NEWS is on hiatus.  It's almost impossible to give the straight scoop on what's going on without offending half my bank clients!  There's some great blogs now anyway.  I like the Big Picture: bigpicture.typepad.com

Recent press:

L.A. Times: Appraisal can complicate selling, refinancing a home - Nov. 2012

L.A. Times: SoCal home sales tanking again - Feb. 2011

Realtor.org: How I Sold It - July 2010

L.A. Times: House flipping is back in South L.A. April 2010

Youtube: How to Buy a Bank-Owned Home March 2010

L.A. Times: How to Buy a Bank-Owned Home Feb. 2010

L.A. Business Journal: Top Home Brokers Nov. 2009

ABC: A Fix up Plan for L.A. Foreclosures April 2009

The New Yorker: LA's go-to guy... April 2009

L.A. Times Nordine story/video Oct. 2008

L.A. Times: Why Aren't Foreclosure Sales Regulated? Oct. 2007

L.A. Times: Banks Cutting Prices Oct. 2007

L.A. Times: One house's trip through the boom and bust Aug. 2007

L.A. Times: A disaster Aug. 2007

DSNews: Why Borrowers Default July 2007

L.A. Times: Sales Secrets July 2007

October 29, 2007

So much for the soft landing.  Used home sales jackknifed in September, the steepest plunge on record.  This is the worst real estate slump since World War 2.  Pundits are blaming the “credit crunch”, but there is no credit crunch, at least at the consumer level.  There’s a consumer confidence crunch.  Buyers just don’t want to buy while prices are dropping.  Unlike the stock market, it’s not that hard to time the real estate market.  Buyers will be back in droves when prices bottom out, in 2010.

BofA quit wholesale lending Friday.  The CEO said “I’ve had about as much fun as I can stand”.

Countrywide lost $1.2 billion in the third quarter, and unveiled a plan to modify $16 billion in loans to struggling borrowers.  “Unprecedented times call for unprecedented remedies”, said the COO.

Merryl Lynch’s CEO will resign today after a $7.9 billion third quarter writedown.

Attention bank CEO’s: Want to be a hero?  Be the first to introduce borrower-friendly loan docs.  Put all the significant terms in plain writing, on the first page, in English and Spanish.  More trust and goodwill = more profit.  A no brainer!

The Treasury, SEC, and several congressional committees are investigating why the credit agencies waited until July to downgrade securities backed by subprime loans.  Perhaps it’s because Standard & Poors, Moody’s, etc are paid by the investment bank they’re rating.  If the company doesn’t like the rating, they don’t pay for it.  Typical Wall Street shenanigans.

Retiring on social security?  Don’t count on it.  January’s cost of living increase will be 2.3%, the smallest since 2003.  That’s scary when you consider the real-world increases in medical care, fuel, food & housing.

Mortgage insurance stocks (PMI, MGIC, etc.) have fallen 30% in the last few days.  Someone knows something.  But don’t even worry, because sales will rebound next year and prices will rise 2.2%, at least according to NAR’s latest forecast.  NAR’s new chief economist sounds suspiciously like his predecessor, (author of 2005’s “Why the Real Estate Boom Will Not Bust”).  NAR has already called the bottom eight times so far since 2005, but who’s counting.

The empire fades:  I just sold a foreclosed building occupied by a very successful EZ Rent Rims store.  That’s right, people now rent the wheels on their cars (at least in L.A.).  How much more in debt can we get?  The U.S. personal savings rate is below zero, and the government debt level is $9 trillion ($9,000,000,000,000).  The only thing keeping us afloat is the fact that the U.S. Dollar is still the world’s currency, and only the U.S. Mint (and Kim Jong-Il) can print them.  It’s not backed by gold or anything other than worldwide confidence in our economy.  But that confidence is slowly eroding, and the dollar has been sliding for 5 years.  The Fed has always reported how much currency it was printing…until March 2006.  Now it’s like Willy Wonka’s chocolate factory, no one knows what’s going on in there.

Leo

June 07, 2007

The average rate on a 30 year fixed mortgage has risen 5 weeks in a row.  It’s at 6.47%, the highest since last August.

Inventory in 18 major metropolitan areas rose 5.1% in May from the previous month, and is up 29% over May 2006.

Hedge funds have been profiting from the subprime crisis by buying derivatives.  Now a group of over 25 funds run by some of the richest people in the country want to make sure defaulted borrowers aren’t given more time or special terms to stay in their houses.  The group is led by Paulson & Co., whose fund is up more than 90% this year.

More sad news:  “I reviewed several hundred [subprime] loans recently for our wholesale division,” said Allen Hardester, director of development for mortgage-broker, Guaranteed Rate, “and all of them, with one exception, qualified for a prime-rate loan.”

NAR changed chief economists but the spin continues.  Yesterday’s news release titled “Home Sales Projected to Fluctuate Narrowly With a Gradual Upturn” said prices will stabilize this year and rise in 2008.  I think if he says that for the next four years, his 2011 forecast will be prescient.

Call if you need anything.

May 25, 2007

So much for the selling season.  So. Cal. home sales were off 29% in April from April ’06.  It was the worst month in 12 years.

Nationwide, used home sales fell 2.6%, to the slowest pace since June 2003.  The median price fell .8%, the ninth straight monthly decline.  Inventory rose to a record 4.2 million, an 8.4 month supply.  According to the Commerce Dept. new home sales jumped 16.2%.  This statistic is always suspect because builders self report their sales to Commerce.  But it could be true because they really slashed prices: the median price fell 11% from the prior month, the largest drop on record.

147,000 homes were foreclosed in the U.S. last month, up 62% over April ’06.

Call if you need anything.

May 15, 2007

You heard it here first: the U.S. economy is in recession. April retail sales were the lowest since...forever!  Or at least since they began keeping track in 1970.  Economists' consensus was for a .4% rise.  Oops.  I guess the lackadaisical real estate market really is affecting the overall economy.  The official first quarter growth rate was 1.3%, but BLS and the Commerce Dept. always overstate growth and grossly understate inflation. According to the Wall Street Journal’s survey of economists the worst is already over, but this group has missed every recession since the 1970’s until they were nearly over.

So. Cal’s Katrina?  This winter and spring we’ve had so many days of howling dry winds.  I’ve lived here my whole life, and never seen weather like this before.  And now for the first spring ever there’s almost no wildflowers.  I’m afraid we’re going to see unprecedented fires this summer.

Not that I’d buy right now, but there’s still some good loans out there:  BofA is offering 95% LTV with no points, no fees whatsoever and no PMI.  Fixed or ARM, competitive rates.

Call if you need anything.

May 7, 2007

Despite the weather improving in March, pending sales of existing homes decreased at a seasonally adjusted annual rate of 4.9%; Sales were down 10.5% from a year ago.  Economists were looking for a 0.4% increase.

N.O.D.'s in California were up 23% in the 1st quarter over the last quarter of 2006.  The median age of the defaulted loans was 15 months.

Subprime:  New Century laid off 2000 more employees Thursday.  There's 750 left, down from 7200 last year.  GMAC and UBS lost $115 million and $123 million respectively in the first quarter.

There are two economies in the U.S. now, that of the super-rich and everyone else.  The richest 20% account for up to 70% of total consumption.  $10 million houses, art, $300,000 cars, etc. are all red hot.  Bentley and Ferrari are sold out for the year.  Wall Street now has indexes (blingdexes) to track the highest end of the consumer economy.

Pundits won't have David Lehreah to kick around anymore.  NAR's chief economist and author of the 2005 worstseller "Why the Real Estate Boom Will Not Bust" has resigned.  I always felt sorry for him, the poor guy never got it right.

Call if you need anything.

April 25, 2007

Home sales fell 8.4% in March, the biggest drop in 18 years.  The decline was three times what had been expected.  The median price also fell, for the eighth straight month.  Foreclosures rose 47%.  Sales pace has slowed to 7.3 months, up 30% over last year.  NAR, as per custom blamed the weather, but admitted prices would decline throughout the year.  Prices have never fallen for an entire year since NAR began keeping track 40 years ago.

Statewide, foreclosures were up 800% in the first quarter.

