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 A quickie: Calculated Risk highlights St. Louis Fed President William Poole's worries that Fannie Mae and Freddie Mac are headed for trouble.
Poole: "I do not have any information on the GSEs [government-sponsored enterprises] that the market does not also have. Nevertheless, in assessing the risk of further credit disruptions this year, I would put the GSEs at the top of my list of sources of potentially serious problems."
Reality check: Fannie and Freddie reported combined losses of $6 billion in the fourth quarter.
And what happens if Freddie and Fannie get in deep trouble? Poole predicts a bailout: "... unfortunately, the GSEs probably can expect targeted aid. ... the GSEs ... might get assistance directly from Congress ... ."
This is a fair question for presidential candidates: Do you believe there is an implicit government guarantee standing behind Freddie and Fannie? That is, will you support a bailout if they get in trouble?
Thoughts? Comments? E-mail story tips to peter.viles@latimes.com.
Photo credit: Bloomberg News
 Interesting, and revealing, comments from Treasury Secretary Henry M. Paulson Jr. (pictured) in Chicago last night. With two of the nation's most influential newspapers reporting the same trend at the same time -- a rise in "jingle mail," or "walking away" from mortgages -- Paulson strongly urged homeowners not to walk away. He sounded a bit like a bill collector.
"Homeowners who can afford their mortgage should honor their obligations. And nearly all do," he said. "Homeowners who gambled in the housing market and viewed their purchase as a short-term investment may choose to walk away. Those who do this are nothing more than speculators, and they are not the focus of our efforts."
We have explored this issue to death on the blog, and the views here are pretty clear: Most of you believe that walking away from a mortgage is not a matter of honor, it is a financial decision, and sometimes the smart one, for borrowers. It comes with serious consequences, but a majority of you have made clear you believe it is sometimes the best choice.
Thoughts? Comments? E-mail story tips to peter.viles@latimes.com.
Photo credit: Reuters
 I hitched a ride this morning on the Brokers' Caravan in Burbank with Judy Graff, who comments here as sfvrealestate, which is also the name of her blog. I know what you're thinking, and you're wrong. She does not drive a Mercedes. She drives a Toyota Prius.
Here's what we saw, most of it new on the market:
1100 and 1100 1/2 N. Buena Vista Street 91505 (pictured): $658,000 for two legal residences totalling 1,600 square feet -- a 2 plus 1 main house plus a one-bedroom guest house/carriage house, plus a small standalone office. Nice, old-school Spanish revival with lots of original detailing. If you are into trees, the property has a massive eucalyptus tree in the back yard.
3022 N. Lamer Street 91504: On the market since last summer, reduced from $1.2 million to $999,999. An airy, 2,300-square-foot, 3 bedroom, 2 1/2 bath home with a heated, kidney-shaped pool and sweeping Valley views from the Burbank Hills. A handsome house with large public rooms, but no yard to speak of.
2223 N. Lamer 91504: $699,000 for a 2,122 square foot, 4-bedroom, 2-bath house that will have to find a very specific buyer. As in, a buyer who doesn't want much grass to maintain, because this house has a paved front yard and a pool in back. The marble floors are not for everyone, either.
2304 N. Sparks 91504: Reduced, from $699,000 to $575,000, this is a short sale, and a house with a sad story to tell. The previous occupants clearly left in a hurry -- children's toys are strewn about, and his-and-hers college diplomas are still framed and mounted on one wall. Judy blogs about it here. UPDATE: The listing agent informs the owners are still in the process of moving out. So scratch the sad story and the leaving in a hurry -- it's the opposite. They're leaving slowly.
824 N. Parish Place 91056: $774,999 for a 2,012 square-foot, 4-bedroom, 2 3/4 bath home, half a block from the Chandler Bikeway. Unremarkable.
1430 W. Valleyheart 91506: $1.65 million for an unusual house -- a horse-lover's paradise, zoned for five horses, and beautifully redone -- so unusual that I gave it a separate post.
Your thoughts? Comments? E-mail story tips to peter.viles@latimes.com.
Photo credit: Nick Tatone
 The New York Times tonight covers a story familiar to readers here: increasing numbers of homeowners are choosing to walk away from their mortgages and their houses.
The Wall Street Journal also tackles the story tonight, under the headline "Borrowers Abandon Mortgages as Prices Drop."
Behind the trend: If you didn't put much of your own money down when you bought the house, it's a lot easier to walk away. And a large number of recent buyers put very little down.
From the NYTimes: “Will
everyone walk out?” asked Christian Menegatti, a real estate analys. “No. But there’s been a cultural shift.
Buying a house used to be like entering a marriage, a commitment for
life. Now, if you see something better, you go back into the dating
market.”
When homeowners see houses identical to their own
selling for much less than they owe, Mr. Menegatti said, “I wouldn’t be
surprised to see five or six million homeowners walk away."
Bloviation: You may feel you've read this story before, but the NYTimes account goes well beyond the anecdotal and explores the cultural and financial changes driving this trend. It's well-reported and worth reading.
Your thoughts? Comments? Email story tips to peter.viles@latimes.com
Photo Credit: LATimes
Hat tip: PJ via email.
A confession: Writing this blog, with the constant drumbeat of doom and gloom, sometimes makes me forget why real estate in Los Angeles is such a local obsession in the first place. Then I visit a house like Stan Smith's in Burbank, and I understand again.
