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Thanks to all who contributed predictions for 2008. Below, some of my favorite L.A. Land reader predictions for 2008. For those who missed my predictions, they're here.
Your predictions:
Mark G: "There will be a new definition for 'Sweat Equity': 'The value of my home and the loss of equity is causing me to sweat profusely.'"
Victor the Predictor: "(Countrywide CEO) Angelo Mozilo will become ambassador to the Calabasas Pumpkin Festival."
Michael T: "The naysayers on this blog will continue to live cheap, petty little lives even after they manage to buy the property they've always dreamed of."
Michael Snyder: "A flood of new taxes, fees and fines will assault home owners and small businesses as panicked local governments try to make up for the loss of their predicted windfall from increasing property taxes."
Cal: "Mortgage insurance companies will start imploding constraining mortgage credit further (especially hurting the Fannie/Freddie market). 30 yr fixed rates hit 7.5% as investors back away from the mortgage market altogether."
Who Cares?: "Bubble blogs, which have contributed to the hysteria, and continue to do so, will fade and go bye-bye, just as the hot real estate market of yesterday did."
Brettdl: "The U.S. government will be forced to bail out Fannie Mae and Freddie Mac. Countrywide will go belly up or be bought out by a foreign entity."
Amir: "2008 will cause builders and contractors to default, throwing their inventories back to the banks, and send prices even lower for 2009 when we'll see the recession everybody's talking about."
More from Cal: "So. Cal sales start showing slight year over year increases in August 2008 and each month forward. Resale inventory plateaus."
Rob: "Kate in the Valley will finally settle on a 3-bed 2-bath craftsman near a park for 50% off peak prices. Sells the movie rights for full value."
Keith: "Kate will be played by Sandra Bullock in the movie, or possibly that gal from 'Weeds'."
Bonus prediction from L.A. Times op-ed columnist Joel Stein: "Home prices drop an astounding 15%. Far more disheartening to Americans who bought homes in the last three years, stainless steel kitchen appliances go out of style."
Thanks, everybody, and Happy New Year.
Today's report on existing home sales in November shows a slight increase in sales across the nation -- up 0.4% from last month's levels. Inventory dipped from October levels, but at 4.77 million new and existing homes for sale, remains well above year-ago levels, which could continue to pressure prices lower.
“Inventory is still high, and further reduction in prices may be required in some areas to induce buyers back into the market,” said Lawrence Yun, chief economist for the National Association of Realtors.
More from Yun: "“Near term, existing-home sales should continue to hover in a narrow range, just as they have since September, and that’s good news because it’ll be a further sign that the housing market is stabilizing."
The NAR, though, continues to lobby for aggressive rate cuts to help revive the housing market. From Reuters via CNBC: "The trade group also urged the Federal Reserve to slash interest rates by as much as three-quarters of a percentage point in January as a way to embolden home buyers."
Inventory of homes for sale on local MLS systems is running well ahead of year-ago levels in Miami (19% ahead of last year's levels), Los Angeles (26.8%), Phoenix (27%) and Las Vegas (27.5%), according to Housing Tracker. National inventory, as estimated by the Realtors and the federal government, is running 9% ahead of year-ago levels:
Existing (months New (months total
homes (to sell) homes (to sell) inventory
Nov. 07 4.27 m. (10.3 mo) 505,000 (9.3 mo.) 4.77 million
Nov. 06 3.83 m. (7.3 mo.) 545,000 (6.3 mo.) 4.38 million
Nov. 05 2.90 m. (5.0 mo.) 503,000 (4.9 mo.) 3.40 million
Nov. 04 2.48 m. (4.3 mo.) 418,000 (4.5 mo.) 2.90 million
Source: NAR, U.S. Dept of Commerce
Photo Credit: Reuters
Read more For sale: 4.77 million homes »
Good morning. One of the few major real estate fraud prosecutions in the region is the federal prosecution of an alleged fraud ring in Beverly Hills that operated from 2000 to 2003.
Today the L.A. Times takes a second look at the case, and it doesn't reflect well on Lehman Brothers, which is the alleged victim of a series of fraudulent transactions, appraisals and loans.
Not that Lehman Brothers did anything wrong. But the bank seemed awfully eager to lend, and awfully clueless: "Kathy Moore's loan application sailed through the mortgage desk at Lehman Bros. Bank, and little wonder. With sterling credit, deep pockets and two appraisals pegging the value of the Benedict Canyon house she wanted to buy at $2.5 million, she seemed a perfect fit for a $1.47-million loan. Had the bankers taken a closer look, they might have discovered that the home was worth just $775,000 and that Moore's borrowing power existed only on paper."
Another house in Brentwood sold for $759,000 in November 2000, and just two months later sold again for $2.2 million. Lehman was the lender on the second sale.
In all, Lehman says it made loans totalling $142 million to the same cast of characters in Beverly Hills. The bank isn't commenting as the various cases wind their way through the courts. "I think the bankers deserve what they got. They were incompetent," said real estate investor Max Baril. "You have to do more than just keep opening the mail and depositing the checks."
Your thoughts? Comments? E-mail story tips to peter.viles@latimes.com.
 If you think some homebuyers have been taking weird financial risks lately, take a good look at the way Americans are financing their cars these days. Ken Bensinger's insightful piece in today's LATimes explains that car "buyers" (are they really even buying the car?) are increasingly rolling over previous car loans into new car loans. The result: bigger and bigger vehicle loans, often for way more money than the new vehicle is worth.
Example: Cindy Gerhardt, the Oklahoma secretary pictured at right, "has rolled over so much debt on successive vehicle
purchases -- five in three years -- that she now owes almost $43,000 on
two trucks worth no more than $29,000 and, she says, perhaps as little
as $22,000."
