How to avoid foreclosure

The headline in Friday's New York Times got my attention: "Pain of Foreclosures Spreads to the Affluent."   Problem is, the story doesn't come close to backing it up. In fact, the story explains that foreclosures are practically nonexistent in affluent Greenwich, Conn.

And that's the real story: The foreclosure crisis is not a crisis at all -- at least not yet -- in most affluent areas. This is obvious to many of you, but it's worth noting just the same. Take a look at this photo gallery of neighborhood foreclosure statistics in Southern California -- the trend is clear: Older, established, wealthy neighborhoods are practically foreclosure-free zones.

First-quarter foreclosure totals from a few notable areas:

Beverly Hills:   7
Calabasas (pictured): 6
Hollywood: 15
Santa Monica: 9
Venice: 0

Lancaster: 746
Palmdale: 729
San Bernardino: 585

Your thoughts? Comments? E-mail story tips to peter.viles@latimes.com
Photo Credit: Morning mist in Calabasas, submitted to Your Scene at latimes.com by Andie.

Comments

[anonymous]

no place is immune. bh, samo... downfall in the better neighborhoods is simply a function of time. peter viles has it wrong when he says better 'hoods will hold up (sorry peter, you're a great blogger, hopefully a pu-prize journo - but there are brighter minds than you and definitely brighter than me).

but my bitter rental bile isn't for peter. it's for lefty, shockg and all the other RE Agent bubble deniers. Puckhead & leavinla - having trouble telling if you are on the bitter savers' side or on the bubble prolonging cheerleaders' side from your blogs.

and i've seen several mikes. 1 is a bit of a racist, unfortunately. another was a guy who mocked savers for not getting into RE, suggesting they would be impovershed forever.

in anycase. there is no containment. there is no "good neighborhoods that this doesn't apply to" it is a connected system. and most of all, there is no end in sight. the griping savers like myself are cheering RE deflation, but credit retraction is going to hit us all - hard.

regular predictions of a removal of 10 trillion in credit (and losses in equity of 2 trillion leading to this - not just RE deflation, but the various paper behind it) is going to kill job creation, new business for companies, state & local services, etc.

RE will deflate 75% in bubble cities. This is great, we'll be able to afford a home... But we'll be living in that home wearing cheap polyester, counting the pennies we spend on gas, and drinking the oily 'Victory Gin' Orwell describes in 1984.

Save your pennies.

[Laker]

I somewhat agree. But what this argument fails to consider is the "food chain" effect in housing. If you take one piece out, the whole (ponzi) pyramid will collapse.
Prices will get down 40-50% from peak in ALL areas of LA. However, areas with high foreclosure rates will get there much faster as simply banks will be more "willing" to slash prices to sell. However, at place like BH, westside, etc with less foreclosures so here only the owners will need to reduce prices and only the ones that need to sell will do that...as time passes, more will need to sell from various reasons including Option ARM(agedon) that only due to start in 2009.
Therefore, these good areas will reach the same relative bottom but it will take much longer time. AKA japan 15 years of declines...

[FreedomCM]

What about Ladera Ranch, in The OC?

Home to many mortgage hi-flyers and others wanting to live the lifestyle in million dollar tract houses.

And to the highest rate of foreclosures in The OC, 1 in 15 households last quarter.

[E]

The "Merely Rich" have enough assets to be bled slowly. The banks will bleed them dry first...and then foreclose. Give it time. Plenty of time bomb mortgages out there I'm sure. Be patient.

WRT foreclosures in the "bad parts"

Well...you know the saying...you can't get blood from a turnip. Kick em out and sell the house.

[LA-renter]

Peter, I think you misrepresent the article.

(1) Sounds to me like the "good" places have cracks too. The difference seems to be options. As "affluent" implies, people in trouble have more resources to drag out a troublesome situation.

(2) I suspect that place like Greenwich did not see big speculative turnover. Or, did they? (I really do not know.) Price may have risen with the bubble, but did volume? In other words, are there fewer instances of speculative buying in Greenwich.

...What completely confuses me is how just a couple of years ago "experts" talked about limited supply. Now, we hear that there is a massive surplus of housing...

Where did all the people go missing?... Area 51?

[CD]

Did you check the NOD,s ? That tells you a different story........

[LeftLA]

Excellent photo!

[baruza]

While it may not pop up in foreclosures, the Greenwich real estate market isn't exactly healthy either. Inventory has ballooned, and there's a ton of $5+ and $10+ million homes on the rental market, like Jimmy Cayne's. Between Bear Sterns and a number of hedge fund failures, they are definitely feeling it. Greenwich will never see mass foreclosures though, just price declines. There's a lot of equity cushion there.

