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Click here to check out our map. I'm curious about your thoughts on this. Do you see an interesting pattern or theme as to where the closings are? Before you go too far into the "foreclosure-store closure connection" (a path I headed down briefly, and turned back), consider that the store at Lincoln and Montana in Santa Monica is closing, and that's pretty much a foreclosure-free zone. If you'd prefer to browse a simple table of all the closings instead of the map, I've got this to offer as well.
Posted by Pete Viles
Your thoughts? Comments? E-mail story tips to peter.viles@latimes.com
Calculated Risk, the reliably insightful economics blog, posted the above chart today as part of its coverage of the Harvard Joint Center for Housing Studies report. It's not up to date -- as you can see it does not include 2007 and 2008 data; but it's a powerful illustration of why the Los Angeles housing market really is different. What happened here did not happen in most of America. What happens next? That's why the blog publishes comments.
Your thoughts? Comments? E-mail story tips to peter.viles@latimes.com
Hat Tip: Uncle Billy Reads Calculated Risk.
 A while back I posted a lengthy bloviation arguing the housing bust will hit much harder in far-flung suburbs. Update: A new study argues that, not only will suburbs be harder hit in this downturn, but also that rising gas prices were the tipping point that caused the housing bubble to burst.
"The gas price spike popped the housing bubble," according to a new report from the group CEOs for Cities, which adds, "Growth in housing prices was fueled by low and stable gas prices from 1990 through 2004."
More: "Although housing prices are in decline almost everywhere, price declines are generally far more severe in far-flung suburbs and in metropolitan areas with weak close-in neighborhoods. The reason for this shift is rooted in the dramatic increase in gas prices over the past five years."
The report concludes, "The rise in gas prices has fundamentally altered the landscape of urban housing markets in a way that will not quickly be undone, barring an unforeseen collapse in oil prices."
Your thoughts? Comments? E-mail story tips to peter.viles@latimes.com.
Photo Credit: "She's real fine, my $4.09," submitted by Pete to the "Pain at the Pump" album on Your Scene at latimes.com.
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.
 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.
 This wide-ranging market overview, to be published in Sunday's L.A. Times, but now available online, is worth checking out. Headline: "The Muted Market."
Highlights:
--"It's pretty ugly out there," says longtime Coldwell Banker broker David Toyama. He says business is down 50% from last year.
--Inventory, expressed in months to sell, is running nearly three times greater than historical averages. In February, inventory in L.A. County stood at 21.2 months' worth of sales -- up from 10.6 months a year ago.
--One seller learned the hard (expensive) way how not to sell into a declining market: She listed her West Covina house for $600,000 in February 2007, reduced it to $550,000, then $480,000, then $460,000. She finally sold it after 11 months on the market, for $440,000.
Your thoughts? Comments? E-mail story tips to peter.viles@latimes.com.
Photo Credit: L.A. Times
 From Tom Petruno's Money & Co. blog today: "Wachovia Corp.’s shareholders must be wishing they could have a 'do over' of the bank’s major foray into California –- its 2006 purchase of Golden West Financial, the California lender that specialized in so-called option ARMs.
"With mortgage loan losses soaring, Wachovia today slashed its quarterly dividend payment 41%, from 64 cents a share to 37.5 cents. The Charlotte, N.C.-based bank also said it raised $7 billion in fresh capital via common and preferred-stock sales to unnamed investors. ... A headline on a Goldman Sachs & Co. report today on Wachovia put it succinctly: 'California really is that bad. Golden West riskier than we thought.'
"The report, by analyst Brian Foran, said the Golden West loan portfolio was being squeezed by the 'unprecedented period of stress' in the California real estate market."
Golden West didn't just specialize in option ARMS, it lived, ate, and breathed them. Bloomberg News today: "Ninety-nine percent of Golden West's mortgage loans were option ARMs... ." You wonder, then, how it's possible that Wall Street didn't recognize how risky these loans were until, um, today.
Your thoughts? Comments? E-mail story tips to peter.viles@latimes.com.
