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 No, it's not this blog -- It's Diana Olick's Realty Check blog at CNBC.com. As Diana and her legion of followers were debating this week whether it makes sense for lenders to freeze rates on some mortgages, surprise, surprise: A top federal regulator spoke up on Diana's blog, explaining the administration's thinking on the topic.
The regulator is FDIC Chairman Sheila Bair, and here's part of what she blogged: "My loan modification proposal targets a specific set of borrowers: those that are in subprime hybrid adjustable rate mortgages (2/28s and 3/27s) who have been current on their payments at the starter rate but are unable to make their resets. If it is determined that they can make the reset payment, then they will be bound to the terms of their contract. Because of weak underwriting, however, we believe that the overwhelming majority will not be able to make the reset, which typically results in a payment shock increase of 30 – 40%. The FDIC currently estimates that 1.2 million borrowers who are facing resets in the next five quarters may be eligible for this proposal.
More: "One last important point I would make is that this category of borrowers is typically already paying between 7 – 9% at their starter rate. This is well above prime rates for a typical 30 year fixed mortgage. The vast majority of borrowers who took the conservative route will still be paying a lower interest rate than the targeted borrowers receiving this modification."
A big, unanswered question: Is the plan now being worked out between Treasury and major lenders the fundamentally the same as Bair's plan? The White House, ever vigilant in shedding light on financial policy decisions crucial to millions of Americans, said this morning it would be premature to discuss any of this.
Your thoughts? Comments? Insights? E-mail story tips to peter.viles@latimes.com
 Good morning. The Wall Street Journal is reporting today that the White House and major lenders are about to announce a deal under which lenders will freeze the interest rates on sub-prime loans.
"The Bush administration and major financial institutions are close to agreeing on a plan that would temporarily freeze interest rates on certain troubled sub-prime home loans, according to people familiar with the negotiations."
More: "Details of the plan, which could be announced as early as next week, are still being worked out. In general, the government and the coalition have largely agreed to extend the lower introductory rate on home loans for certain borrowers who will have trouble making payments once their mortgages increase."
The coalition of lenders in in talks with Treasury Secretary Henry Paulson (pictured) includes Countrywide Financial, Citigroup, Wells Fargo and Washington Mutual, the Journal reports. The arrangement sounds similar to the one announced recently by Gov. Schwarzenegger.
So many questions: Will it make a difference? (Remember, sub-prime loans that go into default often fail before the rate resets.) Is it fair? (Millions have ARMs that will reset -- where is their rate-freeze?) Is it good policy? Does it send a message to consumers that poor financial decisions will not lead to negative consequences? Are the lenders and servicers getting something in return? Regulatory concessions? Favors? Winks and nods?
These and more questions will be answered, I suspect, in the comment section. E-mail story tips to peter.viles@latimes.com.
Photo Credit: Treasury.gov
 It is hard to keep track of the various challenges facing Countrywide Financial at the moment, but this is a new one: "Countrywide Financial Corp. is the target of a multi-state federal investigation aimed at determining whether the Calabasas-based lender has been levying unjustified fees on consumers going through bankruptcy."
More, from this morning's Los Angeles Times: "The U.S. trustee's office, the agency charged with monitoring the bankruptcy courts, has filed subpoenas in at least a dozen cases in Florida, Pennsylvania and Texas asking Countrywide for information about questionable claims for fees."
Typically, when Fortune 500 companies face this kind of investigation they issue a boilerplate statement that reads something like this: "We are cooperating fully with this investigation and we look forward to a speedy resolution."
That's one of the things that makes this story different. Countrywide is objecting to the investigation: "Countrywide has objected to the subpoenas, saying in court filings that the sweeping nature of the requests is unprecedented and part of a 'series of attempts by the U.S. trustee to conduct a wholesale investigation into Countrywide's policies and procedures.' "
Ray of sunshine department: Countrywide shares gained 66 cents today, closing at $9.38.
Your thoughts? Comments? E-mail story tips to peter.viles@latimes.com.
Photo Credit: Bloomberg
 Good morning. If I had to pick only one region of Los Angeles to monitor for housing trends, in hopes of capturing the overall market, I'd probably pick the San Fernando Valley. Yes, it's expensive (median sales price $590,000), but it's a big area, containing within it a range of neighborhoods and properties.
That said, things are looking down in the Valley. From the Daily News: "Home sales in the San Fernando Valley hit a record low for the second consecutive month in October, plunging 54 percent from a year ago as mortgage industry turmoil continued to roil the market, a trade association said Wednesday."
More: "Last month 354 previously owned houses changed owners, 417 fewer than sold last October and down eight sales from the previous record low of 362 in September, said the Van Nuys-based Southland Regional Association of Realtors.
Inventory: 7,730 properties listed for sale in the San Fernando Valley, a 16-month supply.
Your thoughts? Comments? Insights? E-mail story tips to peter.viles@latimes.com.
Photo Credit: "The Valley," submitted to LATimes.com's Your Scene by Murchy
 My e-mail buddy Brock Harris has provoked much discussion here in the past (he's the guy set off a small firestorm here when he advised in September, "If you love it, Buy it!").
So I give him the floor, or rather this blog post, for another round of his breezy advice. Here goes, from Silver Lake real estate agent Brock Harris:
"HERE'S WHAT TO DO IF YOU... (this is why you love me, I actually give advice):
"…OWN A HOME, NEED TO SELL: For the love of god, drop that price. Do NOT price high, thinking buyers will offer less. They don’t – instead, they’ll move on to the 50 other homes just like yours for sale. Only the best priced, best conditioned places are moving – be that house! Los Angeles has the country’s largest housing inventory, up 21% from last year, and nearly half of all currently listed homes in L.A. have reduced prices.
"…OWN A HOME, DON’T NEED TO SELL: Well, geez, don’t worry about a thing.
"…STILL RENT AND DON’T WANT TO MOVE: Enjoy rent control, and don’t freak out when your landlord raises you 5%. As landlords lose the appreciation on your home, they’ll look to rents to make up the difference.
