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Respected real estate columnist Kenneth Harney today takes issue with conventional wisdom that there has been a "mortgage meltdown" that has made mortgage money harder to come by. "Mortgage money is plentiful," he writes, " the majority of mortgage products remain
relatively unaffected by troubles in the sub-prime segment."
Point taken. But if you read Harney's column, he notes numerous ways in which mortgage credit is much harder to get than it was at the beginning of the year:
--"products and underwriting that allowed people to buy houses
they couldn't afford have disappeared."
--"underwriting standards are stricter than they were a year ago."
--"Jumbo loans ... often require two appraisals -- one by an appraiser selected by the lender and the other by the investor."
--FICO score standards generally are higher than a year ago
--Stated-income mortgages with no verifications are hard to find.
In other words, a lot of mortgage products HAVE been affected by troubles in the sub-prime segment.
Your thoughts? Email story tips to lalandblog@yahoo.com.
 Good morning again. If you work in the executive suite at Countrywide Financial, or in public relations, your three least favorite words this morning are probably these: "By Gretchen Morgenson." That is because Morgenson, a hard-hitting, Pulitzer Prize-winning reporter for The New York Times, is again taking Countrywide to the woodshed in the Sunday paper.
Countrywide has recently been touting its extensive efforts to help borrowers avoid foreclosure. Morgenson's story says those claims are highly dubious. Highlights:
--"... borrower advocates who work with a broad array of lenders say that none make it harder to modify loans than Countrywide."
--Countrywide's foreclosure prevention team is hard to reach and often hostile to borrowers, who are often charged unexplained fees during the foreclosure process.
--While touting its efforts to help borrowers in the media, Countrywide recently told investors that it rarely provides workouts that reduce interest rates -- the exact relief that many borrowers are seeking.
Countrywide, Morgenson reports, "strongly disagrees. Last week, it described its efforts on
behalf of troubled homeowners. 'Our No. 1 priority is to help borrowers
stay in their homes,' said Steve Bailey, a Countrywide executive, in a
news release."
Joining Countrywide in strong disagreement is Calculated Risk, which cites chapter and verse of what it considers Morgenson's "terrible reporting" on this story. Example: Morgenson points out that, for Countrywide, foreclosure is a "profit opportunity"; CR's response: So what? CR argues that, for a loan servicer, every loan is a profit opportunity; otherwise, what's the point of being in the business of servicing loans?
Your thoughts? Comments? Email story tips to lalandblog@yahoo.com.
Hat tip: Sunsetbeachguy
Good Morning, Jeff Tedford, we hope you are not afraid of heights.
As promised, a few notes and thoughts about that San Diego condo auction yesterday. The Union-Tribune quotes real estate agent David Pastor, who says units sold for prices "comparable with the market."
Exactly what those prices were is a bit of a mystery -- the auction of condos and townhomes built by D.R. Horton was closed to the press. But commenter "sunsetbeachguy" directed us to this San Diego real estate website, where a second commenter, "Chuck," lists what he says are the sales prices. Based on his numbers, it appears most units sold at about 30% to 33% below the price the auctioneer says the units were "previously valued to."
Chuck's take: "I did not buy; prices were about five to ten percent to high for me to
be interested, but the auction seemed fair to me and I think people
today got a good deal and will do well in the long run."
Our friend Inland Empire's take: "... the sky really didn't fall. The buyers got starter homes and the
builder got rid of cheap condos in a bad area and can now move on to
other projects."
Our take: A few important caveats here: we don't know for a fact what these condos sold for, and we don't know if they were ever worth the "previously valued to" numbers publicized by the auctioneer. If a condo was "previously valued to" $547,000, and sold yesterday for $375,000 (one of the examples given by Chuck), that represents a "discount" of 31%; but it's a discount from a somewhat meaningless number. Was the condo ever "worth" $547,000? Perhaps. Or, perhaps, that was wishful thinking by a builder with less than perfect timing. In any event, it appears this was a successful auction for the builder, in the sense that condos sold for prices a real estate agent felt were equal to the rest of the San Diego condo market -- in fact, the LATimes yesterday, in a profile of the San Diego market, cited a condo that had sold for 30% less than its peak market value. So these sales appear to be in line with the rest of the market -- there was no "fire sale" yesterday.
Your thoughts? Insights? Email story tips to lalandblog@yahoo.com.
Hat tip: Sunsetbeachguy
We had a coach in high school who often followed up his criticisms by saying, "The truth hurts, doesn't it?" Yes, sometimes the truth does hurt. But there are ways to avoid the hurt, aren't there? As D.R. Horton is doing today in San Diego, you can keep the press out of your condo auction.
News item from the Union-Tribune: "D.R. Horton, the nation's largest
builder, is limiting attendance at its planned auction Saturday of
condominiums at two local developments, according to the firm it hired
to run the event. Late Friday afternoon, Real Estate Disposition
Corp. (REDC) said that only registered bidders with $5,000 in cash or
cashier's check would be permitted to attend.
More: “'We are going to be closing the auction to the
press tomorrow,' said Michael Schack, senior vice president of REDC. 'We are only allowing registered bidders in. We are not allowing
cameras, photography, press, media. It is not our choice.'"
Our take: If we ran a large homebuilding company, and had overbuilt to the extent we had to resort to auctions, we'd probably close the auctions to the press too. How does coverage of the auction help D.R. Horton? They don't want potential buyers in Des Moines and San Antonio holding out for the "San Diego Discount."
