L.A. listing prices flat, inventory inches higher

Median listing prices in Greater L.A. were essentially flat over the last week, falling $100, as the inventory of unsold homes and condos inched slightly higher, according to Housing Tracker's analysis of MLS listings.

Highlights:

-- Median listing prices fell to $459,900, a decline of 2.1% in the last month and 16.2% in the last year.
-- The inventory of unsold houses and condos rose to 42,038, which is 27.6% ahead of last year's levels. 

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)
12/07             $495,000 (down 10.0% y/y)     43,174 (up 28.2% y/y)
1/08               $479,900 (down 12.6%)           40,850 (up 33.3% y/y)
2/08               $475,000 (down 13.5%)           43,625 (Up 38.3%)
3/10/08         $465,500 (down 15.4%)            41,838 (Up 32.3%)
3/17/08         $464,900 (down 15.5%)            42,098 (Up 31.4%)
3/24/08         $460,000 (down 16.2%)            41,934 (Up 27.2%)
3/31/08         $459,900 (down 16.2%)            42,038 (Up 27.6%)

Your thoughts? Comments? E-mail story tips to peter.viles@latimes.com.

Why bailouts won't work and prices must fall

I hope those of you who like to make a punching bag out of my employer (no, not Sam Zell, the Los Angeles Times) have noticed that the newspaper continues to publish full-throated, anti-bailout opinion pieces.

Last week it was economist Christopher Thornberg's politically incorrect, but historically obvious argument that the housing bubble was caused by "greed on steroids."

Today it's Peter Schiff, who writes on the opinion page that bailouts won't work, and housing prices must be allowed to fall to a "sustainable bottom" -- levels supported by the market, not by government intervention.

Highlights:

"At current levels, the average American still can't afford the average house. Despite the creativity of its new policies, Washington can't alter that math. The only mechanism to restore balance and get the credit flowing is for prices to fall steeply to a true market level, and for losses (for consumers and corporations) to be recognized and absorbed."

"The government is trying in vain to get funds flowing again and put a floor under prices. But it's too late. U.S. home prices are like a beach house supported by eight pillars: lax lending standards, low down payments, 'teaser' interest rates, widespread real estate speculation, pliant appraisers, willing lenders, easy refinancing and a market for mortgage-backed securities. Knock out even half of these pillars and the house comes crashing down. We've knocked out all of them. Yet everyone hopes that this allegorical house can defy gravity and that bubble-era prices can be sustained in a post-bubble world."

Thoughts? Comments? E-mail story tips to peter.viles@latimes.com
Photo: Getty Images

The coming trillion dollar debt meltdown

The next time you are trying to impress your friends by telling them how much bad debt America's banks are choking on (It's $400 billion, I tell you!), you can trot out this new estimate: $1 trillion. Yes, that's trillion with a "t." A thousand billion, if you prefer.

Bloomberg News: "Yes,  $1 trillion is the amount of defaults and writedowns Americans will likely witness before they emerge at the far side of the bursting credit bubble, estimates Charles R. Morris in his shrewd primer, 'The Trillion Dollar Meltdown.' That calculation assumes an orderly unwinding, which he doesn't expect.

More: "'The sad truth,'' he writes, 'is that subprime is just the first big boulder in an avalanche of asset writedowns that will rattle on through much of 2008.''

Where is Carl Sagan when you really need him?

Thoughts? Comments? Email story tips to peter.viles@latimes.com.
Photo Credit: Amazon.com

Hillary Clinton's sub-prime connection

News item: Newsday reports that longtime Hillary Clinton aide and fixer Maggie Williams made $200,000 working for a now-bankrupt sub-prime lender that was known for marketing high-fee loans to low-income borrowers.  The lender, Delta Financial Corp., hired Williams to improve its crisis-management operation after state and federal investigations  led the company to pay $12 million to borrowers.

I've been hoping for an item like this so that I could climb up on my high horse and make a few political points. First, let's be honest about why Delta Financial hired Maggie Williams: they hired her because she is known and respected by the Clintons and other important Democrats (she was recruited by a former New York City politician). She was hired as a political fixer. Someone who could pick up the phone and get a United States senator on the other end.

Second, the Clinton connection is a reminder that sub-prime lenders had friends and defenders in both parties. There is a bit or revisionist history running around right now that claims Democrats tried to rein in sub-prime lenders. Yes, a few state attorneys general did try. But the Democratic Party in Washington was deep into this mess, cheering just as loudly as Republicans were for the "rise in homeownership levels."  The responsibility for years of criminally weak regulation of mortgage lending rests with both political parties.

True, the mortgage mess now has become a partisan issue, with Democrats advocating aggressive government intervention and new regulations on lenders. But let's not confuse that with history, and how we got here.  And let's remember, the lenders, builders, the banks may be dumb, but they're not stupid: they have plenty of friends in both parties today, massaging legislation and regulation as we speak.