I'll give you the details, but won't do justice to it: 4 bedrooms, 3 bathrooms, 3,400 square feet, exquisitely redone (think Ralph Lauren if he was a real horseman), zoned for five horses (yes, horses in Burbank). It has 10 stalls, two tack rooms and a large pool on a huge lot (16,000-plus square feet). Four fireplaces, a three-car garage. Yes, it is very close to the 134. No, I couldn't hear freeway noise in the house. The owner, real estate agent Stan Smith, is embarking on a new chapter of life: he's buying an inn in southern Vermont. 1430 W. Valleyheart Drive, 91506. Listed for $1.65 million. More pictures below.
Photo credits: Stan Smith
A quickie: Wells Fargo has designated Los Angeles County a "severely distressed" housing market, which means tighter mortgage guidelines for L.A. borrowers, effective this week. From Biz Journals: "In a move that could have far-reaching ramifications for home buyers in the Golden State and elsewhere, Wells Fargo & Co. is tightening its mortgage lending guidelines in more than 200 markets across the country, including Los Angeles County, that it has labeled severely distressed or distressed."
More: "In markets considered severely distressed, for example, it will not make a loan for more than 75 percent of the value of the home. Twenty counties in California, including Los Angeles County and Orange County, are on the severely distressed markets list."
Thoughts? Comments? E-mail story tips to peter.viles@latimes.com
Hat tips: Beth and Better Village
 Blogger's note: A reader, C. Benedicto, e-mailed this commentary.
"I lost my house to foreclosure after the 1994 Northridge Earthquake. At the time, the house I purchased in 1989 for a premium was worth less than the mortgage, plus I needed to come up with additional funds for repairs to the damage caused by the earth movement.
"Losing a home, which was my family's major investment, was painful, and to date my wife and I are still trying to recover financially and emotionally. However, despite the grave loss we feel, we believe we have no one to blame but us -- for being so stupid buying a house just to keep up with the Joneses and as an investment. We now stay in a modest abode and live a lifestyle within our means.
"When a Realtor neighbor encouraged me during the height of the real estate frenzy to go aboard the bandwagon and buy a piece of property, which I believe was overpriced, because, she said, I could make a hefty profit within a year, I asked her how possibly I could afford to pay the mortgage once the teaser rates expire. To my amazement, she looked at me in disbelief like I was stupid.
"These banks and speculators knew exactly what they were getting into. Many of them made a lot of money flipping houses like burgers when the market was going higher into oblivion everyday. Now that the housing market turns against them, they want me to help them out and pay for their greed. No way, Jose!!!!"
Thanks. A reminder, the blog is an open forum. If you'd like to defend bailout proposals, now is your chance. E-mail story tips to peter.viles@latimes.com.
Photo credit: AP
 News item from the Daily News: "The median price of a San Fernando Valley home plunged a record $113,000 in January from a year ago and sales sank to an all-time low as credit and foreclosure problems further pounded the market, a trade association said Wednesday."
At $500,000, median sales prices in the Valley have now fallen a staggering 23.7% since peaking at $655,000 last June. That's 23.7% in seven months.
More: "Still, prices would have to fall further to make them affordable and turn around the sluggish sales market, said Daniel Blake, director of the San Fernando Valley Economic Research Center at California State University, Northridge. 'I'm still not seeing a light at the end of the tunnel,' Blake said."
Hat tip: Brad Greenberg
Thoughts? Comments? E-mail story tips to peter.viles@latimes.com
Photo credit: Aerial view of Ventura Boulevard in Sherman Oaks, from L.A. Times.
 As banks lobby for what has been described as an "epic rescue plan" for the mortgage industry, President Bush today hardened his oppostion to bailout plans he said would help "lenders and speculators." Bush said such plans would be unfair to millions of homeowners who pay their mortgages on time.
USA Today: "Echoing Treasury Secretary Henry Paulson, Bush says a Senate proposal to deal with the foreclosure crisis would 'do more to bail out lenders and speculators than to help American families keep their homes.' "
Update: It's worth noting the specific objections the administration has to the Senate bill on foreclosures. From CNN Money: "Earlier this week, the Bush administration said the president would veto the Foreclosure Prevention Act of 2008 if it passes Congress because it objected to two key elements. The first is a provision that would change the bankruptcy law to let judges reduce the amount of principal and interest due on mortgages of those filing for bankruptcy. ... The administration also objects to a provision in the bill that would provide $4 billion to let state and local government buy and rehabilitate foreclosed homes, and improve disclosure of subprime mortgage loans in hopes that borrowers won't be surprised by big payment increases."
Commentary: It's impossible to separate politics from principles here. The president knows that bailouts are unpopular, so he argues the bankruptcy changes -- which have nothing to do with a bailout for lenders -- are part of a bailout for lenders. Ah, very clever. Very cute. And completely consistent with the lack of intellectual honesty that dominates American politics at the moment. If you don't like changes in the bankruptcy law, why not step up and say so?
It's also disappointing that, at today's news conference, none of the reporters bothered to follow up on this.
Still, Paulson's comments (see below) were pretty clear. Paulson shot down talk of a real bailout for lenders. So, some politics, some principle.
The president's comments came a day after his Treasury Secretary dismissed called for a massive rescue plan for the mortgage industry. From the Wall Street Journal: "The Bush administration is hardening its opposition to the chorus of Democrats, bankers, economists and consumer advocates calling for a big-money government rescue program for struggling homeowners."