But if we ran a blog about housing -- and oddly enough we do -- we would report every scrap of information we could get about the auction, so we again ask for your tips and feedback today.
Hat tip: "sandiegan"
Good morning, again. The LATimes updates the slump story in San Diego and finds continued pessimism: "It's pretty bad, and I don't see a whole lot of improvement," says analyst Pete Dennehy. "Month after month, sales have
just continued to go down. Foreclosure rates are through the roof. . .
. We won't see improvement until 2009 and beyond."
How far have prices fallen? The Times quotes real estate agent Jose Saborio, who says condos in his building that orginally cost $500,000 have recently sold for about $350,000 -- a 30% drop.
Anybody going to the condo auction today in Mission Valley? We'd love to hear reports of what happens. Failing that, we're expecting the locals will cover it and we'll have a link for you tomorrow morning. Post your comments here, email your story tips to lalandblog@yahoo.com.
 Good morning, Jake Locker, in our part of town it's a spectacular day. As we do on Saturdays, we now turn the blog over to our tree-loving friend Pieter Severynen, who joins us with "Tree of the Week."
California Pepper Tree – Schinus molle
The California Pepper Tree is as much part of our missions as the olive tree or the edible fig. Yet the first tree here was only planted in 1830 in Mission San Luis Rey, in what is now the city of Oceanside. That once magnificent tree is still alive, but in declining health. Notwithstanding its name, the tree is native to the Peruvian Andes.
The California Pepper Tree is a fast-growing evergreen, to 25-40’ tall and wide. On older trees the trunk becomes heavy, gnarled and twisted, full of burls that sprout small branches. The strong limbs carry gently drooping branchlets, which are clothed with bright green leaves composed of tiny leaflets. The overall effect is of gracefully weeping clusters of foliage. Yellowish white summer flowers develop into pink pepper corns which are edible but should be consumed only in moderation since they can cause an upset stomach.
The tree is drought resistant. It is beautiful in the right setting: lots of room, away from sewer lines, drains and pavement, where the greedy surface roots and the copious litter of leaves and branchlets don’t matter. It is not a tree for the tidy tiny city lot.
Thanks, Pieter
Email Pieter: plseve@earthlink.net
Photo Credit: Hotgardens.net
News item from the LATimes tonight: "As the mortgage industry swooned in late 2006 and 2007, Countrywide
Financial Corp. Chief Executive Angelo Mozilo cashed in stock options
valued at $138 million -- vastly expanding his wealth even as his
shareholders watched their stock shrink in value."
More: "Company officials say Mozilo did nothing wrong and that the
transactions were made under trading plans that specified how many
shares would be sold each month."
Here's the interesting twist, though: Mozilo changed his trading plan twice -- in late 2006 and early 2007, the Times reports.
More: "Although trading plans usually protect executives against allegations
that they traded on inside information, experts say Mozilo may have
weakened his defense by making changes in a relatively short period of
time. 'This raises a slew of red flags,' said
Andrew Stoltmann, a Chicago-based securities lawyer. 'Any time you have
revisions or modified plans. . . it is extremely suspicious.'
Your thoughts? Comments? Email story tips to lalandblog@yahoo.com.
Photo Credit: Reuters
 Two of our favorite blogs, Westside Bubble and Manhattan Beach Confidential, are seeing some price-chopping.
In Manhattan Beach, try to guess what the next move is on the house pictured at right:
Listed June 28 at $2.899 million
Reduced July 20 by $100,000 to $2.799 million
Reduced August 19 by $100,000 to $2.699 million
Reduced Sept. 5 by $100,000 to $2.599 million
Reduced Sept. 25 by $100,000 to $2.499 million
Westside Bubble, meantime, finds 10 listings in Santa Monica and Mar Vista that have been reduced by 15% or more. The Biggest Loser (and we mean that in a good, complimentary way, like the TV show) is a cemetery-adjacent 3-bedroom in Santa Monica, which has lost 42% off its asking price, from $1.28 million down to $745,000.
Comments? Insights? Email story tips to lalandblog@yahoo.com.
 Good morning. We'll say this about Jim Cramer: a few weeks ago he freaked out on live TV and begged the Fed to wake up and cut rates, and people made fun of him. Then the Fed woke up and cut rates. We consider him one of the most influential financial commentators in America.
So we think it's newsworthy that he went on the "Today" show this week and said, "Don't you dare buy a home now, you will lose money."
Naturally, the National Association of Realtors went batty, calling Cramer's remarks “misleading, inaccurate, and inappropriate.”
If you're reading this Friday morning, you can see a live rematch/grudge match/smackdown between Cramer and the NAR on the "Today" show at 7:30 a.m.
Help us out: Who are the most influential financial commentators in
America? More important: Can anyone explain to us how to watch CNBC
videos on a Mac? We're lost.
Photo Credit: AP
A major homebuilder warned this morning of the growing problem of "surplus inventory" as another month of weak sales of new homes left the inventory of unsold new homes at 529,000, and the total number of homes for sale in America at a staggering 5.1 million.
Inventory of unsold homes has spiked 14% in the past year, and 77% from August 2004 levels (see chart below).
Homebuilder KB Home reported a 32% drop in third-quarter revenue and warned that inventory will continue to rise, driving prices lower: "We expect housing industry conditions to continue to worsen
through the end of the year and into 2008," said Jeffrey Mezger, president and chief executive officer. "Rising
foreclosure rates are intensifying the problem of surplus inventory
and will likely drive further home price reductions."