"…NEED/WANT TO BUY A HOUSE NOW: Where to begin? It’s a great time to be a homebuyer. Stay in strong areas. Shop long and negotiate hard. Get a GREAT agent. Don’t fall into the trap of 'I’m willing to wait.' Realtors have a name for people 'willing to wait for the right house.' Renters.
"…OWN INCOME PROPERTY: Refi that sucker into a fixed, 30-yr loan. And pull money out, as much as the rents will cover! You will not be able to tap or leverage the property again, and that war chest will serve you well when it’s time to buy those bank-owned foreclosures."
Thanks, Brock. Comments? Insights? E-mail story tips to peter.viles@latimes.com
Photo Credit: "Across the Reservoir," Submitted to Your Scene by David
 Frequent commenter Better Village emails to point out an Interesting item at NYTimes.com explaining what $6 million will buy you in three different real estate markets. You've seen items like this before: In Naples, Fla., $6 million buys you a gated, Mediterranean-style, 9,200-square foot estate; In Telluride, Colo., it buys you a 4,300-square foot lodge; and in Los Angeles, it buys you a modern, 6,000-square foot, 4-bedroom house (pictured at left) with sweeping views. You can argue all day long about which home is worth more and where you'd rather live.
Here's the part Better Village notes: property taxes.
--Taxes on a $6 million home in Naples: $29,332 a year.
--Taxes on a $6 million home in Telluride: $8,198 a year.
--Taxes on a $6 million home in LA: (wait for it... wait for it...) $74,937 a year.
That is a big difference.
Thoughts? Insights? Email story tips to peter.viles@latimes.com.
Photo Credit: Jeffrey Hobgood Real Estate.
This is a question I've asked before, but blogger and columnist Daniel Weintraub at the Sacramento Bee asks it more eloquently than I did: What is so disastrous about falling home prices?
Weintraub: "It is great news when the price of energy, food, transportation, health care and consumer electronics drops. But for some reason it is bad news when the price of shelter drops."
More: "So now that housing prices have stopped soaring and in some places are dropping, shouldn't that be good news? Shouldn't we be seeing stories filled with anecdotes about formerly priced-out middle-income families finally getting their chance at the American Dream?
"I understand why foreclosures are bad news, and why the impact of losing a house when you can no longer afford to make the payments is a compelling story. But for every house sold because the buyer couldn't make the payments, there is a buyer on the other end of that transaction who got a good deal. And for every foreclosure, there are probably 10 buyers of nearby homes who benefitted from the general easing of house-price pressure."
It's clear falling home prices are causing some economic damage. Still, these are good points. I know a lot of you will agree, but I'd also like to hear from those of you who disagree. Thoughts? Comments? Email story tips to peter.viles@latimes.com.
Hat tip: Sacramento Land(ing) blog
News item: "Sales of existing homes fell for an eighth straight month in October even as more properties came on the U.S. housing market, driving the supply of homes up for sale to the highest level in 22 years, the National Assn. of Realtors reported Wednesday."
More, from Marketwatch: "Seasonally adjusted sales dropped 1.2% to an annualized pace of 4.97 million last month, the real-estate advocacy group said. The sales pace stands at the lowest seen since 1999, when the group began tracking combined sales of single-family homes and condominiums."
More, from the NAR news release:
--Existing home sales in October were down 20.7% from 2006 levels.
--Total inventory of unsold existing homes rose 1.9 percent at the end of October to 4.45 million existing homes for sale, which represents a 10.8-month supply at the current sales pace, up from a 10.4-month supply in September.
--From Lawrence Yun, NAR chief economist: “As noted last month, temporary mortgage problems were peaking back in August when many of the sales closed in October were being negotiated. We continue to see the biggest impact in high-cost markets that rely on jumbo loans,” he said. “Mortgage availability has improved as evidenced by much lower mortgage interest rates and a sharp jump in FHA endorsements for home purchases.
Thoughts? Comments? Email story tips to peter.viles@latimes.com.
A personal note: This week I began full-time work at the Los Angeles Times as a senior producer at LATimes.com. I'm excited to be joining one of the best news organizations in the country, where my main assignment will be redesigning the Real Estate page on LATimes.com, and working with the newspaper and website staffs to produce compelling stories and features about housing and the real estate market. I welcome your thoughts and advice on that project.
Meantime, I'll continue to write and edit this blog, and I hope to recruit some LA Times staffers to contribute as well. It's my hope the blog will keep its independent voice and outlook, and will continue to generate spirited and insightful conversation. Thanks to all of you who read and comment, and please keep the comments coming.
Relatedly, I'm dropping the use of the royal "we" in posts. When I offer an opinion, or engage in bloviation, or declare that Matt Ryan of Boston College should win the Heisman, I don't want to give the impression I'm speaking for the newspaper. I'm not.
Lastly, the email address is changing. Email story tips to peter.viles@latimes.com.
 Good evening. The Case-Schiller index -- the one that calculates home price trends by tracking the sales histories of individual houses -- shows local prices falling by 7% in the past year.
From the LATimes: "U.S. home prices continued to fall at a fast pace, and price declines in Los Angeles and Orange counties outpaced other major metropolitan areas in September, a national index released today shows.
More: "Local prices dropped 7% from a year earlier, according to the Standard & Poor's/Case-Shiller composite index. The index showed that home prices fell an average of 4.9% in 20 metro areas nationwide."
So what does next year look like? Not good for new home sales, according to the CEO of D.R. Horton: "Donald Tomnitz, speaking at a JPMorgan Chase & Co. conference in Las Vegas, said that ' '08 is going to be worse than '07 for us and for the industry in general.' "
Thoughts? Comments? Insights? Email story tips to peter.viles@latimes.com
Photo Credit: LATimes
Not a shocking piece of news, but a development worth noting: "Mortgage finance companies Fannie Mae and Freddie Mac will not be able to invest in loans valued above $417,000 next year, their regulator said on Tuesday, saying it will hold the current loan limit steady."