Alternative universe:  In the first quarter last year there were two $20 million + home sales on the Westside (Malibu-Beverly Hills).  This year there was 7.

The L.A. Times is reading my news.  They figured out that the median price is rising because cheap houses aren’t selling (due to new tighter credit standards) the day after I posted it here.

Call if you need anything.

April 16, 2007

Home sales in So. Cal. were down 32% from March '06. The median price (half the homes sold for more, half for less) rose to $505,000, but that's extremely misleading. The cheap houses have stopped selling because there's no more 100% financing. That's why sales in San Bernardino & Riverside Counties dropped 47%.

5316 properties were foreclosed in California in March, up 27% from February. Foreclosures have increased 264% in California in the last 6 months, and now account for 15% of all home sales.

New Century, class act 'til the end, has been stopped by a bankruptcy judge from paying its Ferrari driving executives a $6.3 million bonus for selling its assets.

Developers destroy the world, part 938: in what may be the dumbest buy of all time, a British developer has paid $500 million for the old Robinsons May site at Santa Monica & Wilshire in Beverly Hills. The seller paid $33.5 million just 3 years ago. They plan to build two twelve story ultra-luxury condo towers at what is already one of the worst intersections in L.A.

Call if you need anything.

April 5, 2007

California new home permits fell 42% in February from the same month last year, and housing construction has nearly stopped.  February starts were down 6% from January, and 42% from February '06.   Nationwide, residential construction spending fell 15%.  It was the 11th consecutive monthly decline. 

New Century, once the #1 subprime lender, filed bankruptcy and laid off 3200 employees.

I got a funny letter form HUD yesterday, announcing new higher loan ratios and lower credit requirements for FHA loans.  I hope they're not serious.  During the last REO cycle here they basically gave away their REO's, at tax payers' expense.

A study proves the bigger the house, the worse the CEO (Slate).

The new UCLA Anderson forecast is in agreement with virtually all the other major economists:  a recession is not in the cards.  I remember the last time they were all so bullish....right before the last recession.

Call if you need anything.

March 30, 2007

New home sales dropped 18.3% in February from the same month last year.  It was the slowest month since June 2000.  Inventory rose to an 8 month supply. The median home price was $212,800, down 1.3% from a year ago.  It was the seventh straight monthly decline.  Inventory rose to 3.75 million homes, an eight month supply, up 5.9% from January.  2.1 million of those are vacant, up 35% from a year ago.  In California sales were down 9.6%.

Lennar, the U.S.’s largest home builder, said earnings fell 73% in the first quarter.  Two months ago they told investors 2007 would be as good or better than 2006.  Oops.  Their average selling price dropped 7%, even as sales incentives more than tripled to $45,500 per home.

Super-high-end home sales are hot in the snootiest areas like Bel Air and Malibu.  A huge R1 lot here in Hermosa (not even near the beach) just sold to a builder for $5 million.  He expects to sell a spec house for $12 million.  The rich get richer......

Call if you need anything.

March 23, 2007

Lenders launched foreclosure actions against more than one in every 200 U.S. mortgage borrowers in the fourth quarter of 2006, the biggest share of homes at the start of the repossession process on record.

According to a new study by First American Core Logic, one in three borrowers who got -4% teaser rate loans between 2004 and 2006 will get foreclosed.

U.S. Housing starts were down 28.5% in February from a year ago.  As usual, weather was blamed (even though it was the warmest winter ever).

Subprime:  Ameriquest has fired over 3000 of its 6000 workers and closed 6 operations centers.  Fremont will unload a “significant number” of its 2400 home loan employees.

Rep. Barney Frank, chairman of the House Financial Services Committee, plans to introduce legislation to restrict overly risky mortgages.

NAR’s chief economist David Lereah has again predicted a housing recovery in 2007.

Call if you need anything. 

March 13, 2007

There's so much bank news I can't keep up. Here's just a taste:

Countrywide is no longer making zero-down loans.  New Century has stopped taking mortgage applications, and the NYSE halted trading on the stock yesterday when it dropped to $3. Federal regulators have shut down Fremont's subprime mortgage business with a cease and desist order.

According to Federal Reserve Governor Susan Bies, "What we're seeing in this narrow segment [subprime] is the beginning of the wave. This is not the end, this is the beginning." The Mortgage Bankers Assoc. says 100 more lenders will go out of business this year.

Low-down easy-qualifying loans have suddenly become very hard to get. This will have a dramatic effect on the market and the U.S. economy. For a couple years I've known we'd have a recession this year. This will be the trigger.

NAR reports pending home sales were down 4.1% in January from December, and down 9.8% from January '06. Inventory in 18 major metro areas rose 3.9% at the end of February from a month earlier, and is up 36% from a year ago.

Realtors are complaining about NAR's silly "the market is strengthening" stance. Only the sellers are buying it, so agents are stuck with a ton of overpriced inventory.

Call if you need anything. 

March 2, 2007

Sales of new U.S. homes fell 16% in January, the biggest drop since January 1994. At the current sales pace, there's a 6.8 month supply.

Housing starts have fallen for 11 straight months. That's happened four times before, and each time a recession started during or at the end of the slide.

New Century now faces a third class action lawsuit. I'd hate to be a subprime lender: When you make money borrowers sue for predatory lending, and when you lose money the investors get you.

Freddie Mac, always on the cutting edge, will now implement tougher subprime landing standards.

Not enough traffic for you on the Orange crush? Worry not, as at least 30 residential high rise towers are planned or already under construction in O.C.

I hate builders, part 937: 6 more residential towers are proposed, this time in Oxnard, next to . . . you guessed it, the Ventura freeway. Bladerunner is becoming a reality.

Call if you need anything. 

February 16, 2007

So. Cal. home sales:  January sales were off 17% from January ’06.  It was the slowest January since 1998.  The median price dropped 10K to 485K.  The only hot market is $5 million + SFR’s in places like Bel Air and Malibu.  The super rich have done very well the last six years.

Prices fell in 40 states in the fourth quarter, and U.S. foreclosures rose 25% in January.  The Ohio Dept. of Development has allocated $1 million in rescue funds to help distressed homeowners in their state.

The subprime meltdown has led to a flood of acquisitions.  Resmae, in Chapter 11, has agreed to be purchased by Credit Suisse.  The Mortgage Store Financial will buy Central Pacific Mortgage.  Bear Stearns will buy Encore Credit Corp. and Tribeca Lending will acquire The New York Mortgage Co.

More subprime news:  New Century faces two class action lawsuits from money-losing investors, and Wamu’s Long Beach Mortgage will eliminate 250 jobs.

Call if you need anything.

February 02, 2007

Good news first:  L.A. County’s industrial vacancy rate fell to 1.5% in the fourth quarter, the lowest in the country.

Now the rest:  Nationwide, home sales dropped 8.4% last year, the biggest drop since 1982 (when interest rates were 16%).  The vacancy rate of homes in the U.S. is 2.7%, the highest it’s ever been.

Nationwide, 40 to 50 small lenders a day are going out of business.

Coldwell Banker is suing a realtor in New Orleans for lost profits she would have made if she hadn’t lost both her brokerages to Hurricane Katrina.

O.P.M.:  A 42 story office tower at 6th and Grand will become downtown’s largest condo conversion. The timing is interesting, as builders can’t sell the existing inventory.

N.O.D.’s in California were up 145% in the fourth quarter, the most in any three month period since 1998.  Home loans are most likely to go into foreclosure when they’re three to five years told.  Since seemingly everyone refinanced their mortgages in 2002, 2003 and 2004, I expect foreclosures to increase this year and next.

How do you reconcile these two “facts”:  the corporate media says the market’s bottoming out, and the subject of the next REO Managers Assoc. of California meeting is  “The short sale explosion”.

Call if you need anything.

January 19, 2007

No mortgage payments for 12 months:  Mortgage Payment Deferral Inc. has a program to defer payments for up to 36 months. 

So. Cal. home sales:  sales were down 22% from December ‘05, which was also slow.  It was the slowest December (typically a good month) since 1995.  The median price (half sold for more, half for less) was a record 495K, up 2K from June’s prior record.