Mezger says the "oversupply of unsold new and resale homes" has worsened in many markets. "At this
time, we see no signs that the housing market is stabilizing and
believe it will be some time before a recovery begins," he said.
Reuters on new home sales: "Sales of new single-family U.S. homes fell 8.3 percent in August to a 795,000 annual sales pace,
its slowest rate in over seven years, while the inventory of homes
dropped, a Commerce Department report showed on Thursday." Inventory dropped 1.5% from July to August, and stands at 529,000.
The National Association of Realtors reported earlier this week there are 4.58 million existing homes for sale, which represents a 10-month supply of homes at the current pace of sales.
Stats:
Month Total homes for sale Existing homes months to sell New homes months to sell
Aug 07 5.11 million 4.58 million 10.0 mo. 529,000 8.2 mo.
Aug 06 4.49 million 3.92 million 7.5 mo. 568,000 6.6 mo.
Aug 05 3.34 million 2.86 million 4.7 mo. 479,000 4.7 mo.
Aug 04 2.88 million 2.48 million 4.6 mo. 404,000 4.2 mo.
Sources: NAR (Existing homes), Commerce Dept. (New homes)
Comments? Insights? Email story tips to lalandblog@yahoo.com.
Good morning. News item from Reuters via CNBC: KB Home reports a third-quarter loss and says it sees "no signs that the housing market is stabilizing. "KB Home Thursday posted a fiscal third quarter
loss, as the U.S. home market suffered a deepening decline in demand, a
swelling supply of homes for sale and tighter standards in the mortgage
market."
From the press release: Jeffrey Mezger, president and chief executive officer:
"The oversupply of unsold new and resale homes and downward pressure
on new home values has worsened in many of our markets as tighter
lending standards, low affordability and greater buyer caution
suppress demand, while higher foreclosure activity combined with
heightened builder and investor efforts to monetize their real estate
investments boost supply. The negative impact of these conditions on
our selling prices and gross margins prompted us to take substantial
write-downs of inventory and goodwill in the third quarter. At this
time, we see no signs that the housing market is stabilizing and
believe it will be some time before a recovery begins."
More: "We expect housing industry conditions to continue to worsen
through the end of the year and into 2008," said Mezger. "Rising
foreclosure rates are intensifying the problem of surplus inventory
and will likely drive further home price reductions."
Our take: Considering that it comes from a company that sells homes, this is a pretty negative assessment across the board: the market is weak and growing weaker; prices are falling but homes are still unaffordable to many potential buyers.
Your thoughts? Comments? Email story tips to lalandblog@yahoo.com.
 No, this is not about the Little House ON the Freeway, this is about a little house aboutthisclose to the freeway.
Westside Bubble has been watching this 3-bedroom listing in Mar Vista for a while -- back in February, it was listed at $725,000 and the listing noted, "freeway close." Roger that.
It's almost October, the freeway is still close, the price has been cut to $679,000, and the listing now reads, in part: ""This light and bright home sits high on a knoll affording privacy. ... The 405 expansion/sound wall is almost complete. ... VERY motivated Seller!!..."
Comments? Email story tips to lalandblog@yahoo.com.
Photo Credit: Westside Bubble
 We've seen a couple of these before, but this one is worth noting: another auction of brand-new homes is coming this weekend in San Diego. "53 New Homes in San Diego Must Be Sold," or so says the website of REDC, which is running the auction.
We've looked at a bunch of the listings, and it appears these are all condos (thanks, D). Opening bids are set at roughly 50% of "previous value," although both of those numbers are squishy concepts at best. Example: Pricing on 2222 La Boheme, a 2-bedroom, 2-bath, 1097-SF home, is listed as: starting bid $189,000, "previously valued to" $419,990.
There's an interesting side story here: CNBC's Diana Olick reports the homes were built by D.R. Horton, but it is unclear whether Horton has already sold the houses units off in bulk, or still owns them. Horton isn't talking -- at least they're not talking to Diana.
Comments? Insights? Email story tips to lalandblog@yahoo.com
Photo Credit: Reuters
In all the excitement yesterday about The Little House on the Freeway, we missed this one: "Home sales decreased 27.8 percent in August in California compared with the same period a year ago, while the median price of an existing home increased 2 percent, the California Association of Realtors reported."
More from CAR: "'While low affordability, tighter underwriting standards and expectations of lower prices continue to pose challenges for the market, the decline in sales accelerated in August as a result of the so-called credit or liquidity crunch that began in July.,' said C.A.R. Vice President and Chief Economist Leslie Appleton-Young. 'With credit drying up, even qualified buyers were unable to receive funding for home purchases. ... We expect the impact of the credit crunch to play out over the next several months, and that it will continue to negatively impact sales,' she said."
LA numbers: Median sales price was $605,000, a gain of 2.6% over year-ago levels; the number of homes sold in LA fell 23.9% from year-ago levels.
Comments? Insights? Email story tips to lalandblog@yahoo.com.
 Good morning. Who says houses aren't moving in LA? I just saw one moving up the freeway.
But seriously folks... News item: Countrywide will dispatch 7,000 "home loan consultants" to open houses around the country beginning this weekend in a campaign it is calling "America's Open House."
From the Countrywide press release: "Countrywide's sales team will join forces with local real estate agents at weekend open houses to educate home buyers about the basics of the real estate market and give them the tools they need to shop for a home."
More: "'With housing prices lower in many parts of the country and still-low interest rates, we are clearly in a buyer's market,' said Dan Hanson, managing director of Countrywide Home Loans. 'Our hope is to make it easy for people who've been on the sidelines to go out, look at open houses, and understand their home loan options.'"