More: "The so-called "conforming loan limit" will be held in place despite falling home prices around the nation, said the regulator, the Office of Federal Housing Enterprise Oversight.
Your thoughts? Comments? Insights? Email story tips to lalandblog@yahoo.com.
Good morning. The L.A.Times' Peter Hong explores a favorite topic on this blog -- how low will prices go? The consensus in the story is that prices will fall in the 15% to 25% range, but maybe not that much in higher priced areas. The piece contains a mini-debate that has also been popular here: Will prices eventually weaken in more expensive coastal areas, or are those neighborhoods immune?
"Southern California home prices have fallen for five straight months, according to data released this month, and are now down 12% from their peak last spring and summer," Hong writes.
This sidebar contains a few predictions, including these:
--Michael T. Carney, professor of finance and real estate, Cal Poly Pomona: A decline of at least 15%, bottoming at the end of 2009.
--Delores A. Conway, director, Casden Real Estate Economics Forecast, USC: A decline of 5% to 10% in areas of L.A. and Orange counties where housing supply is tight; 5% to 15% in other parts of those counties; and 10% to 20% in the Inland Empire. "The downturn will not be as severe in some areas. It really depends on the sub-market," she says.
--Edward E. Leamer, director, UCLA Anderson Forecast: A drop of 20% to 25%, bottoming in 2009 or 2010. "It will get back to normal when people buy a home to live in, not invest in," Leamer says.
Your thoughts? Insights? Email story tips to lalandblog@yahoo.com.lalandblog@yahoo.com
 Median listing prices in greater LA slipped ever so slightly in the past week, to $499,000, as inventory continued to run well ahead of year-ago levels, according to Housing Tracker's analysis of MLS listings.
Highlights:
--Median listing prices have been fairly flat for a month, dropping only $1,000 since October 29th. The median listing price for greater LA is 9.3% below year-ago levels.
--Inventory of unsold houses is now dropping -- as it tends to do this time of year -- but is now 21.6% ahead of last year's levels.
Date Median Price Inventory
4/06 $579,666 27,251
4/07 $545,000 35,489
5/07 $545,000 38,297
6/07 $540,000 40,766 (up 20.4% y/y)
7/07 $535,000 42,685 (up 14.5% y/y)
8/07 $529,000 44,483 (up 13.6% y/y)
9/07 $520,000 46,414 (up 16.9% y/y)
10/07 $510,000 46,603 (up 15.6% y/y)
11/12/07 $499,900 46,503 (Up 19.0% y/y)
11/26/07 $499,000 45,911 (Up 21.6% y/y)
Thoughts? Comments? E-mail story tips to lalandblog@yahoo.com
Photo Credit: LATimes
Traffic seems kind of slow, commenters are quiet, and Sunsetbeachguy says it's my fault -- I failed to post a link to the insightful and humorous blog There is No Housing Bubble. So there is the link, and here are a few highlights:
--"Debt is Wealth!"
--"All it takes today to be rich is to be able to sign the loan papers."
--"Look for a property nobody wants. Find one where everyone says only an
idiot would buy that house. Become that idiot and buy that house."
Even if you fail to see the humor in this, you have to give the writer some credit: these posts date from early 2006.
Comments? Questions? Email story tips to lalandblog@yahoo.com.
Good afternoon. Another Monday brought another stock market selloff -- to the tune of 237 Dow points -- -- on more worries about the housing and credit crisis crunch (An emailer argues it's not a "crisis," just a correction. Really? At Countrywide Financial, it's a crisis).
Countrywide shares fell to $8.61 today after Sen. Charles Schumer complained to federal regulators that Countrywide may be abusing the Federal Home Loan Bank system.This from Reuters: "A U.S. regulator should scrutinize billions of dollars of loans that have helped keep troubled mortgage lender Countrywide Financial afloat in recent months, Schumer said on Monday. ... At the end of September, Countrywide had borrowed $51.1 billion from the Federal Home Loan Bank system -- a government-sponsored program.
There was other crummy news on the credit/housing front:
--A CNBC report that Citigroup is thinking about "massive" layoffs. How massive? CNBC's Charles Gasparino reports "the total number could reach as high as 45,000" -- that's not a typo. That's out of 320,000 jobs.
--A UBS analyst downgraded shares of Fannie Mae and Freddie Mac, and HSBC Holdings said it will put two funds with mortgage exposure on its balance sheet and spend $35 billion to bail them out.
Thoughts? Comments? Insights? Email story tips to lalandblog@yahoo.com
 Good morning. Consider this item a sandwich made of Thanksgiving leftovers.
The meat: David Lazarus provides the protein here with a thoughtful column in today's paper, reporting that holiday shoppers seem to have a new respect for debt this year: "... anecdotal evidence suggests that, after years of putting everything they desired on plastic, some people finally may be getting smarter about their finances. And many, though they may not be conscious of it, seem to have a gut feeling that the economy is going to keep heading south."
The stuffing: Commenter Rich succinctly explains how massive debt became a kind of comfort food to homebuyers during the bubble: "If you're a good student of human nature, it will be clear that the psychology behind taking on high mortgage debt is a feeling of comfort that borrowers had when they looked around and saw so many others like themselves successfully being granted such large loans...." There's nothing comforting, however, about falling home prices and rising foreclosures.
The cranberry sauce: Commenters arroyogrande and yourkillingmelarry see the dark humor in all of this, and recommend a classic piece of debt humor: This Saturday Night Live skit from earlier this year featuring Steve Martin, and revealing the secret of debt management: "Don't Buy Stuff You Cannot Afford."
The apple pie: Expect to see more coverage of shifting attitudes toward debt. Old attitude: debt is a wonderful opportunity to build wealth by investing in real estate. New attitude: debt carries risks and burdens. Read the fine print.
Your thoughts? Comments? Insights? Email story tips to lalandblog@yahoo.com.