Who needs to buy five vehicles in three years? But I digress.
The potential consequences mirror the mortgage meltdown: at some point (it's already happening) defaults on auto loans start to rise. The underlying value of auto loans repackaged as securities drops, and the owners of those loans take losses, and at some point credit tightens, which hurts auto sales, which hurts the overall economy. Not a pretty picture.
And not a picture that lends itself to sound policy solutions. Show me a politician of any stripe who will say to Americans: you can't really afford that new SUV. You can't really afford that new house. You need to manage your credit more carefully.
Your thoughts? Comments? Insights? Email story tips to peter.viles@latimes.com.
Photo Credit: LATimes
 Good morning. These are the days for New Year's resolutions. As 2008 is an Olympic year, I resolve to learn how to swim.
I hope some of you out there are resolving to do your small part toward civic beautification by planting a tree. And I hope you will use my tree-loving friend, Pieter Severynen, as a resource. Here is Pieter's Tree of the Week:
The Southern California Black Walnut – Juglans californica var. californica
"After a year of almost no rain, our native walnut trees were stressed, but they still managed to keep looking graceful and to hang in there without any irrigation. In contrast the more formal looking English walnut, Juglans regia, with its larger, lush leaves and bigger fruit, familiar from the store, needs regular water. The SCBW prefers to grow on moist sites, northern slopes, and in streamside woodlands accompanied by oak or cottonwood. It grows into a small 15-30’ tall and wide deciduous tree. After a fire new growth will sprout from the root crown or trunk and thus the tree often develops several trunks, which are dark gray brown and covered with deeply furrowed bark. The feathery, 6-12” long compound leaves feature some 9-19 2 ½” long leaflets. The tree is resistant to oak root fungus. The fruit, green when young, black when ripe, contains a single walnut, with a hard shell and tasty if little meat. But it was a favorite food of the local Chumash Indians who did not enjoy the luxury of supermarket shopping. It also supports a variety of wildlife.
"Our SCBW tree is often used in native low maintenance plantings. Because of human population pressure it is declining in its natural range. Still it is doing better than its larger cousin up north, the Northern California Black Walnut, Juglans californica var. hindsii, of which only two native stands remain, although it has become naturalized in other areas. The northerner is used as a rootstock for the English walnut while that rootstock itself is the source for walnut burl in expensive furniture."
Thanks Pieter, for this and all your contributions this year.
Email Pieter: plseve@earthlink.net.
Photo Credit: csupomona.edu
 Good morning. Repeat after me: It's not just a sub-prime mortgage crisis, it's a mortgage crisis. Or, as PIMCO's Paul McCulley writes, it's a "classic double bubble" -- one bubble is the asset, the other bubble is the lending against that asset.
One bubble is housing, the other is mortgage lending. Not just sub-prime lending. All of it.
If you don't believe me, read E. Scott Reckard's piece in today's L.A. Times about growing troubles with Option ARMs.
Option ARMs, Reckard writes, "were the easiest and most profitable home loans for lenders and brokers to make for much of this decade."
Why did borrowers like them? Simple: Option ARMs allow you to buy maximum house for minimum initial monthly payment. They are not particularly complicated or confusing. You buy now and pay later.
"... more than 75% of option ARM borrowers have been making only the minimum payments, analysts at Standard & Poor's Corp. said last week. As a result, the delinquency rate on option ARMs already is jumping and is likely to keep rising sharply, S&P said."
Why was there a bubble in mortgage lending? Because mortgage lending, particularly products like option ARMs, was wildly, shockingly profitable. According to John Diamond, a Chino broker, while a broker might earn $4,500 for selling a $300,000 fixed-rate loan, the commission could total $12,000 on an option ARM of the same size. "These loans drove the whole industry from late 1999 through late 2006," Diamond said. "It was just about the only thing any broker wanted to sell."
Don't blame just the brokers. Borrowers wanted these things.
Your thoughts? Comments? Insights? E-mail story tips to peter.viles@latimes.com.
Various blogs have been popping in the past 24 hours with rumors that Washington Mutual would be lowering limits on existing home equity lines of credit. It turns out there is some truth to the rumors -- WaMu is in fact lowering the amount of some existing HELOCs, but not as sharply as some bloggers have predicted.
Here's a sample comment from the discussion board at Zillow.com: "Washington Mutual customers are in for an ugly Christmas surprise from their bank. WaMu plans to start reducing existing home equity lines of credit (HELOC) as early as this week without notifying their customers prior to doing so. ... Here is an example of how it will go down. If you owe $50,000 on a heloc and WaMu reduces your limit to $40,000 then you have $10,000 due immediately."
Reality check: WaMu tells L.A. Land that's not true, though it is making some changes in HELOCs. This from WaMu spokesman Alan Gulick: "What you are hearing is part of our normal course of business for the ongoing management of the credit we extend our customers. ... We do have an enhancement to our program going in place this week and we contact customers in accordance with our agreements and as we always do when there is a change to their account. ... I can confirm that we are lowering the excess line amount to a level that is above the current balance -- we did not block or terminate credit lines."
While I'm on the subject, investors are very sour on WaMu at the moment. Its shares fell a new low today, trading as low as $13.50 before closing at $13.54 -- that's a decline of 71% over the past year.
Your thoughts? Comments? Insights? E-mail story tips to peter.viles@latimes.com
Good morning. Median listing prices in greater Los Angeles continued their slide over the past week, dropping by $5,100, or 1.0% in a week, according to Housing Tracker's weekly analysis of MLS listings.
