California's coming Option ARM crisis

Good morning. Various housing and real estate links from here and there:

The Economist, via Patrick.net, warns about the "Ticking Time Bomb" in the American housing market -- Option ARMs, which allow homeowners to pay less than even the interest on their loans, until a day of reckoning when payments rise and ARMs often explode: "Delinquencies are already rising fast. Write-offs for option ARMs at Washington Mutual, a stumbling thrift, have zoomed from 0.49% in the last quarter of 2007 to 3.91% in the second quarter. But the real crunch will come when the mortgages 'recast', forcing borrowers to start making full payments." Oh, and The Economist, quoting Barclays Capital, says most of these time bombs are in California.

From Calculated Risk: Single-family housing starts are at their lowest level since 1991.

If you want extra credit today, there's plenty to read about the doomed duo, Fannie and Freddie. Brad Setser explains the key role Fannie and Freddie played until recently in allowing foreign central banks to invest in the U.S. housing market -- a key source of bubble money.  And from Patrick.net, here's a link to the full Barron's article arguing Fannie and Freddie are toast. The logic is pretty simple: to stay independent, Barron's argues, they need to raise about $10 billion each. The problem is, who's going to invest $20 billion in companies with a combined market value of just $12 billion? You know the answer, don't you? Of course you do, it's right there in front of you: You're going to invest in them, through your Treasury Department.

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

Barron's: End could be near for Fannie, Freddie shareholders

Random morning real estate links from here and there:

From the New York Times: A subprime glossary: Liar's Loans, Ninja Loans, Jingle Mail and Exploding ARMs: Those are all part of a glossary of sub-prime expressions that, according to the Times "reflect the deceit, cynicism and scandalous exploitation that are taking the homes of many thousands, perhaps millions, of families."

From Bloomberg News: "Fannie Mae and Freddie Mac fell to almost 18-year lows in New York trading Monday on concern the government will be forced to bail out the mortgage-finance companies, wiping out common stockholders."

Behind the Fannie/Freddie jitters, from Barron's:  "It may be curtains soon for the managements and shareholders of beleaguered housing giants Fannie Mae and Freddie Mac." (Registration required, but you get the idea.)

--Peter Viles
Your thoughts? Comments? E-mail story tips or links suggestions to peter.viles@latimes.com

Photo credit: Bloomberg News

How "second mortgages" became HELOCs

Friday morning housing links from here and there:

The New York Times, in the latest installment of its "Debt Trap" series, chronicles the marketing effort by banks that turned dicey "second mortgages" into financially attractive "home equity lines of credit." The Times: "Not long ago, such loans, which used to be known as second mortgages, were considered the borrowing of last resort, to be avoided by all but people in dire financial straits. Today, these loans have become universally accepted, their image transformed by ubiquitous ad campaigns from banks." The value of home equity loans outstanding has increased a thousandfold since the 1980s, the Times reports, and, of course, delinquencies are rising.

The Wall Street Journal reports on a McCain housing headache: "Sen. John McCain's son served until last month on the board audit committee of a Nevada bank that is struggling to survive amid mounting losses and regulatory scrutiny." The bank is Silver State Bancorp.

Zillow's Diane Tuman takes a closer look at why that Detroit house sold for $1, and finds some pretty amazing photos of the house. This is worth checking out: The house was stripped bare by vandals, a common fate for vacant homes in parts of Detroit, according to Detroit News reporter Ron French: “As soon as they know it’s empty, it’s like a gazelle limping in the Serengeti — they will take it down," French tells Zillow. "You will see people pushing a wheelbarrow down the street, full of siding or copper. They take everything.” (Hat tip: Patrick.net)

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

A tax break for subprime lenders?

Morning housing-related links from here and there:

From Bloomberg News: "Existing U.S. home sales fell to a 10-year low in the second quarter and the median price for a single-family house dropped 7.6 percent as the real estate recession deepened. ... The biggest declines reported by the Realtors today were in Sacramento ... with a 36 percent drop."

From the L.A. Times: "One reason California still has no state budget is a closed-door dispute over a tax proposal that could be a multimillion-dollar boon to banks that engage in subprime lending."

Also from The Times: "Real estate developer Storm Properties Inc. of Torrance said Wednesday that it had sold more than 1.4 million square feet of industrial and office buildings to Thompson National Properties for about $110 million."

From MSNBC via Patrick.net: The collapse of the new-home market has left numerous "ghost towns" and "half towns" outside American cities.

-- Peter Viles

Use the comment function to suggest other links or websites, or e-mail link suggestions to peter.viles@latimes.com.

One-third of SoCal housing inventory is 'distressed'

Wednesday morning links from here and there:

From Dr. Housing Bubble: Foreclosures and short sales make up 33% of for-sale inventory in Southern California.

From the Detroit News: A vandalized, foreclosed house that sat on the market when priced at just $1,100 has sold -- for $1.

From Reuters: A slew of factors suggest the worst may soon be over for the housing market.

Calculated Risk disagrees, writing the bottom in prices could be four years away in some bubble markets:  "Expect to start looking for the bottom in the bubble areas in 2010 to 2012 or so."