Photo Credit: L.A. Times
 Good morning. As is the custom here, the first post of the weekend is reserved for one of the best ways to beautify a home and increase its value: plant a tree. The tree-loving Pieter Severynen celebrates a different tree every week:
American Sweet Gum – Liquidambar styraciflua
In the rich bottomlands of its native Southeastern U.S., the liquidambar easily grows into a towering 80-120’+ tall tree with a 3-4’ wide trunk. While it is a valuable commercial hardwood there for veneer production, here we enjoy this deciduous tree for its straight silvery, fissured trunk, the long stemmed, 3-7”, 5-7 lobed palmate leaves reminiscent of maple leaves that make light sparkle, the beautiful fall colors, the odd squarish corky outgrowths (‘wings’) on its branchlets, the hard spiky seedpods that look like little medieval maces, and the strong resin smell produced when a leaf is crushed. (I usually crush and smell a leaf of plants I meet; it is a good aid in identification).
The tree’s names refer to this resinous quality: styraciflua means flowing with styrax or storax, a fragrant resin, although strictly speaking the true storax used in the perfume industry comes from the related Liquidambar orientale.
In southern California the American sweet gum starts out narrow and erect, eventually widens to 25’ while growing moderately fast to a beautiful 60’ tall pyramid. The branches tend to grow in narrow crotches and compete with the main trunk; wood can be brittle; some judicious pruning in youth will prevent future branch drop. The tree likes lots of room; roots often grow on the surface, especially in lawns. Many cities found out that trees planted in narrow parkways don’t respect curbs or paving. Seed pods ("gum balls") dropped on the ground can be a nuisance. But all faults are forgotten during the few weeks in fall when the tree defies our warm weather and shows off its spectacular autumn colors. Of the many named varieties "Aurora" and "Festival" are multicolored, "Burgundy", "Cherokee" and "Palo Alto" are burgundy, purple, or orange red.
Thanks, Pieter
Thoughts? Comments? Insights? Email story tips to lalandblog@yahoo.com.
Photo credit: Geocities.com
Worthwhile reading this weekend: Paul Krugman's column in The New York Times headlined, "Banks gone wild." Krugman looks at the mortgage mess and sees, at its core, a failure of corporate governance. How else to explain that CEOs who damaged their companies with bad bets on mortgage-backed investments still made out like bandits?
"Executives are lavishly rewarded if the companies they run seem
successful: last year the chief executives of Merrill and Citigroup
were paid $48 million and $25.6 million, respectively. But if the success turns out to have been an illusion — well, they still get to keep the money. Heads they win, tails we lose."
Commentary: I agree that executive compensation is an ongoing outrage -- and proof, as Krugman argues, that the Enron scandal failed to break up, or even slow down, the no-questions-asked, back-slapping, check-writing party in America's corporate boardrooms. But I don't think it's the main factor in the credit and mortgage mess we're now witnessing. This is the price we all pay for lax regulation and oversight of the lending industry, and for a consumer culture that has come to believe that debt leads to wealth.
Your thoughts? Insights? Email story tips to lalandblog@yahoo.com.
Hat tip: Better Village, via email
 Happy Thanksgiving.
Based on the response to the previous item, it's a safe bet this piece of news will not be popular on this blog: "U.S. Treasury Secretary
Henry Paulson, convinced individual workouts will not solve a
worsening mortgage crisis, is pressing the industry to help
large groups of borrowers qualify for more affordable loans."
More, from Reuters tonight: "In an interview with the Wall Street Journal, Paulson said he he was 'aggressively encouraging' the
mortgage servicers who collect payments from borrowers to
develop new criteria that would allow large numbers of
borrowers to qualify for mortgages with better terms. This is a shift from Paulson's previous strategy of
encouraging the industry to work individually with borrowers."
The other headline from the WSJ interview is that Paulson predicted the default/foreclosure problem "will be significantly bigger next year because 2006 (mortgages) had lower underwriting
standards, no amortization, and no down payments."
In other words, if you thought the 2005 vintage of mortgages was crappy, you ain't seen nothing yet.
Paulson's comments raise a lot of questions, not the least of which is whether this is good policy. I know in advance many of you think it's terrible policy, and that it encourages and rewards borrowers who made poor financial decisions. Beyond that: Will Paulson's jawboning work? Will lenders rewrite mortgages by the hundreds of thousands without any regulatory or legislative relief in return? Will the investors who own the mortgages agree, again without anything in return? Or will there be some horse-trading behind the scenes?
Update: Tanta, in a "Dear Mr. Paulson" post at Calculated Risk, opines on likely horse-trading and regulatory relief: "Concrete bennies have to be put on the table. Regulatory relief. Fun
with reserve and capital calculations. Approval of mergers and
acquisitions. You know the drill. This is about maximizing profit. You
are going to have to do something that makes this profitable, if you're
going to expect lenders to do it on a large scale. Your job, of course,
will be to write the PR that says that all this "regulatory relief" to
for-profit banks and mortgage companies is all about Helping the Poor
and being Heroes to Homeowners."
Your thoughts? Comments? Insights? Email story tips to lalandblog@yahoo.com.
Photo Credit: Treasury.gov
Hat tip: Sunsetbeachguy
 A day late, my apologies, but worth noting: "Four major sub-prime lenders promised to give a break to California homeowners who cannot afford escalating mortgage payments, under a plan announced Tuesday by the lenders and Gov. Arnold Schwarzenegger."
More, from SFGate.com: "Countrywide, GMAC, Litton and HomeEq - which collectively service more than one quarter of sub-prime loans to people with poor credit - agreed to maintain the initial, lower interest rate for some sub-prime borrowers whose rates are scheduled to jump significantly higher. To qualify, borrowers must occupy their homes, have made their payments on time and prove they cannot afford payments with the higher interest rate."
It's not clear how long the lenders will freeze rates under the plan, which Schwarzenegger says will save "tens of thousands of people from being added to the foreclosure lists."
Where did the idea come from? According to the governor's press office, "The agreement the Governor negotiated with lenders builds off a proposal put forward by Federal Deposit Insurance Corporation Chair Sheila Bair that encourages lending agencies to keep sub-prime mortgage borrowers at their initial interest rate if they are living in their home, making timely payments, but can't afford the loan "reset"--or jump to a higher rate."