Highlights:
--Median listing prices slipped to $489,900, a decline of 10.9% from year-ago levels. Median listing prices are now down 15.5% from their peak, which was $579,666, in April of 2006.
--Inventory of homes for sale declined from the previous week, to 42,751, but continues to run well ahead of year-ago levels -- by 26.8% (Tracking inventory is tricky: It should be falling this time of year, and it is; it's just not falling as fast as it usually does).
Date Median listing 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)
11/07 $499,900 46,503 (Up 19.0% y/y)
12/10/07 $498,900 44,175 (Up 27.5% y/y)
12/17/07 $495,000 (down 10.0% y/y) 43,174 (Up 28.2% y/y)
12/24/07 $489,900 (down 10.9% y/y) 42,751 (Up 26.8% y/y)
Thoughts? Comments? E-mail story tips to peter.viles@latimes.com
You didn't ask for them, but here they are: L.A. Land's predictions for 2008:
--At least one major financial company with exposure to the mortgage market will collapse in 2008, although the collapse will likely be disguised as a last-minute merger.
--Among the investors who will buy bundles of distressed properties will be foreign buyers, unleashing a wave of media coverage about creeping foreign ownership of America's housing stock.
--Washington will stumble toward an S&L-style bailout of mortgage-backed securities (Lou Barnes calls this "nouveau RTC"). The president, explaining the bailout, will say: "Let me make one thing clear: This is not a bailout."
--The Democratic nominee for president will blame Republicans for failing to help struggling homeowners as the economy becomes a major issue in the 2008 campaign.
--Los Angeles homes prices, as measured by the Case-Shiller index, will decline throughout 2008.
--California Attorney General Jerry Brown will launch what he calls a major investigation into foreclosures and foreclosure scams.
OK, there they are, sitting ducks for your withering comments. Now I'd like to hear your predictions -- the serious and the not-so-serious. I'll choose my favorites out of your predictions and make them into a separate post.
The Case-Shiller Home Price Index shows prices in Los Angeles fell 8.8% from October '06 to October '07, but that L.A.'s housing market is still holding on to more gains than any other big city in the nation -- in other words, L.A.'s local housing bubble is still the nation's most inflated.
Or, if you don't believe there's a housing bubble, you would say L.A. is still sitting on the biggest price gains in the nation since 2000.
Regardless of how you see it, prices in L.A., according to Case-Shiller, are declining at an accelerating pace.
Headline from Reuters via CNBC: "Prices of existing U.S. single-family homes recorded their biggest annual drop in October, suggesting the housing slump is far from over, a national home price gauge released Wednesday showed."
Case-Shiller measures home prices by metro area. Here's a selection of metro areas, and their price index declines from Oct. '06 to Oct. '07:
Miami -12.4%
Detroit -11.2%
San Diego -11.1%
Las Vegas -10.7%
Phoenix -10.6%
L.A. -8.8%
Case-Shiller uses an index in which prices in 2000 were given a value of 100. Thus, you can measure which cities have the highest price increases since 2000 -- even after recent declines. That's the list on which L.A. is first:
L.A. 249.5
Miami 244.4
Washington 226.7
San Diego 217.0
Las Vegas 208.7
More on Case-Shiller: L.A. prices peaked in late summer and early fall of 2006, at an index of 273.9, reached in July and again in September. In July 2006, when prices first peaked, Case-Shiller was showing a year-over-year price increase of 11.2%.
Month-to-month prices turned negative in October 2006, and have been negative ever since. The price change in the most recent two-month period, September '07 to October '07, was the biggest month-to-month decline measured, at 2.1%.
Year-over-year prices turned negative in February of 2007, and have accelerated every month since then. Case-Shiller clearly shows the L.A. market in October was in a period of rapidly accelerating price declines:
Month L.A. index month-to-month % year-over year %
Jan. 07 268.7 -0.5% +1.0%
Feb. 07 266.6 -0.8% -0.4%
Mar. 07 264.6 -0.8% -1.4%
Apr. 07 263.4 -0.5% -2.2%
May 07 263.1 -0.1% -3.3%
June 07 262.1 -0.4% -4.1%
July 07 260.8 -0.5% -4.8%
Aug. 07 258.1 -1.1% -5.7%
Sept. 07 254.8 -1.3% -7.0%
Oct. 07 249.5 -2.1% -8.8%
Note: Those of you looking for clarity on which statistic measuring home prices is the best, or most accurate, will probably end up disappointed. There are numerous ways to measure housing prices, and I report as many of them as possible. Three widely publicized reports -- by the National Association of Realtors, the California Association of Realtors, and DataQuick -- track home sales by month, and calculate the median home sales price each month, and use that as a yardstick. I happen to like the Case-Shiller index, which measures price changes by using "matched pairs" of sales -- looking for homes that sold twice over a period of time, and calculating the percentage price change for each pair, and then using those numbers to calculate an overall market trend.
Your thoughts? Comments? Insights? E-mail story tips to peter.viles@latimes.com
Good afternoon and Merry Christmas in advance. The California Association of Realtors reported Friday -- late Friday, according to commenter Cal -- that November home sales fell 36% from year-ago levels, and median sales prices fell 11.9%, also from year-ago levels. That's a newsworthy decline -- steeper than most accounts I have seen of the California market.
CAR's figures also show a 12% drop in median sales prices in the Los Angeles region, from a median of $590,790 last November to $520,960 in November of '07.
More, from the CAR press release: “The large decreases in the statewide median price of the past few months have resulted from difficulties in obtaining jumbo loans, particularly in the upper and middle tiers of the market,” said CAR Vice President and Chief Economist Leslie Appleton-Young. “Whether this trend will continue after the liquidity crunch has eased remains to be seen.”
