Ask Pete, Chapter 4: Your questions

These are the dog days of August. I detect a lull in the conversational buzz on the blog. So, in the transparent hope of spicing things up a bit, I offer another installment of "Ask the blogger," known here as "Ask Pete."

Use the comment section below to submit your questions about L.A. real estate, housing news, media, blogging, statistics, etc. As is my custom, I will pick the easiest questions. I'll answer them here by midmorning tomorrow.

-- Peter Viles

Photo: An Italian-style Villa in Hermosa Beach, featured recently as the L.A. Times' "Home of the Week." Credit: Chase Lindberg

Comments

[George]

Based on historic averages and rates of appreciation, what should the median home price be right now? (Assuming there wasn't a bubble.)

[RichW]

Is it a good time to buy ? (cough)

[Doug in Toronto]

Pete: I've been reading (and posting to) your blog for some time. But living in Canada as I do, I'd like a little info about things I don't understand surrounding the real estate process in California. (1) Why do so many people go to mortgage brokers? Here, people almost always go to banks / credit unions first; mortgage brokers do exist here but there aren't many of them and they don't do a lot of business. (2) What is escrow and why do you need it? My lawyer handled the transfer of funds when I bought my home. The mortgage funds were advanced to him (in trust) and all I had to do was write the cheque. (3) Is it simplistic to assume the primary reasons for subprime / alt-A lending were to increase compensation for mortgage brokers (thereby improving market share) and to achieve the American dream of everyone having a home of their own? Or did the securitization of mortgages come before subprime / alt-A?

Keep up the good work.

[eternal summer]

Hi Pete,

Please look into your crystal ball & give us your prediction on housing trends for 2009.

Thanks!

[larry]

pete
You keep stating in this blog that this real estate cycle is different. Is it possible that the long term impact could be massive declines in less affluent outlying areas and a perminent escalation in the Santa monica / Beverly hills central city areas? This would lock out most people from the affluent areas and reduce mobility on the American property ladder we're used to. It would make this city resemble the cities of the developing world with rich enclaves, think rio or Lima. Globalization doesn't just work one way...

[MarkW]

In the areas like the IE that are seeing increased sales, who is buying? Is it first time buyers, investors, people retiring?

[The original RZ]

It seems like we hear every day about the parties responsible for the housing bubble and subsequent bursting: predatory lenders, overzealous creditors, flippers, people buying homes they couldn't afford, the federal government, etc. But it seems as if one party never mentioned are appraisers. What role did they have in the current state of housing affairs? Do they deserve the free ride they're getting?

Thanks for doing your Q&A!

[Rational Renter]

#1 - The median home price should right now be between $275,000 and $300,000 in L.A. The discrepancy is due to the fact that median household income for 2008 is not yet known. But that's the range. For details on the calculations, you can check the link under my name.

[xtine]

Hi Pete,

1) Is there any good reason to use a RE agent anymore? I've been talking to some, and they just keep handing me the same tired Redfin listings I rejected months ago. Is there any info they have that I can't get online?

2) Do you think the banks are holding boucoup inventory because they don't want to show the losses on their balance sheets?

2) My mother thinks I should move to East LA. Is she crazy?

[Belle]

How do you think transportation oriented development will do?

[Nick]

What information about property ownership is available in the public record, and what are the best places online to search for aggregated public information?

Where are the best sources for average rental prices by area (to compare with sales prices, for example)?

Is there any event you can think of other than bank failures which would cause banks to unload their shadow inventory?

[TakeFive]

So Pete, are you tempted to buy yet? Even just a little? Do you and the Mrs. stop by open houses and think "well, we could...".

Will we soon be reading a story in the Times about the Blogger Who Decided To Buy with all the rationalizations of why it makes sense to buy now?

Or are you going to stand by your cold anaysis, wait for the market bottom, and not even consider it before then?

[Jeff S]

Pete -

Don't you get tired of the same conversation everyday.
Group A (call them renters): "Prices have a long way to go down"

Group B (call them realtors). "Prices aren't going down in the good areas. Now is a good time to buy".

Group C (debaters). "You don't know what you are talking about. Prices are down everywhere. "

Maybe we can automate the responses so depending on the story no one has to post their comments, their previous posts auto respond for them.

[Rob]

What about that long overlooked Commercial Estate Market, or should we even care about the Stats "over there"?

[Louis Cabeza]

Will reverse mortgages be the next scandal? The people who sold liar loans now seem to have all migrated there. Watch what your elderly parents sign.

[Ragnar]

Pete -

How is MC Hammer doing and where is he living in California these days? What sort of home does he live in today versus sometime circa 1990? This information should provide great anecdotal data points for comparing both past and present housing run-ups and down-turns in Southern California. Thanks!

[Cal]

See any compelling storylines over the next couple months either positive or negative or are we in the doldrums right now?