A quickie: UCLA economist Ed Leamer argues in today's New York Times for a 5% tax rebate for first-time home buyers, writing that the buyers will otherwise continue to sit out the market:
"When it comes to housing, lower prices don’t inevitably cause sales to rise. Why? Because lower housing prices create the expectation of still lower prices later, causing buyers to wait for a better deal. Left alone, a weak market therefore overshoots with prices too low and construction too little. ... The only solution is for the federal government to offer a temporary 5 percent tax rebate — up to $25,000 — for first-time home buyers."
Broken-record bloviation: In this region, where housing prices are demonstrably unaffordable to many working families, the government should not be propping up housing prices. The political goal of affordable housing can't be reached if the government panics when housing prices begin to decline.
Your thoughts? Comments? E-mail story tips to peter.viles@latimes.com.
Hat tip: HV via e-mail.
This just in: Everybody else was doing it! They were flipping houses in Barcelona and overpaying for condos in Ireland!
The New York Times reports of bursting real estate bubbles around the world: "Once-sizzling housing markets in Eastern Europe and the Baltic states are cooling rapidly, as nervous Western Europeans stop buying investment properties in Warsaw, Tallinn, Estonia and other real estate Klondikes. Further east, in India and southern China, prices are no longer surging. With stock markets down sharply after reaching heady levels, people do not have as much cash to buy property. Sales of apartments in Hong Kong, a normally hyperactive market, have slowed recently, with prices for mass-market flats starting to drop."
The Times floats the angle that the spreading global problem is a "result of American contagion." I'm not so sure. Overpriced assets and easy money are capable of finding trouble on their own. They don't need help.
And the global bubble has been bursting for quite a while now. Check out this YouTube video -- I first posted it on this blog almost a year ago, on April 17, 2007 -- about the French housing bubble. The "bulle immobiliere," if you please.
Your thoughts? Comments? E-mail story tips to peter.viles@.latimes.com.
 From where I sit, Congress appears headed toward approval of some version of the Frank-Dodd plan to encourage banks to write down mortgages and then have the federal government guarantee them, in hopes of avoiding hundreds of thousands of foreclosures. But would the policy work? Would it help the overall economy?
Enter the Congressional Budget Office: "U.S. lawmakers' plans to aid troubled homeowners would likely help prevent many foreclosures but wouldn't stop the freefall in home prices or stabilize the economy, a congressional report said on Friday."
More, from the AP: " 'Such actions could help reduce the number of foreclosures... (but) would significantly shift the risk involved in mortgage losses from the current lenders and investors to taxpayers,' said a report from the CBO, which gives nonpartisan research advise to lawmakers."
Read the CBO report here.
Your thoughts? Comments? E-mail story tips to peter.viles@latimes.com
Photo Credit: AP
I reported back in December that Washington Mutual had confirmed it was lowering the amount of some home equity lines of credit, or HELOCs. Judging from my e-mail in-box, WaMu is continuing to squeeze its customers.
This came in tonight: "I just received the notice today of the reduction on our HELOC from WaMu ... As a customer I can verify that the amount they lowered it to is much less than the amount we currently have as a balance. On 4/2/08 our balance was $69,778.47. Today, 4/9/08, we received notice via mail that our limit was to be lowered to $64,900. In addition to this change, which I should mention the letter was written on 4/3/08, the bank charged us an overlimit fee on 4/4/08."
Last week a Realtor in San Diego wrote, "Just after I made a large payment of $10K (only $350 payment was due), they took away all of my credit line. This is putting me in a panic and possible bad situation. I have been with WaMu for many years and have had many home loans with them, and never missed a payment, and have always had bank accounts with them, in addition, my credit is great. I had no notice or warning whatsoever, of course if I had, I would not have given them $10,000 that I did not need to."
More: "I am a Realtor, and times are tough, and it helped knowing that I had that cushion, making it a little easier to justify spending money on marketing and advertising in an effort to keep business coming in and thus enabling me to meet my payment obligations."
This is a significant trend in the economy right now: it is hard for lots of people to borrow money. Cal mentions this often in the comment section. The Fed can cut interest rates 'til the cows come home, it doesn't matter, it's still hard to borrow.