One more: "CAR's Unsold Inventory Index for existing, single-family detached homes in November 2007 was 15.3 months, compared with 6.4 months (revised) for the same period a year ago. The index indicates the number of months needed to deplete the supply of homes on the market at the current sales rate."
Your thoughts? Comments? Insights? Email story tips to peter.viles@latimes.com.
Hat tip: Cal
 Good morning, and thanks to all those who commented on the post "Leaving L.A., Leaving California." But on further review, I think I screwed up on that post.
I asked, "Why are people moving out of L.A. and California?" which was a fair question but also leading -- an invitation for L.A.-bashing. I could have asked a more balanced question, something along the lines of, "How do you rate the quality of life in L.A.? Is living here worth the price?"
While I'm at it, full disclosure: My wife and I moved here 3 1/2 years ago from New York because we wanted to live here and we thought we'd like it here. We do. We like the parks, the mountains, the beaches, the weather, the farmer's markets, the professional opportunities, the restaurants, the people, and the constant, sprawling, urban energy of Los Angeles. Our kids play outside almost every day -- we like that.
We haven't figured out how to make peace with the three-headed beast of schools, housing and traffic, and those are sources of anxiety and even doubt. L.A. turned out to be more expensive than we thought. We study the region and try to figure out whether it is becoming a better place to live or a worse place. We are hoping for better.
Your thoughts?
Photo Credit: "Venice Boy Wonders," submitted to Your Scene at LATimes.com by Hanif.
 Good morning. We've been arguing about L.A. on this site this week -- whether the quality of life here is worth the price we pay to live here. Here's some quality: the region's stunning and seemingly boundless variety of trees. Pieter Severynen's tree of the week:
The Orange Tree – Citrus sinensis
"Oranges originated some 4,000 years ago in southeast Asia; their name derives from the Sanskrit ‘narangh.’ Alexander the Great brought the bitter or sour orange, Citrus aurantium, to Greece and the Moors cultivated it in Spain. When Columbus returned from his voyage to the new world he convinced the Spanish rulers Ferdinand and Isabella that there was money to be made in the Indies: for his second trip in 1493 he acquired orange seeds and sugar cane cuttings in the Canary island of Gomera to establish commercial plantations. The first one was set up in Hispaniola; oranges later spread on the mainland from St. Augustine, Fla. But around that time European sailors brought the sweet orange from China to Portugal.
"That fruit caused an immediate sensation: not only did it have the scurvy fighting qualities of the bitter Seville orange, but it also possessed a delicious taste. The new fruit tree quickly spread in the Americas.
"This evergreen compact tree is beautiful year round, in bloom or fruit or without. Dozens of varieties reflect its long history. Note that mandarin oranges and tangelos are grouped in the Citrus reticulata species. If you want to buy an orange tree consult a good reference source, such as the Sunset Western Garden Book. Valencia oranges need less heat and can stand more frost than navels, while blood oranges vary.
"The rootstock (almost all Citrus trees are sold grafted) determines if the tree will be a globe shaped 30’ x 30’standard or a 10’ x 10’ or smaller dwarf and makes the tree bear fruit when young. Fruit may hang on the tree for a long time before it is fully ripe. Production is heaviest on the lowest branches. Cool nights cause the orange color and increase acid content. Harvest period depends on variety. The small white flowers in spring are freshly fragrant, the elliptical leaves, typically 6” x 3” but up to 9” long, are shiny dark green. The thin brown bark burns easily when exposed to sun. The tree needs good drainage and performs best when it is irrigated deeply, fertilized several times a year and has its soil covered with a thick layer of mulch. Given good care the tree can live and produce for well over half a century."
Thanks, Pieter.
Photo Credit: From Wikimedia by Wilbanks, licensed to the public under the Creative Commons Attribution license. Original at: www.flickr.com/photos/wilbanks/100480646/
Email Pieter: plseve@earthlink.net
Remember that big fund the banks were putting together back in October to pool and bail out various bad investments they had made? You remember, the $80 billion super duper fund? Well, forget about it.
This from CNBC.com this afternoon: "Major banks have abandoned plans to set up a bailout fund for subprime-related debt, mainly because not enough banks were willing to participate."
More: The fund, "... was intended to buy the assets of ailing so-called "Structured Investment Vehicles" in order to prevent a fire sale of billions of dollars worth of shaky debt. But a source close to the situation told CNBC that the fund is being dropped because of a lack of interest from banks in contributing to the fund and a lack of high quality assets that these SIVS were willing to sell."
Thoughts? Analysis? Email story tips to peter.viles@latimes.com.
News item from today's L.A.Times: "The leader of the state Senate on Thursday joined a growing legion of state and federal officials calling to protect Californians from losing their homes and to ban lending practices that helped create the growing sub-prime mortgage crisis."
More: "Lenders also would be required to hold face-to-face meetings with borrowers. The sit-downs would explore the possibility of restructuring adjustable-rate loans and provide lists of federal-government-approved counselors to help them navigate the complex legal process."
If you read this interview with Treasury Secretary Henry Paulson, he made one thing pretty clear: the servicers don't have the resources -- they don't have enough people -- to analyze loans quickly on a case-by-case basis. You may think that's ridiculous, or unacceptable, but that's what the servicers are telling the federal government, and the government believes them. That, in turn, is why Paulson believes it makes sense to come up with a "three sizes fits all" way to handle sub-prime borrowers in trouble -- because the servicers will otherwise never sort through the loans quickly enough.
