Do you get the feeling that markets lately are like you-know-who to the left, that only when they finally look down and realize there's nothing solid below, the inevitable occurs?
Charles Hugh Smith had a remarkably-timed post Monday (2/26) titled, "This week's theme is 'I wonder'--as in, I wonder if the stock market is about to roll over into a sharp descent." Sure got that right!
Nouriel Roubini's latest "Is the Sub-Prime 'Garbage' 6% or Rather 50% of the Mortgage Market? And the Worst Housing Recession in Decades..." on the size of the impact from the ongoing story of the subprime lending meltdown.
It took everything pushing flat-out - low interest rates, very easy loan standards, speculative fever, booming economy, and momentum - to push house prices up this high. Then for the last year Westside prices have teetered, with well-priced houses selling quickly and the rest stuck in stalemate. Now the props are falling away.
8 comments:
Nice beginning. Keep up the good work. Hope you cover the Miracle Mile area as well.
Anyone has any comment on the effect of the new subprime lending guideline on LA RE? What's the exposure of this town? Or does anyone have pointers to historic data on the amount of ARM, I/O, and other loads specific to this area?
First time here. Looking forward to it.
With the prices way out of line with incomes, I would have to say that LA most likely has a very large exposure to subprime lending. If you can't afford to buy based on your income, then you have two choices...rent or else buy with a toxic loan. And there have been a lot of buyers over the past few years...
New lending guideline as reported on marketwatch.
http://www.marketwatch.com/news/story/regulators-propose-tougher-subprime-lending/story.aspx?guid=%7B972B947D%2D8A91%2D405E%2D8D33%2DA7DE64202AA1%7D
About amount of exposure--my guess is the same, but still trying to grasp how bad it is. Another way to figure out the exposure is perhaps through the originators--we've heard a number of mortgage originators in trouble. (Countrywide, Fremond, etc.) Which lenders are big in LA subprime? How are they doing?
LOL, they want to make a killing selling their houses but don't even take the time to write a decent ad - reflects the whole get-rich-for-just-living-in-a-house-during-a-bubble mentality.
You mentioned the Marin POS site in response to my last comment - I keep going to all three of those blogs but I guess Marinite got some scary, threatening e-mails and has given up posting. It's a shame, I found some of those posts worthy of Mad TV or SNL (when it was funny).
Culver City is definitely "hanging on" to the prices, and I think the renaissance here has helped fuel that - but many of the homes are really little bungalows that do not justify the prices. Maybe some of the architecturally interesting places up in the hills are worth a heftier price tag, but certainly not a 900-square-footer with the original 1920s electrical wiring (just try to blow dry your hair with the lights on at the same time in one of those!).
I rented a place that the landlord got in foreclosure for about 250K in 1997. I rent it for $1400 a month, thinking one day I might buy it (very cute 1920s house). Then the prices were clearly getting out of control. It has a guesthouse, and the guy renting that bought it for $520 in 2002. He then sold it for, wait for it...$805K in 2004! He did put some money into it (about 80K) to clean up some issues, but still! This was about an 850 sq footer with a small guesthouse in the back.
Thanks, everyone, for visiting and posting! I'll mostly cover the Westside areas I know best - Palisades-Santa Monica-Mar Vista - but am open to neighboring submissions (hint, aj and vera).
I've enjoyed Marinite's writing for quite awhile. Hope we see more there.
Good to see the Westside is getting its much needed attention. This spring should be the start of HUGE price drops. I have done some preliminary research on Zillow sales hisories and found a few cracks in the market already in Culver City, Westchester and Santa Monica. 14-22% over a 21 month period dating back to 2005. Should be the sign of more things to come.
I have started a website where people can post such drops to help document what is really going on as opposed to industry spin doctors. Check it out and add to it when you come across something.
http://westsideremeltdown.blogspot.com
* Santa Monica showed the largest drop which is quite interesting.
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