This would be the "epic rescue plan" cooked up by Bank of America that the New York Times reported on last Friday.
More: "In an interview yesterday, Treasury Secretary Henry Paulson branded many of the aid proposals circulating in Washington as 'bailouts' for reckless lenders, investors and speculators, rather than measures that would provide meaningful relief to deserving, but cash-strapped, mortgage borrowers."
From Smart Money: "President Bush and other administration officials have voiced skepticism before about a major government effort to ease the burden of the nation's housing slump. But Paulson's comments are the most explicit to date in laying out the administration's opposition to the recent spate of rescue plans.
Thoughts? Comments? E-mail story tips to peter.viles@latimes.com.
Photo credit: Reuters
A quick, important news item tonight from The Wall Street Journal: "The Bush administration is hardening its opposition to the chorus of
Democrats, bankers, economists and consumer advocates calling for a
big-money government rescue program for struggling homeowners."
This would be the "epic rescue plan" cooked up by Bank of America that The New York Times reported on last Friday. More: "In an interview yesterday, Treasury Secretary Henry Paulson (pictured) branded
many of the aid proposals circulating in Washington as 'bailouts' for
reckless lenders, investors and speculators, rather than measures that
would provide meaningful relief to deserving, but cash-strapped,
mortgage borrowers."
Thoughts? Comments? Email story tips to peter.viles@latimes.com.
Photo Credit: AP
The northern California city of Vallejo is dangerously close to bankruptcy tonight, an event that would punctuate the decline of the state's housing market and the sudden reversal of financial fortune for California's state and local governments.
Bloomberg reports: "Vallejo, a city of 135,000 outside of San Francisco, moved closer to bankruptcy after negotiations with its labor unions collapsed. Bondholders will likely be asked to sacrifice some of their investment if the city seeks bankruptcy protection, an attorney for the municipality said last night. Vallejo faces ballooning labor costs and declining housing-related sales-tax revenue, leaving budget officials projecting that money will run out within weeks."
More: "Municipalities throughout California are grappling with billions of dollars in labor and pension cost increases incurred during the late 1990s. The crisis comes as the worst housing slump in the U.S. in 26 years saps tax revenue. The state's own $16 billion deficit led Governor Arnold Schwarzenegger last month to declare a fiscal emergency."
The Mercury News: "As Vallejo geared up for
Thursday night's showdown on the city's fiscal crisis, the mayor, staff
and public safety unions held 11th hour negotiations Wednesday to
fashion a deal to stave off bankruptcy. Both sides were also set to
meet Thursday morning, hours before the City Council is scheduled to
make an unprecedented vote on whether to seek bankruptcy protection."
Thoughts? Comments? Email story tips to peter.viles@latimes.com
Hat tip: Better Village
 A new L.A. Times/Bloomberg poll about the economy indicates only one in five Americans support Sen. Hillary Clinton's call for a moratorium on foreclosures.
Highlights, from the LATimes: "Most Americans are planning to spend their stimulus rebate checks to
pay down existing debt or add to their savings, not to fuel the kind of
consumer spending that would bolster the economy, a new Los Angeles Times/Bloomberg poll has found."
On foreclosure: Asked whether they support the Clinton anti-foreclosure plan (a moratorium on foreclosures and a rate freeze) or the Obama plan (tax credits for homeowners and a fund to help borrowers refinance), the results tilt heavily toward Obama:
The question was phrased, Which proposal do you prefer?
--Moratorium on foreclosures: 20%
--Tax credits/refinancing fund: 50%
--Both equally: 3%
--Neither: 13%
--Haven't heard enough: 6%
--Don't know: 8%
Asked whether the Bush administration "has taken sufficient steps to aid the housing industry and ease the affects of the mortgage crisis," or "has not done enough," most respondents (57%) faulted the administration for not doing enough.
The bloviation part: I've complained before about polls that presuppose the government should be aiding homeowners, and then ask respondents to choose the best way to do it. That's the problem with this poll -- it pushes respondents to pick the best government policy, rather than asking the larger question of whether the government should be intervening at all. I suspect I know the way most of you would respond on that issue.
Thoughts? Comments? Email story tips to peter.viles@latimes.com.
Photo Credit: AFP/Getty Images
 A quickie: A lot of us on this blog have spent a fair amount of time bickering over which housing statistics best capture market reality. It strikes me that they're all starting to capture the same reality:
According to Housing Tracker, median listing prices in greater L.A. have declined 14.6% from year-ago levels and 18.9% from their peak.
According to DataQuick, median sales prices in Los Angeles have declined 11.9% from year-ago levels and 16.7% from their peak.
According to the Case-Shiller home price index, home prices in Los Angeles dropped 13.7% over the past year.
Not a whole lot of difference.
Your thoughts? Comments? Email story tips to peter.viles@latimes.com
Photo Credit: AP
 Good morning. Interesting item over at LA Now this morning: The housing downturn in the Chino Valley means no one wants to buy farmland and turn it into subdivisions, which means dairy farming has a new lease on life out there.
From the Press-Enterprise: "As a result, the exodus of dairies from the Chino Valley has come to a halt, at least for the time being. It is possible ... that dairy farming will continue in the region for another decade."
Thoughts? Comments? E-mail story tips to peter.viles@latimes.com.