[MyLessThanPrimeBeef]

It's never too early in the morning for Pink Martini's 'Hang On, Little Tomato.'

All you lil' tomatoes out there, just hang on.

[El Guapo]

I'm sure the level of foreclosures (in the high end) won't ever get to the level in say, Lancaster. But, I believe it's coming. The well to do have more resources and a longer rope before their loans adjust. But adjust they will. I also believe there are many "posers" in the high end. Someone who could afford Redondo stretched to get into Manhattan Beach, etc.

The run up in prices was pretty uniform all across SoCal and the demographics and incomes didn't match that run up. So, overleveraged is overleveraged.

My prediction: by year's end, this last pillar of denial (that the nicer neighborhoods will be relatively unaffected) wil be abandoned. I'm not talking about the $5M+ range where you have to be a pro athelete to buy, but anything up to $2M range.

[Rich]

In the new media world where nobody pays reporters to hit the pavement any more, they all seem to be fudging it. There have been more than a couple of articles recently in various respectable syndicted sources where the headline begins to talk about how the housing crisis is hitting middle America, then the article goes on to describe people with upper-class incomes and way to much house and property who are clearly not "middle America" at all.

We suppose that some upper-income borrowers who took out ARMS in order to get some loose equity may get hit with foreclosure, but so far there's not even good anecdotal evidence showing it to be happening. And "jingle mail" is still in the realm of urban legend, despite how much it's been written about...

[Hugh Jorgan]

Reading your blog, and seeing the advertisement for $2 MILLION "residences" in Paradise Valley, just boggles the mind. Does anyone at latimes.com ever pay attention to where they place the ads?

[Daniel A]

It is just taking a bit longer to catch up the affluent. Usually they have stronger reserves to keep them afloat a bit longer but it will catch up to them, not to the extent of foreclosures in Palmdale but the rate will increase.

[mike]

as i said last night and will say again. THIS PROBLEM DOES NOT AFFECT LOS ANGELES. if you think los angeles is affected, you are a fool. thats right a FOOL!!!!!!!

[peter m]

Foreclosures, the numbers of or lack of in each LA zip is a symptom , though a major one, of the complete total recessionary collapse here in CA, which has spread from being just a RE bubble collapse to a systematic total statewide economic collapse, lead by a sharp decline in consumer spending except for gas and food, the necessities. CA unemployment rate is'officially' at 6.2 but the real hidden rate is much higher, probably around 8-9%: in many inland counties such as in central valley or the IE it is over 10% and escalating.
Hi-paying Jobs and a robust economy are a key prop to maintaining those high coastal fancy LA prices; once this prop is pulled those overpriced 2/1, 800 sq ft , million $ Santa Monica/venice beachside shantys will collapse in a heap down to .5 mil.
Last Re bubble collapse in 1990-1996 westside and South bay home prices / zips went down average 30-40% neg yoy-in real not nominal prices.
It actually took about 3 yrs from 90 to 93 for this drop to occur, followed by 3 yrs of flatlined prices.

This current Recessionary collapse will make the last one look like a sunday rose garden walk . Credit is dissappearing fast out of the economy. This looks to be a sharp 1 or 1.5 yr recession about a s bad if not worse than in 1981.

[Joseph... the Real Estate Guy]

Peter,

What's your point?

[Joseph... the Real Estate Guy]

Peter,

Put that VODKA away!

[Phyllis Harb]

There are so many levels to this housing downturn, but when keeping track of how much the price of necessities have increased, you begin to understand that anyone on a tight budget, can't continue to aborb these day to day increases. The addiontial $100+ a month in gasoline costs has to come from somewhere.

The more affluent can absorb these price increases, perhaps they will have one less restuarant meal a month.... But they can still make their house payment.

[No Downside]

Further proof that nicer areas, i.e., westside, beverly hills, beach areas are all immune to the housing problems facing greater LA. There is no ceiling on how high these prices can go.

[Cal]

The lower density helps reduce the foreclosures per zip and the high end can afford to hold on longer. As the move up market breaks down it will affect higher up the food chain more. These markets, while highly desireable are much smaller and therefore affected much more by changes in demand.

Sales for Q1 (condo/sfh)
Beverly Hills : 67
Calabasas : 44

Lancaster : 366
Palmdale : 315

[adoptivefather]

Why will Los Angeles real estate hold up better than other areas? Because the US is about to enter a phase of mass internal migration. Oil prices will force people to move toward strategic centers and Los Angeles is the ultimate in that category. NYC also.