Your thoughts? Comments? E-mail story tips to peter.viles@latimes.com.
 The rush in Congress to agree on an emergency housing bill appears to have given way to a three-way muddle, with the House, the Senate and the White House staking out different positions. A muddle is not necessarily a bad thing, but that's where we are:
The AP today: "The Bush administration announced new steps Wednesday to help more homeowners head off foreclosure. The Senate, in the meantime, worked to complete a bipartisan housing bill the White House says would worsen the mortgage mess."
The new White House proposal could be called Dodd-Frank Lite -- a limited and voluntary version of the widespread mortgage write-downs and new guarantees favored by Sen. Chris Dodd and Rep. Barney Frank: "It is a more modest version of a concept Democrats have recently been pushing to respond to the housing crisis, which would have the FHA back from $300 billion to $400 billion in restructured loans for distressed borrowers if lenders were willing to take a substantial loss on the mortgages. The administration's idea, however, would reach far fewer borrowers than the Democrats' proposal -- roughly 100,000 rather than between 1 million and 2 million -- without requiring lenders to take large losses."
The administration laid out its most explicit criticism of Dodd-Frank, saying it would "'essentially put taxpayers on the hook for a large number of non-performing loans." The administration also criticized the Senate's proposal for grants to allow local governments to buy foreclosed homes, calling it "a costly bailout for lenders and speculators.''
Your thoughts? Ideas? E-mail story tips to peter.viles@latimes.com
Photo Credit: AFP/Getty Images
 All kinds of news is breaking out on the real estate beat today. A quick catch-up:
--The White House voiced strong opposition to the Senate housing bill, saying it "will likely do more harm than good by bailing out lenders and speculators, and passing on costs to other Americans who play by the rules and honor their mortgage debt obligations."
--Washington Mutual found some new friends with money: "The Seattle-based thrift scored a $7 billion capital infusion Tuesday from a group led by private equity shop TPG." WaMu said "mortgage problems will lead to a $1.1 billion quarterly loss and the elimination of 3,000 jobs.... It also plans to close its 186 stand-alone home loan offices and stop offering loans through mortgage brokers."
--The National Assn. of Realtors reported that "pending sales of previously owned homes fell a bigger-than-expected 1.9% in February to the lowest level on record."
-- Last, never least, the L.A. Land blog launched several photo galleries in the popular, user-generated LATimes.com photo gallery Your Scene. The above photo, taken in Mar Vista this morning, is from the Foreclosure gallery. Post your photos, it's easy and free. Other L.A. Land galleries include Weird L.A. Houses, Under Construction and Tree of the Week.
Thoughts? Comments? E-mail story tips to peter.viles@latimes.com.
The L.A. Times this morning explores the issue of whether the government should offer mortgage aid -- a bailout, for lack of a better word -- to the "undeserving." Peter Gosselin's front-page article observes that, in previous crises, the government has erred on the side of helping the overall economy rather than trying to determine who deserves special aid and who doesn't.
"And in almost every instance, a simple calculation tipped the balance in favor of action: Although some who were undeserving might end up being helped along the way, the benefit to society as a whole was simply too substantial to ignore."
A couple of thoughts: You would think it goes without saying that many oppose these mortgage aid packages for very specific reasons, but it doesn't -- so I'll say it: Many Americans oppose mortgage aid right now because they believe lenders and borrowers participated in an unsustainable housing bubble that drove up prices, enriched millions, gave the economy a false appearance of prosperity, and made housing unaffordable to those who refused to take foolish mortgage risks. This argument is particularly potent in Los Angeles, where soaring housing prices long ago lost touch with income levels, and home ownership levels lag well behind national rates.
Many of these bailout critics also argue -- they argue it here daily -- that government attempts to prop up housing prices will ultimately prolong the housing crisis rather than shorten it. In other words, there are two arguments here: the first is fairness, the second is whether a broad bailout provides "a benefit to society as a whole" -- whether it will work.
