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 The answer to the earlier pop quiz on the house at left: The Zillow Zestimate for this three-bedroom, one-bath home in Santa Monica 90405: $917,000.
Of course, that doesn't mean the house is worth that much, or would sell for that much. It just means that, based on the most recent comps in that neighborhood, and the size of the house -- 933 square feet -- and the lot, that's the Zillow computer's best bet.
When and if prices start to fall in this neighborhood, the Zestimates will fall too.
Your thoughts? Comments? E-mail story tips to peter.viles@latimes.com
Photo Credit: L.A. Times
As expected, the Federal Reserve lowered interest rates again today, which in a normal recession-fighting cycle is a simple story: "The Federal Reserve today lowered interest rates, hoping to spur new borrowing by businesses and consumers."
That's not the story this time around. While the Fed is cutting rates, banks in many cases are making it harder to borrow. They have no choice — they've made so many bad loans that they can't afford any more boneheaded moves. The Fed isn't trying to help consumers; it's trying to save the banks.
Lou Barnes, my favorite Fed-watcher: "... the financial system is still too busted to function properly, credit is extremely scarce and expensive, the system is terribly vulnerable to recession-cycle credit loss ahead. ... How can loans be scarce with the Fed hosing loans into banks? Because system capital is impaired. There isn’t enough capital to support current loans outstanding, let alone new ones."
Cutting rates may be the Fed's best option, but that doesn't mean it's working. There is a cost, too, to the rate-cutting: a weaker dollar, rising import prices (oil and gas), the threat of more inflation, the kick in the pants to savers.
If you don't think credit is getting tighter, ask someone with a home equity line of credit. I continue to hear from homeowners who have had their HELOCs frozen or reduced.
This today from a recent L.A. home buyer whose credit line was frozen two days ago: "We bought our house last February right in downtown Culver City, got a good price and went for one of the fixer-uppers on the street (due to the state of the house aesthetically we were able to get a good house on the low end of the spectrum of prices for houses in our neighborhood). We put 20% down too which you would think would have prevented any of this from happening in the first place. We were planning on having that HELOC liquid there in case we needed it with the renovation we are planning for our kitchen this year...which will of course only ADD equity to the house. According to their 'reduced' value of the house we still actually have over $80,000 in equity (calculated by taking their low-ball estimate and subtracting from that the outstanding principal on the mortgage). ... I tried talking to the bank over several conversations over the phone and basically they do not look at, nor care to hear about, the actual equity on the house."
Your thoughts? Comments? E-mail story tips to peter.viles@latimes.com.
 I thought I'd give Redfin's new foreclosure listings database a spin, so I plugged in the ZIP for Highland Park (90042) to see what would pop up. It's good stuff — it shows six bank-owned properties, and the information on each listing is pretty extensive, especially for a free, no-registration service. Highlights:
4210 Via Arbolada #216
Last sale: June 2006, $460K.
Now listed: $329,900
6420 La Riba Way
Last sale: Oct. 2004, $325K
Now listed: $285K
6140 Mesa
Last sale: Sept. 2006, $525K
Now listed: $309K
719 Milo Terrace
Last sale: 1995, $160K
Now listed: $380K
5105 Stratford
Last sale: 2001, $170K
Now listed: $429,900
Put me down as a satisfied user. Would like to hear your thoughts on this one, and what other searches you like, and whether you have to pay for them or not.
Photo Credit: Street scene in Highland Park, L.A.Times
Look carefully at the photo, there is a quiz below.
One of the most popular topics on this blog is the debate over what will happen to prices in higher-cost neighborhoods. To date, they have generally held their value better than greater Los Angeles, and have not suffered large numbers of foreclosures. That said, reader e-mail from "Someday the Ants Will Eat Grasshoppers":
"Your readers keep asking why the
prices are holding up on the high end Westside properties. I’m not sure what
they’re looking at, but I have been tracking prices in Westwood, lower
Brentwood, Santa Monica (north of the 10), and Pacific Palisades every day for
past 3 months. I look at every house for sale under $2M with 3 bedrooms or more,
and I look every day. Really.
"Here are the relevant numbers
(calculated from my daily Redfin downloads for those neighborhoods and that
price range):
"The average number of listed homes
dropping their asking price per
day: 1.15
"The average size of any one price
drop when it occurs: $53,090.90
"The average drop across all 50-60
properties meeting the search criteria per
day: $1,017.58
"Ratio of new homes being listed to
homes being sold: 3.48.
"So…Westside sellers are constantly
dropping asking prices, and often in large amounts (the largest I saw since Feb
was $400K). New properties are being listed for sale over three times more often
than listed properties are selling. With asking prices for these sub $2M
properties dropping about $1K per day, only the very rich would want to buy now.
I mean, if you are in that market, that’s like putting $30K per month in your
pocket just for waiting.
"People have observed that comps are
not lowering. However, the average selling price is about $200K less than the
average asking price in these neighborhoods right now. The comps are slow to
decline simply because there are very few sales right now. No one (with good
reason) seems to be buying. Eventually the transactions will happen, and the
comps will adjust. Everyone needs to be patient, although frankly, I wish
someone would buy now and then to help accelerate the lowering
comps.