Photo Credit: L.A. Times
 The guy who signs the paychecks around here, Sam Zell, opined on CNBC that he sees a housing turnaround this spring. From Reuters: "I think starts have already pretty much bottomed out," Zell said. "I think the housing market this spring will begin its recovery phase."
Forbes: "Many investors are agreeing with Zell's assessment that the bottom is near. They are rushing into homebuilders, which were battered throughout 2007, in anticipation of better times ahead. In the past three months, shares of D.R. Horton, Pulte Homes, and Lennar have each rallied at least 40%."
For the record, even though the big boss is bullish, I continue to believe the housing market in Southern California is a long way from a bottom, and that prices are likely to decline throughout most of 2008. On a national level, it's quite possible housing starts have bottomed out and will soon begin a recovery. We could also get a little bounce off the bottom this spring in L.A.-area housing activity, but my guess is that after a brief pop, rising inventory will resume putting downward pressure on prices.
It's worth noting, though, that Zell has made a ton of money in real estate over the years.
Your thoughts? Comments? E-mail story tips to peter.viles@latimes.com.
Photo Credit: Sam Zell, from The Chicago Tribune
 No, no, not Neverland.
Yes, Neverland.
News item from LA Now: Michael Jackson stands to lose his bizarre Neverland ranch to foreclosure.
Reuters: "Michael Jackson's famed Neverland Valley Ranch in California will be foreclosed and sold on March 19 unless the pop star pays a balance of nearly $25 million, property records showed on Tuesday."
Reuters reports Jackson rarely spends time at the 2,800-acre property in Santa Barbara County.
Thoughts? Comments? Insights? E-mail story tips to peter.viles@latimes.com
Photo Credit: L.A Times
 A bunch of headlines today all deserve posts of their own. But, as Kennedy said, life is not fair, so they get lumped into a roundup:
--Foreclosure activity in California rose 7.25% from December to January and is pacing 120% ahead of year-ago levels, according to RealtyTrac.
--In a dismal report on January home sales, the California Association of Realtors said sales fell 29.8% from year-ago levels, median prices fell 21.9% from year-ago levels, and inventory spiked to 16.8 months' worth of unsold homes. Prices in Los Angeles were down 18.4%, sales were down 38.1%.
--Listing prices in greater L.A. fell by $100 over the past week, to $469,900, a decline of 14.6% from year-ago levels, according to Housing Tracker's weekly analysis of MLS listings. Inventory of unsold houses and condos was flat at 41,849, an increase of 32.2% over year-ago levels.
--In the biggest news of all in the Viles household, L.A. Land is now being promoted on electronic billboards all over town. Don't drive off the road trying to read them. But when you get home, go to the blog and hit "refresh" 27 times.
Thoughts? Comments? E-mail story tips to peter.viles@latimes.com
Photo Credit: An electronic billboard featuring L.A. Land, from Bus Blog
A couple of quickies this morning on what government might do to slow the tide of foreclosures:
The New York Times, which has been on the cutting edge of reporting and commentary about government bailout plans, awakens today to an important part of that story: Many, many Americans are strongly opposed to bailouts for struggling homeowners. "People struggle to buy homes in this city, for sure,” says Mark Ellerbrook, who manages a government homeownership program in Seattle. “And then you have what looks, on the face of it, like the city giving money to people who made bad decisions.”
The L.A. Times reports that Senate Democrats are pushing for changes in federal bankruptcy laws that would allow homeowners to renegotiate their mortages in hopes of keeping their houses: "The proposal, part of the Foreclosure Prevention Act embraced by leading Democratic lawmakers, would allow judges to ease the terms of mortgage loans during bankruptcy proceedings."
The bankruptcy change raises a number of issues, and I'd like to hear your thoughts. Say a judge does in fact reduce your mortgage. Does that constitute a sale of the house, with reduced property taxes, and a new, cheap comp in your neighborhood? How does the judge decide what the house is worth -- only what you can pay?
Much more important: How many people facing foreclosure are likely to go into bankruptcy to get a new mortgage? And what is the likelihood that, if bankruptcy laws are changed, they will make timely payments on the new, reduced mortgage in the future?
I'm reminded of the words of mortgage broker and Fed watcher Lou Barnes, who wrote recently that attempts to prevent foreclosures are a waste of time. He doesn't mince words: These are "weak financial households" that purchased homes only because of disastrous underwriting. They can't be saved.
Barnes: "The sad reality: The vast majority to suffer foreclosure today were weak financial households to begin with. ... The few households suffering temporary bad luck (job loss, health, divorce) deserve all the 'workout' help the system can provide. The inherently weak households will defy every effort. Even extraordinary re-writes will beget re-default, the poorly maintained house creating deeper loss in the ultimate foreclosure, the troubled inventory overhanging the marketplace and preventing recovery."
Thoughts? Comments? E-mail story tips to peter.viles@latimes.com
Home prices in Los Angeles lost 13.7% in 2007, and were declining at an accelerating pace at the end of the year, according to Standard & Poor's Case-Shiller home price index. The report also points to a regional housing bust -- the American cities with the nation's most severe price declines in November and December of 2007 were concentrated in the West and Southwest.
From LATimes.com: "The Los Angeles-area home price index, which includes Orange County, is now 15% below its peak, which Case-Shiller says occurred in September 2006. Various economists have predicted that Los Angeles-area home prices will decline 20% to 30% from their peak level."