Your thoughts? Comments? Email story tips to lalandblog@yahoo.com.
Photo Credit: AP
Hat tip: E&A, via email.
Good morning again. We leafed through DataQuick's October sales report to find the hottest and coldest Zip Codes in L.A. County, comparing median sales prices from October 2006 to October 2007. Our ground rule: only Zip Codes in which 10 or more homes were sold in October qualified. A few comments below.
Hottest
Area/zip % change Oct. 07 median sales price
Beverly Hills/90210 192% $3.65 million
Beverly Hills/90212 71.8% $2.19 million
Sherman Oaks/91403 66.7% $1.27 million
Pacific Palisades/90272 41.8% $2.69 million
LA/Brentwood/90049 32.4% $2.25 million
LA/Rancho Park/90064 31.0% $1.31 million
LA/90027 30.7% $1.24 million
Palos Verdes/90274 24.8% $1.50 million
Rowland Heights/91748 22.6% $650,000
Manhattan Beach/90266 16.4% $1.66 million
Coldest
Tujunga/91042 -37.2% $386,000
Malibu/90265 -34.9% $1.59 million
Palmdale/903550 -29.9% $235,000
Downey/90240 -26.8% $504,000
Encino/91316 -25.9% $515,000
Lancaster/93534 -25.0% $224,000
Lancaster/93535 -24.1% $239,000
LA/Windsor Hills/90043 -23.9% $415,000
LA/Firestone Park/90001 -23.9% $350,000
Downey/90242 -23.0% $423,000
Commentary: Take out the two outliers -- Malibu and Rowland Heights -- and the trend is clear: median sales prices are rising in expensive neighborhoods -- $1.2 million and up; they are falling in neighborhoods where sales prices are below the county's overall median sales price, which was $525,000 in October. Let me try that again, more clearly this time: The zip codes registering the biggest year-over-year median price gains are in expensive areas. The zip codes registering the biggest year-over-year price declines are in inexpensive areas. You can't really tell from these numbers that there is a problem with jumbo mortgages; you can, however, see the impact of the evaporation of sub-prime mortgages.
Your thoughts? Comments? Email story tips to lalandblog@yahoo.com
Good morning. One of the more common hopes for a quasi-public bailout of the mortgage market is for Congress and the White House to pass legislation giving Fannie Mae and Freddie Mac -- the for-profit, government-sponsored buyers and guarantors of mortgages -- an even bigger role in the mortgage market. Let Freddie and Fannie buy more mortgages, and let them buy the big ones -- Jumbos -- is a common refrain.
Those hopes took a body blow* this morning when Freddie Mac shocked Wall Street, reporting a $2 billion loss and warning that "it might not have enough capital on hand to cover the mandatory reserves for its mortgage commitments."
Fallout: Freddie shares fell 29% this morning; one analyst told CNBC's Diana Olick, "Freddie is a disaster." Another analyst, Howard Shapiro, wrote, "... it will mean, in our opinion, a further exacerbation of the housing downturn — even less credit available and steeper downturns in home prices."
Further fallout: Shares of Countrywide Financial -- which relies heavily on Freddie and Fannie to purchase its loans, and has been lobbying for an expanded role for Freddie and Fannie -- fell to new lows, dropping below $10 per share.
Commentary: It may still be premature to ask whether there is an implied government guarantee of Fannie and Freddie, but I believe it is a good question for presidential candidates: Investors believe the government will bail these companies out if they run into trouble: is that true?
*Updated Commentary: I wrote earlier today that hopes for a bigger role for Fannie and Freddie would likely be hurt by Freddie's dismal performance. I've been listening to CNBC today and numerous commentators believe the opposite is true: that Freddie's troubles will spur Congress to loosen regulations, perhaps freeing Freddie and Fannie to buy more mortgages, even though their performance at the moment is shaky.
Your thoughts? Comments? Email story tips to lalandblog@yahoo.com.
 Kate in the Valley, my favorite sidelined househunting blogger, comes off the sidelines tonight to file an update: prices are falling in one of her preferred neighborhoods, and she's still not biting:
"You might remember that back in June I visited a little 3 bed + 2 bath house in Fashion Square (a.k.a 'the house where it all started') that was listed at $825k. When I told the agent that I thought that was way too high, she offered me a little cash back to sweeten the deal. Needless to say, I didn't go for it. Anyhoo, it's been almost six months and the house still hasn't sold. But the agent gave me a call again recently. Yup. She wanted me be the first to know (because, apparently, she still does not read my blog) that the house is currently listed at $694k and: 'there's room to negotiate!'
"The new list price represents a nearly 16% decline over the last six months (assuming you offered to pay list but, given the agent's sales pitch, why would you?). I still think it's too much and wouldn't be surprised if it dipped into the low $600s before it finally moves. And this isn't the tale of one desperate seller either; the whole neighborhood has taken a significant hit in recent months.
"So what does this mean for me? Well, for starters, it means I'm really glad we didn't buy a house this year. It also means that some of the allegedly bubble-proof neighborhoods in the Valley are starting to deflate much faster than the city-wide statistics reveal. But it doesn't mean that I'm going to put in any offers right now or any time soon. The price corrections have only just begun."
Thanks, Kate.
Comments? Thoughts? Be polite. Email story tips to lalandblog@yahoo.com.
As The Bangles* said, "Just another manic Monday, I wish it was Sunday." Elements of this particular Manic Monday include:
--Citi Selloff: "Goldman Sachs downgraded Citigroup to "sell" from "neutral," and said the largest U.S. bank may have to write off $15 billion over the next two quarters as mortgage losses reduce earnings." (Reuters via CNBC.com)
--Homebuilder Blues: Home builder sentiment stayed at a record low in November, as builders reported that special sales incenties are "having limited success in terms of getting buyers in the door."