Thoughts? Insights? Email story tips to lalandblog@yahoo.com.
 News item from the LATimes: "The supply of unsold U.S. homes ballooned to an 18-year high in August
as demand for existing homes fell to a five-year low, according to a
report by the National Assn. of Realtors. The Washington-based trade
group blamed the onset of the global credit crisis last month for the
drop in sales.
"The unusual disruptions in the mortgage
market resulted in a fairly high number of postponed or canceled
sales," said Lawrence Yun, the group's chief economist.
NAR President Pat V. Combs: “The abundant choice of homes is permitting buyers to better negotiate price and terms. There are good opportunities in the market now, especially for first-time buyers.”
The total inventory of unsold existing homes -- 4.58 million -- represents a 10-month supply at existing sales rates, and does not include unsold new homes.
Thoughts? Comments? Email story tips to lalandblog@yahoo.com.
Photo Credit: Reuters
 Good morning, Will Kempton, how goes the battle against gridlock?
News item: "For 10 days now, a sagging house parked on the Hollywood Freeway's northbound
shoulder in the Cahuenga Pass has had people gawking -- and talking."
Our take: We'll get to the humor in a sec. But first: who's the genius at CalTrans responsible for letting a house sit in a freeway for more than a week? Or was it a team effort?
Now humor: Please use the comment section to write your best photo caption. Better yet, write the MLS listing for this "Eye-catching freeway adjacent fixer, minutes from downtown, it's the talk of the town!"
Email story tips to lalandblog@yahoo.com
Photo Credit: LATimes.com
Vultur asked for this, and it makes sense: median sales prices, with year over year changes. We're adding another stat, which we read about over the weekend: trailing 12-month home sales in LA. More on that later.
Month Median Sales Price y/y change 12-month LA sales total
Jan. 07 $520,000 6.0% 108,755
Feb 07 $528,000 8.0% 107,966
Mar 07 $540,000 6.0% 105,514
Apr 07 $540,000 6.0% 103,455
May 07 $550,000 7.0% 100,167
Jun 07 $545,000 5.0% 96,513
Jul 07 $547,500 5.0% 94,478
Aug 07 $550,000 6.0% 90,985
Source: DataQuick; Note: y/y percentage changes are rounded (don't ask, old calculator rounds automatically, we're working on it)
Hat tip: Vultur
Thoughts? Insights? Email story tips to lalandblog@yahoo.com.
Good morning. News item from Reuters: "A drop in prices of existing U.S. single-family homes accelerated in
July, and the annual decline in the 10 largest cities was the sharpest
since 1991, according to the Standard & Poor's/Case Shiller
national home price index on Tuesday."
More: "S&P said its composite month-over-month index of 10 metropolitan
areas declined 0.6 percent in July to 215.94, for a 4.5 percent
year-over-year drop. It was the worst rate of decline since July 1991
as the economy was emerging from recession, S&P said."
The price index for Los Angeles dropped 0.5% from June to July, and 4.8% from July 06 to July 07.
Thoughts? Comments? Email story tips to lalandblog@yahoo.com.
Median listing prices in greater LA slipped again this week, down by $999 to $519,000, according to Housing Tracker's weekly calculation of MLS listings. Inventory moved slighly higher, to 46,252 homes for sale.
Median listing prices have now slipped $26,000 since this blog launched in mid-April; listing prices are 8.1% below year-ago levels, and have declined 5.5% in the past six months.
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)
8/13 $529,000 44,483 (Up 13.6% y/y)
9/10 $520,000 46,414 (Up 16.9% y/y)
9/24 $519,000 46,252 (Up 14.6% y/y)
Thoughts? Comments? E-mail story tips to lalandblog@yahoo.com
Photo Credit: Reuters
 Blogger's Note: Thanks for all of your ideas and pitches for new LA Land Diaries. We're introducing one today: Westside Story, in which a family of six humans and four cats tries to find a house within reasonable commuting distance of two secure jobs. Enjoy:
"Someone wanted to know what kind of buyers pay $1 million for a lousy post-war box on a postage stamp... well that would be us. While we both understand that we could live in Olathe, Kansas or somewhere off of U.S. 1 for less than a quarter of what we pay here, our jobs, families and friends are located in Los Angeles and here is where we are staying until our jobs move elsewhere. We both purchased homes we loved in our single years and now that we are married with kids, those homes in lousy school districts and "transitional" neighborhoods with no parking and endless parties are not exactly the place for us.
"So my house (pictured) is currently in escrow for what feels like the 170th day for $50,000 less than asking price and the ten of us -- myself, my husband, three children, one exchange student and four cats -- are crammed into one of those 3 bedroom 1 bath post-war boxes in Culver City that everyone seems to love.
"We are seeking a home within a 30 minute commute of Santa Monica and Larchmont Village with decent schools, close proximity to a park, at least 4 bedrooms and 2 1/2 baths and most importantly a grassy backyard with room for the enormous swingset/playhouse that was a gift from the kids grandparents. Price must be less than $1.5 million. Far less.
"We have looked at houses in and around Larchmont, Pacific Palisades, Santa Monica, Culver City, Brentwood, Bel Air, Westwood and a few dozen other places. We use a discount agency and research the bejeebus out of houses before we even visit. We've made an offer on exactly ONE. We were outbid by nearly $600,000 by a flipper who currently has "our" house listed for nearly double what we offered. It's been listed nearly 45 days now, so at some point we will find out which of us had a better idea of the value."