Headlines, highlights, lowlights:
--The Case-Shiller index for Los Angeles fell 3.1% from November to December, and declined 13.7% over the course of the year.
--As measured by Case-Shiller, Los Angeles still has the nation's largest housing bubble. For those who don't believe there was a housing bubble, you would say that Los Angeles is holding on to more price appreciation than any other American housing market.
--The cities with the largest price drops from November 2007 to December 2007 are concentrated in the West, suggesting the possibility of a regional recession similar to the one that followed the S&L bust:
1) Phoenix (-3.5%)
2) San Diego (-3.4%)
3) San Francisco (-3.25%)
4) Los Angeles (-3.1%)
5) Las Vegas (-2.9%)
The Case-Shiller index is considered among the most accurate measures of home values over time. Unlike other sales reports, which rely on overall market activity, the Case-Shiller index is built out of "matched pairs" -- instances in which the same house sold twice over a period of time.
Thoughs? Comments? E-mail story tips to peter.viles@latimes.com.
 How deep is the discount on foreclosed houses right now? I ran some numbers on six houses and found discounts ranging from 16.6% to 41%. You can see the houses, with listing descriptions and listing prices, here.
What do I mean by discount? The decline from peak sales price to current asking price. I know, I know, most of these things sell for below the ask. So the "discount" will ultimately be greater. But this is a starting point, a way to provide information about current listings in relation to past sales prices.
Pictured at left: 1828 S. Manhattan Place, Los Angeles 90019, a duplex. Sold for $680,000 in May 2006, according to Zillow.com, now listed for $579,500. Nominal discount: 17.2% from peak price.
Your thoughts? Comments? Tell me your favorite sites to search foreclosure listings. E-mail story tips to peter.viles@latimes.com.
Photo Credit: David Silverstein
This one comes from Chicago -- a long way from L.A. Land -- but it is one of those stories you can't make up. It's too bizarre.
Here's the headline from the Chicago Tribune: "How fraud led to this property changing hands 3 times as son of owner sat dead inside."
"The new buyers of a rundown graystone on the South Side showed up Jan. 9 to look at the house they won at a foreclosure auction. They took the plywood off the front door and went inside to make sure the utilities had been shut off. Then they called the police.
"Sitting upright in the corner of a bedroom off the kitchen was a human skeleton in a red tracksuit. Next to him lay a dead dog. Neighbors told police the corpse was almost certainly Randy Johnson, a middle-age man who lived alone in the North Kenwood house.
"The cause of Johnson's death has not yet been determined, but it is just one of the mysteries about 4578 S. Oakenwald Ave. Somehow, Johnson's house was transferred three times to new owners without anyone noticing he was inside. It's a story involving forged deeds, a corrupt title company and a South Side family that has been under investigation for mortgage fraud."
Wild, wild stuff.
Hat tip: pseudo100, via e-mail
Thoughts? Comments? E-mail story tips to peter.viles@latimes.com.
 Headline: No Countrywide For Old Men.
Excuse the Oscar pun, but the headline comes from CNBC.com, and I kind of like it.
The latimes.com blog L.A. Now reports Countrywide Financial, clinging to its life as its would-be savior begs for a bailout, has canceled a lavish ski junket in Colorado.
From The New York Times: " ... the besieged mortgage lender, has canceled a gathering of bankers from smaller mortgage banks at the Ritz-Carlton Bachelor Gulch ski resort (where room rates begin at $725), Countrywide said in a statement on Sunday. The company was to pay for 30 invited guests' hotel rooms, meals, skiing and tips."
Countrywide iced the junket only after a public spanking from CNBC. CNBC's real estate blogger, Diana Olick wrote last week, "There's something called remorse. Maybe you've heard of it. Clearly Countrywide Financial is not in touch with that emotion right now."
Hat tip: Better Village
Thoughts? Comments? E-mail story tips to peter.viles@latimes.com.
Photo credit: Countrywide Chairman Angelo Mozilo by L.A. Times.
 So which is it? Is the housing market in such a terrible state that it needs an epic rescue plan from the federal government?
Or is it on the brink of turning around, as the National Association of Realtors argues today, even while issuing another crummy report on home sales?
From AP: "Sales of existing homes fell to the lowest level in nearly a decade in January while the median price for a home dropped for the fifth straight month.
More: "The National Association of Realtors said today that sales of single-family homes and condominiums dropped by 0.4 percent last month to a seasonally adjusted annual rate of 4.89 million units, the slowest sales pace on records going back to 1999."
The NAR reports the level of sales is down 23.4% from last January's level.
Now the positive NAR spin: The ever-optimistic Lawrence Yun, chief economist for the Realtors, continues to see light at the end of the tunnel -- he sees better days ahead later this year: "As the increased limits for FHA and conventional loans are implemented, more buyers will have access to safer FHA loans and lower interest rate loans in high-cost areas, which could lead to steadily higher home sales later in the year."
NAR President Richard Gaylord, a broker with RE/MAX Real Estate Specialists in Long Beach also predicts a bounce-back in sales later this year in high-cost areas such as California: "Once buyers have greater access to higher loan limits, it will take a few months for increased shopping activity to translate into higher sales," Gaylord said. "We should see some movement of pent-up demand by this summer, but higher loan limits need to be implemented fully and promptly to have maximum benefit."
