Finally: A RE blog gets some respect

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

White House, banks, in rate-freeze deal?

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

Another headache for Countrywide

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

Down (54%) in the Valley

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

Advice from Silver Lake

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

What $6 million buys... in taxes

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.

What's so bad about falling home prices?

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

Existing home sales down 21%

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 new address for LA Land

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.

" '08 is going to be worse"...

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