--Agency angst: "Shares of Fannie Mae and Freddie Mac sank to 10-year lows on Monday over new worries that a spike in U.S. home foreclosures will boost losses at the two mortgage finance companies."
--More coming: "Minneapolis Federal Reserve Bank President Gary Stern said on Monday he expected the U.S. housing market to weaken further because of a large pool of unsold homes."
--Lastly, the Dow fell 218 points, closing below 13,000 (LATimes.com).
Analysis: If we're in a housing and credit slump, and there is more bad news to come -- which is pretty much the conventional wisdom right now -- why does the market insist on being surprised every time some of this expected deterioration comes to pass? I like what Lou Barnes wrote on this topic on Nov. 9:
"In times of plague, wagons and carts each day clattered through cities and towns, the draymen calling, “Bring out your dead!” So it is on Wall Street today. You would think by now that surprise would have faded at the number and identity of new shrouds, contagion perfectly obvious. But, no, the secretive and blame-shifting culture of Wall Street is intact, markets as shocked each new day as the last.
Your thoughts? Comments? Email story tips to lalandblog@yahoo.com
*The Bangles? Yes, mid-80's pop. 1986, to be exact.
Good morning. Conventional wisdom has it that mortgage rates generally follow the rate on 10-year Treasury bonds -- as that rate rises and falls, so too do mortgage rates. So why is the gap between these two rates widening? Mortgage broker and Fed Watcher Lou Barnes weighed in this weekend:
"Under normal historical circumstances, the 10-year should lead retail mortgage rates on a leash no longer than 1.50% to 1.75%. We’ve taught a generation of borrowers that wherever the 10-year goes, mortgages are sure to follow. Since the onset of the Crunch in August, frightened money has gone to the 10-year, but mortgage rates have been sticky. For the last couple of weeks, the 10-year at 4.25%, the retail rate for the lowest-fee 30-year mortgages has been stuck at 6.375%. A spread wider than two percent! Why?"
More: "I posed the question to a kid running a trading desk (in his 20s, already a Master of the Universe). 'There’s too much production for demand.' Son, don’t fib to an oldster: the production of mortgage-backed securities has crashed by two-thirds since August. 'So? I said there was too much production for demand.'
So there you have it: in Barnes' view, even though production of mortgage-backed securities has dropped sharply -- by more than half -- investor demand has dropped even more. Mortgages, as Barnes writes, are still "toxic." The Fed can cut the cost of money, but it can't force investors to buy a product they don't want.
The good news, though: Barnes sees mortgage rates heading lower -- just not quite as fast as history indicates they would be right now.
Your thoughts? Comments? Email story tips to lalandblog@yahoo.com.
 Insert your favorite football cliche here: Former USC football star Matt Leinart ...
A) Has been sacked by the housing bubble in Phoenix.
B) Made a poor play selection in the real estate market.
C) Threw away half a million bucks.
Here's the news item from the Arizona Republic: "Phoenix Suns star Amaré Stoudemire has purchased Arizona Cardinals quarterback Matt Leinart's Ahwatukee home for $1.9 million. That's about $500,000 less than what Leinart paid for it last year."
More: "Leinart put the 6,800-square-foot home on the market in June for $2.4 million after he moved to a $2.3 million home in a gated community that real-estate agents have nicknamed 'the Beverly Hills of Chandler.' But the real-estate slowdown has hit everyone, and the home sat on the market."
Matt makes slightly more than the median income in Phoenix: The Republic reports Leinart "could make $50.8 million on his six-year contract."
Your thoughts? Comments? Email story tips to lalandblog@yahoo.com.
Hat tip: FD in TO
Photo Credit: AP
 Good morning. Those of you tempted to become vulture investors and fish around for bargain foreclosure properties are advised to read David Lazarus' column today, in which he lays out an increasingly common trap: companies that sell you outdated, virtually worthless foreclosure "listings."
Lazarus: "A wide variety of smaller services -- try Googling 'foreclosure listings' -- has emerged in recent years to connect distressed properties with potential buyers. Almost all involve fees that can run hundreds of dollars."
Surely some of these services offer a worthwhile product. But many others are selling worthless leads.
My take: If you're looking for a house to live in, this market isn't all that different from looking at the market peak two years ago: Once you've come to peace with the idea that the value of your home might decline after you buy it, pick a neighborhood or three where you'd like to buy, and shop around, go to open houses, surf the Web. You'll be able to compare new listings, old listings, reduced listings and foreclosed listings. If you're a confident, organized, savvy, self-starter, willing to devote some time to your search, you might want to search on your own. Otherwise, work with an agent. But you don't need to spend any money to look for a house.
If, on the other hand, you're looking to invest in distressed properties -- you look in the mirror and see The Donald Trump of Foreclosed Properties -- well, good luck to you. Prices are declining in most parts of Southern California, and you've chosen a risky time to start buying.
Thoughts? Comments? Email story tips to lalandblog@yahoo.com.
Photo Credit: AP
 Good morning. "Tree of the week," authored as always by our tree-loving friend Pieter Severynen, is back after a brief hiatus. Enjoy.
The Floss Silk Tree – Chorisia speciosa
It should come as no surprise that the official Los Angeles city tree is not a native Californian. Southern Brazil and Argentina are the homeland of this 30 to 60’ tall, usually not quite as wide, eccentric.
Covered in very showy, lily like, orchid to pink flowers to 6” across in October, the normally evergreen tree at that time briefly loses all or most of its leaves, the leaflets of which are shaped like fingers on a hand. Its grass-green, weirdly swollen, heavy trunk and few, thick, sometimes wayward growing branches make the tree look as if someone hastily sketched it, but never quite finished the job. Vicious looking thorns cover the trunk. Fruit pods the size of big avocados appear in spring, may hang on for months before splitting open and revealing their cottony contents, sometimes used as a kapok substitute.
"Los Angeles Beautiful" is a grafted wine-red variety, "Majestic Beauty" a grafted thornless one. Easy to maintain, very fast to grow when young, the tree loves full sun. Just keep it away from sidewalks and parked cars. It may need monthly summer wateringbut blooms better when kept dry from late summer on. The white floss silk tree, C. insignis, has white to pale yellow flowers.