U.S. housing starts were down 29% in ’06 from the previous year, and foreclosure filings for 2006 nearly topped 1 million, a 51% increase over 2005.

Freddie Mac lost $550 million in the 3rd quarter of ’06, but it almost sounds like good news when spun by the C.E.O.  “While our quarterly results reflect the volatility we see quarter-to-quarter in response to movements in interest rates, we remain encouraged with the underlying progress of Freddie Mac’s business.”

NAR’s $40 million “now’s a great time to buy” ad campaign last winter was a flop, but they’re going to expand the “public awareness campaign”, advertising nationwide on network T.V. throughout the year.  I don’t know anyone who believes what they say anymore.

Call if you need anything.

January 5, 2007

Happy New Year.

I don’t know why it always takes so long to get these stats, but 115,000 properties in the U.S. went into foreclosure in October, the most all year, and up 42% from October ’05.  California had the most of any state, followed by Florida.

Home sales in California were down 22% in November, compared to November ’05 (which was also bad).  The median price was unchanged at 555K.  Housing starts were down 38%.

Nationwide, home sales were down 11%, compared to November ’05.  The median price was 218K, down from 225K in November ’05.  Prices fell in all regions of the country.  Residential construction spending continued its 8 month slowdown, dropping 11% in November.

Ownit Mortgage of Agoura Hills filed BK Thursday, listing its assets as between $1 million and $10 million, and debts of $170 million.  Several other lenders have gone out of business in the last few weeks.

Call if you need anything.

December 22, 2006

Good news first:  many economists, including those from NAR, CAR, and the National Assoc. of Home Builders, see the market stabilizing, and starting to turn around late next year.

Mortgage rates rose for the 2nd week in a row.

So. Cal. home sales:  November sales were S L O W, down 26% from the same month last year, and the worst November since 1997.  The median price for the 6 county area held steady at 487K, but that won’t last - prices are dropping everywhere right now.

The Center for Responsible Lending issued a scary report Wednesday:  2.2 million sub-prime loans issued since 1998 will end up foreclosed.  California, Arizona, Nevada and Washington D.C. will be hardest hit.

NAR expressed concern Tuesday over increasing foreclosure rates, and is trying to better educate borrowers about “exploding ARMs”.

Another sub-prime lender gone:  Ownit Mortgage has closed laying off all 800 employees.

Merry Christmas!

December 07, 2006

First the good news:  rates keep dropping, for 6 weeks in a row now.

UCLA’s quarterly Anderson forecast was released today.  They foresee a soft landing in ’07:  no recession, just slow growth, and improvement in ’08.

Starting today, Zillow will allow anyone to post listings on its site.  I’m going to list my whole inventory.

Now the rest:  California home sales jackknifed in October, down 28.7% from the same month last year.

Nationwide, used home sales dropped 11.5% in October from October ’05.  The median price was 221K, down from 229K, an all-time record drop.  There’s currently 3.85 million used homes for sale in the U.S., a 7.4 month supply. 

Ameriquest, once the #1 sub-prime lender, may be sold or even closed outright.

The collapsing sub-prime market has left Wells Fargo as the #1 sub-prime lender.  I never would have guessed.   They used to be SO picky.   A few years ago I (with perfect credit and a LOT of equity) applied for a large equity line.  They turned me down flat.  I then went to Malaga Bank, who offered me exactly 5 times as much.

Universal City plans to build 2900 homes and apartments on its back lot, plus an office complex, a hotel and restaurants right next to the 101.  Already the most congested freeway in the U.S., it’s only a matter of time before it comes to a complete stop.

Call if you need anything.

November 27, 2006

U.S. housing starts fell 14.6% in October.  The pace of residential construction is now almost 30% below last year’s level.  Building permits fell 6.3%, suggesting worse to come.

But the market’s hot…in Australia.  Prices in Perth are up 46% this year.

In the biggest real estate deal ever, Sam Zell will sell his office portfolio to Blackstone Group for $36 billion.

NAR’s ill-conceived and hilariously ill-timed $40 million ad campaign appears to have been a bust.  Not coincidentally, a Harris Interactive poll of “Most Prestigious Occupations”, rated realtors dead last.

Call if you need anything.

November 16, 2006

So. Cal. October home sales:  sales declined 22.4% from October of last year.  It was the slowest October since 1996.  But the median price held on at 484K.

With 2 months to go, there’s been 117,560 foreclosures in California this year, 45% more than last year.  Nationwide, foreclosures are up 19.6% this year.

Realtors feel the media is responsible for the housing downturn (I hear you laughing already).  NAR hoped to save the market with a $40 million ad campaign (sad huh – we could do a lot for the poor with $40 mil) over the last two weekends.  NAR’s new mantra:  “It’s a great time to buy or sell a home.”  It’s brilliant!  I have a good one for the great whites on Wall Street:  “It’s a great time to buy or sell Ford!”

Option One is for sale.  Many subprime lenders have become unprofitable in the deteriorating mortgage market.  Encore Credit Corp. was just bought by EMC, Merrill Lynch just bought 1st Franklin, and Morgan Stanley bought Saxon.

Call if you need anything.

November 02, 2006

Nationwide, used sales dropped 1.9% in September.  It was the 6th straight monthly decline.  The annualized rate of decline is 14.2%.  The median price has dropped 2.5% over the past year, the biggest drop since they started keeping track 35 years ago.  Foreclosures rose 17% in the third quarter, and inventory is up 35% from last year at this time.  I don’t think anyone takes them seriously anymore, but NAR’s chief economist said “this is likely the trough for sales”.

Alan Greenspan, probably worried about his legacy, is on a quest to save the housing market.  He reiterated last week that “most of the negatives in housing are probably behind us.  The fourth quarter should be reasonably good, certainly better than the third quarter.”  Greenspan used to be able to influence world markets with his words, but his power seems to have faded.

Countrywide will “reduce staff” by more than 2500 employees in the fourth quarter.

If you can’t beat ‘em, buy ‘em:  CB Richard Ellis is buying Trammel Crow for $1.8 billion cash.  CB will hold contracts for 85 of the Fortune 100.  Pretty impressive.

Call if you need anything.

October 25, 2006

Good news first:  as expected the Fed left interest rates alone today.

Now the rest:  there’s a lot of pre-election press right now about the housing market already bottoming out.  I keep seeing “the worst might be over”.  I wish it were true.  I’d prefer if my portfolio weren’t depreciating.  But I think we’re years away from the market bottoming out.  The down cycle is just beginning.

California defaults doubled in the 3rd quarter over the same period last year and actual foreclosures tripled.  The fourth quarter will be worse.

Countrywide’s profit from mortgage lending fell 40% in the third quarter.  Countrywide is the U.S.’s largest mortgage lender.

Apartment rents in California rose 6% in the third quarter.

Very quietly, and after a 2 year investigation, the Justice Department has decided not to prosecute Fannie Mae for misstating income by over $11 billion dollars.  What would happen to you or me if we cheated on our taxes by $11 billion?

Realtor.com, which is run by the National Association of Realtors, has a big problem with zillow.com.  This can mean only one thing:  that zillow is providing a great service, for free!  Check it out.

Call if you need anything.

October 12, 2006

South Bay sales: September dropped 20% last month from August. The median price is down to $820,000. It peaked at $872,000 last November.

Nationwide, 112,100 properties went into foreclosure in September, up 63% from a year ago. There were more foreclosures in the first three quarters this year than all of last year. At the current pace, there will be more than 1.2 million by the end of the year. In California, foreclosures are up 40% in the last 2 months.

Oops: On October 7th, after a rise in mortgage applications, Alan Greenspan said the "worst may well be over" for the U.S. housing industry. I guess he didn't notice half of the new mortgage ap's were refi's, and that purchase aps are still dropping.

O.P.M.: Market collapsing? Big builders with investor money don't care. Related is knocking down Century City's 30 story St. Regis Hotel, built in 1984, to build a 41 story condo tower. Related thinks they'll be selling them for $2.5 million to $25 million.

The Fed meets October 24th & 25th, but everyone knows the Fed doesn't raise rates 2 weeks before a national election.

Call if you need anything.