[Anon.]

Is there a way for me to find out if my landlord is in trouble on the house I rent? They bought near the top, say they want to refinance, and I can 't see any way my rent is covering a mortgage.

Or maybe my question is, where can I look up to see if a NOD has been filed on my landlord? I'd like to look that up periodically.

[IToldu2CashOut]

With everyone guessing at a bottom you think there might be a scientific way to make a better guess. I was thinking possibly a random phone poll with a big enough sample might do the trick. Asking question like: Are you thinking about buying in LA? What can you afford? How much do you make? How much have you saved and are wiling to spend for a down payment? Obviously there are probably more people who want to buy that actually can, so the follow up questions would be more important.

How come no one has thought of doing this? Is there some reason why it can't be done or would not give us good info? Could you get the LA times to conduct one?

[Vicki]

I sold a house in one zip code for $500K. The median sales price there has dropped 61%. I purchased a second house in another zip code for $675K and the median price has dropped only 29%. By moving, we got a newer larger house for the next decade or so. Any $$ we've lost so far was the illusory profit of the bubble. Does this mean I'm winning the real estate lottery or just doing less badly than I might have had we stayed put?

[I Am Not Dead, So This Must Be LA]

Peter,

Some of the data you have presented suggests that prices have gone up about 150% since 1996. Why is it then that most dire "bottom" predictions only call for a 50% drop (at most) from the 2006 peak? Does that mean it is reasonable to suggest that there would have been 100% appreciation from 1996?

Some have also asked how much at fault appraisers are in this bubble. Is our whole system of basing home values off comps unrealistic and outdated since it is pretty subjective?

[SMRR]

Pete,
Why do politicians ignore the questions you ask and answer another question? Here is Sen. Feinstein's response to my request that we not bailout Fannie, Freddie, Indy, Investment Bankie and Mortgagies...

As a follow up quesiton, can we impeach these folks for commencing with an unpopular bailout that will cost you and I lots of money?

Dear Mr. SMRR:

Thank you for contacting me regarding housing market reform and foreclosure prevention legislation. I recognize how important this issue is, and would like to share with you what Congress has done to help.

Like you, I am very concerned about the current economic downturn, which has been caused in part by the declining housing market. To address record- high foreclosure rates among American homeowners, on July 30, 2008, the President signed the Foreclosure Prevention Act of 2008 (Public Law 110-289) into law. I am hopeful that this broad housing package will help hundreds of thousands of Americans keep their homes while stabilizing the housing market going forward.

Specifically, this legislation will:

oCreate a new program within the Federal Housing Administration (FHA) to help homeowners facing the threat of foreclosure. The HOPE for Homeowners Program will allow the FHA to refinance mortgages in certain cases where banks voluntarily provide loan modifications. To inquire about this new program, please contact the FHA directly at 1-800-CALL-FHA.

oEstablish a new and independent regulator for Fannie Mae and Freddie Mac to ensure that they responsibly fulfill their role in the housing market.

oGrant the Secretary of the Treasury emergency financing authority to purchase debt securities and stock from Fannie Mae and Freddie Mac.

oPermanently increase the conforming loan limit for government-backed mortgages to $625,500, which allows more Californians to obtain mortgages at lower interest rates.

oProvide first-time homebuyers with a tax credit, equivalent to an interest-free loan, worth up to $7,500.

oProvide $3.92 billion in Community Development Block Grants (CDBG) to allow local governments with high foreclosure rates to purchase and rehabilitate foreclosed upon properties.

Additionally, I am pleased that legislation I introduced, along with Senator Mel Martinez (R-FL), known as the "S.A.F.E. Mortgage Licensing Act of 2008" is included in the bill. This important legislation will require all mortgage brokers and lenders to meet minimum national licensing standards in an effort to curb abusive lending.

Please know that I will keep your comments in mind should further legislation to address our country's housing crisis come before the Senate.

Once again, thank you for writing. If you have any additional questions or concerns, please do not hesitate to contact my Washington, D.C. office at (202) 224-3841. Best regards.

[renter in mid-wilshire]

Hey Pete,

Lots of debate about whether the higher end/nicer neighborhoods of LA are immune or not - I think a LOT has to do with whether or not buyers in these areas took out 30 yr fixed mortgages or ARM mortgages (that will be resetting). Any info on the borrowing trends in these areas???

Thanks!

[Peter]

In the last housing crash, the more affluent areas did come down in price, but did they hold up longer as in the current situation? From the data in the early 90's, is there a way to predict how long these areas hold out compared with less affluent areas?

[ButterBean]

Hi Pete,
I live in Washington State with my husband but we're interested in moving back to CA. However, prices are still too high for us. We don't want to spend more than 200K. Where are all the bargains we're hearing about? What areas would you recommend shopping? Is that price range even realistic in CA? How should we go about trying to find a good deal? Thanks.