Your thoughts? Comments? E-mail story tips to peter.viles@latimes.com.
Photo Credit: AP
 

PIMCO on the bailout: "A handout to the fool"

If you're up for some pragmatic, pro-bailout, big-picture thinking, check out this interview with PIMCO economist Paul McCulley. I'll summarize and highlight, but encourage you to read it for yourself.

McCulley's take on real estate right now is that no-money-down, underwater homeowners are making a rational business decision by walking away from their mortgages (where have we heard that before? From readers of this blog).  "When you have no skin in the game ...  it’s eminently rational to go into early payment default."  This, McCulley argues, is creating a deflationary spiral in home prices.

One problem with a deflationary spiral like this, he argues, is that smart buyers (of homes) refuse to buy into it. Who wants to catch a falling knife? So prices continue to fall. But won't investors buy the homes as rental properties at some point? McCulley says prices are so far above that point that the decline would be hellish: "That would conceptually be your floor, but that is so far away from here that the economy would have to go through absolute hell to reach that point."

The solution? Like many others, McCulley looks favorably on the Barney Frank proposal, in which banks would write down problem loans rather than foreclose, and then the government would guarantee new loans at lower amounts, in hopes of keeping underwater buyers from walking away. Is it a bailout? McCulley says it is -- it puts taxpayers are risk in the likely case that the re-written loans go bad. McCulley: ".. The inequities smell to high heaven, and that is one of the huge problems in dealing with it. It runs against the streak of basic fairness in a lot of Americans. You’re going to provide a handout to the fool. The fool is going to be rewarded and I, the taxpayer, will be put at risk at the margin for that handout to the fool. When all I did was exactly what I was supposed to do. Where is the fairness here? It’s a hard question to answer."

Thoughts? Comments? Email story tips to peter.viles@latimes.com.
Hat Tip: TW

'Perversity' in Calabasas: More $$$ for Countrywide bigs

News item from the L.A. Times: "The top two executives of beleaguered Countrywide Financial Corp. will pocket $19 million in stock next week, according to a regulatory filing. It's the start of a series of multimillion-dollar payments expected to go to the pair before and after the company's pending takeover by Bank of America Corp."

More: "The largesse for Countrywide Chief Executive Angelo Mozilo and President David Sambol drew immediate fire from Sen. Charles E. Schumer (D-N.Y.), a member of the Senate Finance Committee, whose members have been debating the merits of a government bailout of consumers and mortgage lenders caught in the sub-prime meltdown.

"It's perverse [emphasis added] for Bank of America to reward the principal architects of the bad business practices that caused this housing crisis," Schumer said in a statement. "Bank of America will hopefully correct the bad practices Countrywide put in place. But enriching people who specialized in deceiving borrowers for the sake of their bottom line will not help that cause."

Also: "Bank of America Corp. will pay $28 million to Countrywide Financial Corp. to chief operating officer David Sambol to retain him as head of the merging companies' consumer mortgage operations."

The headline is a cheap shot, I'll admit -- anytime you're quoting Chuck Schumer in a headline, it's a low blow. But in all seriousness: Do you mean to tell me David Sambol is uniquely qualified to lead Countrywide after Bank of America buys it? I mean, I'm sure he's good at his job. So was Karl Dorrell, but UCLA found another football coach. So was Grady Little, but the Dodgers found another manager.

This is the Countrywide management team that says no one predicted the mortgage crisis; these are the guys who said last summer that Countrywide would benefit from the mortgage meltdown. Then they went out and lost $1.2 billion in the third quarter, lost $442 million in the fourth and sold the company for a fraction of its previous value. And this is the very best management team Bank of America can find?

Your thoughts? Comments? E-mail story tips to peter.viles@latimes.com

Tree of the week

As another week draws to a close, L.A. Land looks forward to a mellow spring weekend in Los Angeles. This is the season when trees flower by the tens of thousands, draping the urban forest in a sweet-smelling blanket. Pieter Severynen on one of the trees that makes this "fragrance time" in Southern California:

The Victorian Box – Pittosporum undulatum

"Early spring is fragrance time in Southern California: You step outside and if you are lucky you smell a strong orange blossom aroma in the air. If so, look around to see if a Victorian box is blooming nearby. For a few weeks the tree is covered with extremely fragrant tiny white flowers. Not a spectacular or a superlative tree, the Victorian Box instead is a dependable, quietly beautiful performer. A medium-sized, round-headed, evergreen tree from southeast Australia, which is also called mock orange, it grows fairly fast initially to 15 feet tall; then slows down to eventually reach 30-40 feet tall and wide. The glossy leaves are light green when they first emerge, gradually turning a darker shade of green. To 6 inches long, they are lance-shaped and wavy-edged. Thin brown bark covers the trunk. That sweet fragrance is a characteristic the tree shares with other members of the family, such as the Willow and Queensland Pittosporums from Australia and the South African Cape Pittosporum.