September 28, 2006

First the good news!  Interest rates are dropping.  The Fed NEVER raises rates before an election (and gas prices magically drop).  This combined with the crumbling market have allowed mortgage rates to drift lower.

August home sales made headlines throughout the country:  Nationwide, the median price dropped 4K from August ’05.  Sales dropped 12.6%.  Inventory is at an all time high: 4 million homes for sale, not including new construction.

Countrywide will layoff about 4 thousand employees in the next few months, and KB Home said West Coast new home orders plunged 58% in the 3rd quarter, 43% nationwide.

Call if you need anything.

September 22, 2006

Updated So. Cal. home sales: sales in the 6 county region fell 25% in August, the 9th consecutive monthly decline and the worst August since 1997.

Nationwide, new home construction fell 6% to a 3 year low.

Scary stats from millersamuel.com:

• 32.6% of new mortgages and home equity loans in 2005 were interest only, up from 0.6% in 2000.
• 43% of first-time home buyers in 2005 put no money down.
• 15.2% of 2005 home buyers owe at least 10% more than their home is worth.
• 10% of all home owners have no equity in their homes.
• $2.7 trillion in loans will adjust to higher rates in 2006 and 2007.
• 70% of borrowers who took out pay-option ARMS in the past year have loan balances larger than their initial loan.
• Homeowners face higher payments as mortgages are reset. Generally, monthly payments rise between $200 and $500 depending on the size of the mortgage.
• According to Reality Trac, August foreclosures were up 23% over July and 53% over a year ago.
• The number of homes for sale is at record highs, and inventories are 59% higher than a year earlier.
• New home sales are down 22% and existing home sales down 11%.
• The NASB housing market index has recorded an all-time decline.
• The housing affordability index is at a 15-year low.
• The house price-to-income (rents) ratio is off the charts. According to HSBC, in 18 states accounting for over 40% of national home values, the price-to-income ratio is 3.6 standard deviations above the mean.
• The OFHEO index of house prices deflated by the consumption price deflator has soared to a record high of 350 from 250 in 2001. From 1976 to 1996 it never was above 220.
• According to the NAR the year-to year prices of existing homes are now flat. A short time ago they were rising at a yearly rate of 16%.
• Nationally, home prices have not declined on a year-to-year basis since 1933. Recently, however, prices have been dropping in the North East, West and Mid-West.

According to the Office of Federal Housing Enterprise Oversight (OFHEO), the current slowdown is the worst since they began keeping track in 1975.

Since I’ve been in business (1987), the California Association of Realtors’ and National Association of Realtors’ economists have always given a (sometimes hilarious) cheery assessment of the market. Even during the California collapse of ’91-’95, recovery was always “just around the corner.”

Want to know what the big boys really think? The U.S. housing futures contract traded on the Chicago Mercantile Exchange is predicting a price drop of 5% next year.

Call if you need anything.

September 15, 2006

August home sales:  sales dropped 21% last month in L.A. County, the slowest August since 1997.  The median price dropped to 517K.  Sales dropped 32% in San Diego County, the 26th consecutive monthly drop from year earlier levels.  Stats for the other counties will be released next week. 

All the major home builders are now lowering their ’06 earnings forecasts, amid slumping orders and rising cancellations.  Their stock prices are taking a beating too.  Standard Pacific is down 47% for the year.  New home inventory is at an all time high in the U.S.  The chief economist for the National Association of Home Builders said the market should bottom out by next year and recover by late 2008.  He has to say that, just like the Realtors’ economists. (Everything’s going to be fine!) Toll Bros’ Inc.’s CEO said the current national housing slump is worse than the “soft landing” predicted by economists.  Builders never seem to figure this out, but real estate is “boom & bust”.  There’s never been a soft landing.

A new report showing labor costs are rising this year was seen as a “grave development” by economists, which will probably prompt the Fed to raise rates again.  Get it, middle class workers?  If you make more money, you’re going to pay higher interest rates.

Call if you need anything.

September 06, 2006

Nationwide, used home sales were down 11.2% in July from July ’05.  New home sales jackknifed, down 21.6%.

Standard Pacific has abandoned plans to sell 272 $600,000 downtown condos.  All will be leased instead.  Condo sales are down 25% this year, but 5600 more are slated to be built in the downtown area over the next 2 years.

From Holden Lewis, Bankrate.com:  “Even as the economy supposedly continues to expand, the gains are not trickling down to rank-and-file workers.  Executives and investors are raking in all the cash.  Average weekly earnings fell 0.2 percent, to $567.50 in August, compared to $568.50 in July.  That’s not going to make houses any more affordable for middle-class working people.  And it’s the deliberate result of our government’s policies, especially that of the Federal Reserve, which has been raising interest rates to keep wage increases in check.”

The Fed’s stuck though.  They know “real inflation” is a lot higher than the B.S. number the government reports.  Raising rates is the only way they can keep it in check.

Call if you need anything.

Leo

August 24, 2006

Get ready for the mother of all REO markets.  Home sales fell 4.1% in July, to their lowest level since January ’04.  It was the fourth straight monthly decline.  Sales in the San Francisco Bay area fell 31%.  It was their slowest July since 1996.  Sales have been falling there for 16 months in a row.  In San Diego, sales have dropped for 24 straight months.  There’s now an all time record 3.86 million homes for sale in the U.S., a 7.3 month supply at the current sales pace.  There are 35,000 houses for sale in Denver alone, and one in four is in foreclosure.  A recent headline:  “Selling a home?  Good luck!”  The midwest is really getting hammered.  It’s tempting to buy $25,000 duplexes in Akron, but the future there looks grim.  Mortgage defaults in California rose 67% in the second quarter, the biggest increase since Dataquick began tracking them in 1992.  That’s a big jump, but it’s nothing compared to what’s happening now.  Wait ‘til the numbers come out this fall. 

Every economist I read expects a “soft landing”, returning to a “normal” real estate market, etc.  Fed chief Bernanke gave Congress a sugary economic forecast last month, predicting a happy combination of sustainable expansion, moderate inflation, an end to global warming and world peace.  But one of the effects of the global economy is we don’t control our own destiny anymore.  The Fed raised rates 17 times over 2 years, and the net effect was lower mortgage rates.  Central governments in Europe and Japan raised interest rates one time this spring, and U.S. mortgage rates immediately jumped to a two year high.

Not to make comparisons (ha ha), but in 1929, the stock market only dropped 10%.  It took three years to deflate.  In 1929 there was no debt, no entitlements, no social security, etc.  People paid cash for houses.  The U.S. savings rate is now - .7%, lower than during the Great Depression.  Consumer debt is exploding, up $10.27 billion last month.  And this spring Congress quietly raised the government debt level to $9 trillion ($9,000,000,000,000.  It’s more impressive written numerically).

CPO’s!  Want free instant computer appraisals on any property in the country?  Check out zillow.com.  I mentioned this when it came out, but it’s been awhile.  Computer valuations are never that accurate, but it’s pretty cool.

Call if you need anything.

Leo

August 23, 2006

Nationwide, home sales fell 4.1% in July, to their lowest level since January ’04.  It was the fourth straight monthly decline.  In the West Sales were down 18% (that’s not a typo) from a year ago.  The scary part is inventory.  There’s now an all time record 3.86 million homes for sale, a 7.3 month supply at the current sales pace.  Building permits and housing starts both also fell.

Home sales in the Bay Area fell 31% in July.  It was the slowest July since 1996.  Sales have been falling there for 16 months in a row now.

Call if you need anything. 

Leo

August 08, 2006

First the good news:  the Fed decided not to raise rates today, after 17 straight monthly rate hikes, due to the “cooling” economy. 

The bad news is they should have quit a year ago. As predicted here, the market is really dead now, even worse than ’91.

Mortgage defaults in California rose 67% in the second quarter, the biggest increase since Dataquick began tracking them in 1992. L.A. County had the most. That’s a big jump, but it’s nothing compared to what’s happening now. Wait ‘til the numbers come out this fall.

Nationwide, home sales dropped 9% in June, the eighth drop in ten months. Inventory is the highest since 1997. And consumer credit debt exploded, up $10.27 billion.

Call if you need anything.