Thanks, Westside.
Your thoughts? Comments? Be polite. Email story tips to lalandblog@yahoo.com. We're still interested in Diary ideas, particularly from people who work in the real estate industry.
Interesting commentary over the weekend in The New York Times: Economist Austan Goolsbee explores the unwillingness of home sellers to accept the reality of falling prices and sell their homes at a loss: "Classical economics can’t explain this behavior. That’s because people who refuse to sell their houses for less than they paid for them are violating a cardinal rule of the market: stuff is worth what it’s worth. It doesn’t matter what you paid for it."
Goolsbee, an advisor to the Obama campaign, cites a little history -- the unwillingness of Boston condo owners to sell at a loss in the big real estate slump of the early '90s: "... much of the market went into a deep freeze as many people held out for market prices that no one would reasonably pay."
Our take: Goolsbee attributes this economically foolish behavior to an irrational hatred of losing money. We have a different take on this: We believe sellers in the current market who are at risk of selling at a loss are operating on a razor's edge of solvency: they can't afford to lower their price -- they bought with little or no money down, they're now upside down, and selling at current market prices won't pay off their mortgage. It's not that they're too proud to take a lower price; it's that they can't afford it. We believe this is one of many factors that makes the current slump different from the last one, at least in bubble-inflated markets like Southern California.
Your thoughts? Insights? Email story tips to lalandblog@yahoo.com.
 Good morning. Manhattan Beach Confidential reports that September sales are on trend to be every bit as weak as August -- perhaps weaker. There's also trouble in that tricky sub-$2 million price range.
From the blog: "MBC has noted before that there was already something strange about the September sales we have seen – they're all at the very high end. (Five of 7 homes sold were priced above $3m.) That fact suggests that a buyer boycott has already taken hold among mainstream listings below $2m. (That's where 30 of the current 73 listings are priced.)"
Our take: The sample size, of course, is very small, and the more important comparison, when the numbers are final, will be September '07 sales vs. September '06 sales.
Your thoughts? Insights? Email story tips to lalandblog@yahoo.com
Photo Credit: LATimes.
 Catching up: Westside Bubble has an interesting price about significant price cuts in Pacific Palisades. The houses are in that tricky sub-$2 million price range.
The 3-bedroom, 2-bath pictured has been languishing on the market since January, when it was listed at $1.699 million. It's now listed for $1.199, a price cut of 29%.
The other two price cuts mentioned aren't as deep: !3% and 8%.
Our take: We've seen weakness for a while in this price range (too rich for first-time buyers, not rich enough for the suitcases-of-cash crowd), but we can't remember anything close to a 29% price cut on the Westside.
Thoughts? Comments? Email story tips to lalandblog@yahoo.com
Photo Credit: Westside Bubble
Good morning, John David Booty, you too are on the all-name team. The LATimes profiles DataQuick chief analyst John Karevoll, calling him "the housing market's Mr. Objective."
Highlights:
--Karevoll believes predictions about the housing market are pointless right now: "The kinds of loans that have been made in the last five years, especially the popular interest-only mortgages, 'don't have enough history to predict we're going to sail past this or that the sky will fall -- or anywhere in between,' Karevoll says. 'No one knows.'
--He lives in a house in Running Springs in the San Bernardino Mountains purchased out of foreclosure in 1991.
--He's not a big fan of blogs: "Karevoll tries to ignore the blogosphere, saying, 'Good questions get raised there, but I don't think they get answered.' In any case, he adds, 'predictions of imminent doom started in 2001. If you listened then, you were out a bucket of money.'"
Thoughts? Comments? Email story tips to lalandblog@yahoo.com.
Good morning, Matt Ryan. News item from this morning's LATimes: "In Anaheim, city officials were alerted last week that Lennar Corp., one of the nation's largest home builders, will halt construction on A-Town for up to a year, slowing progress on the centerpiece of what some are calling the city's new downtown."
More: "In Irvine, Lennar's plans to build thousands of homes around the planned Orange County Great Park have been pushed back, and the city has not received an updated timeline from the developer since 2005."
Our take: It appears planners in Orange County have put a lot of eggs in one basket, the basket known as Lennar Corp. As an aside, this is an example of how interest rate cuts by the Fed aren't likely to produce the classic stimulatory effects right now: do you think Lennar is going to change its mind about these projects because the cost of money just dropped by 50 basis points?
Your thoughts? Comments? Email story tips to lalandblog@yahoo.com.
 Good morning, Sandy Banks, thanks for the warning. Our tree-loving friend Pieter Severynen joins us again for a Saturday morning day-brightener -- particularly welcome on this unusually dark and drippy Saturday.
Canary Island Pine – Pinus canariensis
From the Spanish Canary Islands hails this tall stranger. The tree starts out with the emaciated look of an El Greco painting, but soon it fills out, it shoots up, and it keeps on growing fast until it tops out as a 60-80’ tall, handsome pyramid attracting eyes across the landscape. Then in middle life the good life gets to it, it begins rounding out at the bottom, acquires a tiered look, and eventually becomes altogether pleasantly round (headed); it resembles the grandparent who no longer cares what other people think about looks, but just enjoys life and being with the family.
The thin, bluish gray-green 6-12”-long needles in bunches of threes make the tree appear soft and graceful, while the surface of the strong trunk fissures into beautiful reddish brown platelets. The glossy brown mature cones are 4-9” long. The tree is drought resistant as long as the drought is not too bad; here it often needs some supplemental summer irrigation. It loves good drainage. Often over-pruned, it looks best when full of needles. It is one of the few pines that can resprout after a fire.