Newsday reports on a novel foreclosure avoidance strategy: A 60-year-old man brandishing a handgun tried -- and ultimately failed -- to prevent sheriff's deputies from evicting his mother from her foreclosed house.

-- Peter Viles
Your thoughts? Comments? E-mail story tips to peter.viles@latimes.com.
Photo: Getty Images

Section 8 renters bring "cultural shock waves" to suburbs

Good morning, Christiane. Tuesday morning housing links from here and there:

From Bloomberg via DrudgeReport: "Almost one-third of U.S. homeowners who bought in the last five years now owe more on their mortgages than their properties are worth, according to Zillow.com."

From the L.A. Times: Ed McMahon is being sued by a lender who claims McMahon defaulted on a $250,000 loan.

From The New York Times via Patrick.net: The government's Section 8 housing program, combined with the housing downturn, is allowing more poor, inner-city renters to move into vacant suburban houses,  causing "cultural shock waves" that include "social and racial tensions."

From the San Diego Union-Tribune via Calculated Risk: High-end homes, including one that sold for $7.5 million, are beginning to show up in foreclosure statistics.

--Peter Viles
Your thoughts? Comments? E-mail story tips, and suggestions for future links, to peter.viles@latimes.com.

The hits keep coming: Thursday morning's mini-roundup*

*Updated

-- Another Southern California bank on the brink? Scott Reckard reports that federal regulators have ordered Vineyard National Bank of Corona to stop accepting so-called hot-money deposits that are considered too risky. The 16-branch bank has been thumped by the giant losses of its home builder and developer clients.

-- 2007 wasn't a very good year for mortgages, either: The delinquency rate of very young mortgages is rising, the WSJ reports. Home loans made in early 2007 are turning sour at a pace that surpasses the 2006 vintage.

-- First soaring mortgages, now climbing utility bills: Onerous energy prices are prompting a surge in the number of customers who can't pay their bills. SoCal Edison alone shut off service to about 165,000 between January and May, a 14% increase over the same 2007 period.

-- Not done yet: Dr. Housing Bubble lays out 10 reasons why California is nowhere near the housing bottom.

-- New listing: The cavernous hangar in Playa Vista where Howard Hughes' Spruce Goose was built is on the block. The site is valued at about $60 million. Check out the historic photos.

-- Annette Haddad

Email tips to annette.haddad@latimes.com

Magazine asks, 'Do we really need Fannie and Freddie?'

Links of note: From the New Yorker via Patrick.net: The New Yorker's thoughtful economics essayist, James Surowiecki, observes that Fannie Mae and Freddie Mac "became reckless" with other people's money, notes they have little impact on mortgage rates and asks whether we really need them any more: "The government already offers homeowners a subsidy, in the form of a mortgage tax break. Given everything else we could be spending taxpayer money on, does the government really need to be in the mortgage-buying business, too?"

Freddie Mac, by the way, today reported a loss of $821 million in the second quarter, much worse than Wall Street expected.

Elsewhere, the Wall Street Journal goes where the L.A. Times went earlier in the week, profiling L.A.-based FirstFed Financial. As Mark Lacter writes at LA Biz Observed, "Both pieces, written in advance of earnings results this week, are mainly sympathetic to the company's big problem: how to handle the raft of pay option mortgages from a few years back."

Update on FirstFed: Those earnings (losings) are now out, and the company today reported a quarterly loss of $35.5 million, which Thomson Financial says is in line with analyst expectations.

--Peter Viles
Your thoughts? Comments? E-mail story tips to peter.viles@latimes.com
Photo Credit: Bloomberg News

Finding gas under $4 a gallon in L.A. Land

Notable Tuesday morning links from here and there. Feel free to submit or nominate your favorites, by clicking here to e-mail me.

From the New York Times: The CEO of Freddie Mac ignored warning signs about questionable loans.

Tanta, the formidable contrarian at Calculated Risk, takes issue with the New York Times' "hit job" on Freddie Mac.

From RealEstalker: Actress and former bikini model Molly Sims has listed her Hollywood home for $2.99 million.

Update from Kate in the Valley: Kate watches the asking price of a Studio City house drop from $799K to  $589K in two months.

From the L.A. Times: Gas prices, a springtime obsession on this blog, are now 38 cents a gallon below the June peak.

More gas: LosAngelesGasPrices.com finds 12 gas stations selling regular for under $4 a gallon.

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

Links: A big discount on a Little Tokyo loft

I'm test-driving a new feature: Morning links from here and there.

From Redfin via Curbed LA: A Little Tokyo Loft -- once sold for $400,000 -- lists for $245,000.

Opinion, from the New York Times: The federal bailout of Fannie Mae violates constitutional principals.

From Newsweek via Patrick.net: Our "infatuation with homeownership" has created a housing nightmare.

From Bubble Markets Inventory Tracking: An update on an alleged fraud ring in Riverside County.

From Forbes.com: West Hollywood 90038 ranks among America's "most overpiced zip codes."

Top housing-related story on Digg: Bush signs housing bill.

I'd like your feedback on this one: Tell me whether you like the list-of-links concept, feel free to suggest specific stories you'd like to see linked, or to suggest specific blogs or websites you'd like to see featured  on a regular basis.

-- Peter Viles

Photo: Little Tokyo Lofts; Credit: Los Angeles Times