Will a widespread bailout help the reckless and the undeserving? Probably. Here's PIMCO economist Paul 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."
Your thoughts? Comments? E-mail story tips to peter.viles@latimes.com.
Catching up on weekend reading: The Fortune magazine interview from last month with economist and columnist Paul Krugman is worth reading for its matter-of-fact pessimism. Highlights:
--Krugman sees housing prices falling by 25% "overall" and worse here: "In places like Miami or Los Angeles, you could be looking at 40% or 50% declines."
--Krugman sees economic recovery, as defined by job growth, coming in summer 2010 -- at the soonest: "But I wouldn't be surprised if it goes longer than that -- maybe into 2011."
--He sees a good chance the Fed will reduce interest rates to zero. (Not a typo.)
--Lastly, he favors public investments to revive the economy. This is not surprising given Krugman's general political leanings, but his reasoning is worth noting. "... Since this thing is going to go on for a long time, effectiveness is more crucial than speed. I'm actually for public investment now -- repairing bridges, building infrastructure. Normally people say if you try to do any public investment to stimulate the economy, the recession will be over before it can come online. But I don't think that's a problem this time."
Economist Stephen Roach made a similar argument a few weeks ago, and I tend to agree with it. Instead of focusing on "putting a floor" under housing prices, government should focus on public works projects. I know a large city of 10 million people or so that could use a decent public transportation system.
Here's a prediction: By election day, the economic argument will no longer be focused on how best to help homeowners avoid foreclosure but instead on what kind of major stimulus efforts are needed. Expect the Democratic nominee to embrace Krugman's logic.
Your thoughts? Comments? E-mail story tips to peter.viles@latimes.com.
 It's fashionable to criticize mainstream journalism these days, and tonight I will pile on: There isn't enough serious and insightful coverage and analysis of the real drama in Washington right now -- the three-way argument among the Fed, the Bush administration and Congress over how best to respond to the economic mess.
More often than not, news reports -- and this blog as well -- take the easy way out. We portray the Fed and the Bush administration as one actor -- sluggish at first, now lurching toward action, while the other actor, congressional Democrats, pushes loudly for government intervention.
Not only does this miss the true drama of the moment, it's not accurate. Thankfully, there is Lou Barnes to set us straight every Friday. Yes, he comes from the mortgage industry and has been recommending a massive government refinancing for months now. But he also watches this drama closely and sees things your newspaper might not. Like the widening gap between Fed Chairman Ben S. Bernanke (pictured) and the Bush administration. Like the elephant not in the room at the Bear Stearns hearing: where was Treasury Secretary Henry M. Paulson Jr.? (Wimping out in China, Barnes writes.)
He also admits when he makes a mistake -- people in my business hate to do that. This week Barnes corrects himself and says he now believes Bernanke is doing the right thing:
"Since Crunch onset in August it has been hard to evaluate our economic leadership. Perfesser Bernanke has taken action from the beginning, but late, inadequate, and appeared to be detached. That judgment may have been fair through January, but has been mistaken since then. My apologies: his speech this week (must read, short: www.federalreserve.gov), his opening of the Fed’s floodgates in new and essentially infinite amount, his distance from Secretary Paulson in testimony, his refusal this time to guide Congress on fiscal giveaway ('That is your purview...'), his blunt warning of recession, and extraordinary leadership in snuffing the Bear Stearns panic -- together easily the most courageous performance by a Fed Chair since Volcker in '79. Given the lack of public support by the Administration, maybe best-ever."
He also chucks a high, hard one directly at the president, for failing to provide economic leadership at a time when it is so clearly needed. I don't care if he is a mortgage broker or a bookie, Barnes is the best Fed watcher in the business for my money.
Your thoughts? Comments? E-mail story tips to peter.viles@latimes.com.
Photo Credit: Bloomberg News
A number of you have questioned whether a tax break for home builders is accurately described as a bailout. Let me make a few points as we continue the discussion.
--The New York Times calls the proposal "a break for struggling home builders, allowing them to claim current losses against taxes paid in earlier, more profitable years. This provision, intended to aid home builders, would cost about $15 billion in the first year."