Thanks, Pieter
Email Pieter: plseve@earthlink.net
Photo Credit: www.fitzroygardens.com
Interesting end-of-the-week commentary from Lou Barnes explaining something we haven't seen elsewhere: why some mortgage rates actually rose this week, even after the Fed's half-point cut in rates: "As incredulous clients are learning, mortgage rates are higher now than
last week, back up to 6.50% for vanilla 30-year. Yes, higher. ... Perfesser Bernanke probably has the same frustrated shoulder
sag that we do: he played this thing exactly right, and has gotten
nothing for his trouble but a run on the dollar."
More: " At this moment the economy receives some dinky benefit from
the cut (Construction money is .50% cheaper -- wanna build a house?
Short-term rates are down -- how about a nice new neg-am
pre-pay-penalty ARM? No?), but the crunch is still in place, especially
in mortgageland. ... The 10-year T-note,
driver for all long-term credit, has soared from 4.35% to 4.70%."
Thoughts? Comments? Email story tips to lalandblog@yahoo.com.
Our favorite source of listing statistics, Housing Tracker, showed a slight decline in the inventory of for-sale housing in LA in the week ending Monday, which mirrors historical trends -- inventory of "for sale" houses usually declines after Labor Day.
A commenter, though, encouraged us to check out another good source, Bubble Markets Inventory Tracking, which shows a big increase in LA inventory over the past ten days, from 57,734 homes to 58,769, an increase of roughly 100 homes per day. A year ago, the same source was charting a decline in inventory -- from 47,369 in September to 45,780 in October.
Your thoughts? Comments? Email story tips to lalandblog@yahoo.com.
Good morning, Jeff Kent. As a friend likes to tell her 10-year-old son, "Cowboy up."
News item from Reuters: "A record 26% of U.S. homeowners say the value
of their homes has fallen during the past year, above the previous peak
of 24% seen in 1992, a survey released Friday from Reuters/University of Michigan Surveys of Consumers showed. "Overall,
the data indicate no let-up in the slump in home prices," said Richard
Curtin, director of the consumer surveys, in a statement.
MORE: "Homeowners in the western United States, where
some of the most dramatic home appreciation had occurred, have been
especially hard hit by the real estate downturn. In
the third quarter, 33% of homeowners surveyed in the West said their
home value fell during the past year, up from 23% in the second
quarter."
Thoughts? Comments? Email story tips to lalandblog@yahoo.com.
 We are always happy when the weekly post from house-hunter Kate in the Valley shows up in our email inbox. We never know what to expect, and we're never disappointed. This week Kate blogs in defense of Zillow. Enjoy:
"I was reading Zillow's discussion boards today, and I happened to click on the 'Zestimates' topic. (Zestimates are home value estimates prepared and presented by Zillow.com). Nearly every one of the over-200 post to this category this month was from an angry seller. These sellers were convinced that a low Zestimate is: (1) categorically wrong; and (2) the main factor preventing them from selling their home. A lot of sellers went so far as to demand that their home be completely deleted from Zillow's database (something that Zillow does not do, by the way).
"Personally, I don't think a stray Zestimate ever kept anybody from buying a home. To the contrary, Zestimates, coupled with the other information available at Zillow, gave me the confidence to bid when I first started my house hunt (before y'all run to the comment section to tell me not to buy a house right now: I know! But try and focus on the topic for a minute. Focus…. Focus….). While Zestimates are automated, and not based on personal inspections and evaluations of individual properties, I find them to be a helpful yard stick. I don't think Zestimates are infallible by any means; if I visit a house and I think it's worth $600k, and it's listed at $600k, I'm not going to walk away because Zillow says it is worth less. Indeed, a cursory review of the site reveals that an unusually low estimate sometimes happens when a home hasn't changed hands for decades and, as a result, the tax basis is a bit lower than the neighbors. But I do think Zestimates are helpful especially when combined with the four-direction aerial views of the home and lot.
"Looking at the aerial maps, you can see (without ever leaving your desk!) how close a home really is to the freeway, whether it's on an alley, close to commercial developments, or on a tree-lined street. You can see how the home is situated on the lot and whether the pool takes up the whole back yard or just a small corner. I will mentally adjust the Zestimate based on these facts. And, after I've visited a home, I might come back and enter additional information I have gained about the home to create a personalized estimate for the property. This information, combined with my own market research, gave me a little more peace of mind. The bidding process is so stressful, a little peace of mind can do a lot cure cold feet. With that in mind, I find it really hard to believe that anybody was about to bid on a house, glanced at a single Zestimate, and just changed their mind and walked away. Indeed, I can guarantee that at least one house hunter was eased into bidding by Zillow."
Thanks, Kate.
Comments? Insights? Other -- informed -- opinions of Zillow?
 Most who comment here seem to believe we are still in the early stages of a real estate downturn, with no sign of a bottom yet. If you are right -- and we think you are -- it follows that that the federal government, too, is in the early stages of its response, and will likely broaden its response as the housing market weakens.
That is what appears to be happening in Washington this week, starting with the Federal Reserve's half-point cut. Now the Bush administration is back-pedaling a bit, indicating it is willing to allow the bigger role for Fannie Mae and Freddie Mac that Democrats have been advocating.
News item from the AP today: "Treasury Secretary Henry Paulson ... signaled that the administration would consider allowing the big mortgage companies Fannie Mae and Freddie Mac to temporarily buy, bundle and sell as securities any loans exceeding $417,000, known as "jumbo" loans."