The NAR has been wrongly making similar predictions for quite a while now. Eventually, the market will bottom and the NAR will be correct in its optimism. Eventually could be a long while from now. Or, to quote one of my favorite Wall Street aphorisms, "If you're wrong for long enough, you're wrong."
Photo credit: AP
Thoughts? Comments? Send story tips to peter.viles@latimes.com.
Good morning. There is another proposal being floated for a big government rescue of the mortgage market. This one comes from former Federal Reserve Vice Chairman Alan Blinder, who was also an economic adviser to President Clinton, and was floated in The New York Times:
"During the Depression, President Franklin D. Roosevelt and Congress dealt with huge impending foreclosures by creating the Home Owners’ Loan Corporation. Now, a small but growing group of academics and public figures, including Senator Christopher J. Dodd, Democrat of Connecticut, is calling for the federal government to bring back something like the HOLC. Count me in."
The idea is that Son of HOLC would purchase troubled mortages and refinance them at terms more favorable to borrowers, to the tune of $200 billion to $400 billion. Blinder proposes that speculators and those who lied on loan applications would be ineligible, and some troubled homeowners wouldn't make the cut: "... not all bad mortgages can be turned into good ones. Where families simply can’t afford to be owners, the new HOLC should not be asked to perform mortgage alchemy."
A couple of quick thoughts: The owners of the mortgages -- if you can find them -- have no idea which mortgages belong to speculators who lied on loan applications, and which belong to those who lied about their income.
Your thoughts? Comments? Insights? E-mail story tips to peter.viles@latimes.com.
Weekend reading, worth checking out, though I am sure it will not sit well with many of you:
--The New York Times notes the banks are now pushing "an epic rescue plan": "A confidential proposal that Bank of America circulated to members of Congress this month provides a stunning glimpse of how quickly the industry has reversed its laissez-faire disdain for second-guessing by the government — now that it is in trouble."
More: "Bank of America suggested creating a Federal Homeowner Preservation Corporation that would buy up billions of dollars in troubled mortgages at a deep discount, forgive debt above the current market value of the homes and use federal loan guarantees to refinance the borrowers at lower rates. "We believe that any intervention by the federal government will be acceptable only if it is not perceived as a bailout of the bond market,'' the financial institution noted. In practice, taxpayers would almost certainly view such a move as a bailout.
The NYTimes reports that the Bush administration -- yes the same crowd that said "absolutely not" to a bailout earlier in the week -- "has expressed interest" in hearing about bailout plans.
Meantime the ever-alert Westside Bubble links to reports of another bailout in the making: This one for the homebuilders, in the form of a $10,000 tax credit for buyers of brand-new homes. You may recall the homebuilders' lobby has been sulking, and withholding political donations, because it didn't get what it wanted in the first stimulus package.
"A substantial tax credit for home buyers is likely to be part of any second economic stimulus package enacted by Congress," Marketwatch reports. Who knew there is already a second stimulus package being discussed?
Your thoughts? Comments? E-mail story tips to peter.viles@latimes.com.
 Good morning. It has been an eventful week on the blog -- passionate arguments about affordability, bailouts and the media's coverage of the housing bubble. Now a brief time-out from drama, for Pieter Severynen's "Tree of the week."
The Fern Pine – Podocarpus gracilior
"Always clean and neat, all podocarps are beautiful evergreen conifers. We use them as screens, street and shade trees, but in their native habitats, they are prized for their beautiful timber, especially the South African yellowwoods. They come from a very cosmopolitan background: Central and South America, Asia, Australasia and Africa. Several species are available here.
"The fern pine is about as clean-looking, attractive and pest-free a tree as they come. The method of propagation of this eastern African tree determines its growth habit. Sown from seed, the plant grows upright from early age on. Somewhat sparsely foliated initially, the branches eventually become more closely covered with 1-2” long, ¼” wide grayish green to bluish green elliptical leaves that feel soft to the touch. These trees are usually sold as Podocarpus gracilior. If on the other hand, the trees are grown from cuttings or grafts, then the plants want to grow into a more willowy, drooping shape. These plants are typically sold as Podocarpus elongatus, although it is the same species. With proper staking, both end up looking the same. Because of the color variation in the leaf, it is worth your while selecting the exact shade of green you want in the nursery.
"As a freestanding tree, the fern pine expands at a moderate rate until it reaches 60’ tall and wide; usually it is kept smaller. It is dense and finely textured. Flaking gray platelets clothe the trunk. Given a nearby male, the female tree will bear small fleshy fruits. The tree will stand drought, a variety of soil types and exposures. People who plant the tree at 2’ on center as a quick growing screen find out that it just doesn’t know when to stop growing once the hedge has reached the desired height. Several trimmings a year are needed to keep it under control; a hedge of fast growing shrubs usually makes more sense."
Thanks, Pieter. E-mail Pieter: plseve@earthlink.net
Photo Credit: A fern pine on Venice Blvd. in Mar Vista, by L.A. Land.
Blogger's note: This is an edited version of a previous post. The editing change is explained below.
On the topic of letters to Congress, commenter Bobc writes, "Let the world see your letters." This blog is happy to help by publishing letters and emails to Congress. Feel free to submit them as comments.
