Beware of scam artists following the fires

There's some useful information at the L.A. Times' California Consumer blog for victims of the wildfires:

Fire victims need to watch out for phony adjusters, price gougers, tightfisted landlords and bogus charities.

The Los Angeles Department of Consumer Affairs cautioned that "some people see disasters as a chance to take advantage of those in need."

After a disaster, consumers should have their insurance company send an adjuster to assess the damage and process the claim.

And more for renters:

The department also said that if a rented home or apartment is badly damaged in a disaster, tenants can move out right away without giving landlords advance notice. Such tenants have the right to get back their security deposit and last month's rent. Landlords have to send this money within three weeks after a tenant moves out.

You can read the whole story here. The fire pushed southeast above Sierra Madre and Monrovia today.

-- Lauren Beale

Thoughts? Comments?

 

Do you agree with Barney Frank?

When I was in Washington, D.C., last week, Rep. Barney Frank (D-Mass.) and a couple of other politicians addressed a group of journalists gathered on Capitol Hill to cover the administration's overhaul of finance rules. I hesitated to blog on it because have you ever heard the man speak? It's a stream of mumbling.

With that caveat, he said a couple of discernible things worth recounting.

No. 1: "The notion that homeownership is a universal goal is greatly flawed," Frank said. There are people "for whom rental housing is ideal." His point: Homeownership society thinking contributed to the housing bubble.

No. 2: "The ability to securitize 100% of loans caused the bubble," he said. One of the critical changes going forward is that lenders keep some "skin in the game," he said, and retain at least a 5% stake in the loans they make.

I agree on No. 1 and, as for No. 2, I think a 5% stake is better than nothing, but I have no idea if it's enough.

And while we're talking about having skin in the game, he concluded with this idea: When home prices appreciate, a lot of problems can go unchecked and unnoticed. "But when the tide goes out," he said, "you can see who has been swimming naked."

-- Lauren Beale

Thoughts? Comments?

Photo: Rep. Barney Frank (D-Mass.) says lenders need to retain at least a 5% stake in the loans they make. Credit: Brendan Smialowski / Bloomberg News

Apartment rents fall in Los Angeles County

Apartment rental rates are inching down. The Times' Roger Vicent reports on the findings of a new study at latimes.com:

The average rent in Los Angeles County fell almost 4% in 2008 as apartment occupancy rates dropped and new units came online. The decline should continue this year as more renters lose their jobs, according to the annual USC Casden Forecast expected to be released by the university today.

"In L.A. County alone, 41,000 people moved out of apartments last year compared to the 29,000 people who moved in during the last five years," said forecast director Delores Conway.

To keep their units occupied, some landlords are lowering rents or offering concessions for signing a lease, such as a month of free rent or a reduced deposit, she said.

Rents should level out in 2010 as the economy recovers, the report said. The average one-bedroom apartment in Los Angeles rented for $1,397 a month at the end of last year.

Is it just me or does that still seem like a lot to pay for a one-bedroom rental? More on specific neighborhoods:

The Westside remains the priciest, while Pasadena and Burbank are stable with little change in occupancy or rents. Rents in Hollywood and central neighborhoods such as downtown Los Angeles are being weakened by new condominiums that are being leased rather than occupied by owners.

The San Fernando Valley should continue to see lower occupancy rates and rents in the near term because of layoffs in the area.

I would be curious to know what sorts of deals, gimmicks or incentives L.A. Land readers are encountering in the rental market. Compared with the price tumble in the housing market, 4% sure seems minimal.

-- Lauren Beale

Thoughts? Comments?

Photo: A newly built development on Olympic Boulevard in Santa Monica has 365-square-foot "studio loft" apartments for rent at $1,327 a month. Credit: Jim Simmons

 

Attention renter: Your home is in foreclosure

Renters who hate surprises might be interested in a new service launched today by RealtyTrac, an online marketplace for foreclosure properties. For $24.95 a year, RealtyTrac Renter Alerts  will send subscribers an e-mail when their residence goes into default or is headed toward foreclosure.

RealtyTrac's database of 1.8 million foreclosure and bank-owned properties can also be tapped to research properties before entering into a lease.

What do you think? Twenty-five bucks for some peace of mind?

— Lauren Beale

Thoughts? Comments?

Rent-versus-own balance shifting

As home prices continue to drop, the rent versus buy equation keeps changing. From "Renters lose edge on homeowners" Wednesday in the Wall St. Journal:

Now, after two years of rapid home-price depreciation, the relationship between the cost of rental payments versus after-tax mortgage payments is tilting toward ownership in a number of metropolitan areas.

Over the past 18 years, after-tax mortgage payments have averaged 26% more than rent payments, according to Green Street Advisors, a real-estate consultancy based in Newport Beach, Calif. In 2006, at the height of the housing bubble, mortgage payments reached as high as 66% more than rent payments. But by the end of 2008, average monthly rent for the largest 50 metropolitan areas was $1,045, compared with after-tax mortgage payments of $1,300, assuming a rate of 5.5% on a 30-year fixed mortgage. That means mortgage payments averaged just 24% more than rent payments, the narrowest gap since 2001. ...