MORE: "The idea, which represents a policy change for the administration, is portrayed as a way to inject liquidity into the stretched mortgage market. Paulson said the change involving jumbo loans could occur only in tandem with tighter oversight of the two government-sponsored mortgage companies."
Your thoughts? Comments? Email story tips to lalandblog@yahoo.com.
Photo Credit: Reuters
 Blogger's note: We got an interesting email from a mortgage banker today who raises a point we agree with: the housing mess is far broader than a "sub-prime meltdown," as it is often called in shorthand. Yes, sub-prime is the first part of the market to collapse, and is driving current foreclosure numbers; but a bigger problem lies ahead:
"Remember that the current spate of foreclosures relates mostly to: overbuilding in hot spots, fraudulent loans (mostly people falsely claiming they'll occupy a property) and a relatively small number of borrowers whose subprime rates got jacked way up.
"The big wave of
foreclosures is still coming: people who DO occupy their house and who did not
necessarily commit fraud to get the loan, but simply took out an Option ARM and
have watched their loan balance grow as their house value has dropped.
Those loans allow a low payment for 4-5 years (while the loan balance may be
climbing), and since they only jumped in popularity after fixed rates
spiked in mid 2003, most of those Option ARMs have not yet even seen the big
payment adjustment that's coming. When their payments double (as they
will), many of those borrowers will find themselves with too little equity to
either sell or refinance (especially if they had 2nd mortgages on TOP of their
Option ARMs). Throw in the tighter underwriting standards that have been
imposed recently (making refinancing that much tougher) and you have a
still-coming perfect storm. The coming crisis is the "Option ARM crisis",
which will make the "subprime
crisis" look minor in comparison (at least as far as how real estate values are
impacted).
"The Option ARM foreclosures will only start in mid 2008 and will climax in 2009-2010. The biggest purveyors of Option ARMs have been Countrywide and Washington Mutual. The percentage of homeowners with Options ARMs is highest in California. Think of an Option ARM as a bomb with a five year fuse. Millions of fuses are still burning."
Your thoughts? Comments? Email story tips to lalandblog@yahoo.com
Photo Credit: LATimes
 Countrywide, in its presentation yesterday in San Francisco, made some fascinating arguments about what's causing the foreclosure crisis. Countrywide CEO Angelo Mozilo "criticized media coverage of the mortgage meltdown several times
Tuesday, saying reporters incorrectly blamed 'aggressive lending and
exotic reset products' for rising foreclosures."
So what's driving foreclosures? Here is Countrywide's breakdown -- based on information from its servicing portfolio -- when "cause of foreclosure" is known (80.3%), the breakdown is as follows:
--Curtailment of income: 58.3%
--Illness/Medical: 13.2%
--Divorce: 8.4%
--Investment Prop./Unable to sell: 6.1%
--Low regard for property ownership: 5.5%
--Death: 3.6%
--Payment adjustment: 1.4%
--Other: 3.5%
We find this fascinating on several levels, and inconsistent with most analysis we've seen. To start, we should point out, there is probably no institution in America -- including the media and the government -- that knows more about the current crisis than Countrywide. The government doesn't collect timely data on foreclosures; Countrywide does. If this is Countrywide's best, most honest assessment of the true causes of foreclosure, it's shocking: it indicates foreclosures are spiking due to economic weakness -- "curtailment of income" -- that is so faint it barely shows up in economic statistics. If this is what happens in a fairly strong job market and a growing economy, what happens in a real recession, when unemployment rises significantly?
And if "payment adjustments" are not a problem -- as Countrywide argues -- what good would it do to refinance these loans?
There is one plausible explanation: borrowers were so aggressive -- and so hopeful -- that they essentially planned for economic perfection, and the slightest negative deviation from that plan -- say, an unexpected drop in overtime earnings for hourly workers -- is sending them into default and foreclosure.
But here is an equally plausible explanation: That the "research" is really spin -- Countrywide is eager to answer critics and argue that its own underwriting was not a factor in the foreclosure spike -- that it was entirely unforseen and driven by economic events out of the company's control.
We'd love to hear your thoughts on this. Email story tips to lalandblog@yahoo.com
Photo Credit: AP
 Good morning. We like to mix it up here, and our mix lately has been lacking in some ways. So today we post another contrary view, this time from Silver Lake real estate agent Brock Harris. You may not agree with him, but hear him out:
Buyers are nuts about price. I think it's a stupid way to choose a house. Why?
All
day long I ask potential buyers “How soon do you need to buy?” and
“What areas are you looking in?” and all I hear is: “I am flexible, I
just want a good deal.”
It’s crazy – most buyers will wait YEARS and live in houses they don’t even LIKE to get that “good deal.”
I say bollocks.
Ever
talked to someone who bought well and bought early? What they paid is
IRRELEVANT. The homeowners in Burbank who paid $240K instead of $220K
(they decided they couldn’t wait for the “good deal” anymore), and it’s
now worth a cool million?
The guy who bought the commercial
property on Hollywood Blvd in the mid-90s for $350K (NOT a good deal,
in fact he overpaid 10%), and it’s now worth $4mil?
Heck, my
uncle and aunt in Vancouver “overpaid” for their house back in the day.
Yep, they spent $35K on a house they could have gotten for $33,500.
Boo-hoo, the place is now worth $500K. They bought it because they
LOVED it.
I will take a well-located, prize home I love at
MARKET price all day long over a not-so-nice place at 30% below market.