--Senators Baucus and Grassley, in their housing proposal, estimate the cost of these "refunds" -- their word, not mine -- at $6.1 billion. You can find a link to the Baucus/Grassley proposal on Market Beat columnist Tom Petruno's new L.A. Times blog, Money & Company.
--Let's remember that most big home builders are also lenders. What's being discussed here are multi-billion dollar tax refunds for builders and lenders, refunds they are not entitled to under existing tax law.
--Lastly, let's remember that the builders made a ton of money in the bubble. Executives were paid very well. Then they overbuilt, and now they're stuck sitting on inventory of unsold houses. My vision is not great, but I can't see why it would be a bad thing to let the builders reduce prices until they sell off the inventory, without any special help, encouragement, or refunds from the federal government.
Enlighten me. Your thoughts? Comments? E-mail story tips to peter.viles@latimes.com.
 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
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
Transcript of prepared remarks delivered Thursday by Sen. Barack Obama on housing and the economy, as posted on www.barackobama.com:
"I want to thank Mayor Bloomberg for his extraordinary leadership. At a time when Washington is divided in old ideological battles, he shows us what can be achieved when we bring people together to seek pragmatic solutions. Not only has he been a remarkable leader for New York –- he has established himself as a major voice in our national debate on issues like renewing our economy, educating our children, and seeking energy independence. Mr. Mayor, I share your determination to bring this country together to finally make progress for the American people."
Click below to read the rest of the speech.
Read more Transcript: Sen. Obama's speech on housing »
 Sen. Barack Obama joins the housing speech parade today with what appears to be a difference-splitter: more government action and intervention than John McCain proposed this week, but not as much as Hillary Clinton favors.
Read the entire Obama speech here.
Reuters, via CNBC: "Democratic presidential candidate Barack Obama called for greater government regulation of the U.S. financial system Thursday and proposed a new $30-billion economic stimulus plan to help homeowners. ... He proposed a $30-billion stimulus plan that would provide relief to areas hardest hit by the housing crisis, and an extension of unemployment insurance for those out of work."
L.A. Times: "Democratic candidate Barack Obama ... called for reform of the nation's regulatory system, immediate relief for homeowners caught in the sub-prime mortgage crisis and a $30-billion stimulus package to boost the economy. 'If we can extend a hand to banks on Wall Street, we can extend a hand to Americans who are struggling through no fault of their own,' he said."
On this language, McCain, Clinton and Obama agree: They support aid to the blameless. Who doesn't? The idea that there is some discrete group of blameless, faultless borrowers is a convenient piece of Washington fiction that ignores recent history. Everybody in this mess made mistakes. Borrowers took out loans they didn't understand to buy houses they couldn't afford. Some borrowers understood the risks they were taking; some didn't. Lenders made spectacularly bad loans because someone (Wall Street) was stupid enough to buy the loans. Washington witnessed the entire train wreck and declared it a good thing as it was happening, and only now sees the wreckage.
It's hard to see how an intelligent government response will somehow emerge from collective ignorance of what happened.
Your thoughts? Comments? E-mail story tips to peter.viles@latimes.com.
Photo Credit: Getty Images
Transcript of Sen. John McCain's March 25 speech on housing, as prepared for delivery, from www.johnmccain.com.
"Thank you for joining me here today. I just returned from a trip overseas that included assessing the state of affairs in Iraq, the Middle East, and Europe. I will have more to say on those important issues in the days and weeks to come.
While I was traveling overseas, our financial markets experienced another round of upheaval. This market turmoil leaves many Americans feeling both concerned and angry. People see the value of their homes fall at the same time that the price of gasoline and food is rising. Already-tight household budgets are getting tighter. A lot of Americans read the headlines about credit crunches and liquidity crises and ask: 'How did we get here?' In the end, the motivation and behaviors that caused the current crisis are not terribly complicated, even though the alphabet soup of financial instruments is complex. The past decade witnessed the largest increase in home ownership in the past 50 years. Home ownership is part of the American dream, and we want as many Americans as possible to be able to afford their own home. But in the process of a huge, and largely positive, upturn in home construction and ownership, a housing bubble was created."