It seems the California state Senate believes otherwise -- that servicers can handle these loans not just one at a time, but face to face. Man, this whole thing is messy.
Your thoughts? Comments? Email story tips to peter.viles@latimes.com.
 Let's see: There is turmoil at Bear Stearns, a $9.4 billion write-down at Morgan Stanley, a major insurer of bonds, MBIA, is in trouble, and now there are allegations of a "sub-prime smoking gun"
(Mark Lacter explains at LA Biz Observed).
How do you keep track of it all, and what it means for the availability of mortgages in the future?
The short answer is, I don't -- it's too complicated. There are too many moving pieces, and too much noise. But my secret short-cut is this: check Countrywide Financial stock. It's a good proxy for all the problems of the mortgage industry. And it is close to hitting a new low.
CFC closed today at $8.77/share, very close to its recent low of $8.64 on Nov. 26.
Your thoughts? Comments? Other barometers you watch? Email story tips to peter.viles@latimes.com.
Photo Credit: Countrywide Financial CEO Angelo Mozilo, by Bloomberg.
 Those of you curious to hear more from the treasury secretary on the subject of housing will find this interesting: Henry Paulson (pictured) sat down with the LATimes editorial board this week to discuss the foreclosure mess. Highlights:
Paulson believes current disclosure requirements for mortgages are a joke: "It's sort of, "Everybody cover their rear end," protect themselves
legally. But, I've made the case several times, with all the disclosure
there should be one simple page signed by the lender and the borrower
that says, 'Your monthly payment is x and it could be as high as y in a couple of years.'"
All well and good, but talk is cheap. Does Paulson intend to do anything about it?
On why the rate-freeze for some sub-prime borrowers is necessary: "I think what we're doing is avoiding a market failure that would have
forced housing values down in a way that was not in the investors'
interest, and in a way that the market wasn't intended to work."
Got it. And exactly how is the market intended to work after a historic bubble bursts? Paulson: "What I want is markets to work. And I would define a market failure as
the system not being able to cope with the wave, so that foreclosures
took place that would not have taken place if there were smaller volume."
What does he mean by "market failure"? Paulson: "As I've said, chaos."
The entire interview makes for interesting reading. Paulson twice punts on the question of whether housing prices are too high, and repeatedly expresses frustration at what he lables "skepticism" about the rate-freeze plan.
Your thoughts? Comments? Email story tips to peter.viles@latimes.com
Photo Credit: LATimes.
 Blogger's note: This item contains a correction.
Good morning. There has been lots of reader discussion on this blog about population trends in California and Los Angeles, and what those trends mean for future housing demand, and what that demand means for future housing prices.
Into that mix of speculation, prediction and extrapolation, throw this, from this morning's LATimes: In the last fiscal year, "... 89,000 more people moved out of California than moved here from elsewhere in the United States."
More: "Since 2000, about 500,000 more people have left Los Angeles County than have moved here from other parts of the U.S. ...
Now, let me clarify a bit: despite this "out-migration," the populations of California, and L.A. County, are both growing. They are growing because of immigration and new births (Yes, the birth rate is generally higher among immigrants, so recent immigration contributes to the birth rate). In California last year, 89,000 people moved out of the state, but 200,000 new state residents
either immigrated here or were born here, so the population moved higher. [Correction: In California last year, although the state was losing 89,000 residents to other states, it was gaining far more through either immigration or births, so the population increased by about 438,000 residents.]
The Times quotes a state official who says the state's weakening economy is partly to blame. "People who are leaving the state ... are probably doing so because they believe they'll do better elsewhere."
They may also be tired of the state's relatively high cost of housing, relatively long commutes, and increasingly troubled public education system. That's just my two cents. Now I'd like to hear yours: why are people moving out of L.A. and California?
Read more Leaving L.A., Leaving California »
 A couple of newsy items warrant mentioning today:
Gov. Schwarzenegger (pictured at left), is striking a hopeful tone about housing: "This crisis is not going to last," the governor said in Stockton yesterday. "It's a bump in
the road." He predicted that California's declining home values would
turn upward again soon.
I'm pretty certain he is wrong, but being hopeful is often a good leadership strategy nonetheless. It's not entirely fair, but Schwarzenegger is in a position to suffer more from the housing downturn than any other elected official in the state. A state budget crisis -- entirely possible over the next couple of years -- is a governor's burden.
In other words, the easiest way to be a popular governor is to have good timing -- time your career so that you govern during an economic expansion. Schwarzenegger had great timing until the past few months.
Moving, on, the Federal Reserve, as most of you already know, is proposing a series of new regulations aimed at bringing more sanity to the mortgage business: "The Fed proposal would require lenders who make sub-prime loans to
consider borrowers' abilities to make payments and to verify that they
have the income and assets they claim. It also would require better disclosure of special bonuses that mortgage
brokers earn when they write loans at higher rates than a borrower is
eligible to receive."
Your thoughts? Comments? Email story tips to peter.viles@latimes.com
Photo Credit: LATimes
 Earlier today I horrified at least one reader, and probably a few more, by using the Wall Street cliche "dead cat bounce" to describe the very slight increase in home sales from October to November.
I happen to like the phrase because, in addition to summoning the swaggering, seventh grade humor of the trading floor, it is descriptive and easily understood: Is that a sign of life in the housing market? No, it's just bouncing like a dead cat would after a long fall.
(Don't knock seventh grade humor. It was funny).
But the aptly named commenter "Whatiswrongwithyoupeople" took offense, writing, "What kind of people use terms like 'dead cat bounce?' "Whatis" later added, "My point was it's a sickening phrase, Traders use it, and you
complain that realtors are scum."