Because in ten years it’s not going to make a bit of difference to me,
and the nicer place will be worth more anyway.
I am calling
through my entire database and I am not kidding you, there are people
who have been waiting since 2001. “I’m not in the market,” they say,
“but if a really good deal comes along, give me a call.” Yeah, right.
Thanks, Brock. You're a brave guy to wade in here with those words.
Comments? Thoughts? Insights? Be polite, for once in your life.
 Update: Commenter Cal points out a headline we missed today: Countrywide said it is hiring as part of its foreclosure prevention efforts, and the new jobs are in India -- yes, India, not Indiana: From the company's presentation today in San Francisco: "Increased staffing levels in India for home retention and loss
mitigation efforts, shifting additional costs to an area with lower
labor expense."
News item from Reuters: "Countrywide Chief Executive Angelo Mozilo said Tuesday the largest U.S. mortgage lender is 'out' of the subprime business, apart from offering home loans eligible for purchase by government-sponsored enterprises."
Second news item, from Dow Jones: "Countrywide Financial Corp.Chief Executive Angelo R. Mozilo said the largest U.S home lender plans to double the number of financial centers over the next four to six months to become more 'bank like.'"
Why the banking expansion? Third news item, from The Wall Street Journal: "Countrywide Financial Corp., seeking more deposits to finance mortgage lending, plans to double its number of branch offices offering certificates of deposit and money-market accounts."
Never a dull moment.
Photo Credit: Reuters
 We're updating our post on the Fed rate cut, as promised, with analysis:
In The New York Times, economic columnist David Leonhardt asks, "Will the Fed Reverse the Housing Slump?" He answers, "Don’t count on it." Leonhardt lays out the possibility that we are in for housing price declines on the order of 20%, and warns, "The scariest part of a national decline like this is that it could be more like 40 percent in some parts of the country." He specifically mentions southwest Florida as a place at risk of a big price decline.
Pimco's Bill Gross notes that, the last two times the Fed kicked off a rate-cutting campaign with a half-point cut, it was too late -- the economy was already on its way to a recession. He's not predicting a recession, he's just saying ... Gross sees another full point of rate cuts coming as the Fed tries to soften the housing downturn.
Old post below:
Good afternoon. You know the news, but here it is: "The Federal Reserve today slashed its key short-term interest rate a
half-point to 4.75% -- the first cut of any sort in four years -- and
added a half-point cut on a less-used rate, warning that tightening
credit conditions could worsen the housing downturn."
For the record, here's what the Fed said about housing: "... the tightening of credit conditions has the potential to intensify the
housing correction and to restrain economic growth more generally."
Well, you can't argue with that. Put plainly, the Fed says we are in a period of falling housing prices -- a "correction" -- and it could be getting worse.
Your comments? Will half a point make a difference to home sales or prices in the next couple of months?
Photo Credit: Reuters
Good morning, again. Interesting little tidbit from E-Trade, part of the company's explanation of why its earnings will come in well below forecasts: the company sees rising delinquencies in home-equity loans, "many
taken out by homeowners who had good credit but had borrowed
excessively."
This makes perfect sense, but we don't see this logic very often from corporate America: that the housing bubble encouraged some consumers to borrow recklessly, taking on more debt than they can handle, and the result is that some individuals with previously good credit records are missing payments: "A lot of consumers with
previously good credit scores have taken on a higher debt load than
they normally would have, and that's where you see the deteriorating
credit performance," said Jarrett Lilien, E-Trade's president and chief operating officer.
Again, makes perfect sense, we rarely hear it from the companies that made the loans. The economic impact here is significant: you're talking about borrowers who tapped their home equity, and temporarily spent beyond their means, pumping up economic activity. Now the borrowing-and-spending binge is over, the money is spent, and they are having a hard time paying it back.
Your thoughts? Comments? Insights? Email story tips to lalandblog@yahoo.com
 Good morning. RealtyTrac reports a big spike in foreclosure activity from July to August -- filings were up 36% from July nationally, and 48% in California. Those month-to-month gains are staggeringly high.
From AP: "'The jump in foreclosure filings this month might be the beginning
of the next wave of increased foreclosure activity, as a large number
of subprime adjustable rate loans are beginning to reset now,'
RealtyTrac Chief Executive James J. Saccacio said."
More: "The number of bank repossessions jumped to 42,789 in August,
compared with 20,116 a year earlier, the RealtyTrac said. In July,
there were 26,842 bank repossessions."
More numbers:
Month nat'l filings y/y % m/m % Cal. filings y/y % m/m %
June 164,000 87% -7% 38,000 286% -2%
July 179,000 93% 9% 39,000 289% 1%
Aug 243,000 115% 36% 57,000 363% 48%
Note: RealtyTrac reports all foreclosure "filings," so it often double and triple counts a single home's trip through foreclosure. Still, we believe the percentage change numbers -- the "trend" numbers -- are valuable indicators of foreclosure trends.
Your thoughts? Comments? Insights? Email story tips to lalandblog@yahoo.com.
Photo Credit: AP
Here's a small surprise from Housing Tracker's weekly analysis of MLS listings: the inventory of homes for sale in Greater L.A. slipped slightly over the past week, as median listing prices held steady.
The median listing price dropped by exactly one dollar, from $520,000 to $519,999, and is
8.5% below year-ago levels; inventory fell by 196 houses and condos, bringing the total number of listings in Greater L.A. to 46,218, an
increase of 15.2% over year-ago levels.
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 | |
