Fallout: City of Vallejo teeters near bankruptcy

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

Times Poll: Only 20% favor foreclosure moratorium

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

Charting the housing slide

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

Foreclosure fallout: Saving the farm

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

Zell sees housing recovery this spring

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
   

Michael Jackson facing foreclosure

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

Foreclosures, falling prices and billboards

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

Can a new bankruptcy law fend off foreclosure?

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

L.A. home prices dropped 13.7% in '07

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.

Foreclosed: How big is the discount?

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