"While good as a closely planted screen or windbreak, the tree looks best when standing alone and pruned periodically to enhance its form. It loves full sun to partial shade and low-to-moderate water. Its drawbacks are hard, small, inedible, orange fruits with sticky seeds; abundant drop of leaves that may be allelopathic (poisonous to other plants); and roots that become invasive with age: Best to keep it away from pavement. But one major problem has emerged that overshadows all others: The tree becomes invasive in favorable climates. It has turned into a weed in parts of Australia, South Africa and California, and in Hawaii, the Caribbean and Pacific islands, where it invades disturbed soils. We would be wise to select safer substitutes in our new plantings."

Thanks, Pieter

E-mail Pieter:  plseve@earthlink.net
Thoughts? Comments?
Photo Credit: The city of Monterey Park

Philadelphia to suspend some foreclosure sales

Breaking news from Reuters: "Authorities in Philadelphia will suspend foreclosure sales of homes whose owners have fallen behind on adjustable-rate subprime loan payments -- potential relief for tens of thousands of struggling debtors."

More: "Sheriff John Green said he would halt sales of foreclosed properties in April and would seek a court order extending a moratorium for an unspecified period. His action follows a nonbinding resolution passed unanimously by the Philadelphia City Council on Thursday calling on Green to stop the sales to give borrowers more time to seek a settlement that would prevent them from losing their homes."

The story raises questions: First, is this action legal? If I'm running a large bank and I'm trying to get my hands on houses so I can put them on the market before they fall further in value, I might want the houses now. Second, will other municipalities follow suit? My guess is that the answers are no and yes, in that order.

Your thoughts? Comments? E-mail story tips to peter.viles@latimes.com.
Photo Credit: Philadelphia Mayor Michael Nutter, by AP.

Bloggers' lobby: Stopthehousingbailout.com

Recently I had a conversation with a fellow journalist about government efforts to ease the mortgage crisis. I was explaining to this person that mainstream media accounts of the issue very often ignore the anti-bailout sentiment that dominates blogs like this one. The journalist was confused. Opposition to a bailout? Here in liberal L.A.? On a blog on the L.A. Times website? "Your readers must be rich," she told me.

If I had been drinking coffee, I would have spit it out. I explained that, no, as far as I know, that's not the case. In fact, many of them can't afford to buy a house in Los Angeles, and they're upset (not the word I used) at government efforts to support inflated housing prices in one of the nation's least-affordable housing markets.

With that conversation in mind, I pass along an e-mail I received this morning:

"Along with NationalBubble.com and Patrick.net, I invite you to join our efforts to stop the planned government bailout of the housing industry. We believe that it is not the government's role (i.e., not the taxpayer's burden) to bailout irresponsible lenders, brokers, and borrowers.

"Accordingly, we have created a website www.StopTheHousingBailout.com (currently hosted on NationalBubble) that is designed to be a clearinghouse of information for a movement against the bailout. The website is in its infancy, but currently consists of a statement why the bailout is wrong and several links to efforts to stop the bailout (e.g., a petition, a pledge, anti-bailout apparel, links to contact political representatives, etc.).

"We ask that you consider joining forces with us to stop the bailout. A band of bloggers against the bailout can be a powerful political weapon. Moreover, a united front will present a newsworthy story for the media. By banding together against this ill-advised bailout, we can be heard beyond the readership of our collective pages and make a difference. Together, we can present a stronger message than the sum of our individual voices."

Your thoughts? Comment? E-mail story tips to peter.viles@latimes.com

How not to sell a house: The story of 3 Magnolia Drive

An update tonight on 3 Magnolia Drive, a foreclosed house owned by a bankrupt lender that was put up for auction on March 15 ... and still hasn't sold.

It's a nice enough house: 4 bedrooms, 3 baths, 3,238 square feet, in the Ladera Ranch section of Orange County. Built in 2003, it sold for $1.2 million in 2005, and went into foreclosure last year.

I reported last week that, at the auction at the Fairplex in Pomona, George and Kim Sarantos were the high bidders for the house at $705,000. Trouble is, the company servicing the loan on the house -- American Home Mortgage -- didn't accept their bid, and countered with a higher price, asking $40,000 more, according to Kim Sarantos.  After some haggling, and some frustration, she and her husband walked away.

"We just said, 'forget it,' " Sarantos said tonight. "It's not worth it to us."

American Home Mortgage -- which is in bankruptcy -- has the house listed on its website for $885,000. Because auction buyers agree to pay a 5% premium to the auctioneer, the true cost of the Sarantoses' bid was about $740,000. Because they felt they would have to put up even more money for some repairs and maintenance, they didn't want to pay much more than that.

"The house needs work, and by the time we pay all the closing costs, it's over $800,000, and it's just not worth it," Sarantos said. "This isn't going to be the last house out there for us. We didn't lose any sleep over it."

Thoughts? Insights? E-mail story tips to peter.viles@latimes.com.