Point taken. My mother would probably agree. And I do like cats, by the way. So I said to "Whatis," and say to the rest of you, if you don't like "dead cat bounce," let's see if you can do better. I will happily stop using the phrase provided someone here can provide a substitute that is equal to the task -- it needs to
be pithy, short, and descriptive of the cruelly misleading nature of a
false bounce off the bottom.
Personally I doubt anyone will do better, but
I invite you to try. Feel free to defend "dead cat bounce," if you like it.
Photo Credit: Pamela, by Coco, submitted to Your Scene at LATimes.com.
The DataQuick numbers for November sales are out: sales in L.A. Country dropped 46% from year-ago levels, and median sales prices continued to slip. I'll run through a bunch of numbers, but I warn you it is a bit confusing because there are so many ways to slice and dice these numbers:
In L.A. County: November sales totaled 4,468, an increase of 2% over October sales levels, but a decline of 46% from year-ago levels. Median sales price was $499,000, a decline of $1,000 from October levels and 3.5% from year-ago levels. The trailing 12-month sales total in L.A. fell to 78,712.
In all of Southern California (These are the numbers highlighted in the LATimes.com's coverage): The trend is very similar -- a total of 13,173 new and existing homes sold, an increase of 2% over October sales levels, but a decline of 43% from year-ago levels. Median sales price for the region was $435,000, a decline of $9,000 from October levels, and 10.5% from year-ago levels.
Could the slight increase in sales from October to November be a sign of a housing bottom? Could be. It could also be a hint of the dead-cat bounce many have predicted in bubble markets this winter as the absolute freeze in mortgage activity during the late summer and early fall gives way to sluggish, but still declining, activity. "DataQuick President Marshall Prentice said the unusual increase could
show the market has hit bottom, but he cautioned that the trend would
have to continue to confirm that. He noted that in November 1994, sales
rose from the previous month, but the market had not hit bottom."
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
Nov 07 $499,000 -3.5% 78,712
Thoughts? Comments? Insights? E-mail story tips to peter.viles@latimes.com
Good morning. Peter Hong's update on the Palmdale real estate market in today's LATimes is worth a read. Prices are falling out there -- he profiles a family that bought a four-bedroom home in 2005 for $385,000 (yes, 100% financing), and now a very similar home nearby is listed for $325,000.
The problem, though, is that prices are still too high to attract buyers. "For the market to recover, 'the median price has to come down to match incomes,'" Lancaster real estate James Baker told Hong. (There's a thought you rarely hear from a California real estate professional: prices must reflect income levels.)
Falling prices will mean more recent buyers and borrowers without equity, which will mean more foreclosures.
Despite what you hear from Washington, rising payments are not the only cause of foreclosure -- in this cycle, many foreclosure-bound borrowers go straight into default while still paying the lower, initial interest rate. In the land of no money down, falling prices mean foreclosure risk. If you start with zero equity, and prices fall, it's nearly impossible to sell or refinance.
More foreclosures means more houses for sale, which puts further downward pressure on prices.
Your thoughts? Comments? Insights?
An e-mailer (thanks, TW) pointed out this Wall Street Journal story about the foreclosure mess in Corona. The story contains one of those anecdotes that deserves retelling.
As the Journal tells it, the family in question buys a four-bedroom house in 2004 for $557,000, then refinances three times, most recently last year, for $835,000. They use most of the refi money to pay off credit cards. Got it.
Now owing $6,300 a month on the refinanced house, they try to sell it -- for $839,000 -- into a market swimming with inventory. No deal. Meanwhile, eyeing a new life in Texas, the family buys a 3,600-square foot home outside Houston this summer for $283,000. "It was easy," says the wife, Karenn Oropeza. "We had good credit. The deal was done in seven days."
Now they own two houses. Got it.
Over the summer, the family of four takes a vacation to the Caribbean and buys two cars: a Lexus and a Suburban. They stop making mortgage payments on the Corona home in June, and they move to Texas. The California house is in default, and likely headed to foreclosure -- the Oropeza's doubt they will be able to sell it. "We're sad because there goes our credit, and because
people think we are a bunch of flakes who walked away from the house
and tried to make money," Mrs. Oropeza told the Journal.
TW observes, "They pulled about $300k in equity (based on inflated appraisals) out of their
California home. They spent the proceeds on vacations and new cars and a new
house in Texas. They then walked away from the California home. ... They basically got a free house and a couple nice cars in exchange for a bad credit
score for a while."
Your thoughts? Comments? Insights? Email story tips to peter.viles@latimes.com.
Thanks, TW.
Median listing prices in greater L.A. dipped over the past week by nearly $4,000, to $495,000, according to Housing Tracker, which tracks MLS listings and crunches the numbers once a week. Median prices are now down $50,000 since this blog began publishing in April.
Inventory slipped again -- by a thousand listings, but not as much as inventory usually drops this time of year, resulting in a widening year-over-year increase in inventory -- up 28.2% over year-ago levels.
Date Median Price I 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)
11/07 $499,900 46,503 (Up 19.0% y/y)
12/10/07 $498,900 44,175 (Up 27.5% y/y)
12/17/07 $495,000 (down 10.0% y/y) 43,174 (Up 28.2% y/y)
Thoughts? Comments? E-mail story tips to peter.viles@latimes.com
 Good morning. Alan Greenspan (pictured at right) is throwing in his two cents, again. Actually, he's suggesting the government take your two cents -- times many billion -- and throw it to homeowners who can't pay their mortgages:
"Alan Greenspan, former chairman of the Federal Reserve, said Sunday that the government
should provide direct financial assistance to homeowners who are
threatened by foreclosure in the worsening credit crisis."