Leo

July 21, 2006

Fed chief Bernanke gave Congress a sugary economic forecast this week, predicting a happy combination of sustainable expansion, moderate inflation, an end to global warming and world peace.

So. Cal. home sales:  sales fell for the seventh month in a row.  Sales were down 17.5% from June ’05, the slowest June since 1999.  The median price is still holding steady @ 493K, but obviously not for long.

Nationwide, housing starts and new building permits fell dramatically in June.  According to a trade group builder confidence is at a 15 year low. 

Now the good news! (At least for landlords):  Rents jumped in the first half of ’06 in L.A. & Orange Counties, the biggest jump in 5 years.

Call if you need anything.

Leo

July 12, 2006

Nationwide, May home sales dropped 1.2% from April, and down 6.6% from May ’05.  Inventory is 51% higher than a year ago, with the average house taking over 6 months to sell.

There are 35,000 houses for sale in Denver, and one in four is in foreclosure.  A recent headline:  “Selling a home?  Good luck!”

Despite a mountain of evidence to the contrary, every economist I read expects a “soft landing”, returning to a “normal” real estate market, etc.

Call if you need anything.

Leo

June 23, 2006

First the good news:  according to a new report by Harvard, home prices in the U.S. rose 9.4% in 2005, the largest annual gain in more than 40  years of record keeping.  Now the bad part:  30% of new mortgages last year allowed borrowers to pay off no principal, including negative amortization loans that can result in owing more than they borrowed.

So. Cal homes sales:  sales in May were down 11.7%, the worst May since 1999.  In Orange County sales dropped 31%.  Inventory is 50% higher than a year ago.  But the median price only dropped $1000.

San Diego is leading the real estate decline.  Since November the median price has gone from 518K to 490K, and sales have dropped for 23 consecutive months.

California builders now expect to build 15% to 20% less homes than last year due to the slowdown.

UCLA’s highly (over)rated Anderson Forecast, released today, says house prices are not likely to be substantially lower 5 years from now than they are today.

Nissan begins shifting employees this month to its new national headquarters in Tennessee.  1300 local jobs will be eliminated.

And you thought downtown traffic couldn’t get any worse:  developers unveiled plans to build one of LA’s largest buildings, 2 million square feet, next to the convention center.  A 54 story tower will include 1000 hotel rooms, 216 luxury condos, and what we’ve all been waiting for, the largest ballroom in the city.

Call if you need anything.

Leo

June 12, 2006

California defaults jumped in the first quarter, up 23.4% over the last quarter, and 28.7% over the first quarter of ’05.  The U.S. overall did worse:  the number of properties entering foreclosure was up 38% over the previous quarter, and 72% over the first quarter of ’05.  The Midwest is really getting hammered.  I’m tempted to buy $25,000 duplexes in Akron, but I see no future there.

Mortgage rates were basically unchanged this week but due to inflation worries a 17th consecutive rate increase by the Fed is guaranteed on June 29.

Nationwide, spending on residential construction dropped 1.1% in April, the biggest decrease since January ’04.

If you want free computer appraisals on any property in the country check out zillow.com.  I mentioned this when it came out but it’s been awhile.  Computer valuations are never that accurate, but it’s pretty cool.

Call if you need anything.

Leo

May 25, 2006

April home sales:  sales fell 21% (that’s not a typo) in So. Cal, the biggest drop in 11 years.  At least the median price only dropped from 486K to 485K.

Nationwide, the median home price fell 3.3% in the first quarter.  (In Danville, Ill., the median price fell 11.6% to $52,500).  Housing starts fell for the third month in a row, dropping 5.6%.

The state lost a net 2600 jobs in April, after losing 13,400 in March.  Expect the trend to continue as the housing market dies.  Home building permits were down 20% in the first quarter.

According to a new survey, Indianapolis has the U.S.’s most affordable major housing market, and L.A. of course is the least affordable.

Call if you need anything.

Leo

May 12, 2006

The Fed raised short term rates Wednesday for the 16th time in a row.  The prime rate is now 8%.  They may take a break next month, but mortgage rates will continue to rise slowly.  For the first time ever, I’m refinancing all my ARM’s into 30 year fixed.

NAR’s pending home sales index fell again in March, down 1.2% from February and 6% from March ’05.

Nationwide, foreclosures were up 72% in the first quarter over the same period last year.

Ameriquest will cut 3800 jobs and close all 229 retail branches in the U.S.  Their loan volume fell 46% in the first quarter.

Countrywide’s CEO made $160 million last year, equal to 6% of the company’s 2005 net income.  Maybe he’s worth it.  They always approve me in 5 minutes, and their mortgage statements with 4 payment options are the best.

An Irvine developer outbid Donald Trump to buy a 2.25 acre lot in Century City for  $110 million ($1056 a square foot).  They’ll build another ultra-luxury condo tower there, to compete with the other one’s going up.  That’s exactly what the area needs: more Ferraris in total gridlock on Santa Monica Blvd.

Call if you need anything.

Leo

April 28, 2006

Sorry about all the bad news, but here goes:  mortgage rates are up sharply this week, the highest since early 2002. The Fed will raise rates again May 10th, but Bernanke’s comments yesterday suggest they’ll take a break after that.

Nationwide, over 100,000 properties entered foreclosure in January, up 27% from December, and 45% from January ’05.  Georgia had the highest foreclosure rate, followed by Nevada, Colorado, Texas and Indiana.

Apartment rents rose 6.7% in LA and Orange Counties over the last year, and 7.3% in the Inland Empire.  Rents will increase more in the next couple of years as home sales decline.

Housing starts fell in March, to the slowest pace since December.  Sales rose slightly, but the median price was flat and inventory ballooned.

According to a new report more people are supposedly moving out of Los Angeles than moving in, so why does traffic keep getting worse?

Subject to congressional approval, the U.S. Forest Service would like to sell 77,000 acres of national forest land in California.

Call if you need anything.

Leo

April 14, 2006

L.A. County home sales:  sales declined 10.3% in March from a year earlier, the fifth

straight month of falling sales.  The median price actually rose 3% to 506K, but that’s

misleading.  Prices are definitely not rising.  The same thing happened after the last

peak in 1990.   The median price continued to rise a bit even as sales basically

stopped.

The yield on the 10 year T note closed yesterday above 5% for the first time since June

2002.  The Fed will definitely raise rates again May 10th.  The average fixed rate

mortgage was 6.56% this week, the highest since early 2002.

Call if you need anything.

Leo

March 31, 2006

The Fed raised rates again this week and made it clear they’re not done. If they stop

raising rates the dollar will fall because many foreign investors will quit buying U.S.

treasuries.

Nationwide, new home sales were down 10.5% in February, and down 13% from

February ’05. In the West, sales were off 29%, (but up 9.5% in So. Cal.) Sales were

the slowest since March ’03, and the median price dropped 3% from a year ago. The

average amount of time it takes to sell a new home has grown to 6%.

UCLA’s highly (over)rated Anderson forecast released this week now recognizes the

real estate market “has peaked and is starting to soften”. But they don’t see a pending

recession. In their last forecast in December they said “the market’s still hot, and will

probably begin to slow over the next 2 years.” The L.A. Times never reports how wrong

they’ve been over the last 5 years, but always mentions the one time they got it right

in 2001. One economist quoted in the Times sees the market not as a bubble but as a

souffl?, flattening out. I see it more as a hot fudge sundae thrown off the Times Mirror

building.

Call if you need anything.

Leo

March 16, 2006

February So. Cal. home sales:  sales dropped 7% from February ’05, to the lowest level in 5 years.  The median price rose to $480,000, helped by higher-end new home sales in San Bernardino County.  But new home prices dropped 5.4% and 21.5% in L.A. and Orange Counties, respectively.  South Bay home sales jackknifed in February, down 58% from the same month last year.

Nationwide, the Pending Home Sales Index (tracks the number of homes in escrow, put out by NAR) fell for the 5th month in a row January.  It has steadily declined since August.

Central governments around the world raised interest rates early this month, and U.S. mortgage rates immediately jumped to a two year high.  Greenspan raised rates 13 times over 2 years, and the net effect was lower mortgage rates.  The more I learn, the more I feel like no one really knows what’s going on.