"I hope you run this story
(or at least selected parts of it), because many of the high earners in your fan
club get less attention, and certainly less sympathy, about the difficulty of
getting into the market. They deserve to know that their lot will change, too,
and their hard work and patience will pay off. Life is
fair."
Thanks, Someday.
Now, as promised, the quiz. The house pictured is a 993-square foot, 3-bedroom, 1-bath in the 90405 ZIP code of Santa Monica.The current Zillow Zestimate is:
a) $599,000
b) $714,000
c) $805,000
d) $917,000
e) $1.06 million
Your thoughts? Guesses? Email story tips to peter.viles@latimes.com
Photo Credit: L.A. Times
 A Washington think tank is warning that housing prices are falling at an accelerating level, destroying wealth at a pace that will cost the average homeowner $85,000 in lost wealth this year alone.
The projections by the Center for Economic and Policy Research are based on the numbers in Tuesday's Case-Shiller home price index, which showed accelerating price declines in most big cities.
The annual rate of price decline over the last quarter was 24.9% in the 20-city index and 25.8% in the 10-city index," the center said in its Housing Market Monitor today. "At this rate of price decline, the excesses of the housing bubble will have largely disappeared by the end of the year. At the same time, the price decline implies an incredibly rapid loss of wealth. In real terms, the rate of price decline in the 20-city index would imply a loss of almost $6 trillion in real housing wealth over the course of the year, an average of $85,000 per homeowner."
I'm a so-so student of economic history, but I'd have to bet that, even adjusted for inflation, the only time that many Americans have lost that much wealth in a short period of time would have been during the Great Depression. I'm not even sure it happened during the Depression. (I understand: This hasn't happened yet; it's only a prediction.)
Repeating again: The CEPR says prices are falling so rapidly that the bubble will be gone by the end of 2008, but the loss of housing wealth will be massive.
Your thoughts? Comments? E-mail story tips to peter.viles@latimes.com
Photo: Getty Images
 A quick update on Zillow's entry earlier this month into the mortgage business, as a go-between linking would-be borrowers to would-be lenders. Zillow marketing guru Spencer Rascoff writes into the blog to report: "Zillow Mortgage Marketplace is off to a great start. There have already been almost 20,000 loan requests submitted by borrowers and over 56,000 loan quotes submitted by lenders. ... Over 4,700 of those loan requests have been in California and over 2,300 in L.A. ... Overall, we're thrilled with the results so far. Borrowers are benefiting from the anonymity with which they can submit loan requests, and lenders are loving the free leads."
Relatedly: Redfin, the online, discount brokerage, relaunches its site Wednesday with what it claims is a first: free listings of foreclosed houses. From Redfin's press release: "Many foreclosed properties can be bought directly from the bank prior to their being listed by a broker in the MLS, but buyers can only see them on most websites if and when the bank hires a broker. Redfin users can see the foreclosed properties as soon as the bank takes possession, usually after an auction fails to attract a buyer willing to pay the amount owed on the mortgage."
More: "The foreclosed properties are an especially valuable asset, because Redfin is now the only major site to offer actionable foreclosure data free of charge. Other sites show foreclosures but then ask the user to pay to see their addresses; often these listings are marketed as foreclosures when in fact they are in pre-foreclosure, where the owner has received a notice of default but is still able to avert foreclosure. Redfin shows the bank-owned (also known as Real Estate Owned or REO) foreclosure properties that are actually for sale, including their full address and bank contact details. Redfin does not show foreclosure properties scheduled to be sold at auction."
Your thoughts? Comments? E-mail story tips to peter.viles@latimes.com.
Old conventional wisdom: The new "junior jumbo" mortgages — in the $417,000 to $730,000 range — are going to lower interest rates, lure new buyers, and breathe new life into the California real estate market.
New conventional wisdom: The "junior jumbos" are a major disappointment. They aren't that cheap, they are hard to get, and they're not helping very much.
The New York Times reports tonight: " ... the effort to make it easier to get jumbo mortgages — loans over $417,000 — has yielded frustration and disillusionment. ... many prospective borrowers and their mortgage brokers say the new loans are either not available or the rates are far higher than they expected. Relief, they say, has been replaced by grief. The program 'is so much of a failure that it’s really unbelievable,' said Daniel M. Shlufman, president of the FCMC Mortgage Corporation in Clifton, N.J.
Numbers: A Santa Ana mortgage broker is quoted saying he can get a rate of 5.75% for a loan of $417,000; but if the loan is just a little bit higher — into "junior jumbo" territory — rates jump to 6.99%.
Your thoughts? Comments? E-mail story tips to peter.viles@latimes.com.
 This blog voted thumbs-down on the ultimately failed attempt to change the name of El Porto to, um, something else. (It's still El Porto here, thus it was a failed attempt.)
This is a slightly different issue, and I seek your input: If you're visiting the coastal city in Ventura County that's home to the San Buenaventura Mission, are you visiting:
The city of Ventura?
Or...
The city of San Buenaventura?