In Los Angeles, for example, mortgage payments averaged 60% more than rent payments between 1990 and 2008. Now, those payments average 30% more than rent.

"We're not saying on an absolute basis that it's cheaper to own a home, but on a relative basis ... owning is looking much more attractive than it has in a long time," said Andrew McCulloch, a Green Street analyst. While the shift doesn't mean that renters will rush to buy homes soon, "it's not a 'no-brainer' anymore if they're going to rent versus own," he said....

Carla Zeineh, 22, and her husband recently began shopping for a home in Irvine, Calif., and discovered that with a 5% mortgage rate, her monthly payment on a $350,000 two-bedroom home with 20% down could be less than the $1,800 month that they pay in rent on their two-bedroom condo.

Between the $8,000 first-time home buyer tax credit from the stimulus package and the $10,000 incentive for Californians to buy newly built homes, the rent-versus-own tipping point may not be far off for some.

-- Lauren Beale

Thoughts? Comments?

Photo: San Pedro's Walker Avenue has a mix of owner-occupied homes and rentals. Credit: Lauren Beale / Los Angeles Times

Related posts:

State could offer a $10,000 tax break for buyers of new homes

First-time buyers get $8,000 tax credit in stimulus bill

From owner to rent, in the same house: Part II

Seems not everyone was pleased with Friday's announcement that Freddie Mac will let some foreclosed owners stay as renters in the homes they've lost. Affordable-housing advocates applaud this plan, and who is on the opposite side of the fence? Turns out it's real estate agents. From the Wall Street Journal Saturday:

Fannie and Freddie's responsibility for running businesses sometimes is at odds with its mission of fostering home ownership and community stability. So while tenant groups have hailed the companies' moves, some critics contend that the plans, while perhaps providing a social good, don't make sound business sense.

Among the critics are real-estate agents, whom Fannie Mae will rely on to handle maintenance and rent collection for some of the properties. They say renting the homes could slow sales because homes don't sell as well with tenants living in them.

"Fannie Mae is in the business of financing homes and selling them, but now this change is going to result in properties probably remaining on the market," said Brett Barry, an agent with Realty Executives in Phoenix who sells properties that now include tenants eligible for a Fannie Mae lease. "Now," he added, "if someone calls me at 3 a.m. with a toilet malfunction or a roof leak, I'm responsible for handling that."

But won't agents be paid for their property management duties, collecting rents and in commissions when the properties eventually sell? In this economy, it seems to me any work is good. Here's a chance not to have all one's income tied to sales.

Fannie and Freddie will market the homes for sale while they are rented and leases will transfer to the buyers. Real-estate agents also say they are worried the policy will limit the pool of buyers to investors, and that it could lead rental prices to dictate sale prices and further erode values.

"If you've got a house worth $350,000 and rent it for $1,200, no investor is going to buy that," said David Peeples, a Tallahassee, Fla., real-estate agent. Because that monthly rent wouldn't cover the mortgage payments, he said, "The end result is that with a tenant, it's going to be unsellable."

Back up the truck again here please. In the above example: 1) Perhaps the house really isn't worth $350,000 if rents are so out of kilter with the mortgage payment? 2) How does the tenant make it unsellable? If the math doesn't work with a tenant, it doesn't work without one, and that makes it unsellable at that price.

Am I missing something here?

-- Lauren Beale

Thoughts? Comments?

Photo: This Santa Maria, Calif., home sold last year in a foreclosure auction. In the third quarter of 2008, mortgage giants Fannie Mae and Freddie Mac held 20% of all loans that were 90 days or more past due. Credit: Brent Foster / Los Angeles Times

Welcome to California's IOU society [Updated]

[Update: California Controller John Chiang began resuming payment of state income tax refunds and other obligations March 6.]

There's an interesting juxtaposition of stories Friday at latimes.com. In a nutshell, there isn't enough affordable housing in L.A. but there won't be welfare checks to pay rent anyway. And if you were planning to earmark that state tax refund to help pay your mortgage, fix your roof or to cover your expenses since you lost your job, think again.

From "California controller to suspend tax refunds, welfare checks":

State Controller John Chiang announced today that his office would suspend tax refunds, welfare checks, student grants and other payments owed to Californians starting Feb. 1, as a result of the state's cash crisis.

Chiang said he had no choice but to stop making some $3.7 billion in payments in the absence of action by the governor and lawmakers to close the state's nearly $42-billion budget deficit. More than half of those payments are tax refunds.

The controller said the suspended payments could be rolled into IOUs if California still lacked sufficient cash to pay its bills come March or April.

"I take this action with great reluctance," Chiang said at a news conference in his office. But he said that without action to close the deficit, "there is no way to make it through February unscathed."

The payments to be frozen include nearly $2 billion in tax refunds; $300 million in cash grants for needy families and the aged, blind and disabled; and $13 million in grants for college students.

And just one day before, from "Hundreds wait for chance at affordable housing units in Los Angeles":

The Hollywood Community Housing Corp. wasn't giving away housing vouchers Thursday -- just the slim chance of securing a subsidized apartment in a new, 58-unit building.