Other members of the Bombacaea or cotton tree family are equally fascinating. The waterproof seed hairs from the fruit of the related South American kapok tree, Ceiba pentandra, were used as stuffing for pillows and life jackets, before synthetics took over. Thor Heyerdahl used the lighter than cork ‘balsa’ wood of the Peruvian Ochroma grandiflora tree to build his ‘Kon-Tiki’ raft on which he sailed from South America to the Tuamotu islands in the Pacific in order to prove his theories about migration. The African savanna baobab tree, Adansonia digitata, has a monstrously swollen, bottle shaped, often hollow trunk, on top of which rests a small crown, making the tree look like it was planted upside down.
Thanks Pieter
Email Pieter: plseve@earthlink.net
Photo Credit: PlantsofDisneyland.com
 Good morning. I've been called a few names on this blog ("Mr. Vile," "Mr. Gloom and Doom," etc.) and urged to consider Rogaine, but this is a new one: "psychic vampire."
Bernice Ross writes at Inman.com today, "I am sick and tired of the negative media constantly ranting about how horrible everything is in our business. It's time for our industry to fight back against these psychic vampires who seek to suck every bit of hope and optimism out of us just to build their circulation."
Exactly what evidence of hope and optimism is the media ignoring? So glad you asked. Ross, a real estate sales coach, quotes these stats from Doug Duncan, the chief economist for the National Mortgage Bankers Assn.:
"Thirty-five percent of the homes in the U.S. do NOT have a mortgage. ... Some 94.88% of the loans ARE performing. ... The foreclosure problem in this country is really a story about seven states. (Yes, California is one of them) ... The resale market in California's major markets continues to be strong. In fact, the closer you are to a metropolitan area, the better the sales are. In the million-dollar-plus price range, there has been essentially no change from 2006 to 2007."
She concludes, "There's no question about the fact that there is bad news in some markets. What irks me is that there is also a lot of good news that is either being buried or is not being reported at all."
Well, then. Certainly some of you have thoughts on this? Comments? Insights? E-mail story tips to lalandblog@yahoo.com.
Photo credit: L.A. Times
 News item: Wells Fargo CEO John Stumpf dropped the "D" word today: "We have not seen a nationwide decline in housing like this since the Great Depression," Stumpf said at a banking conference in New York.
(Aside: This is a pretty good talking point if you're stuck in an argument with someone who maintains the current slump won't be as bad as the early '90's housing slump.)
More: Stumpf said the second-largest U.S. mortgage lender and fifth-largest U.S. bank was "not immune" from the storm, but was well-positioned to ride it out, despite expectations for "elevated" credit losses from home equity loans into 2008.
Another day-brightener from Reuters: "NovaStar Financial shares fell as much as 63% Thursday after the troubled sub-prime mortgage lender posted a $598-million third-quarter loss and said bankruptcy is possible."
One more from CNBC.com: "Barclays, Britain's third-largest bank, checked in with a $2.7-billion writedown between July and October that was actually less than expected."
Your thoughts? Comments? Insights? E-mail story tips to lalandblog@yahoo.com.
Photo Credit: Los Angeles Times
 Good morning. Back in the day, when the rules were 20 and 30 -- 20% down and a 30-year-fixed mortgage -- you would never ask, "Who owns a foreclosed house." The answer was obvious. The bank owns it. The lender.
But today it's a tricky legal issue. The bank/lender sells mortgages to a bunch of wizards in thousand-dollar suits who slice them and dice them and blend them into a bunch of exotic -- and lately toxic -- securities. A servicer collects payments on behalf of these faceless investors. So who OWNS the mortgages? Which brings us to what could be a major legal ruling in Ohio:
"Judge Christopher A. Boyko of Federal District Court in Cleveland dismissed 14 foreclosure cases brought on behalf of mortgage investors, ruling that they had failed to prove that they owned the properties they were trying to seize."
The New York Times: "Lawyers for troubled homeowners are expected to seize upon the district judge’s opinion as a way to impede foreclosures across the country or force investors to settle with homeowners. And it may encourage judges in other courts to demand more documentation of ownership from lenders trying to foreclose."
It could be that the Ohio case is an odd exception, and that in most cases the chain of custody on a mortgage is more clear, and the ownership easier to pinpoint. That said, it's a safe bet you'll see more lawsuits challenging foreclosures.
Your thoughts? Comments? Insights? E-mail story tips to lalandblog@yahoo.com.
Photo Credit: AP
 By now you've probably read or heard a headline today with these eye-popping tidbits: Stockton, Calif., had the highest rate of foreclosures in the U.S. in the third quarter, with 1 in 31 households receiving some sort of foreclosure notice. In third place was Riverside-San Bernardino, where 1 in 43 households posted a foreclosure filing. (Detroit took the No. 2 spot.)
What's more, with 31,661 filings on 20,664 properties, the Inland Empire saw its filings jump fourfold year over year for the most filings of any metro area in the U.S.
These statistical stunners are according to RealtyTrac, the Irvine-based foreclosure database marketer.
But can they be believed?
Not entirely.
By trumpeting such sexy statistics, Realty Trac gives the impression that there was a dramatic increase in the properties entering foreclosure in the quarter vs. previous periods. But the truth is that some of these households were also receiving notices in the first and second quarters as well. In California, the foreclosure process usually takes a minimum of four months.
“They are all new filings, but not all new properties,” Rick Sharga, RealtyTrac’s vice president of marketing, told me today.
So why not just report new filings on new properties?
RealtyTrac has been coming under increasing scrutiny. Last month, the Atlanta Journal-Constitution took a close look at the company's data after it said that Atlanta's foreclosure rate had jumped an alarming 75% from June to July. RealtyTrac admitted to the newspaper that it made mistakes in its calculations, and that the month-to-month increase was really 14%.
Unfortunately, not all media outlets are taking the time to vet the RealtyTrac numbers.