And which name would you prefer?
Here's coverage from the Sunday Real Estate section of the L.A. Times: "Ventura is in the process of reinventing itself with a major downtown makeover, combined with moves to brand the city as a center for the arts. ... As part of its new image, more use is being made of the city's original, official and more romantic name, San Buenaventura, especially to describe the central downtown area. That's also home to the San Buenaventura Mission, the ninth of California's 21 missions, founded in 1782 and completed 27 years later."
Your thoughts? Comments? E-mail story tips to peter.viles@latimes.com
Photo Credit: A 2,500-square-foot farmhouse on Main Street in San Buenaventura, with a smaller home also on the lot, listed for $1.475 million. By Anne Cusack, L.A. Times
| Month |
L.A. Index |
monthly % change |
yoy % change |
| April 2007 |
263.4 |
-0.5% |
-2.2% |
| May 2007 |
263.1 |
-0.1% |
-3.3% |
| June 2007 |
262.1 |
-0.4% |
-4.1% |
| July 2007 |
260.8 |
-0.5% |
-4.8% |
| Aug. 2007 |
258.1 |
-1.1% |
-5.7% |
| Sept. 2007 |
254.8 |
-1.3% |
-7.0% |
| Oct. 2007 |
249.5 |
-2.1% |
-8.8% |
| Nov. 2007 |
240.4 |
-3.6% |
-11.9% |
| Dec. 2007 |
233.0 |
-3.1% |
-13.7% |
| Jan. 2008 |
224.4 |
-3.7% |
-16.5% |
| Feb. 2008 |
214.8 |
-4.3% |
-19.4% |
Source: Case-Shiller S&P Home Price Index
 The monthly Case-Shiller numbers -- the ones based on repeat sales of the same house -- show L.A. housing prices fell by 19.4% over the past year, the L.A. Times reports at this hour.
The latest Case-Shiller report, for February, indicates Los Angeles prices are falling at an accelerating rate, dropping 4.3% from January to February. Of the nation's 20 larges cities, only San Francisco (5.0%) and Las Vegas (4.8%) experienced steeper price declines.
"There is no sign of a bottom in the numbers," said David M. Blitzer, chairman of Standard and Poors' index committee.
If you want to know where the housing bubble was biggest, just look at the cities now suffering the biggest declines:
1) Las Vegas down 22.8%
2) Miami down 21.7%
3) Phoenix down 20.8%
4) L.A.-Orange County down 19.4%
5) San Diego down 19.2%
Your thoughts? Comments? E-mail story tips to peter.viles@latimes.com
Photo credit: Associated Press
The off-again, off-again ground-breaking for the big Grand Avenue project in downtown Los Angeles has been delayed again. Now delayed until early 2009, if construction financing can be arranged. That is a big "if."
From LATimes.com: "The developer of the massive Grand Avenue project said Monday that completion of the $3-billion redevelopment effort will be delayed until 2012 because of difficulty in obtaining construction loans amid the real estate downturn. ... Bill Witte, head of Related California, said he now believes that construction will begin in the first quarter of 2009 and emphasized that the project is not in jeopardy."
From LA Downtown News: "Initially, Related intended to begin construction on the project in October 2007, but the schedule has been pushed back multiple times." The delay is a new lease on life for a previously doomed parking garage that was closed and scheduled to be demolished last month, but is now likely to reopen, LA Downtown News reports.
Thoughts? Comments? E-mail story tips to peter.viles@latimes.com.
A lull in the market decline? A sign we are nearing the bottom? Or a false signal? You tell me: Median listing prices were unchanged for the second week in a row, and inventory of for-sale homes in greater Los Angeles rose only modestly, according to Housing Tracker's analysis of MLS listings.
Highlights:
--Median listing prices were unchanged over the past week at $450,000, a decline of 17.4% from year-ago levels.
--Inventory of homes and condos for sale increased to 42,728, an increase of 14.4% from year-ago levels. A year ago, inventory was building rapidly; this year it has been flat to slightly lower since February.
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%)
3/08 $464,900 (down 15.5%) 42,098 (Up 31.4%)
3/31/08 $459,900 (down 16.2%) 42,038 (Up 27.6%)
4/7/08 $455,000 (down 16.7%) 42,482 (Up 23.3%)
4/14/08 $450,000 (down 17.4%) 42,428 (Up 19.6%)
4/21/08 $450,000 (down 17.4%) 42,430 (up 16.7%)
4/28/08 $450,000 (down 17.4%) 42,728 (up 14.4%)
Your thoughts? Comments? E-mail story tips to peter.viles@latimes.com
 You folks asked some good questions. As is my custom, I'll answer the easy ones:
1) Mike at 12:55 pm asked, " why do you sometimes post in 5 minutes and sometimes in 3 hours??"
Thanks, Mike. If I am sitting at the computer at work and doing nothing else, I post comments very quickly. If it is 7 p.m. and my 4-year-old son yells at me, "DADDY! Turn OFF the computer, let's play baseball!" Then I turn off the computer and play tee-ball in the back yard. Seriously, it's just me moderating comments. I have other duties at The Times, and in life.