Even so, by 11 a.m. more than 700 people were waiting in a line that snaked down Santa Monica Boulevard in Los Angeles -- and housing advocates were worried enough about potential unrest that they called police to help manage the crowd.

Ultimately, everything ended peacefully with 240 people getting applications for a lottery for the 58 new units and the rest leaving empty-handed, some in tears.

The bad economy coupled with the shortage of affordable housing in Los Angeles almost guarantees such scenes. Many in line told variations of the same story in explaining why they waited for hours in the baking sun for the chance to apply for apartments that will still cost up to $1,023 for a two-bedroom: They are crowded into small apartments for which they pay almost more than they can manage.

Begs the question of if a state IOU will be transferable. Can it be used to pay the rent? Buy food? Barter? Pay your federal or property taxes? 


--Lauren Beale

Thoughts? Comments?

Photo: Hollywood Housing Director Tripp Mills announces that there will not be enough applications available to people standing near the end of a long line outside the Immaculate Heart Church. Credit: Robert Gauthier / Los Angeles Times

Planning to rent out your home? There's a tax rule change

Do you plan to rent out your primary residence for the next few years rather than selling? There's a tweak in Internal Revenue Code 121, which allowed principal-residence sellers to qualify for up to $250,000 in tax-free capital gains (up to $500,000 for a qualified married couple) if they owned and occupied their primary home at least 24 of the last 60 months before its sale.

Under the old rule, rental properties could be converted to primary homes and primary residences to rentals -- if the time of occupancy requirements were met -- and you could still take a big chunk of any gains tax-free.

In 2009 that rental portion is no longer eligible for the break.

For an explanation of the 2009 change, L.A. Land checked in with Alayna Schroeder, an attorney, author of "Nolo's Essential Guide to Buying Your First Home" and an editor at Berkeley-based Nolo, who advised consumers to "be careful if your plan is to hold on to your home and rent it out -- not an uncommon strategy for many homeowners today who need to move but aren't ready to sell at the low prices dominating many real estate markets. Now, the time the property is not your principal residence is considered 'non-qualified use.' You are only permitted to exclude gain for qualified use -- the time the property is your principal residence."

Homeowners who rent their places out this year could be looking at receiving less (a pro-ration) of the previous exclusion -- if they are lucky enough to make a profit when they sell. So check in with your tax adviser if you're one of them.

Even though home values are way down, this change in the tax rule may matter to some weighing the "rent it out or sell it" question.

-- Lauren Beale

Thoughts? Comments?

Photo: "You don't need to worry about this if you don't ever plan to rent your house out. If you think you might, however, be aware of the tax implications of doing so," Alayna Schroeder advises. Credit: Tonya Perme

L.A. rents take a tumble

      

Rents held steady for much of 2008 even as home prices tanked. Now, rents are tumbling across Southern California along with home sale prices. Read The Times' story, "Housing Downturn Hits L.A.-Area Rents":

After rising for several years, rents in the Los Angeles area are declining because of the economic recession and depressed home prices, researchers, real estate agents and property managers say.

The lower local rents match a national trend, according to a report released Wednesday showing apartment rents fell in 54 out of 79 U.S. metropolitan areas in the fourth quarter of 2008. Softening rents add another obstacle to a housing market recovery, economists say, because tenants with low rent payments feel less urgency to buy a home.

Nationwide, apartment rents eased 0.1% in the fourth quarter, the first drop since 2002, according to the analysis by research firm Reis Inc.

Los Angeles apartment rents fell 0.7% in the fourth quarter, the first decline since 2001, although overall rents for the year were up slightly over 2007.

-- Peter Y. Hong

Photo: The decline in apartment occupancy rates is starting to have an effect on the rate of rent increases. Above, a high-end apartment tower on Ocean Avenue in Santa Monica. Credit: Ken Hively / Los Angeles Times

Home sweet rental: in praise of renting

Is renting just a temporary stop on the road to home ownership, or is it a destination in and of itself?  And does it even matter in the search for a place to call home?

An opinion essay worth reading in today's L.A. Times addresses that question. Headline: "You don't have to own it to make it a home." Kerry Madden writes:

My husband and I have never owned a house -- and may not any time soon, despite the steep drop in home prices. ... We've lived in our current home for 10 years now. We pay $1,400 a month in rent for a five-bedroom in Silver Lake. Our only debt is mounting college loans. Our landlord is a good guy. He's raised the rent only once, and he has a home-warranty plan, which means that if something breaks, the company comes out and fixes it. The neighborhood is full of friends for the kids.

But is it a holding pattern? Shouldn't we look to buy now that prices are finally coming down? But how can we with tuitions going up?

As I say, worth reading. The essay, as I read it, is only partly about the old rent-versus-buy argument, which is pretty much an economic discussion. It's also about the psychic issue of where your home really is, and what makes a place your home.

-- Peter Viles

Your thoughts? Comments? E-mail story tips to Peter Viles.
More about author Kerry Madden here.
Photo: Los Angeles Times