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Open Forum (6/5- )
Thursday, June 4, 2009
It's hard to count all of the wild actions of recent years as the government – and quasi-governmental overlords of the economy – have attempted to wrangle the beast that was the housing bubble and all its far-flung impacts worldwide.
What's the bigger news?
AIG? (Only now leaving the jerseys of Manchester United.)
Bear Stearns? ("Kids, there used to be this giant investment bank called... oh, well, never mind.")
Chrysler & GM? (Fiat and Obama Motors.)
Fannie & Freddie? (Public entities, after all.)
Eliot Spitzer? (Anti-corruption crusaders need girlfriends, too!)
Oh, we're definitely missing plenty here – help us fill in the list.
What's the most consequential action of the gov't, the Treasury, the Fed, and/or Warren Buffett during this crisis?
The headline today is that they have finally put someone in the stockade.
It's the Orange Man, Angelo Mozilo, formerly of something called Countrywide – a name now strangely tied to both Enron and B of A.
(B of A – that's the one headed by Ken Lewis, er, no, well, kinda.)
It's impossible to ignore the Countrywide news because that name pops up all over bad loans across America, including right here in MB. Perhaps only WaMu (er, Chase) even provides good competition.
Everyone knew the loans were bad and everyone knew they would be someone else's problem later. So they kept going, and going. Until they couldn't.
So what's the biggest news of this unwinding period?
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6 comments:
OK folks, this comment shows you that PAST comments on PAST stories are gone, for now.
The next NEW post will launch the new comment system.
I am told that we'll get the old comments restored to the older stories at some point, perhaps soon.
Thanks for bearing with us on the transition.
Not sure if the new DISQUS comment system shall eventually be utilized for past posts, but in the meantime perhaps we're back to using this first generation system ... ?
There had been a comment posted about the MB City budget process, appropriately questioning the City Manager's support of retaining $312K in the budget to provide for a 4% management salary increase to the 25% of city staff that are unrepresented by bargaining units (the remaining 75% of staff being covered under contracts with Police, Fire or Teamsters unions).
With measurable reductions in revenues, numerous special funds intended to be self-sustaining that now require regular infusions of cash, and *especially* in light of all the proposed program cuts, there is NO WAY our tax dollars should be allocated to further perpetuating the rapidly escalating problem of overcompensated public servants.
There's still time to urge our MB City Council to revise this course before the presumed June 16 approval of the City's 2009-2010 budget.
(To her credit, Mayor Portia Cohen has repeatedly tried to place more focus on appropriately adjusting staffing and salary levels to reflect the downturn, but has been unable to get any traction with her fellow Councilmembers.)
I would think the issue of pay increases would get more comment from the readers of this site. Is it apathy or support for the increase? The funding for the City of Manhattan Beach city is currently short and is going to get much worse. The benefit packages that were created have not been funded. We are on the road to becoming another Vellajo along with many other cities on California. The money is running out.
Do these homeowners deserve help?
June 5th, 2009
Mathew Padilla, Reporter
Homeowners who treated their houses like cash machines, tapping the equity as home values rose, are among the most likely to end in foreclosure, even more than those who bought at housing’s peak, a new study finds.
Often homeowners have had second, third and even fourth mortgages at time of foreclosure — a trend not adequately addressed by any of the federal or state foreclosure avoidance progams, said Michael LaCour-Little, a finance professor at Cal State Fullerton who authored the study.
LaCour-Little tracked all houses and condos set for foreclosure auctions, known as trustee’s sales, in the first two weeks of November 2006, 2007 and 2008 in Orange, Los Angeles, Riverside, San Bernardino and San Diego counties. He is presenting his study today in Washington, D.C. at the mid-year conference of the American Real Estate and Urban Economics Association.
I plan a bigger story on his findings, but wanted to share a few results now.
For example, for the early November 2008 data sample, he tracked 2,358 properties. Here’s what he found:
They were purchased at an average price of $354,000 and average year of 2002 (long before the housing peak of 2005).
Total debt on the properties averaged $551,000 at time of foreclosure. That’s 56% more than the properties were worth when purchased, meaning at least that much was cashed out!