2) Uncle Billy at 12:56 p.m. asked, "Did you have an inkling of how different our real estate market would become when you started this blog?"
Thanks, U.B. I thought the market would weaken, but not this quickly, and not this unevenly. I did not see the collapse in the mortgage industry coming. I would have guessed prices in better neighborhoods would be lower right now.
Read more Ask Pete, Chapter 2: Your questions, answered »
 I now understand Sam Zell's strategy to revive newspapers: He's going to provide all the content himself. Here's Zell's analysis of the housing market today, filed by Tom Petruno on his Money & Co. blog:
"What this country needs is a cleansing" in the residential market, Zell said. "We need to clear out all of those people who should never have been in houses in the first place and who for sure shouldn't be getting sympathy." He blamed another Sam -- Uncle in Washington -- for encouraging homeownership at any cost in recent years. The rise in the U.S. homeownership rate from 63% to 69% during the boom was totally unjustified, Zell said, other than by "the political impetus of, 'Let's put more people into homes they can't afford.'"
Your thoughts? Comments? E-mail story tips to peter.viles@latimes.com.
Photo: Charles Rex Arbogast / AP
 News worth noting: Eli Broad, who co-founded KB Home, said today he expects home prices to drop another 20%.
From Bloomberg News: "'I don't think we're anywhere near a bottom in housing,' Broad told Bloomberg TV at the Milken Institute Conference in Beverly Hills, California. 'We're going to have a big inventory of unsold, unoccupied homes that's going to take three or four years to clear out.'
More: "'People were using their home equity as really an ATM machine,' Broad said.... 'They were spending more money than they were earning by taking equity out of their home. That couldn't go on indefinitely. We're now paying a price for that.'"
Some quick math: A 20% decline in existing median sales prices in Los Angeles would push prices down from their current level of $440,000 to $352,000. That would be a decline of $198,000, or 32%, from peak pricing of $550,000, reached last summer.
Your thoughts? Comments?
Photo of new homes in Sylmar / Los Angeles Times
 Back by popular demand: Monday afternoon ask-the-blogger Q & A. You ask the questions, I pick the easy ones and answer them on the blog later today.
So bring 'em on: Questions about the L.A. housing market, the economy, the news media, etc.
Ground rules: Submit your questions in the comment section by 3 p.m., I'll answer 10 or 12 of them by 5 p.m. today.
Photo credit: Los Angeles Times
 Breaking news from the Census Bureau: The number of vacant homes for sale in the United States inched up to 2.3 million in the first quarter, the highest level ever measured, and an ominous sign for home-sellers and home builders.
From Reuters: "The share of vacant U.S. homes rose to a record level in the first
quarter, the government reported on Monday, with homeowners finding it
increasingly difficult to find buyers in a collapsed market and more
homes in foreclosure."
From the AP: "Global Insight economist Patrick Newport called the report 'worrisome.' 'The
inventory problem has not gotten any better,' Newport said. Although
glut-fighting home builders have reined in construction, 'They still
will have to cut back more.'"
The number of vacant, for-sale homes has been rising steadily for five years, climbing from 1.2 million in the first quarter of 2003 to 2.3 million in the first quarter of this year. The percentage of homes that are vacant and for sale has also been rising, from a recent low of 1.5% in 2001, to 2.9% in the first quarter. Those percentages do not include homes for rent.
Federal Reserve Chairman Ben Bernanke has warned that the current surge in foreclosures threatens to add more inventory to an already crowded market. In a speech in March, he said, "At the national level, the rise in expected foreclosures could add
significantly to the inventory of vacant unsold homes--already at more
than 2 million units at the end of 2007--putting further pressure on
house prices and housing construction."
Your thoughts? Comments? E-mail story tips to peter.viles@latimes.com.
Photo: New houses scheduled to be auctioned in Gardena.
 From a front-page story in today's LATimes about the impact of the slowing economy on younger workers: "Dulce Maya is worried that she won't be able to squeeze by much longer. The 27-year-old restaurant manager bought a three-bedroom, two-bath house in Fontana for $350,000 two years ago with a $5,000 down payment and an adjustable-rate mortgage.
"This year, her $2,300 monthly payment will probably rise to $3,300 and her work hours were recently cut because business is slow. Maya has asked her bank to lower her payments so she can keep her house, which is now valued at $200,000, and expects to hear back in the next few weeks. If it doesn't agree, she says, she may have no choice but to hand the bank the keys.
"'I don't know what happens next,' Maya said. 'I may try and rent an apartment for around what I'm paying, but rents are going up too.'
Random thoughts and bloviations:
1) The estimated decline in the value of the house is 42%. In two years.
2) Is this mortgage salvagable? And should it be saved? The Dodd-Frank plan, as I understand it, would offer the lender the following deal: The government will guarantee a new mortgage at 85% of current appraised value, or $170,000. That would certainly make payments more affordable: roughly $1,100 per month for a 30-year-fixed at 6%. This appears to be a pretty good deal for the homeowner.