The U.S.’s personal savings rate fell to -0.7% in January. Consumers’ outlays exceeded their income by $63 billion.

Fannie Mae has uncovered more accounting “errors” and will miss its deadline for filing its 2005 annual report with the SEC.  In 2004 they were forced by the SEC to restate earnings by $11 billion.  According to Money News, “the company’s financial struggles call into question the strength of the entire mortgage market.  Fannie Mae finances one in every 5 mortgages made in the U.S.  If Fannie Mae were no longer able to purchase the billions of dollars in home loans from mortgage lenders, it would bring the entire lending market to a grinding halt.”

Next month congress will quietly raise the government debt level to $9 trillion ($9,000,000,000,000.  It’s more impressive written numerically).

According to a nationwide poll last week, 86% of homeowners expect home prices to appreciate over the next 3 years, and 5% expect no appreciation.  Interestingly, they didn’t ask if anyone expected depreciation.

Call if you need anything.

March 3, 2006

Interest rates on long-term Treasury bonds jumped Thursday to their highest level since November, amid more signs that the world’s major central banks will make credit tougher to get.

The Fed’s vice chairman, Roger Ferguson, has quit and won’t attend the next rate-setting meeting at the end of March.  Meanwhile, two new Fed governors have been approved, meaning President Bush has named all of the Federal Reserve Board’s current members.  One, Kevin Warsh, 35, isn’t an economist.  But his father-in-law is a big contributor to Republican causes.  Warsh is a White House aide who worked in the mergers and acquisitions department at Morgan Stanley for a few years.

Nationwide, used home sales have fallen for the fifth month in a row.  January sales were down 2.8% from December, and down 5.2% from the previous January.  The median price was flat at $261,000 (it peaked at $269,000 in August). Inventory is at an all time high, up 43% from a year ago.  The numbers are worse for condos.  Economist Joel Naroff:  “ The condo market is tanking, the single-family market is faltering and with inventories sky high, it is only a matter of time before prices start falling sharply.”

Looking for REO’s?  Texas and Ohio currently have the most in the U.S.

It was a good year:  Westwood based home builder KB Home paid its CEO $34 million last year.

Call if you need anything.

Leo

February 03, 2006

As usual, the Fed’s rate increase this week had a negligible affect on mortgage rates.

Nationwide used home sales fell 5.7% in December.  Sales were down 11.4% in the West.

The National Association of Realtors predicts sales will drop 4.4% next year.  But don’t place your bets yet.  Here’s how accurate their economists have been lately:

          In 2002, they were off by 6.4%, and got the direction of the movement wrong.

          In 2003 they were off by 14.2%.

          In 2004 they were off by 14%.

          In 2005 they were of by 9.6%, and got the direction of the movement wrong.

New home construction in California fell 3% last year, the first drop in 10 years.  A trade group also predicted an 11% drop this year.  40% of all new jobs in California since 2001 were in construction.  Big west coast builder Ryland Group said sales were down 34% in California and the West last year, and has dropped some prices as much as $100,000.

81,382 properties entered foreclosure in the U.S. in October (the latest month reported), the most all year, and up 18% over September.  In California, the number of notices of default recorded rose 19% in the fourth quarter.

The U.S. Government will borrow $188 billion this quarter, the most ever, and $17 billion more than their last estimate.

San Pedro:  construction begins this spring on a 16 story $175 million condo tower.  It’s the city’s first-ever residential tower, and it’s east of Gaffey.

Call if you need anything.

Leo

January 20, 2006

So. Cal. home sales:  sales were off 4.5% last month from December ’04, and the lowest of any December since 2001.  But the median price held at 479K, where it’s been since August.  The median price hasn’t dropped in 10 years, but it’s about to.  Housing starts dropped 21.7% in the West, the biggest drop since 1999.  Nationwide, housing starts fell 8.9%.

The Fed will raise rates again at the end of this month. Core inflation is slowly accelerating.  They have no choice.

43% of first time home buyers got zero down loans last year.

Call if you need anything.

Leo

January 09, 2006

Not much news, the market is still soft and going softer.Long term interest rates have become cheaper than short term rates, historically a sign of impending recession.

California new home sales jackknifed in November, down 17% from October, and 18% from November ’04.  Nationwide, used home sales dropped for the second month in a row, to the lowest level since March.  Inventory in the U.S. has almost doubled since January, ‘05.

Leo

December 27, 2005

Not much news.  The Fed’s rate hike last week had little effect on mortgage rates. Bernanke will probably raise rates at least twice more. Core inflation is still getting worse, despite 13 consecutive rate hikes.

L.A. County home sales were off 1.8%, last month, but the median price held at 497K.

Fannie Mae’s chief economist predicts home sales to drop 10% next year.

Have a safe New Year.

Leo

December 9, 2005

Inflation seems to be slowing.  If this trend continues, the Fed will probably raise rates just one or two more times.  The rate setting committee’s next meting is Dec. 13.

Nationwide, home sales fell 2.7% in October.  Inventory is the highest it’s been since 1986.  Sales declined in all areas of the country.

Fannie & Freddie’s conforming loan limit rises to 417K January 1st.  That’s still well below the California median home price of 454K.

So. Cal. office rents will continue to rise next year according to the annual Casden R.E. Economics Forecast. They’re basing this on the assumption the economy will improve next year.

The new UCLA Anderson Forecast is a shocker.  Last time they said the market had peaked and properties were overvalued 40% to 45%.  Now they say the market’s still hot, and the market will probably begin to slow over the next 2 years.

Is there a more clogged intersection than Wilshire & Santa Monica Blvd.?  Developers want to add 252 condos there.  But don’t worry, they said the project “would not increase traffic”.

Ameriquest just eliminated 1500 jobs, the start of a national shakeout in the home-loan business.  The Mortgage Banking Assn. predicts 80,000 bank jobs will be eliminated if interest rates rise to 8.25%.

Call if you need anything.

Leo

November 28, 2005

First the good news!  Due to decreasing demand, interest rates finally dropped a bit.  Today’s average 30 year fixed is 5.77%. 

So. Cal. home sales:  the median price for the 6 county region continued to drop in October, to 473K.  (August was 476K, September 475K).  Sales were down 10% from the previous month.

Nationwide, housing starts fell 5.6% last month, and permits dropped 6.7%, the biggest decline in 6 years.

According to the Washington Post on Nov. 11, (washingtonpost.com) prices and sales volume have dropped sharply in the D.C. area:  Sales are down 28%, inventory up 62%.  New townhouses are selling for 100K less than they were in May.

Call if you need anything.

Leo

November 11, 2005

No good news lately.  The average 30 year fixed is now 6.42%, the highest in over 2 years.

Nissan will eliminate 1300 jobs in Gardena and Carson when they move their headquarters to Nashville, where real estate and taxes are lower.  They’ll save money by replacing high paid employees with new workers at lower pay and less benefits.  The median home price in Nashville is 159K.  Mansions go for 500K.

According to the U.S.’s largest R.E.I.T. investor, high end house values will drop 50%.

Freddie Mac announced yesterday that it overstated 1st quarter income by $200 million. Fannie Mae is already in trouble for overstating several years’ income by $11 billion. They missed another regulatory deadline for filing a financial report this week, this time for the 3rd quarter.  They haven’t filed an earnings report since last year.

Call if you need anything.

Leo

October 28, 2005

Bernanke seems like a good pick to replace Greenspan.  That’s the good news.  Interest rates have been going up for 6 weeks and the market continues to slow.  The average 30 year fixed rate mortgage is 6.15% this week, a 15 month high.

Mortgage defaults in California rose in the third quarter for the first time in more than 3 years.  Most were in Southern California, where defaults were up 20% over last year.  The Bay Area’s doing much better.  Defaults there declined 13%.

Nationwide, unsold new home inventory is at an all time high.  New home sales in the West – which includes California – dropped 12% last month.

So. Cal. September home sales:  sales were down 7.4% from August, and the median price dropped .2%.

20% of the home loans issued last year were subprime, up from 10% a decade ago.