More, from NYTimes.com: "Two ways to help homeowners directly would be to reduce taxes or to
give cash grants similar to those given to disaster victims. ... 'Cash is available,' he
added, 'and we should use that in larger amounts, as necessary, to
solve the problems of the stress of this.'"
Like Lou Barnes, Greenspan believes the rate freeze for some sub-prime borrowers won't make much of a difference. Barnes sees it helping roughly 15 families: "The plan will save two families in Arizona, another three in California, nine in Florida, and Etta Mae Huntzinger in Topeka."
But, wow, cash to borrowers. Your thoughts? Comments? Email story tips to peter.viles@latimes.com.
Photo Credit: Reuters
 Good morning, again. Burbank Realtor Judy Graff -- a reader and sometimes commenter here -- emails that she sees a sliver of a glimmer of a sign of life in the Burbank market:
From her blog: ""This house (pictured) on Groton was listed earlier this week for $679,000. It has
3 beds, 2 baths, a pool and is about 1400 square feet. It's in great
shape, although it has not been remodeled lately. It sold for full
price in three days. So, I guess the real estate sky is NOT falling, at
least for well-priced homes in nice neighborhoods that are in good shape."
That's a lot to ask, though: well-priced, nice neighborhood, and in good shape. Still, it's a sign of life.
Thanks, Judy.
Your thoughts? Comments? Insights? Be nice. As Ann pointed out this morning, it's getting rough in here.
Photo Credit: http://www.sfvrealestate.blogspot.com.
Good morning. Redfin got a fair amount of publicity this week ("Today" show, etc.) with its list of "Seven tactics for selling your home," so I figure it's worth a link. There are a million of these "how to sell your house" lists, but this one bills itself as the result of real research, or as Redfin says, "the best academic research and our own analyses of listing databases and website traffic."
Tactic number one seems the most important. Read it slowly and carefully if you are thinking of listing a house for sale:
"Don't overprice your property: Once a property fails to sell at its debut price, the time it spends on the market can encourage buyers to become more aggressive in negotiating. Price reductions can further encourage aggressive bargaining."
Here's one more tactic: Avoid prices that end in numbers like 55,000 or 80,000. Round to the nearest $25,000: "The real estate sites used by home buyers typically filter price in $25,000 or $50,000 increments, so a home selling for $350,000 is likely to be seen significantly more than a home selling for $355,00 because the $355,00 home will be excluded by buyers who set $350,000 as their maximum price."
Your thoughts? Insights? Email story tips to peter.viles@latimes.com.
Photo Credit: Reuters
 Good morning, again. We've had some spirited discussion, at times downright argumentative, on the blog this week. Maybe we can all agree that the tree at left -- a "dragon tree" -- is a fine conversation piece. My tree-loving friend Pieter Severynen explains:
(Canary Islands) Dragon Tree – Dracaena draco
"Trees go in and out of fashion. The odd-looking but very impressive dragon tree was planted with some regularity in the '30s and '40s but nowadays only few specimens are seen here outside of botanical gardens.
"It is really a big succulent that looks like an umbrella shaped multi-branched squat palm tree, very much at home in a cactus or succulent garden. The sturdy silvery gray trunk divides into a handful of short upward growing evenly spaced branches that are topped by full heads of 2-foot long sword-like leaves in dense rosettes. The tree grows very slowly to 20 feet tall and wide, and loves full sun and little to moderate water. Eventually clusters of greenish white flowers form at the ends of branches, followed by orange berries, but blooming cycles may be far apart. Flowering supposedly makes the stem branch.
"Endemic to the Canary Islands and the Atlas mountains in Morocco, the island trees have become endangered because of over-harvesting of their red sap, called dragon’s blood. The Egyptians used it for embalming, Middle Age physicians prescribed it to cure various ailments, later it was used to stain wood to make it look like mahogany and 18th Century violin makers applied it to give their instruments a deep lustrous red color. Sap from related dragon trees such as D. ombet from NE Africa and D. cinnibari from Yemen is still collected for similar purposes."
Thanks, Pieter. Email Pieter: plseve@earthlink.net
Comments? Insights?
Photo Credit: Palms4u.com
No one makes the case for a government bailout better than Lou Barnes, the mortgage broker/pundit who writes an insightful and passionate weekly roundup of the mortgage world. When he writes this week that "society is more important than your anger," he's talking to us -- bloggers and commenters who have argued -- often with some evident anger -- for a market solution to the mortgage meltdown.
Lou's argument is simple: the market is broken, banks are in real trouble, the market will not fix itself: "The acute economic problem today is the functional bankruptcy of the Western banking system. Losses in trillions of dollars of weird assets have impaired systemic capital; central banks have kept the system liquid, and undoubtedly will continue to do so, but nobody has an idea how to get the system to make new loans. You have to have capital to do that, and we’re fresh out."
Then he speaks directly to us: "The hostility to rescue is pervasive among American civilians, at center the blind fury at all participants in the housing run. The desire for blame and punishment is stronger than for self-preservation."
What will it take to make the government act? "I think we’ll have a financial accident -- a morning when a market cannot open, or a few large institutions fail..."
Your thoughts? Insights? Email story tips to peter.viles@latimes.com
 Good morning. Over at patrick.net -- for my money a terrific national real estate bubble blog -- Patrick is collecting, and publishing, anti-bailout letters addressed to Sen. Barbara Boxer, left.
One couple -- names withheld -- writes, "If you are truly a representative of the people, you will do the right thing, keep our economy from getting into an even worse situation, stop delaying the inevitable price correction, and let the bubble deflate to a place where prices match the cost of living. We are patiently waiting for our $150,000/yr combined salaries to afford us a starter town home."