Below is the letter a commenter* sent to both U.S. Senators from California:
"Honorable Senator Feinstein
750 B Street, Suite 1030
San Diego, CA 92101
"Dear Senator:
"I feel I must express my outrage that a taxpayer-funded “bailout” for
the huge financial institutions (e. g. banks, Wall Street investment
firms) is being considered by Congress. These corporations made their
billions by entering into mortgage contracts with full knowledge of the
risks involved. That the gamble has not played out in their favor is
just too bad. Even with these sour loans, none of the banks will fail.
Their assets are far greater than the loan amounts they actually hold
because the banks sold the vast majority of the loans to Fannie Mae or
Real Estate Investment Trusts.
"Do not be seduced by Wall Street lobbyists telling you that “the sky
is falling” – nothing could be further from the truth. I bought my home
because the previous owner sold short. Many other potential homeowners
are waiting for the same type of opportunity. As irresponsible
borrowers walk away from foreclosures, those of us saving our pennies
are eagerly waiting for the chance to invest in our own futures.
"Sincerely ..."
For the record, this is an open forum -- if you write Congress supporting a bailout, I'll publish that too.
*Why was the post edited? The original version was signed by a commenter using a fictitious, and humorous name. This version strikes the name, which the curious can find in the comment thread.
Photo Credit: Commons.wikimedia.org
 Good morning. The graphs at right say it all, or almost, but I will throw in some words too. From this morning's L.A. Times:
"Apartment rents are indeed climbing, hitting an average of $1,494 a month in Southern California for the last three months of 2007, an increase of 4.5% over the same period a year earlier, according to a survey of larger apartment complexes by RealFacts, a property research firm. ...In fact, home values and rents often move in opposite directions, real estate analysts said."
More: "The downward pressure on house prices and the upward pressure on rents are in some respects reciprocal of one another," said Stuart Gabriel, director of the Richard S. Ziman Center for Real Estate at UCLA. "The two go hand in hand."
Caveat: The rent number is an average, and most statisticians prefer a median.
Your thoughts? Comments? E-mail story tips to peter.viles@latimes.com
 In a report earlier this week, the California Association of Realtors discussed affordability of "entry level" homes in Los Angeles. The Realtors calculated it would take household income of $86,700 a year to buy a home priced at $433,200, which the Realtors figure is an entry-level home in this county. Only 27 percent of the households in the county can afford that, the group said.
What kind of home might you get for that kind of money? And in what kind of neighborhood? For $399,800, you could buy a very small house on Estara Avenue just north of downtown. Two bedrooms, one bath, only 572 square feet.
The listing describes this little house as a "First time Buyer's Alternative ... a great property with good size fenced Yard lots of room for your children to Play."
While playing, your children could look out in the street and see the terrifying scene above. The house is a stone's throw from the spot where police today shot and killed one man and wounded another after a wild incident that began with a drive-by shooting.
I don't mean to pick on this neighborhood -- there are no doubt hard-working people there struggling to make a better life, and home ownership plays a role in that quest. My point is this: There is something not right about paying $400,000 for a tiny house in a neighborhood the police described today as "a base of operations for Avenues gang members."
Four hundred thousand dollars for a tiny house in a neighborhood where violence is common, according to a man named Juan Soto. "This kind of incident happens about once a month," Soto told the L.A. Times. "This is not the first time."
I understand that Los Angeles has become a very expensive city in recent years. I'm afraid I don't fully understand why.
Thoughts? Comments? E-mail story tips to peter.viles@latimes.com
Photo credit: L.A. Times
 The banks are making their case, and the government is listening. From The New York Times tonight: "Prodded in part by some of the nation’s biggest banks, the Bush administration and Congress are considering costly new proposals for the government to rescue hundreds of thousands of homeowners whose mortgages are higher than the value of their houses.
Which banks? "Bank of America, which is in the process of acquiring Countrywide Financial and has potentially huge exposure, has circulated a proposal to create a new federal agency that would buy vast quantities of delinquent mortgages at a deep discount and replace them with fixed-rate federally guaranteed loans. The bank warned that tightening credit conditions were leading to 'escalating levels of delinquency and default among borrowers' and 'an unprecedented number' of homes that would enter foreclosure.' "
Thoughts? Comments? E-mail story tips to peter.viles@latimes.com
Hat tips: BG @ The God Blog, via email, and John, via comments.
Photo credit: Treasury Secretary Henry M. Paulson Jr. by AP
 A number of you have commented on the jump in mortgage rates this week -- Ace says he's seen Bank of America/Countrywide jumbos at 8.3%. Thanks for the tip, here's more:
From BankRate Monitor: "Mortgage rates skyrocketed this week as investors fretted about a pickup in inflation. The benchmark 30-year fixed-rate mortgage rose 41 basis points, to 6.37 percent. ... Four weeks ago, it was 5.57 percent. ... The 30-year fixed jumbo, for loans of more than $417,000, went up 39 basis points, to 7.55 percent."
Also: As Cal points out in the comment section, expectations for a big drop in jumbo rates are now diminishing.
Your thoughts? Comments? E-mail story tips to peter.viles@latimes.com.
Photo credit: AP
 News item from the Daily News: "Foreclosures more than tripled last month in the San Fernando Valley, with the sub-prime loan crisis creeping into higher-priced neighborhoods, a research center said Wednesday."