Downtown traffic too light for you?  Not for long.  KBHome and Lennar will break ground in June for 25,000 square feet of retail, 700 condos in 27 and 40 story towers, and a 55 story hotel, all across the street from Staples.

Call if you need anything.

Leo

October 14, 2005

Mortgage interest rates have been rising steadily for 3 weeks.  The trend is going to continue.  Inventory has doubled in the last 2 months, and prices are now dropping in all areas.  It had to happen eventually.  Prices can’t continue to rise 30% a year while incomes go up 3%.  Affordability has dropped to 14% of state population, the lowest level since records began.

California housing starts fell 11% in August.

Nationwide, home sales rose in August (reflecting sales activity in June/July, when the market was still hot), and the median price was 220K, way up from 190K in August ’04.

Call if you need anything.

Leo

September 23, 2005

The Fed’s constant rate hikes are finally having the desired affect of slowing the housing market, especially the high end.

August So. Cal home sales:  sales were up 10% over July, and the median price was up 17% from August ‘o4.  But San Diego county is lagging.  Sales were down for the 13^th consecutive month, and the median price has been virtually flat all year.

The Justice Department is suing the National Association of Realtors over discount brokers’ rights to MLS access.  NAR has no chance.  The world’s changing, and millions of dollars in lobby money won’t stop it.

The Federal Reserve confirmed something this week that realtors have always known:  blacks are three times more likely to pay subprime mortgage rates, regardless of income.

The always s optimistic California Assoc. of Realtors predicts 10% appreciation next year.

Call if you need anything.

Leo

September 9, 2005

The rate on the 30 year fixed was unchanged this week, 5.8%.

Nationwide, inventory rose in July to the highest level since May 1988, while the U.S. savings rate fell to an all time low (including the Great Depression) of minus .06%. 

Affordability is becoming a problem.  The proportion of California households able to afford a median-priced home fell to 16% in July from 19% a year earlier.  More than 50% of state residents who bought in the last 2 years spent more than a third of their pretax income on housing.  20% paid more than half their income.

If you’re in trouble and contemplating bankruptcy do it before October 17th, when the new bankruptcy law takes effect.

Call if you need anything.

Leo

August 26, 2005

The managing director and economist of Pimco says the main goal of Fed policy is to increase long-term rates enough to cool the housing market.

U.S. existing home sales fell 2.6% in July, while new home sales rose 6.5%.

In So. Cal., home sales fell 5.8% from July ’04.  Prices in the 800K+ market dropped 5% from June ’05, the first drop in 10 years.

Home Mortgage and equity line of credit debt has swelled from $4.8 trillion at the end of 2000 to nearly $8 trillion now.  Title of a banking analyst’s report last week:  “This Powder Keg is Going To Blow.”

Phoenix has had the U.S. hottest real estate market over the last year, rising 47%.  6 of the 10 fastest-appreciating markets are in Florida.  L.A. rose 8.3%.  Prices dropped in lots of the square states:  Michigan, Ohio, Indiana, Tennessee, Kansas.  In Danville, Illinois the median price for a SFR is 73K.

More than 100 residential skyscrapers are proposed for Sin City, with 8000 condos under construction or ready to start.

Call if you need anything.

Leo

August 12, 2005

Sorry for all the bad news this week:

The Fed’s constant rate hikes (Tuesday’s was the 10th in 10 months) are finally having an affect on the market.  Mortgage rates have risen steadily for weeks now, and prices are now dropping in some markets.

Fannie Mae, already in trouble for seriously cooking the books, says it’ll take another year just to figure out what their real income has been the last couple years.  They already admitted overstating income by $11 billion, but that number is expected to rise.  The NYSE is considering delisting them.  Analysts say that could cause a collapse of the U.S. housing market, so I doubt it’ll happen.

The nation’s savings rate fell to .02% in June, the 2nd lowest rate since the Great Depression. In October ’01 the rate fell slightly lower, when consumers enthusiastically responded to patriotic (idiotic) promotions from auto companies.

REIT’S are getting slammed on Wall Street, in anticipation of a real estate correction.

Call if you need anything.

Leo

July 29, 2005

The average fixed rate mortgage is 5.85%. It’s risen 5 weeks in a row.

Greenspan to Congress last week:  “Thus, our baseline outlook for the U.S. economy is one of sustained economic growth and contained inflation pressures.  In our view, realizing this outcome will require the Federal Reserve to continue to remove monetary accommodation.”  Translation:  rates are going up August 9th.

June So. Cal. home sales:  sales were up 2% over June ’04.  The median price for the 6 county area rose to 465K, but at the slowest appreciation rate in over 3 years.

Nationwide, used home sales sold at the fastest pace in history in June, and the median price rose to a record 219K.

Call if you need anything.

Leo

July 1, 2005  

The Fed raised rates a quarter point yesterday, the 9th hike in the last year, and said that it would continue to raise rates at a “measured” pace.

UCLA’s new Anderson forecast again said we’re in a real estate bubble.  They’ve been saying it for 2 years now.  I wonder how many people cashed out after reading their ’03 forecast.

The Supreme Court ruled last week that local governments can seize and condemn houses to enrich private developers that build offices and houses on the land.

Nationwide, used home sales dropped slightly but are still very strong.  New home sales were up a bit, but only because April’s number was revised downward.

Prediction from the nation’s most-listened-to bond investor:  the Fed will raise the overnight rate another half a percentage point, pause briefly, then drop it again before the end of the year.

Big Sales:  the Promenade at Howard Hughes Center in Playa Del Rey just sold for $95 million, and a 40 acre estate in the Hamptons sold for $90 million to a Swedish industrialist.

Call if you need anything.

Leo

June 17, 2005

30 year fixed mortgages are averaging 5.2% today.  Jumbos are 5.54%.

May home sales:  sales in So. Cal. Were off .9% from the same month last year, and prices were flat.  The So. Cal. median price remains 456K.  The market has definitely peaked.

L.A. based KB home’s quarterly profit jumped 78% on revenue of $2.1 billion.

U.S. housing starts rose .2% in May, but building permits declined.

Call if you need anything.

Leo

June 3, 2005

Interest rates dropped again this week.  Now would be a good time to lock in a fixed rate.

U.S. home sales:  used homes sold at a record pace in April, but inventory is increasing.  The U.S. median price is now 206K, which is still less than the worst house in Watts.  Bakersfield currently has the nation’s hottest housing market.

Call if you need anything.

Leo

May 06, 2005

The Fed raised its key interest rate another quarter point Tuesday, the 8th hike since June.  The average 30 year fixed mortgage is still 5.78%.

Nationwide, used home sales jumped in March to the 3rd highest level on record.  New home sales were up 12.2%.

Karma! 2 more former Homestore (Realtor.com) execs were indicted for fraud this week.  9 others from my favorite company await sentencing.

California’s population grew 1.5% last year to 36.8 million.  1 in 8 Americans live here now.

L.A. County office vacancy fell 3% in the 1st quarter to 14%.

Americans earned and spent more than expected in March, according to the Commerce Department.  Once again, we spent more than we earned.  Apparently we have decided that we can spend more than we earn forever.

Call if you need anything.

Leo

April 21, 2005

March home sales in So Cal: the number of homes sold was almost identical to March ’04, and the median price rose to a record 439K.  Inventory has dropped 50% in the last 6 months.

Housing starts fell 17.6 percent in March, the biggest decline since January 1991.  Economists had expected a drop of more like 6.6 percent. 

Palmdale/Lancaster is booming again. 4 projects totaling 56,000 SFR’s are underway.

So. Cal. apartment rents rose 5.2% in the 1st quarter.

The landmark bankruptcy bill will soon be signed by Bush. If you’re considering filing, better do it now.

Call if you need anything.

Leo

April 11, 2005

The market’s still red hot, interest rates drifting lower again.  We’re definitely due for a correction, but it won’t happen until interest rates really move up.

USA Today reports that almost 51,000 buyers paid $1 million or more for homes last year.  In 1999, there were 10,000 such buyers.

Home builder Standard Pacific gave it’s CEO a $11.5 million bonus for ’04, on top of his 956K salary.

Who is rich?  He who is happy with what he has.

Call if you need anything.