Click below to read the rest of the speech.
Read more Transcript: Sen. McCain's March 25 speech on housing »
A transcript of Sen. Hillary Clinton's speech on housing and the economy, delivered March 24 in Philadelphia. The transcript, from www.hillaryclinton.com, is of her remarks as prepared for delivery.
"Thank you. Thank you. It’s great to be back here at Penn and in Philadelphia. I remember giving the commencement address here some years ago and I always had that image of the beauty of this campus and, of course, its extraordinary reputation. And I’m delighted to have a chance to be here with you to talk about an issue that is critical not only to Pennsylvania but to our country.
Click below to read the rest of the speech.
Read more Transcript: Sen. Clinton's March 24 speech on housing »
 Important speech from the Treasury Secretary (pictured) today: "Housing prices need to fall further to permit shell-shocked housing markets to stabilize and policy-makers should not interfere with that process, Treasury Secretary Henry Paulson said on Wednesday."
More from Reuters via LATimes.com: Treasury Secretary Henry Paulson "... said regulators including the Federal Reserve were 'vigilant' and doing everything they could to minimize damage to the economy but played down the value of a more direct government role."
The entire speech is here:, but I've taken the liberty of cutting and pasting the section in which Paulson addresses housing prices:
"The housing downturn and the surrounding uncertainty are significantly impacting our financial institutions and capital markets. However, we should not lose sight of the fact that this downturn was precipitated by unsustainable home price appreciation which was particularly pronounced in a relatively few regions. A correction was inevitable and the sooner we work through it, with a minimum of disorder, the sooner we will see home values stabilize, more buyers return to the housing market, and housing will again contribute to economic growth. Having stability in housing markets will in turn contribute to better conditions in credit markets for mortgage-backed securities.
More, "Data releases every month create headlines about declining housing sales, starts and prices. Yet, declines are exactly what we should expect during a correction. It takes time to work through the excess inventory – and we are. The question many are asking is how deep the correction will be and how long it will last. ...
Read more Paulson: Let housing prices fall »
 The Bush administration's oft-stated opposition to a housing bailout for lenders and borrowers is under assault from many corners today. The Fed-backed, administration-brokered weekend bailout of Bear Stearns' debt makes it nearly impossible for the administration to continue to argue against more government aid to borrowers.
Reuters: "Federal Bailout of U.S. Housing Gaining Momentum" ... "'There is no question but that there will be a federal
bail-out of subprime mortgage loans this year," Linda Lord, the
top lobbyist for Swiss bank UBS, wrote in a memo last week."
David Brooks, resident non-liberal at The New York Times: "It makes sense to try to find some circuit breakers so the housing
market doesn’t totally collapse.... First, no bailout for the true greedheads: the speculators, the
flippers, the people who bought second homes they couldn’t afford. Help
only those who can stay in their homes with a modest amount of aid.
Don’t succumb to lenders who want the government to buy up their bad
paper."
Paul Krugman, one of many resident liberals at The New York Times: "Let’s talk about why a bailout is inevitable.... We probably need something similar to the Resolution Trust Corporation,
which took over bankrupt savings and loan institutions and sold off
their assets to reimburse taxpayers. And we need it quickly: things are
falling apart as you read this."
Comments? Thoughts? Email story tips to peter.viles@latimes.com.
Hat tip: Cal
Photo Credit: Treasury Secretary Henry Paulson, by Getty Images
I saw this headline and I thought it had to be a typo: "JP Morgan to buy Bear Stearns for $2/share."
It is not a typo, it is true, and it is a shocker, a bottom-dollar buyout that was brokered and backed by your government. Shares of Bear Stearns traded at $159 last April, and $57 on Thursday. Even after the investment bank effectively failed Friday morning and was bailed out by JP Morgan and the Fed, Wall Street's smart guys believed the company was worth $30 a share. Man, were they wrong.