"Call it the lemming factor," Sam Ali, a reporter for the New Jersey Star-Ledger, told the Business & Media Institute in another article calling RealtyTrac's numbers into question.
"RealtyTrac first and foremost is not a research firm -- it's a company that sells foreclosure lists to real estate investors."
The Los Angeles Times tends to rely on stats from DataQuick Information Systems. The La Jolla-based research firm has been collecting data for almost 20 years and is not in the business of selling its info to consumers. It also provides separate stats of initial notices of defaults -- the first step in the foreclosure process -- and notices of trustee sale -- the last notice the homeowner receives from the bank. That makes month-to-month or year-over-year comparisons more meaningful.
I asked RealtyTrac to provide The Times with a similar breakdown of third-quarter foreclosures notices in the Inland Empire. This is what they sent:
Riverside County -- 12,240 Notices of Default and 3,036 Notices of Trustee Sale
San Bernardino County -- 10,358 NoDs and 3,036 NTS
By contrast, DataQuick's third-quarter numbers show fewer filings in both categories: Riverside County -- 9,250 NoDs and 3,462 NTS
San Bernardino County -- 7,038 NoDs and 2,255 NTS
For his part, Sharga acknowledged that DataQuick is a pretty good outfit and said the companies may have different "filtering" systems and other analytical variations causing the mismatched results.
"The bottom line is not that there are 31,000 (filings) or something less, but where the trend is going," Sharga said.
He has a point. No matter who's doing the foreclosure-data collecting, the trend is heading in one direction, and that's up.
Questions? Comments?
-- Posted by Times staff writer Annette Haddad
News item from the L.A. Times: Sales of new and resale homes in L.A. County dropped 48% from year-ago levels in October, and the median sales price dropped by $25,000 from September, to $500,000, according to DataQuick. The median sales price in L.A. has now dropped 9% in two months, and sales are stuck at the lowest level DataQuick has ever measured.
Sales in L.A. County were essentially flat from September to October. DataQuick counted 4,368 sales in October -- a stunning decline of 68% from the peak October sales level of 13,535 in 2003. September sales were 67% below peak levels.
At LATimes.com, Peter Hong notes that median prices across Southern California have relinquished two years of gains, rolling back to 2005 levels.
Analysis from DataQuick President Marshall Prentice: "A lot of potential buyers seem to be waiting this one out. It's hard to buy a home when you think it might lose value, especially when you have to borrow money to do it. We can expect issues with jumbo financing to slowly resolve themselves. Meanwhile, demand is accumulating and when the market does level off, there will be a catch-up period."
More headlines:
--DataQuick describes sales levels across Southern California as remaining "at their lowest levels in more than 20 years."
--The median sales price in Riverside County is down 15.1% from year-ago levels, from $412,136 to $350,000.
Analysis: There is no sign in these numbers the housing slump is easing. The sudden drop in median sales price in the last two months is due in part to the drop in jumbo mortgage financing. That said, during the peak months for median sales price -- May through August of this year -- median sales prices were inflated by the collapse of the sub-prime market.
Month L.A. Median Sales Price y/y change 12-month L.A. 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% 103,45
May 07 $550,000 7.0% 100,160
Jun 07 $545,000 5.0% 96,513
Jul 07 $547,500 5.0% 94,478
Aug 07 $550,000 6.0% 90,985
Sept 07 $525,000 1.2% 86,610
Oct 07 $500,000 -3.8% 82,527
Thoughts? Comments? Insights? E-mail story tips to lalandblog@yahoo.com
One day does not a trend make, but the news today on mortgages and housing was notably positive, contributing in part to a large stock market gain. In an attempt at even-handedness, today's headlines:
--Good as Goldman: "Goldman Sachs Group Inc does not expect to take any significant asset write-downs, its chief executive said on Tuesday, easing investor fears of a worsening credit crisis and sending financial shares soaring."
--Pending home sales: "Pending home sales rose unexpectedly in September from the month before but were still far lower than a year ago, data from the National Association of Realtors showed.
--Countrywide shares rose slightly after its monthly operations report showed a 48% decline in loan originations from year-ago levels, but also showed, according to Reuters, "credit quality has begun to
stabilize..."
--On the other hand... "Bank of America Corp. said Tuesday it will take a $3 billion
debt-related writedown in the fourth quarter and warned its losses
could grow, adding to fears the nation's housing and mortgage-lending slump might
exact a greater toll than in the wretched third quarter -- when
industrywide writedowns topped $40 billion."
Thoughts? Comments? Email story tips to lalandblog@yahoo.com.
News item: Countrywide Financial, in its monthly report on mortgage activity, says October loan volume fell sharply from year-ago levels, but rose slightly from September. Reuters: "Countrywide Financial said October mortgage loan volume fell 48 percent from a year earlier, but credit quality has begun to stabilize as the largest U.S. mortgage lender curtails riskier home loans."
More: "The company also said it ended October with 52,775 employees, down 2,077 from September and 8,092 from August. Countrywide plans to eliminate up to 12,000 jobs by December as it focuses on making smaller, safer -- and fewer -- loans."
Month Mortgage fundings Delinquencies* Foreclosures**
March $43.2 B 4.29% .69%
April $40.5 B 4.45% .69%
May $44.4 B 4.71% .71%
June $45.3 B 4.98% .74%
July $39.1 B 5.10% .79%
Aug. $34.4 B 5.05% .89%
Sept. $21.2 B 5.87% .92%
Oct. $22.0 B 5.89% .89%
*Delinquencies, as a percentage of loans serviced
**Pending foreclosures, as a percentage of loans serviced
Thoughts? Comments? E-mail story tips to lalandblog@yahoo.com
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No, it's not this blog -- It's Diana Olick's Realty Check blog at CNBC.com. As Diana and her legion of followers were debating this week whether it makes sense for lenders to freeze rates on some mortgages, surprise, surprise: A top federal regulator spoke up on Diana's blog, explaining the administration's thinking on the topic.