Another Californian, name also withheld, writes, "In the last 6 years, California real estate has become totally unaffordable to young families. By supporting federal efforts to stem foreclosures, you are helping to prop up inflated housing costs and drive responsible citizens out of state."
R.W. of Pleasanton writes, "When I was trying to buy a house back in 2003 and 2004, the mortgage brokers I worked with attempted to push these very same loans on me but I resisted because I realized they would eventually destroy me financially. So now I almost regret my use of good judgment because of people like you running to the rescue of undeserving people."
Here's a link to Boxer's foreclosure policy, from her website.
Your thoughts? Anybody out there have a story to tell about writing a letter on the topic to a member of Congress? Did you receive a substantive response? Anybody out there want to disagree with these letters? E-mail story tips to peter.viles@latimes.com.
Photo Credit: AP
News item: California's attorney general is investigating Countrywide Financial, the L.A. Times reports this afternoon: "The nation's No. 1 home lender, Countrywide Financial Corp., said today that it was being investigated by California Atty. Gen. Jerry Brown and the attorney general in Illinois.
More: "Countrywide said it had received subpoenas from both officials but declined to elaborate, citing a company policy of not commenting on the status of investigations. The Calabasas company said it was cooperating in the two probes."
Brown recently told the L.A. Times he was particularly interested in loans that involved yield spread premiums -- under which mortgage brokers often receive higher compensation for placing borrowers in higher-interest rate loans.
The Illinois investigation was reported by the New York Times, and several of you pointed it out today in comments. Countrywide faces at least two other investigations: The SEC is investigating stock trades by CEO Angelo Mozilo, and the federal agency that monitors bankruptcy cases is investigating whether Countrywide charged unjustified fees to customers going through bankruptcy, the Los Angeles Times reports.
Your thoughts? Comments? Insights? Sorry, no photo this time of Mozilo.
 Yes, that's the famous Stockton RepoBus pictured at left.
News item: The relatively new foreclosure auction tracking service ForeclosureRadar reports that banks and lenders are starting to offer discounts on foreclosed homes at the initial auctions, with discounts running as high as 42% of what is owed on the house.
A refresher course: Foreclosed homes usually don't "sell" at the initial auction on the courthouse steps -- the required opening bid is generally the amount of the foreclosed loan, which is generally more money than the home is worth; what usually happens is no one bids and the bank or lender is stuck with the home and then hires an agent to sell it. ForeclosureRadar is reporting that banks and lenders are now offering discounts at those courthouse steps auctions, and in many cases are still not finding buyers.
"Lenders are clearly becoming anxious to avoid taking on more real estate owned (REO) assets," ForeclosureRadar founder Sean O'Toole said in a press release. O'Toole called the discounting trend a "sea change" in the banks' pricing strategy.
"We were surprised by the magnitude of the discount and even more surprised that most of the homes went back to the bank with no investor bidding in spite of the price cut," he said.
Example: A Stockton home with an underlying foreclosed loan of $419,000 was recently auctioned with an opening bid of $240,000 -- a discount of 42.8% from the bank's investment -- and still attracted no bids, O'Toole says.
He says the percentage of foreclosed homes now being discounted at auction is 66%, and the average lender discount is $48,000 -- up from $9,000 at the beginning of the year.
Comments? Insights? E-mail story tips to peter.viles@latimes.com
Photo Credit: L.A. Times
 Good morning. Countrywide Financial, in its monthly report on mortgage activity, reports that loan volume, while running 40% below year-ago levels, inched slightly higher from its depressed September-October levels. The not-so-good news: Delinquencies and foreclosures both moved higher.
The company continues to grow its banking business: "Retail deposits at Countrywide Bank continued to grow during the month, and totaled $31 billion at the end of November, up from $29 billion last month and $24 billion at the end of November 2006," COO David Sambol said in a news release. "Our plan to have nearly 200 financial centers open by year-end is on track with 170 up and running at the end of November."
By my math that means Countrywide is opening roughly one new bank office every day this month.
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%
Nov. $23.1 B 6.34% .94%
*Delinquencies, as a percentage of loans serviced
**Pending foreclosures, as a percentage of loans serviced
Thoughts? Comments? E-mail story tips to peter.viles@latimes.com
Photo Credit: Countrywide CEO Angelo Mozilo, from the L.A. Times
They are taking buses up in Stockton in hopes of catching falling knives up there -- that is, in hopes of buying foreclosed homes. The LATimes lays out the foreclosure fallout in Stockton, including the bus tour run by Cesar Dias: "... the weekly Repo Home Tour, filling two 18-seat buses with
prospective buyers eager to view foreclosed houses that can be snapped
up at dramatically reduced prices."
This is one of those stories that reminds you just how crazy the mortgage and housing industry was in this state: "Monaliza Botello, a 25-year-old nurse, said she was surprised when
her father, who brings in $4,500 a month, last year secured a loan
requiring a $4,000 monthly payment. The idea was that Monaliza's father would own the new $495,000
four-bedroom for a year or two, at which point she and her husband,
Isaac, could afford to buy it from him with a refinanced loan. But the
three of them, who were all living there, fell behind in their
payments, and Monaliza lost her dream home."
The article focuses in part on buyers snapping up foreclosed houses, and you have to wonder whether bad loans are still being made. These are median home prices for homes sold in San Joaquin County, according to the article:
2000: $133,000
July 2006: $425,000
October 2007: $319,000
Is $319,000 the bottom, or close to it? I wouldn't take that bet.
Your thoughts? Comments? Email story tips to peter.viles@latimes.com.
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