But it raises questions: Is a lender going to take $170,000 for a $345,000 loan? (It's more complicated than that: There are probably two lenders involved.) And what are the neighbors going to think? I'm talking about the neighbors who have just dropped their cable TV service and taken part-time work so they can pay their $3,300 mortgage on a similar house. Kinda makes them feel pretty silly if the house can be had for one-third of what they're paying.
3) In a long newspaper article about economic trends, the best anecdote is often at the bottom of the story. This one was.
Your thoughts? Comments? Feel free to correct my interpretation of the Frank bill. E-mail story tips to peter.viles@latimes.com.
Photo Credit: LATimes.
 Always welcome after a week of dreary news on housing and the economy: Pieter Severynen's "Tree of the Week." Enjoy.
The Blue Gum — Eucalyptus globulus
"After the 1849 Gold Rush, transpacific shipping was booming. Seeds of the Australian Blue Gum Eucalyptus from Southern Victoria and Tasmania were imported in San Francisco in 1853; by 1860 the young Blue Gums had reached 50 feet. Californians started planting and hyping the incredibly fast-growing trees; thousands of newly planted acres were sold as investment property. In 1876, state Sen. Ellwood Cooper promoted their use in ‘Forest Culture and Eucalyptus Trees,’ in which he wrote about his experimental plantings near Santa Barbara. But the discovery of oil in Pennsylvania in 1859 led to the gradual replacement of wood with oil for industrial energy use. When it also became known that weed from young Blue Gum trees makes good firewood and pulp, but poor lumber because it is very difficult to cure, the instant-gratification plantation bubble burst. Still, we are left in Southern California with two thousand miles of Blue Gum hedges that protect citrus orchards from cold winds and we see thousands of older ornamental specimens in our cities.
"The evergreen Blue Gum grows into a 50- to 160-foot-tall, 30- to 75-foot-wide tree with massive trunk and braches, impressive in stature but sloppy in foliage. Juvenile leaves are oval and silvery blue-gray; the 6- to 12-inch-long mature dark gray-green leaves hang down vertically. All leaves are so full of ethereal oils that you can actually smell the tree some distance away (but the crushed leaf smell test is fun). Small, creamy white flowers with numerous stamens appear during November–April, after the cap (Greek: eu –completely; kaluptos – cover) has fallen off the little cup that contains the flower; the subsequent almost inch-wide waxy fruit capsule is covered with a button-shaped top. Long brownish-gray strips peel off the smooth yellowish bark. Thick layers of messy leaves, seeds and bark strips congregate below the tree, prevent other plants from growing and easily catch fire. The tree has a nasty habit of occasionally dropping thick branches without any seeming provocation or warning.
"Notoriously fire-prone because of its ethereal oils, the tree usually resprouts after a fire. It is aggressively invasive in coastal Northern California, but barely here in the Southland because our climate is too dry. Blue Gum is one of the most widely planted trees worldwide for the production of hardwood, pulp, firewood, honey, and the essential oils contained in the leaves. These are used in the manufacture of cleaners, deodorizers, food, insect repellents, and many medical purposes. For our urban forest we have far better choices available among the 600+ Eucalyptus species than the Blue Gum, although during the last 10 years many new Eucalyptus pests such as the sap-sucking, aphid-related psyllids have become established here. Thank UC for continuously introducing small predatory wasps to fight these pests the natural way."
Thanks, Pieter.
E-mail Pieter: plseve@earthlink.net
Photo Credit: L.A. Times file photo from 2000 shows Jeff Zoumbaris, forestry services manager for Burbank, stretching his arms to show the relative diameter of a eucalyptus tree.
 There is a lively debate on this blog and elsewhere about whether the foreclosure crisis will make its way from the hardest hit areas — the Palmdales and Lancasters — into the center of Los Angeles. My suspicion is that the eye of the housing storm won't move much. Yes, the economic weather will worsen all over L.A., foreclosures will rise. But the most severe economic damage will take place in newer, recently built, far-flung communities that have already been hammered. And not just because of the bursting of the housing bubble.
Consider the effect of $4 gas. A 110-mile round-trip commute gets very expensive in a hurry. Consider that fast-growing areas such as the Inland Empire have suddenly lost a major source of economic vitality: home-building all the economic activity it creates and sustains.
But consider something bigger: the possibility that Americans are slowly deciding they don't want to live in far-flung suburbs and exurbs any more. This is the central argument of an essay by Christopher Leinberger in last month's Atlantic magazine titled "The Next Slum?" The next slums, Leinberger asserts, will take shape in soon-to-be neglected suburban cul-de-sacs: " ... many low-density suburbs and McMansion subdivisions, including some that are lovely and affluent today, may become what inner cities became in the 1960s and ’70s — slums characterized by poverty, crime, and decay."
Why? Leinberger sees a growing preference for "walkable" neighborhoods closer to urban centers, and closer to mass transit. He sees a glut of large-lot houses — he quotes one academic who sees "a likely surplus of 22 million large-lot homes."
Then what? Collapsing prices, and a decline in home ownership in wounded suburbs: " ... the fate of many single-family homes on the metropolitan fringes will be resale, at rock-bottom prices, to lower-income families — and in all likelihood, eventual conversion to apartments."
