filings were up by 289%, and California -- with 39,013 foreclosure filings -- has more than double the number of filings of any other state.
Thoughts? Comments? Insights? Email story tips to lalandblog@yahoo.com.
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