An automatic valuation model estimated average value at time of foreclosure was $317,000, which suggests a combined loan-to-value at foreclosure of more than 170% ($551,000/$317,000). And that is a conservative estimate. Properties that banks later sold had an average resale price of $271,000!
LaCour-Little is, well, diplomatic in his conclusion that “borrower behavior, rather than housing market forces, seems to be the predominant factor affecting outcomes.”
More telling is a rough calculation the professor did, estimating that for all properties in his study homebuyers made downpayments of $262 million and cashed out $2 billion, for a 40% return on their money over six years.
The professor stops there. But my inference is — are these people government officials should be trying to help keep their homes?
What do you think?
More: http://tinyurl.com/qgp3qs
In case anyone missed Doonesbury on Sunday... here it is!
http://tinyurl.com/ns9e7h
-or-
http://www.doonesbury.com/strip/dailydose/index.html?uc_full_date=20090607
Perchance, a similar fate has befallen our dear, much beloved huggy. It would explain why he/she/it no longer posts NAR blather, or anything else.
Median home prices drop below 1989 levels in some parts of Southland
Properties in several areas are selling for less than they did 20 years ago, and that's not including inflation. Some first-time buyers are nabbing houses for less than what their parents paid.
By Peter Y. Hong
June 10, 2009
In parts of Southern California, the housing crash has upended a basic tenet of the American dream: that home values always increase over the long term.
Properties in several areas are selling for less than they did 20 years ago, and that's not even counting the effects of inflation.
The reversal is a bonanza for some first-time buyers. They're nabbing houses for less than what their parents paid in the late 1980s, jumping into a real estate market that has become a kind of economic time machine.
To return to the past, take a stroll down Mulberry Avenue in Lancaster. John A. Beatrice, 55, bought his spacious two-story Spanish-style house there brand-new for $120,000 in 1989. It was a price he could comfortably afford, and he planned on staying through retirement, so he wasn't worried about price swings.
"I always knew real estate goes like this," said the aerospace engineer, moving his hand in an undulating motion like bell curves on a graph.
But he never imagined his neighborhood would drop off the charts. In April, a slightly larger home two doors away sold for $66,500. That's just over half the $130,000 it went for new in 1992. In 2005, that house sold for $330,000.
Beatrice's 29-year-old daughter is now shopping for Lancaster houses priced lower than when she was a kid.
Home prices across most of Southern California have not fallen nearly as far. The median price in the six-county area was $247,000 in April, about what it was in 2002.
But in 14 Southland ZIP Codes, mainly desert communities in the Antelope Valley and Inland Empire, median prices have fallen below levels recorded in April 1989, according to MDA DataQuick, a San Diego real estate information service.
That means thousands of homes in those neighborhoods -- even houses barely 20 years old and in decent shape -- have lost every dime of their appreciation, giving back not just the gains of the recent bubble but steady increases logged over a generation.
The April median price in Beatrice's Lancaster ZIP Code of 93535, for example, was $87,000. That's down 74% from a $334,500 peak price in 2007. Even worse was the 92410 ZIP Code in the city of San Bernardino, which covers several older neighborhoods. Its $61,000 April median represents an 84% drop from the peak of $370,000 in 2007.
Prices also tumbled below 1989 levels in neighborhoods in Palmdale, Hemet, Barstow, Desert Hot Springs, Victorville, Highland, Santa Ana and Oxnard, according to DataQuick. Several other inland communities, including parts of Moreno Valley, Banning and Rialto, had median prices that were only slightly above 1989 levels and below the April 1990 median.
The median price is the point at which half the homes sell for more and half for less.
Losing two decades' worth of gains in a single downturn "has never happened," said UCLA economist Edward Leamer, who has studied local areas during booms and busts. "You're seeing something that's abnormal."
More:
http://tinyurl.com/nlnoqd
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The corollary here with prices in more affluent areas, to make it explicit is this:
Home prices continue to fall until they are supportable by incomes; in a radically more prudent lending environment.
Prices locally were "pumped up" by Alt-A and Pay-option much like sub-prime loans pumped up prices elsewhere. Recall, at the peak of this housing cycle, median home prices were about 13 times median household income in MB; now, they are around 11.
Outlying distressed areas are continuing to follow a well described pattern in acting as a harbinger of what is to come locally in about two years.
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