A caveat: This theory doesn't fit neatly in Los Angeles, where urban poverty has already spread its way into what were once middle-class suburbs. But it's still worth considering.
Don't get me wrong. I'm not predicting the housing troubles and foreclosures won't spread into more affluent, centrally located neighborhoods. But the damage there will not approach what is already happening "on the metropolitan fringes."
Your thoughts? Comments? E-mail story tips to peter.viles@latimes.com
Photo Credit: "Degrading images" in Palmdale, submitted to Your Scene at latimes.com by Frank.
 The investment bank Credit Suisse is now predicting that 6.5 million American homeowners -- that's one out of every eight that has a mortgage -- will end up in foreclosure over the next five years.
In a report this week titled "Foreclosure Trends: A sobering reality," Credit Suisse predicts home prices will continue to fall throughout 2008 and 2009, causing a huge wave of foreclosures.
"... We estimate a total of 6.5 million loans will fall into foreclosure over the next five years, with the peak in 2008," the report says. "That estimate includes about 1.2 million loans currently already in foreclosure ... The coming flood of new foreclosures could put 8.4% of total homeowners, or 12.7% of homeowners with mortgages, out of their homes."
Other key points in the report:
-- The report predicts housing prices will fall by 10% in 2008 and 5% in 2009, and then grow by 3% in future years.
-- The report concludes falling prices -- and resulting negative home equity -- is "a primary driver of default and that the walkaway effect is alive and well." In other words, some people who have been paying their mortgages on time, and are capable of continuing to pay, will instead stop paying and walk away once they realize their home is no longer worth what they owe on it.
-- Likening the foreclosure crisis to a baseball game, the report says, "We are at best in the third inning ... global real estate investors are in the early stages of meltdown."
-- By 2009, the report predicts, 63% of sub-prime borrowers will be "underwater" on their mortgages -- owing more than their homes are worth.
Your thoughts? Comments? E-mail story tips to peter.viles@latimes.com
Photo credit: Getty Images
I didn't go looking for expensive gas this morning, it found me, on Lincoln Boulevard in Santa Monica. What does it have to do with housing and the economy? Not much if you live in Manhattan and take the subway to work. A lot of you live in Southern California and drive everywhere.
As always, send your best housing, real estate, foreclosure and random photos to Your Scene at LATimes.com.
 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.
 From Reuters: "Countrywide Financial Corp. Chief Executive Angelo Mozilo (pictured) realized $121.5 million from exercising stock options and was awarded $22.1 million of compensation in 2007, a year when the U.S. housing slump pummeled the nation's largest mortgage lender."
More: "Mozilo, long criticized for his compensation packages, realized the option gains by acquiring and selling 4.92 million shares under a pre-arranged trading plan, Countrywide said in a Thursday filing with the U.S. Securities and Exchange Commission. ... Mozilo's compensation fell 49% from a reported $43 million in 2006. The bulk of his 2007 compensation was from $20 million of stock and option awards made early in 2007, before borrower defaults soared and liquidity grew tight."
My two cents: Man, that's more money than the Clintons made!
Your thoughts? Comments? E-mail story tips to peter.viles@latimes.com.
Photo Credit: Bloomberg News.
 Breaking news from MarketWatch: "U.S. home builders have slashed their prices by a record amount, but sales still plunged by 8.5% to a 17-year low in March, the Commerce Department estimated Thursday ... the supply of homes on the market rose to 11 months, the most in 27 years....
"Inventories are likely understated as well because of canceled sales contracts." From the New York Times: "Sales of new homes in March plummeted to the lowest level since the housing recession of the 1990s, the government said on Thursday, as inventories rose to the highest point in more than a quarter century." The spin you hear from the real estate industry is that falling prices will attract new buyers. It is just as likely the opposite is happening right now: falling prices are scaring buyers. Again from the N.Y. Times: "Prices continue to fall as well, which could discourage would-be buyers from entering the market. The median price of a new home dropped in March to $227,600, down 13.3% from a year ago." Analysis: This is a pretty big economic problem. Home-building is at a standstill because of the inventory glut. It doesn't make sense to build homes if you can't sell them.
Your thoughts? Comments? E-mail story tips to peter.viles@latimes.com
Photo Credit: Catalist Homes
The L.A. Times reports this morning that the Dodd-Frank mortgage rescue plan is in trouble in Congress: "Mortgage industry intransigence, voter anger over possible government aid for speculators and economists' fear that thousands of homeowners might just walk away from troubled loans are contributing to a potential stalemate."
The Frank plan would ask lenders to write down troubled mortgages by roughly 15%, and then put federal guarantees behind the newer, cheaper mortgages.
The anti-bailout sentiment so widespread on housing bubble blogs appears to be a factor in the bill's troubles: "'There is no sympathy for anything that smacks of bailout,' said Allen Sinai, chief economist of Decision Economics Inc., who recently testified in favor of the Frank bill. 'The outrage has shown up very quickly, and means that at this point the government can only go so far.'