Leo

March 24, 2005

The Fed raised the federal funds rate Tuesday and warned about inflation for the 1st time in four years.  Interest rates could be headed significantly higher, which would finally kill the housing boom.

L.A. County February home sales:  Sales were off 8.6% from February ’04.  The median price rose to 424K.

The Anderson forecast, released on the 15th, once again said we’re in a real estate bubble.  The average home mortgage payment in California is now $1,824, up 24% from a year ago. Housing construction now employs 880,900 workers in California, up 6.4% from a year ago.  There are now 423,000 agents in California, up 25% since 2003.  That’s 2% of all working age Californians.

California’s mortgage delinquency rate is at its lowest level since 1979, the first year

the M.B.A. began keeping records.

Ameriquest, the U.S.’s largest B lender, will pay $50,000,000 to settle a class action lawsuit alleging predatory lending.

For the fourth year in a row, the SBA’s funding will be cut again in 2006.

Call if you need anything.

Leo

March 11, 2005

Every spring there’s a flood of new inventory.  Not this year.  The market’s white hot again.  I’ve got 17 active listings, the least I’ve had since 1987.

It’s a different story in the red states:  Ohio has the highest percentage of homeowners in foreclosure:  One out of 11 is 30 days or more behind in payments.

A major bankruptcy reform bill, long sought by credit card companies and banks, and pushed by the GOP, appears close to becoming law.

Interest rates aren’t moving.  Current average 30 year fixed mortage:  5.45%

Ryland, a Calabasas based home builder, gave a $12 million bonus to its CEO for a good ’04.

Call if you need anything.

Leo

February 25, 2005

Southern California home sales jackknifed in January, down 28.5% from December. The median price was 415K, down from 424K in December.

It’s guaranteed the Fed will raise short term interest rates when they meet March 22nd.

Countrywide prognosticators once predicted California REO’s to pick up in 2005. Now they’re thinking early 2007.

People always ask “How can someone get foreclosed on in this market?” Here’s one reason: Half of all bankruptcies in the U.S. are the direct result of medical bills and 75% of those had health insurance when they became ill.

Schwarzenegger now has enough support in the Senate to relax environmental laws that affect housing, in order to make it cheaper and fasted for builders to build.

Think traffic in Orange County is bad now? Miami based Lennar Corp. will build 3400 new houses on the former El Toro Marine base. For decades, the military allowed toxic chemicals to seep into the ground there. Many had hoped for an international airport there.

KB Homes’ CEO got a 25% raise in ’04, to $20 million.

Call if you need anything.

Leo

February 10, 2005

January L A County home sales:  sales were off 5% from Jan. ’04.  The median price dropped 4K to 414K.

 The Fed’s quarter point rate hike last week, the 6th since last June, had no affect on mortgage rates (other than equity lines).  Mortgage rates are dropping this week even as short term rates rise.  This can’t last.  If you’re thinking of locking in a 30 year loan, now’s the time.

One of you asked me (I can’t remember who) for a good property manager in South L.A.  I finally found her card:  Gabriella 310-838-6345.

The biggest loser in Bush’s 2006 budget is HUD, which will lose 11.5% of its funding.

Riverside County’s housing frenzy is over.  New home sales jacknifed 54% in the fourth quarter.  Forecast Homes has dropped the prices in their “Hidden Meadows” subdivision in Menafee 100K.

Maquire Properties is buying 10 office complexes in the Western U.S. for $1.51 billion.

4th quarter profit at Countrywide (the nation’s biggest mortgage lender) plunged 39%.

Leo

January 27, 2005  

December home sales in L.A. County:  sales were off 7.4% from the same month last year.  The median price held steady at 418K.

Paul Krugman worries that interest will soar if the president follows his usual procedure - - hiring only yes-men and yes-women - - when he appoints Alan Greenspan’s successor to chair the Federal Reserve. Greenspan’s term ends next year.

Yahoo is leasing 256,000 sq. ft. in Santa Monica’s Colorado Center, soon to be known as Yahoo Center.  They’re paying $100 million for 10 years.  You’d think for $100 million they could’ve bought something.

Office vacancies in L.A. County fell to 14.8% in the fourth quarter, from 17.4% a year earlier.

Nationwide, housing starts rose 11% in December.

Nationwide, 6.675 million used homes were sold in ’04, the fourth year in a row of record sales.  2004’s mark was a 9.4% increase over 2003.  

Leo

January 17, 2005  

Not much happening so far this year.  Prices are flat, sales volume and interest rates are stable.

Affordability: The National Association of Home Builders released its housing affordability index Thursday, and Lima, Ohio, ranked highest in affordability. Santa Barbara and its environs ranked the lowest.

Countrywide, the U.S.’s biggest mortgage lender, pledged in 2003 to underwrite $600 billion to minorities and lower-income borrowers by 2010.  On Thursday they raised the target to  $1 trillion.  They’re extremely aggressive with zero-down loans, and don’t have to worry about REO’s too much because they sell 99% of their loans.  

Leo

January 3, 2005

We’ve moved.  Our new mailing address is 2629 Manhattan Avenue #290, Hermosa Beach 90254.  The physical address is 1925 Beach Drive, Hermosa Beach.

Fixed mortgages rose slightly last week to 5.72%.  I still say stick with the ARM’s.

New home sales fell 28% in the West in November, the steepest decline in 22 years.  Nationwide, sales were off 12%.  Meanwhile, used home sales rose 13% over November ’03. (In November  ’03 there was no inventory).

California has knocked off Massachusetts to become the least affordable state to rent a home.  9 of the 10 least affordable counties in the U.S. are now in CA.  The vacancy rate in L.A. County is 3%.

Fannie Mae’s CEO resigned last week for cooking the books.  Fannie overstated $9 Billion+ in earnings (oops!) over the last 4 years.  Mr. Raines will have to make do with the $20,000,000 income he earned this year and another 8 digits in stock options.

Call if you need anything.

Leo

December 17, 2004  

UCLA’s widely watched Anderson Forecast, released Wednesday, says California and the nation are in a real estate bubble (as in ready to pop).  They’re calling it the biggest risk to the U.S. economy.  “The housing sectors’ high and unusual contribution to economic growth is not going to continue.”

Stephen Roach, Morgan Stanley's chief economist, also believes we’re in a real estate bubble.  The personal savings rate fell to .2% in October, which is basically zero (in the 1970’s and 1980’s it was between 9 and 11%).  A lot of people (including me) used the equity in their homes to spend more money than they made this year.  Like many economists, he believes the dollar will continue to fall and long term rates will rise.

The Fed raised its key interest rate again Tuesday, the 5th hike in their last 5 meetings.  They’re likely to continue tightening credit at this year’s pace.  As usual, the market anticipated the increase, and mortgage rates (other than home equity lines) actually dropped afterward.

November So. Cal. home sales:  sales were off .6%, but the median price held steady at 415K.  Prices have dropped recently in high-end areas while cheap areas like Riverside are still appreciating.  The median price rose in the Inland Empire, but dropped in Orange and Ventura Counties.

Housing starts fell 13% in November, the steepest plunge in 11 years.

Call if you need anything.

Leo

December 2, 2004

The Fed will raise interest rates again Dec. 14th.  Greenspan virtually guaranteed it last week, saying investors who weren’t hedged against a rise were “desirous of losing money”.  He’s worried about the shrinking dollar and ballooning national debt.  Economist Harry Chernoff:  “no nation in the history of the world has ever escaped this level of indebtedness.”

The average SFR sale price in the U.S. was 264K in October, up 8.5% from October ’03.  Freddie Mac immediately raised their conforming loan limit to 359K.

The So. Cal. index of leading economic indicators fell in the 3rd quarter, the 1st drop since the 1st quarter of ’03.  “It’s too early to say we’re going into recession, but there’s going to be a slowdown in economic activity,” according to the index’s creator.

In unrelated sales, Sunset Gower Studios just sold for $110 million and Manhattan Beach Studios just sold for $100 million.

Consumer confidence declined again in November.  The index now stands at 90.5.

There are over 1,000,000 realtors in the U.S. now, up 300,000 from three years ago.

Call if you need anything.

Leo

November 19, 2004