More: "The 324 percent jump in foreclosures equated to 534 families losing their homes because of delinquent mortgage payments, said the San Fernando Valley Economic Research Center at California State University, Northridge. ... 'It's basically people who took out mortgages where they used a partial-pay option and now they are getting (interest rate) resets and can't afford the new price,' said Daniel Blake, the center's director."
Thoughts? Insights? E-mail story tips to peter.viles@latimes.com.
Photo credit: AFP/Getty Images
 Blogger's note: When I saw those words in the subject line in my inbox -- "Please cover the other side" -- I assumed it was another complaint that this blog is too negative, too focused on the real estate meltdown. I was wrong. This is an e-mail from reader "msprompt."
"I am BEGGING you to please do a story on the other side of this mess. If I read one more Dickensian story that leads with an anecdote about some family who is about to lose their house because they have no money, I'm going to lose it.
"Please do a piece on people who tried to be fiscally responsible during the run-up; who didn't buy a house they couldn't afford simply because someone in a mortgage suit said they could; who worked to amass 20 percent down and present themselves with a rational DTI ratio; these people are the real 'victims' in this mess: People who want to buy a house but are prevented from doing so because price discovery is being artificially delayed. People who have money in the bank and are now losing interest because of the continual rate drops by the Fed. People who will be among those taxpayers likely left holding the bag at the end of this mess. People who didn't enter into a contract because they believed that a contract actually means something, that it is binding. (Ha!) (Full disclosure: I'm describing myself and my husband.)
"On all the housing blogs I read, there is public outcry aimed at the Mainstream Media. No one can understand why the MSM is continually going for the easy story about poor Mr. and Mrs. Fat and their 11 children living in an 8.500-square-foot house -- on which they put zero money down -- who are on the brink of getting the boot. There are other issues here that NEED to get some play. They are dramatic. They feature pathos and conflict and all the necessary elements of news that will attract readers. What about the gaming of the system? The fraud perpetrated against those who played by the rules? The Fed is in cahoots with the banks. No shocker there. But as one of the many middle classers who is getting royally screwed in all this and has been robbed of any voice in favor of a story that evokes more pathos, I have to ask: Where in the hell is the Fourth Estate? Who is protecting the public interest? Why is the MSM not nailing the gov't on this?
"What's happening is an outrage and if a stiff like me can see it, why can't the media?"
Thanks, msprompt.
Comments? Thoughts? E-mail story tips to peter.viles@latimes.com.
Photo credit: AP
 Many of you remind me on a regular basis that the housing problem goes far beyond housing. Fresh evidence today that you are correct: The budget gap in Sacramento is growing, and housing is a big part of the reason.
Breaking news from the Sacramento Bee: "The state budget deficit has increased to about $16 billion, primarily due to continuing problems in the housing market and high energy prices, according to an independent budget analysis released Wednesday.
From LATimes.com: "Legislative Analyst Elizabeth G. Hill, whom lawmakers of both parties look to for advice on fiscal matters, says the depressed housing market and high energy prices will cause revenues to sag even more than the administration of Gov. Arnold Schwarzenegger projected last month."
Bloviation: I think it's fair to liken the state's recent management of its finances to the behavior of families who have tapped housing equity to spend beyond their income. The state's spending in the past couple of years was supported by an unsustainable burst of economic activity fueled in large part by the housing bubble. The state has been spending beyond its means.
There's some political karma at work here: The governor benefited quite a bit from the housing bubble -- because of the bubble and the associated burst of economic activity, and some pay-later borrowing, the financial crisis that swept him into office magically disappeared. No tax increases! No spending cuts! No money down! No payments until next spring! Now the trouble is coming back. (You can insert a "Terminator" "I'll be back" joke if you like.)
Tangentially related: the northern California city of Vallejo is facing a pretty serious financial crisis. From The Mercury News: "Labor negotiators met Monday in an urgent effort to hammer out a budget crisis resolution before the Vallejo City Council votes for drastic cuts or to pursue bankruptcy."
Comments? Thoughts? E-mail story tips to peter.viles@latimes.com.
Photo Credit: Gov. Arnold Schwarzenegger, by the AP
 News item: In an interview today with CNBC, Treasury Secretary Paulson said a big bailout for banks is "absolutely not" needed.
From The Wall Street Journal: "Following the U.K.’s surprise move to nationalize mortgage lender Northern Rock, will the U.S. need to make similar moves?
"'Absolutely not,' U.S. Treasury Secretary Henry Paulson told CNBC,
dismissing talk that the Bush administration needs to initiate a
widespread bailout program to assist the financial industry and restore
investor confidence."
Reuters: "Asked if a broader government bailout was necessary to restore
confidence to U.S. credit and equity markets, Paulson replied, 'Absolutely not. We're seeing real progress.'"
Well, that settles that. To borrow from Dan Rather, you can pretty much take it to the bank, book it, it's true.
Your thoughts? Comments? Email story tips to peter.viles@latimes.com.
Photo Credit: AP
Commenter El Guapo, your request is my command. You asked for a poll question in which readers could predict median listing prices -- as measured by Housing Tracker -- at the end of 2008. Predict away. Feel free to use the comment section to record your prediction for the record.
Bloggers' note: My apologies, I threw out the first 50 votes and rebuilt this poll using new software. The previous version was confusing.
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A quickie: Calculated Risk highlights St. Louis Fed President William Poole's worries that Fannie Mae and Freddie Mac are headed for trouble. 