There is also the question of how well the Dodd-Frank plan would work, and the risk that it would stick the government with a large pile of bad debt. A congressional report on the plan concluded it would not stop the sharp drop in housing prices, and raised other serious issues. For example, if the government is essentially paying 85 cents on the dollar for mortgages through new guarantees, the mortgage industry has strong incentive to game the system by selling only those mortgages that are worth less than 85 cents on the dollar. Only the weakest, least valuable mortgages would get rewritten. Relatedly, borrowers would have new incentive to manipulate their personal finances to qualify for the program -- if it means missing a few payments, some borrowers would deliberately miss mortgage payments to qualify for a cheaper mortgage, the congressional report predicted.
Your thoughts? Comments? Email story tips to peter.viles@latimes.com.
Photo of the Day: An odd sight -- 24 brand new homes, listed as for sale in public auction. You don't see that every day: brand new homes, straight to auction. The homes are in Gardena, the auction is May 10th, starting bids are $498,000.
Photo Credit: Catalisthomes.com
The long-awaited (by me) widget is here. Search foreclosure trends in Southern California by ZIP, using DataQuick Information Systems stats from the first quarter of 2008. Let me know your feedback on this one.
 Update: We've created a data search tool that I hope will be valuable to readers: use this widget to search foreclosure trends by ZIP code throughout Southern California in the first quarter of 2008, so that you can see where the foreclosure problem is most acute, and where it is least evident.
We've calculated foreclosures per household (technically, the other way around: households per foreclosure) to correct for varying populations in different ZIP codes.
A sneak preview: The 10 L.A. County ZIPs with the highest number of foreclosures in 1Q 2008, and the percentage increase from 1Q 2007. Source: DataQuick Information Systems. These are for single-family detached homes.
1) Lancaster 93535 345 392%
2) Palmdale 93550 323 487%
3) Lancaster 93536 255 467%
4) Palmdale 93551 198 421%
5) Palmdale 93552 179 442%
6) Lancaster 93534 146 329%
7) Sylmar 91342 142 426%
8) Norwalk 90650 129 361%
9) Pacoima 91331 105 483%
10) Reseda 91335 101 321%
Your thoughts? Comments? E-mail story tips to peter.viles@latimes.com
Photo Credit: "Snow in Palmdale Mountains," by Frank, submitted to "Your Neighborhood, Antelope and Santa Clarita Valleys," on Your Scene at LATimes.com.
Congress appears to be heading toward approval of some version of the Dodd-Frank plan to write down, refinance and then guarantee as many as 1 million mortgages. What's not to like? Plenty, according to this report from CNN Money, which highlights several arguments against the write-down rescue plan:
-- Robert Shiller, the Yale economist who has long argued there was a bubble in home prices, said the plan will do little to stop the slide in housing prices -- he argues prices have further to fall to reach historical norms.
-- If Shiller is right, and prices continue to fall, "the FHA would be left with a large portfolio of loans backed by houses worth less than the mortgage... the government (and hence taxpayers) would be on the hook for billions of dollars in bad loans."
-- It might not be in the best economic interests of homeowners struggling to meet mortgage payments. MIT professor William Wheaton "argues many of the homeowners now facing foreclosure could be better off renting the same home at current market prices, rather than trying to refinance the mortgage.... For this reason, he thinks the government would be better off giving tax assistance to companies willing to buy foreclosed properties and then rent them to the current occupants."
Your thoughts? Comments? E-mail story tips to peter.viles@latimes.com.
 The number of California homes lost to foreclosure in the first quarter surged 327% from year-ago levels -- reaching an average of more than 500 foreclosures per day -- DataQuick said in a report, warning that the widening foreclosure problem could "spread beyond the current categories of dicey mortgages, and into mainstream home loans."
From DataQuick's report on California foreclosures in the first three months of 2008: "Trustees Deeds recorded, or the actual loss of a home to foreclosure, totaled 47,171 during the first quarter. ... Last quarter's total rose 48.9 percent from 31,676 in the previous quarter, and jumped 327.6 percent from 11,032 in first quarter 2007." That translates into 517 foreclosures every day in the first quarter of 2008.
DataQuick president Marshall Prentice: "The main factor behind this foreclosure surge remains the decline in home values. Additionally, a lot of the 'loans-gone-wild' activity happened in late 2005 and 2006 and that's working its way through the system. The big 'if' right now is whether or not the economy is in recession. If it is, the foreclosure problem could spread beyond the current categories of dicey mortgages, and into mainstream home loans."
From The L.A. Times' Peter Hong: "Sinking home values and the collapse of flimsy mortgages sent a record number of California homes into the foreclosure process in the first three months of this year, a real estate information service reported today."
Default notices -- which mark the beginning of the foreclosure process -- increased sharply, but not as rapidly as outright foreclosures. From Bloomberg News: "California mortgage defaults more than doubled in the first quarter to the highest in 15 years as a drop in sales and prices prevented some homeowners from selling their properties to pay debt, DataQuick Information Systems said.
More: "Homeowners received 113,676 default notices in the first quarter, up 143 percent from a year ago, La Jolla, California- based DataQuick said today in a statement. The level was the highest since at least 1992, when DataQuick's statistics begin."