Few people realize that oil production in the US is declining sharply and we are becoming ever more dependent on foreign oil. The 20,000,000 illegal aliens that are now in the US increase foreign oil dependency by almmost 1.5 million barrels of oil per day.

Take a look at Alaska oil production history below. Next year it will be lower by another 40,000 barrels per day. Who is going to go without?

Trans Alaska Pipeline System throughput (equal to daily North Slope production rates since no storage exists on the TAPS system), actual average per day:

1977 575,897 bbl. (195 days)
1978 1,087,695 bbl. (365 days)
1979 1,281,580 bbl. (365 days)
1980 1,516,213 bbl. (366 days)
1981 1,523,472 bbl. (365 days)
1982 1,619,566 bbl. (365 days)
1983 1,646,188 bbl. (365 days)
1984 1,663,487 bbl. (366 days)
1985 1,780,512 bbl. (365 days)
1986 1,823,110 bbl. (365 days)
1987 1,963,458 bbl. (365 days)
1988 2,033,082 bbl. (366 days)
1989 1,885,102 bbl. (365 days)
1990 1,793,292 bbl. (365 days)
1991 1,822,396 bbl. (365 days)
1992 1,746,893 bbl. (366 days)
1993 1,619,787 bbl. (365 days)
1994 1,587,177 bbl. (365 days)
1995 1,523,120 bbl. (365 days)
1996 1,435,810 bbl. (366 days)
1997 1,334,507 bbl. (365 days)
1998 1,206,839 bbl. (365 days)
1999 1,078,146 bbl. (365 days)
2000 999,202 bbl. (366 days)
2001 992,139 bbl. (365 days)
2002 1,000,916 bbl. (365 days)
2003 993,000 bbl. (365 days)
2004 935,108 bbl. (366 days)
2005 891,104 bbl. (365 days)
2006 759,081 bbl. (365 days)
2007 740,170 bbl. (365 days)

[puckhead]

Wow, I’m getting called out by some loser bitter renter who has not figured out how to make money to buy a house and who’s hording pennies, LOL’s! One thing I’ve learned from investing is to be humble and to let what your instincts are telling you and to not tell your instincts what you want to see. Whenever someone says “I KNOW” too many times, that person knows sh%t. Personally, I don’t know squat about what’s going to happen to the Westside or the South Bay. I’m not looking to buy a house there and I don’t know enough about the specifics there to make any kind of prediction, especially one where it starts with “I know”. I currently own a house in Pasadena for 10+ years and is about to be paid off. I keep my eyes open in my neighborhood and talk to my neighbors enough TO KNOW that there are not many houses for sale in my neighborhood and the ones that do go on the market stay on the market longer, but they do sell, for prices lower than the previous year. Down market? Yes. Apocalyptic? No. Gee, that must make me a RE agent or someone who puts their head in the sand. I also know that I am actively looking for another house in South Pas or San Marino and that supply there has gone from pitiful to merely bad and prices have gone from way way too high to just way too high. Am I seeing any weakness in those markets? Yes, but not much and given the desirable locations and good schools and lack of decent houses and abundance of people with money, I don’t see those two cities falling off a cliff. Such blasphemy!!!!! Such denial!!!!

I love your perma bear prediction of the economy and with it, the stock market. Don’t tell me, you were hoarding food after the dot.com bust and 9/11 just as now. Me personally, I was holding my nose and buying undervalued stocks and bonds of companies and it’s paid off. I say the same thing after the Bear Stearns shakeout and I’ve been buying stocks on weakness. Am I going to say I know I’m right? Hell no, the market has humbled me enough for me never to say that, but I like my chances. Anyone can bitch and moan all day about things. If you are so certain of an economic downturn than buy gold, short the dollar and short the market at today’s level. You can make money in a down market also, or are you too busy being just bitter?

[Tim K.]

Important to note:

Foreclosures implies prices lowering.
Lack of foreclosures does not mean prices are NOT lowering. It just means that those residents can afford to sell at lower prices than the last 5 years and still be okay financially.

Prices are coming down. Doesn't require foreclosures to do so, although foreclosures often help accelerate the process.

[adrian]

I remember somebody saying that a house west of La Cienega won't hold the price just because is on Westside while the one across the street, on Eastside is bleeding value.
She was right, it's happening but at a slower pace and in the end, they will leverage and spread the virus further west.

[jb]

puckhead - why buy another house? do you really see an upside that is greater than your other investing opportunities? I am flat out looking elsewhere cause I think housing is dead.