The ultimate take-over price -- $236 million, or not even enough money to sign a decent baseball free-agent these days -- is stunningly low. It means Bear Stearns was very close to worthless, a realization Wall Street did its best to avoid all day Friday.
It also means the financial fallout that began with the the crisis in the mortgage market -- yes, the same fallout the Bush administration repeatedly assured us was "contained" -- is not contained and is almost impossible to quantify at any given moment. You can safely say this: it is bad and getting worse.
Why a Sunday deal? The New York Times: "The talks between the companies, which were overseen by the Federal Reserve and the Treasury Department because of their potential effect on financial markets, were rushed in an effort to reach a deal before stock markets open in Asia at 8 p.m. Eastern time."
The bailout angle, from the AP: "The Fed will provide special financing to JPMorgan Chase for the deal, JPMorgan Chase said. The central bank has agreed to fund up to $30 billion of Bear Stearns' less liquid assets."
Your thoughts? Comments? E-mail story tips to peter.viles@latimes.com
 Sometimes the Brits say it best. Here's how BBC business editor Robert Peston is describing the joint rescue of Bear Stearns by J.P. Morgan and the New York Fed: "Since J.P. Morgan is saying there is no risk to its shareholders, this represents a central bank bailout of Bear Stearns."
Well put.
"This is America's Northern Rock," Preston added, referring to the British bank bailed out by the Bank of England.
Other takes: The New York Times headlines its story, "JPMorgan and Fed Move to Bail Out Bear Stearns."
The L.A. Times: "Bear Stearns Cos., one of Wall Street's biggest investment banks, got an emergency loan from the Federal Reserve today to help it stay in business, a dramatic development that threatens to take the global credit crunch to a dangerous new level."
In the sound-bite logic of American politics, the Bear Stearns rescue makes a massive housing bailout more likely. Today's sound bite: "If the Fed can bail out wealthy investment bankers at Bear Stearns, the government can certainly offer aid to struggling homeowners." We are halfway down the slippery slope to a full-fledged government rescue for just about everybody with a grievance or a problem that involves a mortgage: banks, lenders, borrowers, the whole crowd.
Your thoughts? Comments? Send story tips to peter.viles@latimes.com
Hat tip: PS via e-mail.
Photo credit: Getty Images
 The real estate market in Southern California is "crippled by uncertainty and credit constraints," DataQuick said today in a report showing continued declines in sales and prices across the region.
Sales in February fell to the lowest level ever measured by DataQuick, and DataQuick said roughly one out of every three houses that did sell had been foreclosed on earlier this year.
In Riverside County, prices have fallen 20% over the past year and 48% of February sales were of foreclosed homes.
Bearish economist Christopher Thornberg, who once generated headlines by predicting a 20% decline in Southern California home prices, has now revised his prediction: he says prices will fall 40%.
Across Southern California, DataQuick reported, median sales prices fell from $415,000 in January to $408,000 in February, a decline of 17.6% from year-ago prices, and 19% from the pricing peak of $505,000, which was reached last spring and summer. Overall sales fell 39%.
In Los Angeles, median sales prices actually rose slightly, from $458,000 in January to $460,000 in February -- the only increase in the six-county region of Southern California. The February L.A. numbers represent a 12.9% decline over the past year, and a decline of 16.4% from the peak of $550,000, reached in August. Overall sales fell 45%.
DQ analysis: "Sales remained extraordinarily low, and a significant portion of what did
sell was in areas beset by foreclosure activity. That's where sellers are the most motivated and price cuts are largest. Mainly it's in the inland
markets, often in newer suburbs, where prices got pumped up artificially
with the sort of crazy loans that no longer exist," said Marshall Prentice,
DataQuick president.
"More difficult to glean from today's
statistics is the exact status of more established neighborhoods, often near
the coast or job centers, where foreclosures aren't a big problem but where
sales are scant. We're anxious to see whether the government's recently
announced higher conforming loan limits
will have much impact on sales in
these areas this spring and summer."