Despite well publicized federal efforts to reach out to homeowners in default, the odds that they will ultimately lose their homes appear to be increasing. DataQuick reports that, of the homeowners in default, "an estimated 32 percent emerge from the foreclosure process by bringing their payments current, refinancing, or selling the home and paying off what they owe. A year ago it was about 52 percent.:
Your thoughts? Comments? E-mail story tips to peter.viles@latimes.com
Photo Credit: Getty Images
A couple of quickies this morning:
--A new online poll from AOL and Zogby International finds that "45 percent of Americans feel that the government should not help homeowners at risk of foreclosure by offering special financing programs, rebates or credits." The poll was taken in mid-February and released today. Same poll finds that 47% of Americans would consider purchasing a home they had found by searching foreclosure listings.
--The L.A. Times conducts an autopsy on the congressional attempt to change bankruptcy law to allow bankruptcy judges to change home mortgages to stave off foreclosure. Cause of death: an intense and somewhat misleading lobbying campaign by the lending industry. "The Mortgage Bankers Assn., which spearheaded the Capitol Hill campaign, claimed that the bankruptcy measure would drive up the costs of all new residential mortgages by as much as 2 percentage points.... But that claim has come under fire by critics who say the MBA cherry-picked data to paint a bleak picture of sharply higher mortgage rates. The association also misquoted a study by the nonpartisan Congressional Budget Office in a way that made it seem that the CBO supported its position against the bill."
Your thoughts? Comments? E-mail story tips to peter.viles@latimes.com.
Median listing prices and inventory of for-sale homes in greater Los Angeles were essentially flat over the past week, according to Housing Tracker's weekly analysis of MLS listings.
Highlights:
--Median listing prices were unchanged over the past week at $450,000, a decline of 17.4% from year-ago levels.
--Inventory of homes and condos for sale increased by two properties to 42,430, an increase of 16.7% from year-ago levels. A year ago, inventory was building rapidly; this year it has been flat to slightly lower since February.
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%)
3/08 $464,900 (down 15.5%) 42,098 (Up 31.4%)
3/31/08 $459,900 (down 16.2%) 42,038 (Up 27.6%)
4/7/08 $455,000 (down 16.7%) 42,482 (Up 23.3%)
4/14/08 $450,000 (down 17.4%) 42,428 (Up 19.6%)
4/21/08 $450,000 (down 17.4%) 42,430 (up 16.7%)
Your thoughts? Comments? E-mail story tips to peter.viles@latimes.com
 Backstory: About five weeks ago the L.A. Times ran a controversial piece about downtown real estate, pointing out "signs that downtown's residential boom is slowing, if not stalling out altogether." I say controversial because the story unleashed a flood of comments on this blog, many of them from defenders of life downtown who were angry about the article (That was the thread in which I was accused of having a "Westside white-bread classist attitude").
Now the new part: Today's paper takes another look, a friendlier look, at life downtown, this time focusing on the industrial district and its "intoxicatingly youthful vibe."
"Here, away from the bustling sidewalks and skyscrapers of the city
center, narrow, quiet tree-lined streets intersected by old rail lines
have become magnets for urban residents looking for a different
downtown experience. ... Birds chirp over the low rumbling of
trucks. Residents say the area reminds them of New York's TriBeCa or
Chelsea districts when they were just becoming residential hot spots."
I'm anxious to hear your comments on this one, but first just one piece of newspaper spin on publishing two seemingly contradictory stories about downtown: they're both valid views of what's happening. Yes, the residential boom appears to be slowing down. And yes, there is also a growing community of people who enjoy living downtown.
There, my spin. Your thoughts? Comments? Email story tips to peter.viles@latimes.com. FYI: Long weekend ahead. No new blog posts until late Monday. Comments will post, eventually.
I'm happy to report that Pieter Severynen's "Tree of the Week" is back after a week off. Welcome back, Pieter.
The Camphor Tree – Cinnamomum camphora
"A tree that has both cinnamon and camphor in its name must be interesting. The camphor tree is a member of the Laurel family, which is known for its aromatic leaves and bark. The family includes the Sweet Bay or Grecian Laurel of cooking fame, Laurus nobilis, and the true Cinnamon Tree, Cinnamomum zeylanicum, the ground inner bark of which yields aromatic essential oils and cinnamon, described as far back as the Bible. You can always identify the camphor tree by crushing a leaf and inhaling its pungent camphor smell. Camphor was steamed out of the bark and wood and used for cooking, antiseptic and other medical applications, incense, insect repellant, and industrial uses before it could be manufactured artificially. In the 1600s Dutch merchants brought the tree to the Netherlands from Japan.
"If allowed to spread, the camphor tre | |
The answer to the earlier pop quiz on the house at left: The Zillow Zestimate for this three-bedroom, one-bath home in Santa Monica 90405: $917,000.
4) Cal at 1:08 p.m. asked, "How do appearances like your appearance on CNN on Saturday happen? Producer calls up and says we need someone to talk about foreclosures?"
(Click below for the answer to that and many more questions)