No "Mortgage Meltdown," but ...

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.

Countrywide slammed in NYTimes

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

The San Diego discount: 30%

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

San Diego condo auction closed to press

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"

30% drop in San Diego condo prices

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.

Tree of the week

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

Angelo's angles: How Mozilo made $138 million

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

Price choppers near the beach

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.

CNBC's Cramer: "Don't you dare buy a home now."

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
 

Glut: 5.1 million homes for sale

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.