Month L.A. median sales price y/y change 12-month L.A. sales total
Jan. 07 $520,000 6.0% 108,755
Feb 07 $528,000 8.0% 107,966
Mar 07 $540,000 6.0% 105,514
Apr 07 $540,000 6.0% 103,450
May 07 $550,000 7.0% 100,160
Jun 07 $545,000 5.0% 96,513
Jul 07 $547,500 5.0% 94,478
Aug 07 $550,000 6.0% 90,985
Sept 07 $525,000 1.2% 86,610
Oct 07 $500,000 -3.8% 82,527
Nov 07 $499,000 -3.5% 78,712
Dec 07 $470,000 -10.5% 74,663
Jan 08 $458,000 -11.9% 71,256
Feb 08 $460,000 -12.9% 68,424
Your thoughts? Comments? Insights? E-mail story tips to peter.viles@latimes.com.
Photo Credit: AFP/Getty Images
 This is a trend that has been with us for a while, and a couple of you reminded me in comments to revisit it. The trend is this: even as foreclosures pile up and prices collapse in less desirable neighborhoods of Los Angeles, prices continue to hold steady -- or even rise -- in higher-priced neighborhoods.
I'm not talking about luxury neighborhoods like Beverly Hills or Malibu, where entertainment money and foreign buyers are big factors. I'm talking about the $700,000 to $900,000 price range. Here are five sub-million-dollar neighborhoods where median sales prices held steady or rose from January 2007 to January 2008:
Neighborhood/ZIP # of sales in Jan. 08/Median sales price % change yoy
Woodland Hills 91364 15 / $875,000 5.7%
Arcadia 91006 20 / $761,000 6.8%
Torrance 90505 15 / $794,000 2.8%
LA/Westchester 90045 15 / $772,000 13.0%
LA/Mar Vista 90066 24 / $743,000 -2.3%
Source: DataQuick/DQNews.com
DSL wrote in comments, "The homes in my target market of South Pasadena, Arcadia, Pasadena, San
Marino rectangle have not come down one iota in terms of listing
prices. Why is this 'bubble bursting' as you all put it seemingly only
confined to areas no one with a decent income would ever dream of
living?"
Just Call Me Maria added, "Good homes in good areas are still
selling for ridiculously high prices..."
From here we venture into the unknown: Will prices inevitably fall in the higher-priced areas, or will they hold their value? The short answer is, I don't know. My gut is that prices will eventually decline in pricier neighborhoods, but won't fall anywhere near as far as they will in cheaper areas. But I haven't seen this movie before.
Before you trot out the recent history, and quote the price declines suffered in "trophy neighborhoods" in the early and mid-1990s, I would say this: this cycle is different. History may not be our guide.
I'd really like to hear your thoughts on this one -- why do we have two extremes in the market, and will they converge or not?
Photo Credit: The Sunset Strip home purchased recently by Mix Master Mike, resident DJ with the Beastie Boys, for $990,000, by Michael McCreary, via L.A. Times.
 As promised, I gave the UCLA Anderson Forecast a quick read for better understanding of why the Wizards of Westwood don't see a recession.
In brief, it's an analysis you've heard before: There won't be a recession because the housing downturn is "mostly confined to housing." Construction employment is weak, but the labor market is not collapsing. We'll muddle through, the economy stalling but barely avoiding recession.
In housing, the forecast sees jingle mail as a noteworthy trend that reinforces the belief that the job market is OK: "This time people are walking away from their homes not because they lost their jobs, got divorced or had health problems, but only because declining home prices have turned their net worth in the house negative, a financial burden to carry into the future or turn over to the lender, whichever they desire. Many have chosen to walk way."
Unfortunately for those hungry for data on the "walking away" trend (is it real or anecdotal?), the report doesn't attempt to quantify the extent of jingle mail.
The headline quote really is in the report, part of Ed Leamer's breezy conclusion: "The data don't yet add up to a recession, and there is nothing here to challenge the basic story of sluggishness that we have had for two years. Don't worry, be happy. You have to avoid recession depression."
Your thoughts? Comments? E-mail story tips to peter.viles@latimes.com
Photo Credit: US Presswire
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